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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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