Question

Smithsonian Industries purchased a supply of electronic components from Sunshine Corporation on October 31, 2021. In payment for the $1,000,000 million purchase, Smithsonian issued a 1-year installment note to be paid in equal monthly payments of 88,849 at the end of each month. The payments include interest at the rate of 12%. What is the amount of interest expense that Smithsonian will report in its income statement for the year ended December 31, 2021? 

Answer 1

Answer is $ 19,212 1,000,000 Value of note payable = Monthly interest rate = Monthly payment on note = $ 12% / 12 = 1% $ $ 88,849 А $ $ $ Interest expense for Nov 2018 = $1,000,000 *1% = Nov 30-Payment towards note payable=88849-10000 = Balne in Note payable (1000000-78849) = Interest expense for Dec 2018 = ($921,151) *1% = total Interest expense = (10000+9212 )= $ 10,000 78,849 921,151 9,212 19,212 B $ $ $ $ C=A+B Interest expense reported in income statement for the year ended December 31, 2021= $ 19,212 please comment if you have any doubt Please give thumps up if you satisfied with the answer

Answer 2

Amortization Schedule
Date	Cash Paid	Interest Expense	Reduction in Principal	Outstanding balance
Oct. 31, 2021				1,000,000
Nov. 30, 2021	88,849	1,000,000 x 1% = 10,000	88,849-10,000 = 78,849	1,000,000-78,849= 921,151
Dec. 31, 2021	88,849	921,151 x 1% = 9,212	88,849-9,212 = 79,637	921,151-79,637 = 841,524
Total		$19,212

Interest expense to be reported in the income statement for the year ended December 31, 2021 = $19,212

Kindly comment if you need further assistance.

Thanks

Answer 3

Note payable = $1,000,000

Annual interest rate = 12%

Monthly interest rate = 1%

Note Amortization Schedule
Date	Cash Paid	Interest Expense	Reduction in Principal	Outstanding balance
Oct. 31				1,000,000
Nov. 30	88,849	1,000,000 x 1% = 10,000	88,849-10,000 = 78,849	1,000,000-78,849= 921,151
Dec. 31	88,849	921,151 x 1% = 9,212	88,849-9,212 = 79,637	921,151-79,637 = 841,524
Total		$19,212

Interest expense to be reported in the income statement for the year ended December 31, 2021 = $19,212

Kindly give a positive rating if you are satisfied with this solution and please ask if you have any query.

Thanks

Answer 4

The calculation for the interest expense to be recorded is as under

1000000/12= $83333.33

Montly payment= 88849

Interest expense per month= 88849-833333.33=5517.67

From 1st Nov to 31 December = 5517.67*2 = 11031.34, the amount that should be. Reported for the year ended dec 31