On October 1, 2011, Coast Financial lent Barr Corporation $300,000, receiving in exchange a nine-month, 12% note receivable. Coast ends its fiscal year on December 31, and makes adjusting entries to accrue interest earned on all notes receivable. The interest earned on the note receivable from Barr Corporation during 2012 will amount to:

Question

Quizplus · Accepted Answer

The note is issued for nine months, so the interest earned will be for the full nine months. The calculation will be:

Interest = Principal x Rate x Time 
Interest = $300,000 x 12% x 9/12 
Interest = $27,000

Therefore, the interest earned on the note receivable from Barr Corporation during 2012 will be $27,000.

On October 1, 2011, Coast Financial Lent Barr Corporation $300,000