Question

On January 1, 2019, Brooks Inc. borrows $90,000 from a bank and signs a 5% installment note requiring four annual payments of $25,381 at the end of each year. During the year ending December 31, 2019, the amount of the payment that is allocated to interest expense equals _____.

Answer 1

$4,500

Step-by-step explanation:

Answer 2

$4,500

Step-by-step explanation:

Data provided in the question:

Amount borrowed by Brooks Inc. = $90,000

Interest rate = 5% = 0.05

Annual payments = $25,381

Now.

The amount of the payment allocated to the interest expense

= Amount borrowed by Brooks Inc. × Interest rate

or

The amount interest expense = $90,000 × 0.05

or

The amount interest expense = $4,500