Question

How would i solve this?

Allstar Company signed a $250,000 mortgage on July 1, 2018 for the purchase of their new garage building. The mortgage entailed equal monthly payments of $3,000 at the end of each month. The interest rate is 8.0% per year. How much interest expense will be paid on August 31, 2018? (Round your answer to the nearest whole dollar.)

Answer 1

Firstly we have to calculate the carrying value of loan as on 1 august 2018

= beginning balance *(1+i%/12) - monthly payment

= ($250,000*(1+8%/12) – 3,000

= 251,667-3,000

= $ 248,667

Interest expense will be paid on august 31, 2018 is

= balance as on 1 august 2018* interest rate/12

= $248,667* 8%/12

= $ 1,658

The correct answer is $ 1,658

Interest expense will be paid on August 31, 2018 is $ 1,658

I hope it is useful to u if u have any doubt plz comment and plz give me up thumb