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14 June, 11:15

On October 1, 2018, Oberley Corporation loans one of its employees $32,000 and accepts a 12-month, 8% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2018 and 2019.

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  1. 14 June, 12:50
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    For 2018, the amount of interest would be $640

    For 2019, the amount of interest would be $2,560

    Explanation:

    The amount of interest revenue which the company will acknowledge in the year 2018 is computed as:

    Amount of interest revenue = Loan amount * Percentage of note * Number of months / 12

    where

    Loan amount is $32,000

    Percentage of loan is 8%

    Number of months will be 3 months (October, November, December). As the loan is made on October 1

    Putting the values above:

    Amount of interest revenue = $32,000 * 8% * 3/12

    Amount of interest revenue = $640

    The amount of interest revenue which the company will acknowledge in the year 2019 is computed as:

    Amount of interest revenue = Loan amount * Percentage of note

    where

    Loan amount is $32,000

    Percentage of loan is 8%

    Putting the values above:

    Amount of interest revenue = $32,000 * 8%

    Amount of interest revenue = $2,560
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