Question

Rosewood Company made a loan of $9,600 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be:

Answer 1

Answer: Interest Revenue for year 1= $432 , for year 2= $145

Step-by-step explanation:

Interest = Principal x Rate x Time

For Year 1

Interest

= $9,600 x 6% x 9 / 12 (April to December =9 months)

= $432

For year 2

Interest= $9,600 x 6% x 3 / 12

( From Jan to March of year 2 since year 1 has been dealt with)

So, Interest

= $9,600 x 6% x 3 / 12

= $145

Interest Revenue for Rosewood company for year 1= $432

Interest Revenue for Rosewood company for year 2= $145