Corona Industries purchased a stamping machine on January 2, 2011, for $100,000. It paid $20,000 down and financed the balance over 5 years at State Bank. Terms of the loan were 10% interest payable on December 31 each year with a required $16,000 principal payment. 2014 proves to be a difficult year and on December 1, Corona negotiates a debt restructuring with State Bank. The settlement calls for cash payment of accrued interest plus $4,000 on December 1 and the transfer of 200 acres of land held by Corona that cost $15,000. The land has a current market value of $22,000.
-On December 1,2014,how much interest is accrued on this loan?

Question

Quizplus · Accepted Answer

Accrued interest @ 12/1/2014 = Loan balance @ 1/1/2014 × rate × time = ($100,000 - down payment $20,000 - payments ($16,000 × 3))= $32,000 × 10% × 11/12 = $2,933

Corona Industries Purchased a Stamping Machine on January 2, 2011