On February 1, Ville Company received a $6,000, 5%, four-month note receivable. The cash to be received by Ville Company when the note becomes due is

Question

Quizplus · Accepted Answer

The note is for $6,000 and has an interest rate of 5%. To calculate the amount of cash Ville Company will receive when the note becomes due, we need to calculate the interest earned on the note.

Interest = Principal x Rate x Time

Where:
Principal = $6,000
Rate = 5%
Time = four months (which is 4/12 or 1/3 of a year)

Interest = $6,000 x 5% x 1/3 = $100

Therefore, the cash to be received when the note becomes due is the principal ($6,000) plus the interest earned ($100), which equals $6,100.

On February 1, Ville Company Received a $6,000, 5%, Four-Month