Randy Company accepted from a customer a P4,000,000, 90-day, 12% interest bearing note dated August 31, 2005

Accounting Mar 08, 2021

Randy Company accepted from a customer a P4,000,000, 90-day, 12% interest bearing note dated August 31, 2005. On September 30, 2005, Randy discounted the note at Family Bank at 15%. However, the proceeds were not received until October 1, 2005.

In the September 30, 2005 balance sheet, the amount receivable from the bank, based on a 360 day year includes accrued interest income of:

A. 17,000

B. 21,000

C. 30,000

D. 24,000

Expert Solution

Answer

In the September 30, 2005 balance sheet, the amount receivable from the bank, based on a 360 day year includes accrued interest income of P40,000 which is not given in options. May be there is some mistake in options.

Explanation

Computation of Accrued Interest:

Accrued Interest = P4,000,000*12%*30/360 = P40,000

Note: September 01 - September 30 = 30 days

Considering 360 days in a year.

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