[goods4188]

On December 1, y1, X corp gave Y corp a $200,000 12% interest loan. Y Corp paid a origination fee of $6000 and only received $194,000. Principal and interest are due in 60 monthly installments of $4450, beginning January 1, Year 2. The repayments yeild an effective itnerest rate of 12% at the PV of $200,000 and 13.4% at the PV of $194,000. What amount of accrued interest receivable should C Corp report on its December 31, Y1 financials.

Answer is $2000.

$200,000 x .12 x 1/12 = one month’s coupon aka the recievable.

I just dont get it. What about the monthly installments? What exactly is the accounting behind the one month of accrued interest even though the payments dont start until January? Also how do you account for the amortization of deferred interest income?

I am truly lost on this question and Becker’s explanation is soo short and doesnt make sense to me. all they say is to get the coupon rate and thats the deferred interest receivable, why? how does that affect the monthly installments? what about the book value of 194,000? I just don get ANY of the accounting behind this question.

I really just dont get this question or its anwser in general so I am open to ANY type of explanation.

[Anonymous]

There's a lot of distracting information in that problem. The loan was made on 12/1 with the first payment being due January 1st, so it's 1 month of interest to accrue, which works out to $2000. They aren't asking for deferred interest receivable, but accrued interest receivable.

I hope that helps!

[Author]

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