Question

Isko Company, a calendar-year company, has a 6% note receivable dated November 1, 2020 in the original amount of P3,000,...


Isko Company, a calendar-year company, has a 6% note receivable dated November 1, 2020 in the original amount of P3,000,000. Payments of P1,000,000 in principal plus interest on the outstanding balance are due annually on October 31, 2021, 2022 and 2023.  

How much is the interest revenue from the note for the year ended December 31, 2021?

Answer

The company had note receivable of P 3,000,000 on November 1, 2020 Out of which P 1,000,000 is payable each on October 31, 2021, October 31, 2022 and October 31, 2023.

Interest revenue for 2021 will be total of the following:

  • Interest on P 3,000,000 at 6% for the period from January 1, 2021 to October 31, 2021, and
  • Interest on P 2,000,000 at 6% for the period from November 1, 2021 to December 31, 2021.

Calculation of Interest Revenue for the year 2021

Interest revenue for 2021 = Interest on P 3,000,000 at 6% for the period from January 1, 2021 to October 31, 2021 + Interest on P 2,000,000 at 6% for the period from November 1, 2021 to December 31, 2021

Interest revenue for 2021 = (P 3,000,000 X 6% X 10/12) + (P 2,000,000 X 6% X 2/12)

Interest revenue for 2021 = P 150,000 + P 20,000

Interest revenue for 2021 = P 170,000

 

Therefore, interest revenue for 2021 is P 170,000.

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