On October 1, 2018, Oberley Corporation loans one of its employees $32,000 and accepts a 12-month, 8% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2018 and 2019.

For 2018, the amount of interest would be $640

For 2019, the amount of interest would be $2,560

Explanation:

The amount of interest revenue which the company will acknowledge in the year 2018 is computed as:

Amount of interest revenue = Loan amount × Percentage of note × Number of months / 12

where

Loan amount is $32,000

Percentage of loan is 8%

Number of months will be 3 months (October, November, December). As the loan is made on October 1

Putting the values above:

Amount of interest revenue = $32,000 × 8% × 3/12

Amount of interest revenue = $640

The amount of interest revenue which the company will acknowledge in the year 2019 is computed as:

Amount of interest revenue = Loan amount × Percentage of note

where

Loan amount is $32,000

Percentage of loan is 8%

Putting the values above:

Amount of interest revenue = $32,000 × 8%

Amount of interest revenue = $2,560

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