Utah Co.sold merchandise to Big Sky Corp.on December 1, 2016, for $9,000, and accepted a promissory note for payment in the same amount.The note has a term of 90 days and a stated interest rate of 8%.Utah's accounting period ends on December 31.What amount should Utah recognize as interest revenue on the maturity date of the note?

Question

Quizplus · Accepted Answer

To calculate interest revenue, we can use the simple interest formula:

Interest = Principal x Rate x Time

In this case, the principal is $9,000, the rate is 8%, and the time is 90/360 (since there are 360 days in a year).

Interest = $9,000 x 8% x 90/360 = $120

Therefore, Utah should recognize $120 as interest revenue on the maturity date of the note.

Utah CoSold Merchandise to Big Sky Corp