Question

Question text Calculating Accrued Interest Income on Promissory Notes Receivable Pickett Company received a 90 day, six percent note receivable for $20,000 on November 1. How much interest income should be accrued on December 31

Answer 1

Answer:

$200

Explanation:

Given that

Note receivable = $20,000

Number of days given = 90 days

Interest rate = 6%

Calculated days from November 1 to December 31 = 60 days

Plus we assume the total number of days in a year is 360 days

So, the accrued interest income is

= Note receivable  × rate of interest × number of days ÷ (total number of days in a year)  

= $20,000 × 6% × (60 days ÷ 360 days)

= $200

Answer 2

The amount on interest income which should be accrued on December 31 is $200.

What is Accrued Interest?

This refers to the type of interest which has been gotten on a financial obligation which is not yet paid.

Using the parameters

• Note receivable = $20,000
• Number of days given = 90 days
• Interest rate = 6%

The number of days from November 1 to December 31 = 60 days

If we can assume that the days in a year is 360, then

The accrued interest income is

= Note receivable  × rate of interest × number of days ÷ (total number of days in a year)  

= $20,000 × 6% × (60 days ÷ 360 days)

= $200

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