Question

On January 1, 2018, Allgood Company purchased equipment and signed a six - year mortgage note for $80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1, 2019. Calculate the portion of interest expense paid on the third installment. (Round your answer to the nearest whole number.) O A. $9,053 O B. $12,000 O C. $70,861 O D. $21,139

Answer 1

Correct answer------------(A) $9,053

Working

Year	Beginning year balance	Interest expense	Installment	Reduction in mortgage	Ending mortgage amount
1	$          80,000	$          12,000	$        21,139	$                       9,139	$       70,861
2	$          70,861	$          10,629	$        21,139	$                     10,510	$       60,351
3	$          60,351	$             9,053*	$        21,139	$                     12,086	$       48,265
4	$          48,265	$             7,240	$        21,139	$                     13,899	$       34,366
5	$          34,366	$             5,155	$        21,139	$                     15,984	$       18,381
6	$          18,381	$             2,757	$        21,139	$                     18,382	$               (0)

*60351 x 15%