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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Zenephia Corp. accepted a 9-month note receivable from a customer on October 1, 2019. If Zenephia has an accounting period which ends on December 31, 2019, when would it most likely recognize interest income from the note?

a. December 31, 2019, and June 30, 2020

b. October 1, 2019

c. December 31, 2019, only

d. June 30, 2020, only

To determine

Notes Receivables:

The note receivables are a type of promissory note which is made for the payment of a specified amount at an extended date. These notes can be interest charging or cannot be charging the interest. If there is an interest accrued then the interest will be recognized once on the last day of accounting year as earned and accrued and on the maturity of note when the accrued interest becomes earned.

To select:

The best time of recognizing interest from the note issued on October 1,2019.

Explanation

The interest on the note receivables issued on October 1,2019 for the 9 months to be recognized once at the year end and afterwards at its maturity i.e. December 31,2019 and June 30,2020. Hence, option (a) is correct.

The interest on the note receivables issued on October 1,2019 for the 9 months to be recognized twice i.e. once at the year end and afterwards at its maturity. Hence, option (b) is not correct

The interest on the note receivables issued on October 1,2019 for the 9 months to be recognized twice which means on December 31,2019 there will be only interest of 3 months and remaining balance will be recognized at its maturity

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