Rosewood Company made a loan of $8,600 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate

Question

4 years ago

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Rosewood Company made a loan of $8,600 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate

of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be:

Business

1 answer:

tatuchka [14] · Answer 1 · 2022-01-12T04:57:12+03:00

Answer:

Year 1 = $387

Year 2 = $516

Explanation:

Loan has been granted on 1 April in Year 1 i.e. for a period from 1 April to 31 December = 9 months.

Interest for year 1 @6% = $8,600 X $\frac{6}{100} X\frac{9}{12}$

= $387

Interest for year 2 will be from 1 January to 31 December =

$8,600 X $\frac{6}{100} X \frac{12}{12}$ = $516

Therefore interest revenue to be reported by Rosewood Company will be as follows

Year 1 = $387

Year 2 = $516