Question

On January 1, 2020, Ann Price loaned $212355 to Joe Kiger. A zero-interest-bearing note (face amount, $275000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2022. The prevailing rate of interest for a loan of this type is 9%. The present value of $275000 at 9% for three years is $212355.

What amount of interest income should Ms. Price recognize in 2020?

Answer 1

$19,112

Step-by-step explanation:

Data provided as per the question below:

Price loaned = $212,355

Rate of percentage = 9%

The computation of interest income is shown below:-

Interest income = Price loaned × Rate of percentage

= $212,355 × 9%

= $19,112

Therefore for computing the interest income we simply multiply the price loaned with rate of percentage.