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11 June, 15:27

On February 1, 2018, Sanger Corp. lends cash and accepts a $2,000 note receivable that offers 10% interest and is due in six months. What would Sanger record on August 1, 2018, when the borrower pays Sanger the correct amount owed

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  1. 11 June, 17:15
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    Journal Entry

    Cash = $2100

    Interest Revenue = 100

    Notes Receivable = $2000

    Explanation:

    We need to find the interest revenue:

    $2000 X 0.10 = $200

    The time interval from February to August is 6 months. Therefore we have;

    Interest Revenue = $200 X (6 months/12 months) = 100.

    Sanger's record on August 1 2018, would be:

    Journal Entry

    Cash = 2000 + 100 = $2100

    Interest Revenue = 100

    Notes Receivable = $2000
  2. 11 June, 18:29
    0
    hello your question is incomplete here is the complete question

    On February 1, 2018, Sanger Corp. lends cash and accepts a $2,000 note receivable that offers 10% interest and is due in six months. What would Sanger record on August 1, 2018, when the borrower pays Sanger the correct amount owed

    A. Cash 2,000

    Interest Revenue 100

    Notes Receivable 2,100

    B. Cash 2,100

    Notes Receivable 2,100

    C. Cash 2,100

    Interest Revenue 100

    Notes Receivable 2,000

    D. Cash 2,200

    Notes Receivable 2,200

    Answer : option c is the correct answer : cash = 2100, interest revenue = 100, notes receivable = 2000

    Explanation:

    The notes receivable accepted by Sanger corp from the Borrower = $2000

    at an annual interest rate of : 10%

    therefore the interest to be paid on the loan of $2000 per annum will be = 10% of $2000 = $200

    since the loan duration is 6 months hence the interest revenue generated from the loan would be = $200 / 2 = $100

    The cash to be recorded after the borrower has paid the correct amount owed would be = notes receivables + interest revenue

    = $2000 + $100 = $2100

    therefore option C is the most accurate record
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