Carey Anderson opened a software consulting firm that immediately paid $21,000 for a computer system. Was Anderson's computer
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Answer:
$17,146
Explanation:
Given:
Acquisition cost of patent = $2,000,000. $1,000,000 is paid immediately. Remaining $1,000,000 is paid after 2 years on September 30, 2020.
We have to calculate present value of $1,000,000 @8%, 2 years. Present value factor is 0.8573.
Present value of $1,000,000 = 1,000,000×0.8573 = $857,300.
Calculation of interest expense:
Principal amount = $857,300
Rate = 0.08
Time period = =
\
Interest expense =
= $17,146
Therefore, interest expense to be recorded as on December 31, 2018 is $17,146