Question

On January 1, 2017, Ahmed Inc. loaned $316,837 to Cyrus Co. A zero-interest-bearing note (face amount, $400,000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2020. The prevailing rate of interest for a loan of this type is 6%. What amount of interest expense will Cyrus recognize over the four years?

Answer 1

Answer:

the amount of interest expense for the four years is $76,041

Explanation:

The computation of the amount of interest expense for the four years is shown below:

= Loan amount × rate of interest × number of years

= $316,837 × 6% × 4 years

= $76,041

Hence, the amount of interest expense for the four years is $76,041