On October 1, 2021, Oberley Corporation loans one of its employees $20,000 and accepts a 12-month, 8% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022.

Oberley Corporation

Amount of interest revenue that Oberley will recognize in 2021 and 2022 are:

2021: $400

2022: $1,200

Explanation:

Amount of employees' loans = $20,000

Duration of loans = 12-month

Interest rate = 8%

Date of loans = October 1, 2021

Interest revenue = $20,000 * 8% = $1,600

2021 revenue = $1,600 * 3/12 = $400

2021 revenue = $1,600 * 9/12 = $1,200

b) The interest revenue is calculated as 8% of $20,000.  This amount is then apportioned according to the number of months that it is consumed.  It is consumed for 3 months in 2021 and 9 months in 2022.  This agrees with the matching and accrual principles of generally accepted accounting principles.