You and several classmates are studying for the next accounting examination. They ask you to answer the following questions. If cash is borrowed on a $50,000, 6-month, 12% note on September 1, how much interest expense would be incurred by December 31? How is the sales tax amount determined when the cash register total includes sales taxes? If $15,000 is collected in advance on November 1 for 3 months’ rent, what amount of rent revenue should be recognized by December 31?
Use the interest formula: Face value of note × Annual interest rate × Time in terms of one year.
Divide total receipts by 100% plus the tax rate to determine sales revenue; then subtract sales revenue from the total receipts.
Determine what fraction of the total unearned rent should be recognized this year.