Vivo Co.received an 8-month,9% note for $100,000 from its agent on October 1,2016.The note is due on May 30,2017.If Vivo accounting period ends on December 31,2016,how much interest revenue should Vivo recognize during 2016 and 2017?
$\begin{array}{cc}
&&&\underline { 2016 }&&& \underline { 2017 } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$3,750&&\$2,250
\end{array}$

b.
$\begin{array}{cc}
&&&\$2,250&&\$3,750
\end{array}$

c.
$\begin{array}{cc}
&&&\$9,000&&&\$0
\end{array}$

d.
$\begin{array}{cc}
&&&\$3,375&&\$5,625
\end{array}$

Question

Vivo Co.received an 8-month,9% note for $100,000 from its agent on October 1,2016.The note is due on May 30,2017.If Vivo accounting period ends on December 31,2016,how much interest revenue should Vivo recognize during 2016 and 2017?  
$\begin{array}{cc}
&&&\underline { 2016 }&&& \underline { 2017 } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$3,750&&\$2,250
\end{array}$

b.
$\begin{array}{cc}
&&&\$2,250&&\$3,750
\end{array}$

c.
$\begin{array}{cc}
&&&\$9,000&&&\$0
\end{array}$

d.
$\begin{array}{cc} 
&&&\$3,375&&\$5,625
\end{array}$

Quizplus · Accepted Answer

Vivo should recognize interest revenue for 3 months in 2016 and 5 months in 2017.
For 2016:
Interest revenue = Principal x Rate x Time
= $100,000 x 9% x 3/12
= $2,250
For 2017:
Interest revenue = Principal x Rate x Time
= $100,000 x 9% x 5/12
= $3,750
Therefore, the total interest revenue that Vivo should recognize during 2016 and 2017 is $2,250 + $3,750 = $6,000. Option B is the best choice as it reflects this calculation.

Vivo Coreceived an 8-Month,9% Note for $100,000 from Its Agent on on October