Davis Corporation borrowed $50,000 on January 1,Year 1.The loan is for a 5-year period and has an annual interest rate of 9%.At the end of each year,Davis will make a payment of $7,791,which includes both principal and interest.The amount of the payment for Year 1 that is interest expense is $4,500.

Question

Quizplus · Accepted Answer

Year 1 Interest expense = Principal balance on January 1 of $50,000 × 9% = $4,500

Davis Corporation Borrowed $50,000 on January 1,Year 1