Question

On October 1, 2021, Oberley Corporation loans one of its employees $27,000 and accepts a 12-month, 10% note receivable.Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022.

Answer 1

Oberley Corporation will recognize $675 in interest revenue for the year 2021 and $2,025 for the year 2022 from the $27,000 loan to an employee at a 10% interest rate.

Step-by-step explanation:

To calculate the amount of interest revenue Oberley Corporation will recognize in 2021 and 2022 from the $27,000 loan to an employee at a 10% interest rate, we need to consider the fraction of the year the loan is outstanding in each year. Since the loan is issued on October 1, 2021, and is a 12-month note, the interest for 2021 will be for 3 months, and the interest for 2022 will be for the remaining 9 months.

The annual interest on the loan is calculated as follows:

Interest = Principal × Interest rate × Time

For 2021:

Interest = $27,000 × 10% × (3/12) = $675

For 2022:

Interest = $27,000 × 10% × (9/12) = $2,025

Therefore, Oberley Corporation will recognize $675 in interest revenue for 2021 and $2,025 in interest revenue for 2022.

Answer 2

2021 $675

2022 $2,025

Step-by-step explanation:

Assuming that the financial year of the Oberly Corporation is from January to December.

The amount of interest revenue that will be recognised by the Oberly Corporation in its financial statements for the year ended December 31, 2021 will be as follows:

Interest Revenue=Principal amount*interest rate*3/12

Interest Revenue=27000*10%*3/12=$675

Since the Oberly Corporation has extended loan to its employee on October 1,2021, therefore only interest revenue of only 3 months will be recognised in the year ended December 31, 2021.

The amount of interest revenue that will be recognised by the Oberly Corporation in its financial statements for the year ended December 31, 2022 will be as follows:

Interest Revenue=27000*10%*9/12=$2,025

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