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 = ![857,300\times 0.08\times \frac{1}{4}](https://tex.z-dn.net/?f=857%2C300%5Ctimes%200.08%5Ctimes%20%5Cfrac%7B1%7D%7B4%7D)
= $17,146
Therefore, interest expense to be recorded as on December 31, 2018 is $17,146