Question

On November 1, Jasper Company loaned another company $100,000 at a 6.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31. The amount of interest revenue that should be reported in the first year is:

Answer 1

Answer:

The amount of interest revenue that should be reported in the first year is $1,000

Explanation:

As we know Note receivable is a type of investment on which the Noteholder receives te interest over the note amount.

Value of Note = $100,000

Rate  = 6%

until 31 December only two months has been passed and the interest revenue of only 2 months will be recognized as follow

Interst Revenue = $100,000 x 6% x 2/12 = $1,000

So the interest revenue of $1,000 should be reported in the first year.