Rosewood Company made a loan of $16,000 to one of the company's employees on April 1, 2020. The one-year note carried a 6% rate of interest. Principal and interest will be paid at the end of the term of the loan. The amount of interest revenue that Rosewood would report in 2020 and 2021, would be?

The answer is $720 and $240

Explanation:

Solution

Recall that:

Rosewood company made a loan of = $16,000

One year note carried an interest of = 6%

Now,

We solve for the amount of interest revenue that rosewood would report

Report is given below:

$16,000 * 6% * 9/12 = $720 Interest revenue in April to December, 2020

$16,000 * 6% * 3/12 = $240 interest revenue in January - March, 2021

Therefore the interest revenue for Rosewood report/feedback in 2020 and 2021 is $720 and $240 respectively.

loan interest revenue for 2020 is $720

loan interest revenue for 2021 is $240

Explanation:

The loan interest revenue in the year 2020 is for 9 months out of the total loan tenure of twelve months:

interest revenue for 2020=$16,000*6%*9/12=$720.00

This would be debited to interest receivable and credited to interest revenue account.

interest revenue for 2021=$16,000*6%*3/12=$240.00