On 1 March 2014, Bayonne Services made a loan to one of its officers. The officer signed a 6- month bill for $4 000 at 8%. Bayonne generally accrues interest at year- end only, so at the time the bill matured, Bayonne had not accrued any interest revenue. On 1 August when the bill matured, the officer settled in full with the company. How much interest revenue did Bayonne record?

Question

Quizplus · Accepted Answer

The interest revenue is calculated as the principal amount multiplied by the interest rate and the time period. For a $4,000 loan at 8% annual interest for 6 months, the interest is $4,000 * 0.08 * (6/12) = $160.

On 1 March 2014, Bayonne Services Made a Loan to One