On June 1, Year 2, Carolina Company collected a $24,000 note receivable that had been issued on June 1, Year 1. The note carried a 6% interest rate. The interest revenue recognized on the maturity date is $1,440.

Question

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Carolina will only recognize five months of interest revenue on June 1, Year 2. The other seven months of interest were recognized (accrued) in Year 1, $24,000 × 6% × 7/12 = $840.

On June 1, Year 2, Carolina Company Collected a $24,000