Question

On November 1, Jovel Company loaned another company $100,000 at a 6% 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:

Answer 1

The amount of interest revenue that will be recorded in the books of Jovel Company as on December 31 will be $1,000.

What is interest revenue?

The revenue which is generated by a company by the way of earnings made through interest over debts during a financial period is known as an interest revenue.

Using the above information, it can be ascertained that the total interest revenue over a loan of $100,000 will be $6,000, however, it was issued on November 1, and accounts close on December 31, so the interest revenue for 2 months will be computed as under,

$\rm Interest\ Revenue\ for\ 2\ Months= \dfrac{Total\ Interest\ Revenue}{12}\ x\ No.\ of\ Months\\\\\rm Interest\ Revenue\ for\ 2\ Months= \dfrac{6000}{12}\ x\ 2\\\\\rm Interest\ Revenue\ for\ 2\ Months= \ 1000$

Thus, the interest revenue has been computed as above.

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