Question

On January 1, 2017, Ann Price loaned $187,825 to Joe Kiger. A zero-interest-bearing note (face amount, $250,000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2019. The prevailing rate of interest for a loan of this type is 10%. The present value of $250,000 at 10% for three years is $187,825. What amount of interest expense should Joe Kiger recognize in 2017? Select one:

a. $25,000
b. $75,000
c. $56,350
d. $18,783

Answer 1

Option D is correct.

Interest expense in 2017= $18,783

Step-by-step explanation:

Interest expense in 2017 = 187825*10% = $18782.5( Approx $18,783)