Question

On September 1, Year 1, Vincent Company loaned $24,000. The note had a 7% interest rate and a one-year term.

Do not use dollar sign ($), commas (,) or decimal points (.) in your answers.


1. Calculate the amount of interest revenue recognized by Vincent Company during Year 1. Blank 1. Fill in the blank, read surrounding text.


2. Calculate the amount of interest revenue recognized by Vincent Company during Year 2. Blank 2. Fill in the blank, read surrounding text.


3. Calculate the amount of cash collected by Vincent Company on August 31, Year 2.

Answer 1

1. Amount of interest revenue recognized by Vincent Company during Year 1 = 560

2. Amount of interest revenue recognized by Vincent Company during Year 2 = 1120

3. Amount of cash collected by Vincent Company on August 31, Year 2 = 25680

Step-by-step explanation:

1. Let's review the information given to us to answer the questions correctly:

Amount Vincent Company loaned = US$ 24,000

Interest rate = 7% = 0.07

Term = 1 year = 12 months from September 1st, Year 1 to August 31st, Year 2

2. Calculate the amount of interest revenue recognized by Vincent Company during Year 1.

Amount of interest revenue recognized by Vincent Company during Year 1 = Amount Vincent Company loaned * Interest rate/12 * 4

Replacing with the real values, we have:

Amount of interest revenue recognized by Vincent Company during Year 1 = 24,000 * 0.07/12 * 4

= 560

3. Calculate the amount of interest revenue recognized by Vincent Company during Year 2.

Amount of interest revenue recognized by Vincent Company during Year 2 = Amount Vincent Company loaned * Interest rate/12 * 8

Replacing with the real values, we have:

Amount of interest revenue recognized by Vincent Company during Year 2 = 24,000 * 0.07/12 * 8

= 1120

4. Calculate the amount of cash collected by Vincent Company on August 31, Year 2.

Amount of cash collected by Vincent Company on August 31, Year 2 = Amount Vincent Company loaned + Interests for one year

Replacing with the real values, we have:

Amount of cash collected by Vincent Company on August 31, Year 2 = 24,000 + (24,000 * 0.07)

Amount of cash collected by Vincent Company on August 31, Year 2 = 24,000 + 1,680

Amount of cash collected by Vincent Company on August 31, Year 2 = 25680