Interest on a $20000 one-year 10 percent note payable dated October 1 2007 was not recorded. The 10 percent interest is payable on the maturity date of the noteWhat is the interest income
What is the maturity date?
20,000*0.1=2,000 is the interest income, since the note is for one year, so the percentage should be applied to the principal amount.
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To calculate the interest income for the $20,000 one-year 10 percent note payable, we need to determine the amount of interest that accrues from October 1, 2007, to the maturity date.
Step 1: Calculate the interest for one year:
Principal amount: $20,000
Rate of interest: 10% or 0.10
Interest for one year = Principal × Rate
= $20,000 × 0.10
= $2,000
Step 2: Determine the accrual period:
The note is dated October 1, 2007, and it is payable on the maturity date, which is one year after that. Therefore, the accrual period is exactly one year.
Step 3: Calculate the interest income:
Since the interest is payable on the maturity date, there are no partial periods involved. Hence, the total interest income is equal to the interest for one year, which is $2,000.
To calculate the interest income for the note payable, we need to determine the interest amount for one year at a 10% annual interest rate.
Step-by-step calculation:
1. Find the interest amount using the formula: Interest = Principal × Rate × Time
Principal: $20,000
Rate: 10% (0.10)
Time: 1 year
Interest = $20,000 × 0.10 × 1 = $2,000.
Therefore, the interest income for the note payable is $2,000.