On December 1, 2019, Temps Company accepted a $12,000, 120 day, 8% note from a customer in granting an extension to a past due account. Temps Company's accounting period ends on December 31, and the note is collected in full on the due date.
Which one of the following statements will be false for Temps Company?

Question

Quizplus · Accepted Answer

Interest for the note is calculated as follows: $ \frac{12,000 \times 8\% \times 120}{365} = 263.01 $ approximately. This means that by December 31, 2019, the company would not reduce Interest Receivable for $80 because the interest for December (one month) would be approximately $ \frac{12,000 \times 8\% \times 31}{365} = 81.92 $, and they would actually increase Interest Receivable, not reduce it, to reflect the interest earned but not yet received.

On December 1, 2019, Temps Company Accepted a $12,000, 120