On October 1, 2013, a firm accepted a 4-month, 8% note for $12,000 from a customer with an overdue account balance. The accrued interest recorded for this note on December 31, 2013, is

Question

Quizplus · Accepted Answer

The note was accepted on October 1, 2013, and it has a maturity of 4 months. Therefore, it will mature on February 1, 2014 (4 months after October 1).

From October 1 to December 31, three months have passed. To calculate the accrued interest as of December 31, we need to determine the interest for three months.

The formula for simple interest is:

Interest = Principal x Rate x Time

In this case, the principal is $12,000, the rate is 8%, and the time is 3 months (October, November, December).

Therefore, the interest accrued as of December 31, 2013, is:

Interest = $12,000 x 0.08 x 3/12 = $240

The correct answer is C.

On October 1, 2013, a Firm Accepted a 4-Month, 8