Question

The amount of principal that is paid at December 31,Alden Trucking Company is replacing part of its fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2019. Alden financed $37,908,000, and the note agreement will require $10 million in annual payments starting on December 31, 2019 and continuing for a total of four more years (final payment December 31, 2023). Kenworthy will charge Alden Trucking Company the market interest rate of 10% compounded annually. 2019 is:

Answer 1

Answer:

$3,169,880

Explanation:

Calculation for How much is 2020 interest Expenses

First step is to calculate December 31, 2019 note payable liability

Using this formula

December 31, 2019 note payable liability = Initial debt + 2019 interest expense - First annual payment

Let plug in the formula

December 31, 2019 note payable liability = $37,908,000+ ($37,908,000 ×10%) - ($10,000,000)

December 31, 2019 note payable liability=$37,908,000+$3,790,800-$10,000,000

December 31, 2019 note payable liability=$31,698,800

Now let calculate 2020 interest expense

2020 interest expense = January 1, 2020 book value $31,698,800 ×10%

2020 interest expense =$3,169,880

Therefore 2020 interest Expenses will be $3,169,880