Absolute Appliances
The company sold merchandise to a customer on December 1, 2019, for $120,000. The company accepted a promissory note as payment. The note has a term of three months and an annual interest rate of 10%. The company's accounting period ends on December 31.
-Refer to Absolute Appliances. What amount should the company recognize as interest revenue on December 31, 2019?

Question

Quizplus · Accepted Answer

The interest revenue for December is calculated as $120,000 x 10% x (1/12) = $1,000, since the note was held for one month within the accounting period ending December 31, 2019.

Absolute Appliances The Company Sold Merchandise to a Customer on December 1