On SeptemberSeptember ?30, 20162016?, Team BankTeam Bank loaned $ 1 comma 000 co
ID: 2438335 • Letter: O
Question
On
SeptemberSeptember
?30,
20162016?,
Team BankTeam Bank
loaned
$ 1 comma 000 comma 000$1,000,000
to
GerryGerry
ConstructionConstruction?,
?Inc., on a? one-year,
99
percent note.Read the requirements
LOADING...
.
Requirement 1. Compute the interest for the years ended December? 31,
20162016
and
20172017?,
on the note. Round interest calculations to the nearest dollar.
Start by determining the formula needed to compute interest.
x
x
=
Amount of interest
Now determine interest for the years ended December? 31,
20162016
and
20172017?,
on the
GerryGerry
ConstructionConstruction
note.
Interest for 2016:
Interest for 2017:
Requirement 2. Which party has
a.
a note? receivable:
?
Gerry Construction
Team Bank
b.
a note? payable:
?
Gerry Construction
Team Bank
c.
interest? revenue:
?
Gerry Construction
Team Bank
d.
interest? expense:
?
Gerry Construction
Team Bank
Requirement 3. How much in total would
GerryGerryConstructionConstruction?,
?Inc., pay the bank if it pays off the note early on
AprilApril
3030?,
20172017??
Total amount paid would be:
x
x
=
Amount of interest
Explanation / Answer
Face Value of Note = $1,000,000
Annual Interest Rate = 9%
Answer 1.
For 2016:
Amount of Interest = Face Value * Interest Rate * Year
Amount of Interest = $1,000,000 * 9% * 3/12
Amount of Interest = $22,500
For 2017:
Amount of Interest = Face Value * Interest Rate * Year
Amount of Interest = $1,000,000 * 9% * 9/12
Amount of Interest = $67,500
Answer 2.
Note Receivable = Team Bank
Note Payable = Gerry Construction
Interest Revenue = Team Bank
Interest Expense = Gerry Construction
Answer 3.
If note is paid off on April 30, 2017:
Amount of Interest = Face Value * Interest Rate * Year
Amount of Interest = $1,000,000 * 9% * 7/12
Amount of Interest = $52,500
Total Amount Paid = Face Value + Interest Accrued
Total Amount Paid = $1,000,000 + $52,500
Total Amount Paid = $1,052,500
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