On February 1, 2018, Sanger Corp. lends cash and accepts a $2,000 note receivable that offers 10% interest and is due in six months. What would Sanger record on August 1, 2018, when the borrower pays Sanger the correct amount owed

Journal Entry

Cash = $2100

Interest Revenue = 100

Notes Receivable = $2000

Explanation:

We need to find the interest revenue:

$2000 X 0.10 = $200

The time interval from February to August is 6 months. Therefore we have;

Interest Revenue = $200 X (6 months/12 months) = 100.

Sanger's record on August 1 2018, would be:

Journal Entry

Cash = 2000 + 100 = $2100

Interest Revenue = 100

Notes Receivable = $2000

hello your question is incomplete here is the complete question

On February 1, 2018, Sanger Corp. lends cash and accepts a $2,000 note receivable that offers 10% interest and is due in six months. What would Sanger record on August 1, 2018, when the borrower pays Sanger the correct amount owed

A.Cash2,000  

Interest Revenue100  

Notes Receivable  2,100

B.Cash2,100  

Notes Receivable  2,100

C.Cash2,100  

Interest Revenue  100

Notes Receivable  2,000

D.Cash2,200  

Notes Receivable  2,200

Answer : option c is the correct answer : cash = 2100, interest revenue = 100, notes receivable = 2000

Explanation:

The notes receivable accepted by Sanger corp from the Borrower = $2000

at an annual interest rate of : 10%

therefore the interest to be paid on the loan of $2000 per annum will be = 10% of $2000 = $200

since the loan duration is 6 months hence the interest revenue generated from the loan would be = $200 / 2 = $100

The cash to be recorded after the borrower has paid the correct amount owed would be = notes receivables + interest revenue

                                        = $2000 + $100 = $2100

therefore option C is the most accurate record

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