Question

please explain why answet is 720

Gold Medal Running Shoes reports the following 2016 Jan. 3 Recorded credit card sales of $110,000, net of processor fee of 3%. Ignore Cost of Goods Sold. Oct. 1 Loaned $12,000 to Jerry Pinket, an executive with the company, on a one-year 8% note. Dec. 31 Accrued interest revenue on the Pinket note 2017 Oct 1 Collected the maturity value of the Pinket note. Journalize all entries required for Gold Medal Running Shoes (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) UCL 1, 2017. Comecie e aluny value in Puket Hote. Prepare a surge compound journalery) Date Debit Credit 12,960 2017 Oct 1 12.000 Accounts and Explanation Cash Note Receivable-Jerry Pinket Interest Receivable Interest Revenue Collected note receivable plus interest 240 7209

Answer 1

On October 1, 2016, $12,000 was loaned on a one year 8% note.

Hence, interest revenue is to be recorded for 3 months of year 2016 ( From October to December).

Interest revenue to be recorded on December 31, 2016 = Amount loaned x Interest rate x Time period

= 12,000 x 8% x 3/12

= $240

On October 1, 2017, Interest revenue will be recovered for 9 months ( From January 1, 2017 to October 1, 2017) Interest revenue to be recorded on October 1, 2017 = 12,000 x 8% x 9/12

= $720

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