If a lender issues a loan to a borrower for $1m, repayable in equal $250,000 chunks each quarter, but they can repay the principal balance at whatever point in the quarter they want to. If interest is 1% on the loan, and first quarter interest is based from 31/12 - 31/03 = $2,500.
If they decide to pay the principal and interest early, say 31/01, what criteria does the remaining 31/01-31/03 portion received in advance, count as unearned income, therefore adding a liability to the Balance sheet? Is it just automatically counted as unearned income, or can it be taken to P&L in January under any circumstances?
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.