On February 1, Platt Company received a €6,000, 10%, four-month note receivable. The cash to be received by Platt Company when the note becomes due is

Question

Quizplus · Accepted Answer

The formula to calculate the cash to be received on a note receivable is:

Cash to be received = principal + (principal × interest rate × time)

In this case, the principal is €6,000, the interest rate is 10%, and the time is four months (which is 4/12 or 1/3 of a year). Therefore:

Cash to be received = €6,000 + (€6,000 × 0.10 × 1/3) 
Cash to be received = €6,000 + €200 
Cash to be received = €6,200

So the correct answer is C) €6,200.

On February 1, Platt Company Received a €6,000, 10%, Four-Month