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28 October, 06:31

Crane Company borrowed $750000 from BankTwo on January 1, 2019 in order to expand its mining capabilities. The 5-year note required annual payments of $195327 and carried an annual interest rate of 9.5%. What is the amount of expense Crane must recognize on its 2020 income statement

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  1. 28 October, 07:33
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    The interest expense of $59,463 must be recognize on its 2020 income statement.

    Explanation:

    With the given data make an amortization schedule

    Hint : First determine the Future Value of the 5-year note

    PV = $750,000

    N = 5

    Pmt = - $195,327

    P/yr = 1

    i = 9.5%

    Fv = 0

    Input the elements in a Financial Calculator.

    2019

    interest expense = $71,250

    2020

    interest expense = $59,463

    Conclusion:

    The interest expense of $59,463 must be recognize on its 2020 income statement.
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Home » Business » Crane Company borrowed $750000 from BankTwo on January 1, 2019 in order to expand its mining capabilities. The 5-year note required annual payments of $195327 and carried an annual interest rate of 9.5%.
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