Question

On November 1, Jasper Company loaned another company $100,000 at a 6.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31. The amount of interest revenue that should be reported in the first year is: Multiple Choice

a. $0.
b. $6,000.
c. $5,000.
d. $16,667
e. $1,000

Answer 1

e. $1,000. The interest revenue that should be reported in the first year is $1,000.

Step-by-step explanation:

The interest revenue that should be reported in the first year can be calculated using the formula: Interest = Principal x Rate x Time. In this case, the principal is $100,000, the rate is 6%, and the time is from November 1 to December 31, which is 2/12 of a year. Therefore, the interest revenue for the first year is $100,000 x 6% x 2/12 = $1,000.