Question

Suppose you borrow $10,000 from the bank on January 15, 2018 to finance your business.  The annual interest rate on the loan is 6%. How much will you record as an interest expense on January 31, 2018?

Answer 1

Amount borrowed on Jan 15,2018 = $10,000

No of days till Jan 31, 2018 = 17 days

Interest Expenses = Loan amount*Annual Interest rate*No of days/365

= $10,000*6%*17/365

= $27.95

So, the amount of interest to be recorded on Jan 31, 2018 is $27.95

Note - INterest rate is annual so assuming it to be compounding annually.

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