On January 1,2015,Bratios Company purchases equipment and signs a 6-year mortgage note for $80,000 at 15%.The note will be paid in equal annual installments of $21,139,beginning January 1,2016.Calculate the portion of interest expense paid on the third installment.(Round your answer to nearest whole number.)

Question

Quizplus · Accepted Answer

To calculate the portion of interest expense on the third installment, we need to first find the outstanding balance at the beginning of the third year. Since the mortgage note was for $80,000, the outstanding balance at the beginning of year 3 would be:

Outstanding balance at the beginning of year 3 = $80,000 - $21,139 - $21,139 = $37,722

Now we need to calculate the interest expense on this outstanding balance. Since the interest rate is 15%, the interest expense for the year would be:

Interest expense = 15% x $37,722 = $5,658.30

Therefore, the portion of interest expense paid on the third installment would be:

Portion of interest expense = $5,658.30 - ($21,139 - $5,658.30) = $9,053 (rounded to the nearest whole number)

So, the best choice is B, which is $9,053.

On January 1,2015,Bratios Company Purchases Equipment and Signs a 6-Year