Currie Company borrowed $20,000 from the Sierra Bank by issuing a 10% three-year note. Currie agreed to repay the principal and interest by making annual payments in the amount of $8,042. Based on this information, the amount of the interest expense associated with the second payment would be: (Round your answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The amount of interest paid on the note each year can be calculated as follows:

Year 1: $20,000 x 10% = $2,000
Year 2: ($20,000 - $8,042) x 10% = $1,396
Year 3: ($20,000 - $16,084) x 10% = $3,916

Therefore, the interest expense associated with the second payment would be $1,396.

Currie Company Borrowed $20,000 from the Sierra Bank by Issuing