Question

In: Accounting

On April 1, 2021, a company loans one of its suppliers $52,000 and accepts a 30-month,...

On April 1, 2021, a company loans one of its suppliers $52,000 and accepts a 30-month, 12% note receivable.

Calculate the amount of interest revenue the company will recognize in 2021, 2022, and 2023. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

Solutions

Expert Solution

In 2021:

April 1 to December 31 is a gap of 9 months.

Interest revenue = Loan amount × Rate of interest × Month’s proportion

                           = $52,000 × 0.12 × (9 / 12 months in a year)

                           = $52,000 × 0.12 × (9/12)

                           = 6,240 × (9/12)

                           = 56,160 / 12

                           = $4,680 (Answer)

In 2022:

January 1 to December 31 is a gap of 12 months.

Interest revenue = Loan amount × Rate of interest × Month’s proportion

                           = $52,000 × 0.12 × (12 / 12 months in a year)

                           = $52,000 × 0.12 × (12/12)

                           = 6,240 × (12/12)

                           = 6,240 × 1

                           = $6,240 (Answer)

In 2023:

There is only [30 months – (9 + 12) months =] 9 months left for maturing the note.

Interest revenue = Loan amount × Rate of interest × Month’s proportion

                           = $52,000 × 0.12 × (9 / 12 months in a year)

                           = $52,000 × 0.12 × (9/12)

                           = 6,240 × (9/12)

                           = 56,160 / 12

                           = $4,680 (Answer)

ekkarill92 answered 1 year ago
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