On June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using a 360-day year, what is the amount of interest revenue recognized by Garcia in the following year? When required, round your answer to the nearest dollar.

interest revenue 350 dollars

Explanation:

we need to sovl for he amount of accrued interest:

principal x rate x time = interest

being rate and time expressed n the same metric. The rate is annual thus, time must be expressed as the portion of a year.

$84,000 x 0.05 x 30/360 = 350 dollars

The interest income to be perceived in the current financial year is $350.

Explanation:

Figure the interest Amount on note for the time of note of 120 days as demonstrated as follows:  

Interest Amount on note = Face estimation of note x Rate of interest x 120 days/360 days  

Interest Amount on note = $84,000 x 5% x 120/360  

Interest Amount on note = $4,200 x 120/360  

Interest Amount on note = $1400  

Therefore, the interest Amount for the time of note of 120 days is $1,400  

Clarification  

Financing cost given in the inquiry is per annum. However, the note gave is 120-day note. Enthusiasm on note will be just for 120 days. So as to ascertain the interest Amount for the time of the note of 120 days, increase the face value of the note with the pace of interest. Presently, increase the resultant incentive with 120/360  

Process the interest to be perceived for the current fiscal year finishing June 30 as demonstrated as follows:  

Interest income = Interest income for 120 days x Number of days from June 1 to June 30/120 days  

Interest income = $1,400 x 30days/120 days  

Interest income = $350  

In this manner, the interest income to be perceived for the current financial year finishing June 30 is $350  

The interest income to be perceived in the current fiscal year is $350.  

Clarification  

The note payable was given on June 1 of the current financial year and the monetary year finishes on June 30. In this manner, the interest income will be perceived is for the period between June first to June 30th (30 days).  

In this way, to compute the interest income for 30 days, increase the interest income for 120 days with 30 days and gap by 120 days.  

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