Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows:
-Refer to Exhibit 14-10. Interest expense for the first year is

Question

Exhibit 14-10 Elaine, Inc. issued a seven-year non-interest-bearing note with a face value of $20,000 and received $13,301. Actuarial information for seven periods is as follows: 
-Refer to Exhibit 14-10. Interest expense for the first year is

Quizplus · Accepted Answer

The interest expense for the first year can be calculated as the effective interest rate multiplied by the carrying value of the note at the beginning of the period.

The effective interest rate can be calculated using the actuarial information provided:

(1 + i)^7 = (20,000/13,301)
i = 6.51%

The carrying value of the note at the beginning of the first year is the amount received, which is $13,301.

Therefore, interest expense for the first year is:

$13,301 x 6.51% = $798.06

Thus, the correct answer is C.