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Valix Fin Acctng 8-2 2012 Edition

On January 1, 2012, a company received a $4,000,000 loan and recorded $342,100 of unearned interest income. Interest is received annually on December 31st and the loan is amortized over 4 years using the effective interest method. Each year, cash received as interest is recorded against interest income and the unearned interest income account is reduced. On December 31, 2014, the final interest payment is received and the loan is paid off in full.

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516 views

Valix Fin Acctng 8-2 2012 Edition

On January 1, 2012, a company received a $4,000,000 loan and recorded $342,100 of unearned interest income. Interest is received annually on December 31st and the loan is amortized over 4 years using the effective interest method. Each year, cash received as interest is recorded against interest income and the unearned interest income account is reduced. On December 31, 2014, the final interest payment is received and the loan is paid off in full.

Uploaded by

kessssa
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Jan 1,2012

Loan Recievable

4,000,000
Cash

4,000,000

Cash

342,100
Unearned income

342,100

Unearned interest income


Cash
Pv of principal interest
( 4,000,000 x 0.7118 )
Pv of interest
( 400,000 x 2.4018 )

Date

150,000
2,847,200
960,720
3,807,920

Interest Received

1/1/2012
12/31/2012
12/31/2013
12/31/2014

150,000

Interest Income

400,000
400,000
400,000

456,950
463,784
471,345

Amortization

Carrying amount
3,807,920
3,864,870
3,928,655
4,000,000

56,950
63,784
71,345

Dec 31,2012
Cash

400,000
Interest Income

Unearned interest income


Interest income

400,000
56,950
56,950

Dec 31,2013
Cash

400,000
Interest income

Unearned interest income


Interest income

400,000
63,784
63,784

Dec 31,2014
Cash

400,000
Interest income

Unearned interest income


Interest income
Cash

400,000
71,345
71,345
4,000,000

Loan Receivable

4,000,000

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