Daniels & Company accepted a nine-month, $24,000 note receivable, with 6% interest, from Renee Company on September 1, 2018. Daniels & Company's year end is December 31. The amount of interest on this note to be recognized by Daniels & Company in 2019 is:

Question

Quizplus · Accepted Answer

The interest for the entire nine-month period is $24,000 * 6% = $1,440. However, only the interest for the period from January 1, 2019, to the maturity date (May 31, 2019) is recognized in 2019, which is 5 months. The interest for 5 months is $1,440 * (5/9) = $800. However, the correct calculation should be $24,000 * 6% * (5/12) = $600.

Daniels & Company Accepted a Nine-Month, $24,000 Note Receivable, with 6