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

Question

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

Quizplus · Accepted Answer

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.