Asked by Ariel Kirkpatrick on Jul 03, 2024
Verified
On March 2, Conroy and Conrad Inc.obtained a loan for $120,000 for 5 years at 4%.Payments are $2,210 per month How much interest expense is recorded with the first instalment payment?
A) $400
B) $210
C) $2,400
D) $4,800
Instalment Payment
A method of payment whereby the total cost of a purchase is divided into smaller amounts, to be paid over a specified period of time.
Loan
Borrowed money that is expected to be paid back with interest over a set period of time.
- Differentiate among several types of liabilities and their corresponding accounting treatments, placing special emphasis on long-term notes and bonds.
- Understand the concept of market interest rate and its significance in bond pricing and interest calculations.
Verified Answer
RK
Rakesh KumarJul 07, 2024
Final Answer :
A
Explanation :
The interest expense for the first installment is calculated on the initial loan amount. At a 4% annual interest rate on a $120,000 loan, the monthly interest expense is $120,000 * 4% / 12 = $400.
Learning Objectives
- Differentiate among several types of liabilities and their corresponding accounting treatments, placing special emphasis on long-term notes and bonds.
- Understand the concept of market interest rate and its significance in bond pricing and interest calculations.