Question

please explain the last two parts

how is it $1000

and how is it $52,333.33

your company obtains a short term loon on Seplember Ist , 2019 to Contes! costs to purchase myentory. The loan is for $50,000, the annual interest rate is 8 %. The loan is for 7 months and matures on March 31st, 2020 The journal entry on September 1st 2019 is DR. Cash 350,000 c Noles payable $50,000 Assumme a December 31 escolar end, the joxnal entry your company does on December 31, 2019 to come mterest is DR Interest Expense 5132326 CR Interest Payable s 1,333.33 How much interest o ne does NOX Company record on March 31st, 2020 When the loan matures ? $1,000 • How much total cash will your company pay back on March 31st, 2020? 852,333.33

Answer 1

Calculation of interest expense on short term loan
Interest expense	Loan amount*Interest rate*Proportionate number of months loan outstanding
In 2020, loan is outstanding for 3 months from January to March and thus interest expense would be for 3 months out of 12 months
Interest expense	50000*8%*(3/12)
Interest expense	4000*(3/12)
Interest expense	$1,000
The total cash paid by company would include the amount borrowed plus interest on short term loan.
Interest on short term loan would be for 7 months which would include interest accrued in 2019 for 4 months plus interest upto march 2020.
Interest	Interest for 4 months in 2019 + Interest for 3 months in 2020
Interest	1333.33+1000
Interest	$2,333.33
Amount payable	Loan amount + Interest
Amount payable	50000+2333.33
Amount payable	$52,333.33
Thus, company would pay total cash of $52,333.33
Interest for 4 months in 2019	50000*8%*(4/12)
Interest for 4 months in 2019	4000*(4/12)
Interest for 4 months in 2019	$1,333.33