On May 1, 2016, Benz’s Sandwich Shop loaned $18,000 to Mark Henry for one year at 7 percent interest.

On May 1, 2016, Benz’s Sandwich Shop loaned $18,000 to Mark Henry for one year at 7 percent interest.

Required
a.     What is Benz’s interest income for 2016?





Explanation

a.

$18,000 × 7% × 8/12 = $840

b.

Total Receivables at December 31, 2016:

Notes Receivable	$18,000
Interest Receivable	840
Total Receivables	$18,840

d.

$18,000 × 7% × 4/12 = $420

e.

Total Cash to be collected:

Principal of note	$18,000
Total interest earned	1,260
Total cash	$19,260

g.

Total interest earned: $1,260 ($18,000 × 7%)

Thank you!