Question

Crane Company borrowed $1610000 from U.S. Bank on January 1, 2019 in order to expand its mining capabilities. The 5-year note required annual payments of $419303 and carried an annual interest rate of 9.5%. What is the amount of expense Crane must recognize on its 2020 income statement

Answer 1

Answer:

Interest expenses in 2020 = $127,646

Explanation:

Given:

Amount borrowed =  $1,610,000

Annual interest rate = 9.5%

Annual payments = $419,303

Find:

Interest expenses in 2020

Computation:

Interest expense (2019) = $1,610,000 x 9.5%

Interest expense (2019 = $152,950

Balance at the end of 2019 = $1,610,000 + $152,950 - $419,303

Balance at the end of 2019 = $1,343,647

Interest expenses in 2020 = $1,343,647 x 9.5%

Interest expenses in 2020 = $127,646