Neil Construction Co. receives a note receivable from Sonny Plastics Inc. as settlement of an overdue account receivable. The note is for three months and bears an annual interest rate of 8%. The original accounts receivable balance was $800. At the end of the three-month period, Neil Construction Co. will pay Sonny Plastics Inc.

Question

Quizplus · Accepted Answer

To find the amount that Neil Construction Co. will pay Sonny Plastics Inc. at the end of the three-month period, we first need to calculate the interest on the note.

The formula for calculating simple interest is:

Interest = Principal x Rate x Time

where: 
- Principal = the amount of the note ($800 in this case) 
- Rate = the annual interest rate (8%) 
- Time = the length of time in years (3 months = 0.25 years)

Plugging in the values, we get:

Interest = $800 x 0.08 x 0.25 = $16

So the total amount that Neil Construction Co. will pay Sonny Plastics Inc. is the sum of the original note amount and the interest, or:

$800 + $16 = $816

Therefore, the correct answer is D) $816.