**Example Accounting Problem on Interest Revenue Recognition**On October 1, Black Company receives an 8% interest-bearing note from Reese Company to settle a $15,800 account receivable. The note is due in six months. At December 31, Black should record interest revenue of- a. $323- b. $326- c. $316- d. $313---**Explanation:**To calculate the interest revenue, we follow these steps:1. **Identify the principal amount of the note:** $15,8002. **Identify the interest rate:** 8% annually3. **Determine the duration for interest calculation within the accounting period:** From October 1 to December 31 is 3 months.**Calculation of interest for 3 months:**Annual interest = Principal amount × Interest rateAnnual interest = $15,800 × 8% = $15,800 × 0.08 = $1,264Since the interest for 3 months (October, November, December) needs to be calculated:Interest for 3 months = (Annual interest / 12 months) × 3 monthsInterest for 3 months = ($1,264 / 12) × 3 = $105.33 × 3 = $316Thus, the correct answer is:- c. $316

Lets understand the basics. For calculating interest revenue needs to record, we need to use below…

On October 1, Black Company receives a 8% interest-bearing note from Reese Company to settle a $15,800 account receivable. The note is due in six months. At December 31, Black should record interest revenue of Oa. $323 Ob. $326 Oc. $316 Od. $313

On October 1, Black Company receives a 8% interest-bearing note from Reese Company to settle a $15,800 account receivable. The note is due in six months. At December 31, Black should record interest revenue of Oa. $323 Ob. $326 Oc. $316 Od. $313

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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