Question

On September 1, 2021, Middleton Corp. lends cash and accepts a $4,000 note receivable that offers 10% interest and is due in six months. How much interest revenue will Middleton Corp. report during 2021? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

Answer 1

Answer:

Middleton Corp. will report interest revenue of 133.33 for the period of 2021.

Explanation:

The adjusting entry for the interest receivable for the period ended 31 december will require the Middleton Corp. to record the 4 months interest as interest revenue for the period ended 2021.

The interest on the note for this period is ending 2021 is,

Interest revenue = 4000 * 0.1 * 4/12 = 133.33

The entry on 31 December will be

Interest receivable    133.33 Dr

   Interest Revenue       133.33 Cr

Answer 2

Answer:

The amount of interest revenue Middleton corp will report during 2021 = $200

Explanation:

The following data were provided from the question;

The amount of cash Middleton Corp borrowed or received = $4,000

Interest rate = 10%

Duration = 6 months = 6 ÷ 12 = 0.5 year

To calculate the amount of interest revenue Middleton corp will report during 2021;

= cash receivable × interest rate × duration

Therefore,

Interest revenue = 4,000 x 0.10 x 0.5

= $200