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On February 1, 2021, Sanger Corp. lends cash and accepts a $7,000 note receivable that offers 20% interest and is due in six months. What would Sanger record on August 1, 2021, when the borrower pays Sanger the correct amount owed

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hyderali230

Answer:

Sanger Will record

Dr. Cash                     $7,700

Cr. Note Receivable $7,000

Cr. Interest Income   $700

Explanation:

Note Receivable is promise in writting to receive a sum of money in future. The money normally consists of Principal and interest.

Principal = $7,000

On August 1, 2021, only six months have passes after recept of Note.

Interest = $7,000 x 20% x 6/12 = $700

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