On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co. Assume that the fiscal year of Seller Co. ends June 30. Using the 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year?

Question

Quizplus · Accepted Answer

The first step is to calculate the maturity date of the note: 
120 days from June 8 is October 6.

Next, we need to calculate the interest revenue that Seller Co. will earn from June 8 (the date the note was issued) to June 30 (the end of their fiscal year): 
22 days / 360 days * $80,000 * 6% = $792.89

Therefore, the total interest revenue recognized by Seller in the following year (after June 30) will be: 
98 days / 360 days * $80,000 * 6% = $513.78

Adding these two amounts together gives us: 
$792.89 + $513.78 = $1,306.67

Therefore, the best choice is C, $1,306.67.