Vivo Co. received an 8-month, 9% note for $100,000 from its agent on October 1, 2016....
Vivo Co. received an 8-month, 9% note for $100,000 from its
agent on October 1, 2016. The note is due on May 30, 2017. If Vivo
accounting period ends on December 31, 2016, how much interest
revenue should Vivo recognize during 2016 and 2017?
| 2016 | 2017 |
a.
$2,250 $3,750
b.
$3,375 $5,625
c.
$9,000 $0
d.
$3,750 $2,250
Homework Answers
Answer
- Note received on 1 Oct 2016
- No of months till 31 Dec 2016 since 1 Oct 2016 = 3 months
- Interest revenue for 2016 = $ 100000 x 9% x 3/12 = $ 2250
- Remaining no of months the note stayed outstanding = 8 month – 3 months = 5 months
- Interest Revenue for 2017 = $ 100000 x 9% x 5/12 = $ 3750
- Correct Answer = Option ‘a’ $ 2250 [2016] and $ 3750 [2017]
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