Question

A partial amortization schedule for a 5-year note payable that Mabry Company issued on January 1,...

A partial amortization schedule for a 5-year note payable that Mabry Company issued on January 1, 2018, is shown as follows.

Accounting
Period		 Principal
Balance January 1		 Cash
Payment		 Applied to
Interest		 Applied to
Principal
2018 $ 133,000 $ 34,193 $ 11,970 $ 22,223
2019 110,777 34,193 9,970 24,223
2020 86,554 34,193 7,790 26,403

  1. What is the amount of interest expense on this loan for 2021? (Round your answers to the nearest whole dollar amount.)

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Answer #1

Solution:

Calculation of Interest expense on loan for 2021:

Interest Expense = (Principal Balance on 2020 - Amount applied to principal on 2020) * Annual Interest Rate

Interest Expense = ($86,554 - $26,403) * 9%

Interest Expense = $5,414

Working Note:

Calculation of Annual Interest Rate

Annual Interest Rate = (Amount applied to interest on 2018 * 100) / Principal Balance on 2018

Annual Interest Rate = ($11,970 * 100) / $133,000

Annual Interest Rate = 9% p.a

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