Question

On January 1, 2017, Ann Price loaned $157773 to Joe Kiger. A zero-interest-bearing note (face amount, $210000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2019. The prevailing rate of interest for a loan of this type is 10%. The present value of $210000 at 10% for three years is $157773. What amount of interest income should Ms. Price recognize in 2017

Answer 1

15,777

Step-by-step explanation:

Given the following :

Amount loaned = $157,7723

Prevailing Interest rate on such loan = 10%

Recognizable interest:

Amount loaned * Interest rate

$157,773 * 10%

157,773 * 10

15,777.3

= 15,777( to the nearest thousand)

Therefore, the amount of income Ms. Price will recognize in 2017 is $15,777.