On September 1 of the current year, a bank lends $1,600 to a company; the note principal and $192 ($1,600 × 12 percent) annual i

Question

Genrish500 [490]

3 years ago

9

On September 1 of the current year, a bank lends $1,600 to a company; the note principal and $192 ($1,600 × 12 percent) annual i

nterest are due in one year. Answer from the bank's standpoint.

Business

1 answer:

SVETLANKA909090 [29] · Answer 1 · 2022-09-17T18:04:33+03:00

Answer and Explanation:

Revenue recognized - $192. Revenue title - "Interest revenue" This is answered considering that the bank follows accrual basis of accounting. Therefore, as the bank has earned the interest by lending to the company, it can recognize the interest revenue. And as it is a bank, the interest revenue would be shown under the "Revenue" section as its main business is lending. The principal will not be revenue at all as it is an Asset and will be regarded as Accounts Receivable.