Question

Magenta Company purchased a machine from Pink Corporation on October 31, 2021. In payment for the $276,000 purchase, Magenta issued a one-year installment note to be paid in equal monthly payments of $24137 at the end of each month. The payments include interest at the rate of 9%. The amount of interest expense that Magenta will report in its income statement for the year ended December 31, 2021, is:

Answer 1

Month Beginning Balance (A) Principal Repayment (B) = (D-C) Total Ending Payment (D) Balance A-B) Interest Repayment (C)= (A*9%*(1/12) 2,070 1,904 3,974 Nov 21 Dec' 21 276,000 22,067 253,933 22,233 Total Interest expense 24,137 24,137 253,933 231,700 Answer is $ 3,974).