Answer:
1. The interest rate on the Company's note payable is 4 %
2. The rent payment was made in the beginning of April 2021
3. The amount of lending by Eldorado is $ 80,000
Explanation:
a. Computation of rate of interest on note payable.
Principal amount of note $ 252,200
Period of interest April 01 - Dec 31 2021 9 months
Amount of interest $ 7,560
Full year interest is
interest amount for 9 months /9 * 12 months $ 10,080
Interest rate = Annual interest / Principal note value * 100
$ 10,080/$ 252,200 *100 = 4 %
b. Computation of period of rent payment
The total rent payment is $ 51,000
Amount of expired rent $ 34,000
Ratio of expired portion of rent
Expired portion/ Total rent $ 34,000/ $ 51,000 2/3 times
Considering the expired portion over the 12 month period
2/3 * 12 = 8 months
so the rent payment was made 8 months prior to December 31 i.e April 01
c. Computation of amount of lending to customer
Interest receivable adjusted $ 600
Period of lending to December 31 3 months
Interest rate on lending 3 %
The annual interest on th lending needs to be calculated as follows:
Interest for 3 months/ 3 months * 12 months
$ 600/3 * 12 $ 2,400
To calculate the amount of lending, we consider the annual interest and divide it by the interest rate
$ 2,400/ 0.03 = $ 80,000
