On August 1, 2018, Trico Technologies, an aeronautic electronics company, borrows $20.0 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 8% promissory note. Interest is payable at maturity. FirstBanc Corp.'s year-end is December 31. Record the acceptance of the note by Firstban Corp.

Question

Business

Abbie Kirk

30 April, 02:40

On August 1, 2018, Trico Technologies, an aeronautic electronics company, borrows $20.0 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 8% promissory note. Interest is payable at maturity. FirstBanc Corp.'s year-end is December 31. Record the acceptance of the note by Firstban Corp.

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Cailyn Burke · Answer 1

Debit Credit

Loan Receivable $20,000,000

Cash $20,000,000

Interest Receivable $666,666

Interest Income $666,666

Explanation:

Interest is calculated by multiplying 0.08 by 20 million and then dividing it by 2 because the loan is a 6 month loan. As Aug - Dec is 5 months we will record revenue of 5/6 of the interest.