Rush Corporation borrowed $50,000 on January 1, 2014. The loan is for a five-year period and has an annual interest rate of 8%. At the end of each year, Rush will make a payment of $12,522.82, which includes both principal and interest. With this loan, the amount of interest expense that Rush reports on its income statement will be the same for each year of the loan.

Question

Quizplus · Accepted Answer

The interest expense will decrease each year as the principal balance of the loan decreases with each payment.

Rush Corporation Borrowed $50,000 on January 1, 2014