(Question) June 1 2008---Received a $6000, 1-year, 8%, note from Sue Forest as full payment on her account.
(Ans)Merchandise Inventory---$6,480
Accounts Payable------$6,480
Is this correct? To get the amount $6,480->I have done: 6000*.08 = 480
6000+480 = 6,480
My eyes hurt.
No, the calculation is incorrect. To calculate the amount of Merchandise Inventory and Accounts Payable, you need to add the interest to the principal amount of the note. Here is the correct calculation:
Principal amount: $6,000
Interest: ($6,000 * 8% * 1 year) = $480
To calculate the total amount to be recorded:
Total amount: Principal amount + Interest
Total amount = $6,000 + $480 = $6,480
Therefore, the correct entries would be:
Merchandise Inventory: $6,480
Accounts Payable: $6,480