Question

On June 1, Grey Co. borrows $15,000 cash from National Bank by signing a 120-day, 10% interest-bearing note. Grey will record interest during the year totaling {$blank input field}. Using a 360 day year, round your final answer to the nearest whole dollar.

Answer 1

$500

Step-by-step explanation:

Principal amount = $15000

Interest rate = 10%

Interest value = 10%*15000

$1,500

Loan term = 120 days

Pro rated interest = 120/365*1500=493.1

To the nearest whole dollar $500

Answer 2

$500

Step-by-step explanation:

The amount of interest to be recorded Grey Co on the borrowed amount of $15,000 is computed by applying the interest rate of 10% to the amount borrowed while apportioning the 120 days period by multiplying by 120 days and dividing by 360 days as computed below:

Interest=$15,000*10%*120/360=$500

The interest that Grey Co would record on the $15,000 is $500 during the year using a 360 day per year instead of the usual 365 day which does not make provision for Banks' holidays