Question

Giorgio Italian Market bought $5,600 worth of merchandise from Food Suppliers and signed a 90-day, 10% promissory note for the $5,600. Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)

Answer 1

Answer: $5,740

The amount to be recorded by the food supplier after 90 days is $5,740

Explanation:

By using the formula

A = p + prt

A = future amount ( amount due on a debt)

p= principal / present value=$5,600

r = interest rate = 10% = 0.1

t = time in year. Convert 90days to Yr..( 60/360) = 0.25yrs

A= p+prt = p(1 + rt)

A = 5600 [1 + (0.1 × 0.25)]

A = 5600 [1 + 0.025]

A = 5600 (1.025)

A = $5,740.

The amount that would be returned after 90 days at 10% interest rate is $5,740.