Assume that on December 13, 2016, Royal Company sells a computer to Savco Corp. at an invoice price of $25,000. Because Savco is short of cash, it gives Royal a 90-day, 12% promissory note. [Assume a 360 day year for interest calculations.]
Required:
1 What is the total amount of interest that will be due on the maturity date?
2 What are the effects on the accounting equation for Royal's transaction to record receipt of the note?
3 If Royal has a December 31 year-end, what is the effect of the adjustment needed to record interest due but not yet received?
4 How much interest will Royal earn in 2017?
5 On what day will the note mature?
6 What are the effects on the accounting equation for Royal's transaction recorded on the maturity date?

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The Answer of Assume that on December 13, 2016, Royal Company sells a computer to Savco Corp. at an invoice price of $25,000. Because Savco is short of cash, it gives Royal a 90-day, 12% promissory note. [Assume a 360 day year for interest calculations.]
Required:
1 What is the total amount of interest that will be due on the maturity date?
2 What are the effects on the accounting equation for Royal's transaction to record receipt of the note?
3 If Royal has a December 31 year-end, what is the effect of the adjustment needed to record interest due but not yet received?
4 How much interest will Royal earn in 2017?
5 On what day will the note mature?
6 What are the effects on the accounting equation for Royal's transaction recorded on the maturity date?

Assume That on December 13, 2016, Royal Company Sells a Computer