On June 1, 2020, Carr Corp. loaned Farr Corp. $ 600,000 on a 5% note, payable in five annual instalments of $ 120,000 (plus interest), beginning January 2, 2021. Interest on the note is payable on the first day of each month beginning July 1, 2020. Farr made timely payments through November 1, 2020. On January 2, 2021, Carr received payment of the first principal instalment plus all interest due. At December 31, 2020, Carr's interest receivable on this loan is
A) $ 0.
B) $ 2,500.
C) $ 5,000.
D) $ 7,500.

Question

Quizplus · Accepted Answer

Interest for December 2020 is $2,500 (600,000 x 5% / 12). Since interest is payable monthly and Farr made timely payments through November 1, 2020, the interest receivable at December 31, 2020, would be for December only, which is $2,500.