On October 1, 2021, Oberley Corporation loans one of its employees $27,000 and accepts a 12-month, 10% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022.

2021: 675

2022: 2,025

Explanation:

The Company loaned in the month of October 2021, so three months interest income will be recognized calculated as follows:

27,000 * 10% (3/12) = 675

On 1 October 2021, the Company accepted 12 months note so it means that the loan was repaid on 30 September 2022, thus 9 months interest revenue will be recorded:

27,000 * 10% (9/12) = 2,025

2021 $675

2022 $2,025

Explanation:

Assuming that the financial year of the Oberly Corporation is from January to December.

The amount of interest revenue that will be recognised by the Oberly Corporation in its financial statements for the year ended December 31, 2021 will be as follows:

Interest Revenue=Principal amount*interest rate*3/12

Interest Revenue=27000*10%*3/12=$675

Since the Oberly Corporation has extended loan to its employee on October 1,2021, therefore only interest revenue of only 3 months will be recognised in the year ended December 31, 2021.

The amount of interest revenue that will be recognised by the Oberly Corporation in its financial statements for the year ended December 31, 2022 will be as follows:

Interest Revenue=27000*10%*9/12=$2,025

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