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On July 1, Perry Company signed a note with principal of $80,000 and a stated interest rate of 4%. The principal and interest are due on April 1 of the following year. Perry will accrue interest on December 31st.

$80,000 * 4% * 6/12 = $1,600 Interest is always stated as an annual rate regardless of loan term. The 4% interest is annual and must be multiplied by 6/12 to account for the six months july-december when recording the accrued interest on 12/31.

Required:
What is an example of accrued receivable?

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Answer:

$1,600

An example of accrued receivable is recording interest revenue before it is been received.

Explanation:

Principal =$80,000

Interest rate =4%.

July to December =6 months

Hence:

$80,000 * 4% * 6/12

=$80,000×0.04×0.5

= $1,600

Perry accrued interest on December 31st is $1,600

An example of accrued receivable is recording interest revenue before it is been received.

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