On May 1, 2011 (maturity date), the note is collected in full by Salem Corporation. Assuming a fiscal year-end of December 31, Salem recognizes which of the following in its income statement for 2011 with regard to this note?

Question

Quizplus · Accepted Answer

The note was issued on May 1, 2010, and collected on May 1, 2011. The interest revenue for 2011 would be for the period from January 1, 2011, to May 1, 2011, which is 4 months. Assuming the interest rate is 12% annually on a $900,000 note, the interest for 4 months is $900,000 * 12% * (4/12) = $36,000. However, since the question asks for the interest recognized in 2011, and the options provided do not match this calculation, the closest option is $18,000, which might be due to a different interest rate or calculation error in the options.

On May 1, 2011 (Maturity Date), the Note Is Collected