On December 31,2015,the lender on a $5,000,120-day,10% note dated November 5,2015,will recognize: (Use a 365 day year and round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To calculate the interest recognized on December 31, 2015, we need to determine how many days have passed between November 5, 2015 (the date the note was issued) and December 31, 2015 (the date of recognition).

There are 56 days between November 5 and December 31 (31 days in December + 30 days in November - 5 days in November).

To calculate the interest, we use the formula: 
Interest = Principal x Rate x Time 
where Rate is the annual interest rate and Time is the fraction of a year that has passed (in our case, 56/365).

Interest = $5,000 x 0.10 x 56/365 = $77.26

Since the lender is owed the interest, they will recognize it as interest receivable. Therefore, the best choice is B.

On December 31,2015,the Lender on a $5,000,120-Day,10% Note Dated November