Financial Accounting: Amount of Interest Revenue

Question

On July 1, 2016, Empire Inc. lends $12,000 to a customer and receives a 9% note due in two years. Interest is due in full on July 1, 2018, the due date of the note. What is the amount of Interest Revenue that will be reported on Empire’s income statement for the year ended December 31, 2016?
$540.
$1,080.
$2,160.
$630.

Answer 1

Hello Becky,

 

July 1st to December 31, 2016 is 6 months

 

so this half a years worth of interest

 

 

$12,000 X 9/100 X 1/2   =   $540

 

 

 

OR   $12,000 X .09 X .5  =   $540

 

 

I am happy that you take the initiative to seek help!