(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
Yes, you have correctly calculated the amount of $6,480 for the Merchandise Inventory and Accounts Payable entries. Let's break down the calculation to further explain:
A note for $6,000 represents the principal amount received. The interest rate of 8% is applied to this amount, and we need to find the interest amount. To calculate the interest, you multiply the principal amount by the interest rate:
$6,000 * 0.08 = $480
Now, you add the interest amount to the principal amount to get the total amount:
$6,000 + $480 = $6,480
Therefore, you record Merchandise Inventory for $6,480 as this is the value of the goods received in exchange for the note, and Accounts Payable is also recorded for the same amount since this note was accepted as full payment on the account.