Shannyn V.

Suarez ABM12-B

Reynaldo San Mateo, an angel investor, decided to invest P1,200,000 excess cash in a certificate
of deposit on April 1, 2020. The certificate carried an 8% annual rate of interest and a 1-year
term to maturity. Interest will be withdrawn monthly (disregard tax effects). Required:

1. What amount of income will be recognized for the year ending Dec. 31, 2020?

1,200,000x0.08=96,000

96,000x9/12=72,000 april-december

2. What is the effect of the adjusting entry on the accounting equation?

increase assets and owners’ equity

3. What amount of cash will be collected for interest revenue in 2020?

72,000

4.What is the amount of interest receivable as of Dec. 31, 2020?

72,000x3/12=24,000 april

5. What amount of cash will be collected for interest revenue in 2021?

1,200,000x8%=96,000

96,000-72,000=24,000

6. What amount of interest revenue will be recognized in 2021?

24,000

7. What is the amount of interest receivable as of Dec. 31, 2021?

Zero, the interest is just for 1 year.

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