Question

Currie Company borrowed $30,000 from the Sierra Bank by issuing a 9% three-year note. Currie agreed to repay the principal and interest by making annual payments in the amount of $11,852. Based on this information, the amount of the interest expense associated with the second payment would be: (Round your answer to the nearest dollar.)

Answer 1

Answer:

$1,876

Explanation:

The computation of the amount of the interest expense is shown below:-

Year    Annual      Interest           Principal             Outstanding

          Payments   Amount 9%     Amount

0                                                                                  $30,000

1          $11,852    $30,000 × 9%  $11,852 - $2,700   $30,000 - $9,152

                                $2700             $9,152                   $20,848

2         $11,852    $20,848 × 9%   $11,852 - $1,876     $30,000 - $9,976

                                  $1,876         $9,976                     $20,024