Answer to Question #120186 in Accounting for Dawud aliyu

Question

How is the interest for notes receivable calculated? if tropical breeze inc. receives a 2000$ , 90 day, 10% promissory from paradise sand on december 1,2018. Calculate 30 days of interest received by tropical breeze inc

Answer 1

Interest on notes receivable is calculated using this formula: Interest = principal x rate x time. The principal is the loan amount, the rate equals the percentage rate of the loan and time is the period of the loan. According to this formula, the interest earned each month by Tool-It on the note will be $2,000, or $200,000 x 1/12 x 12 percent.

$2000\times0.1\times\frac{30}{360}=16.67$