Question

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 $31$

• A. $\$100$
• B. $\$200$
• C. $\$300$
• D. $\$400$

Answer 1

The correct option is B

$\$200$

Explanation for the correct option:

Given that the interest rate is $6\%$ and amount is $\$20,000$ for a time period of November $1$ to December $31$ which are two months and converting time period in years as $\frac{2}{12}=\frac{1}{6}yrs$ as there are twelve months in a year so, interest income is calculated as

$I=A\times r\times t$ where, $A$ is amount, $t$ is time period and r is rate so on putting values we get,

$$\begin{gathered} I=20000\times \frac{6}{100}\times \frac{1}{6} \\ I=\$200 \end{gathered}$$

Hence, the correct option is $\left(B\right)$