Comfort Shoes Received a Promissory Note from a Customer on April

question 131

Multiple Choice

Comfort Shoes received a promissory note from a customer on April 1,2017.The face amount of the note is $2,000;the terms are 12 months and 8% annual interest.How much total interest revenue will Comfort Shoes recognize for the year ended December 31,2017?

• A)$40
• B)$107
• C)$120
• D)$160

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Definitions:

Modified Accrual Accounting

An accounting method that combines elements of both accrual and cash basis accounting, recognizing revenues when they are available and measurable, and expenses when incurred.

Realizable

Refers to assets that can be easily converted into cash or are expected to be sold without significant delay or loss in value.

Modified Accrual Accounting

An accounting method that recognizes revenues when they become available and measurable and expenses when they are incurred, used often by government entities.