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On September 1, 2021, Middleton Corp. lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months. How much interest revenue will Middleton Corp. report during 2021?

Respuesta :

jepessoa

Answer:

$40

Explanation:

the total interest that Middleton should earn = principal x interest rate x time

  • interest = $1,000 x 12% x 4/12 = $40

Middleton should report interest earned during the months of September, October, November and December (4 months in total). The remaining interest must be reported during 2022 according to the accrual principle that states that revenue should only be reported once the earning process is completed.

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