Question

On December 1, 2021, Davenport Company sold merchandise to a customer for $29,000. In payment for the merchandise, the customer signed a 6% note requiring the payment of interest and principal on March 1, 2022. How much interest revenue will the company recognize during 2021 and 2022

Answer 1

Interest = Face value of the Notes receivable * Rate of interest * Number of days

2021 Interest = Face value of the Notes receivable * Rate of interest * Number of days

2021 Interest = $29,000 * 6/100 * 1/12

2021 Interest = $29,000 * 0.06 * 0.08333

2021 Interest = $144.9942

2021 Interest = $145

2022 Interest = Face value of the Notes receivable * Rate of interest * Number of days

2022 Interest = $29,000 * 6/100 * 2/12

2022 Interest = $29,000 * 0.06 * 0.16667

2022 Interest = $290.0058

2022 Interest = $290