Allstar Company signed a $300,000 mortgage on July 1, 2018 for the purchase of their new garage building. The mortgage entailed equal monthly payments of $2,500 at the end of each month. The interest rate is 7.0% per year.
How much interest expense will be paid on August 31, 2018?
The mortgage loan is treated as a long-term loan. The interest amount is computed by applying the given interest rate over the principal mortgage loan amount. The interest amount is charged as an expense for the period.
Answer and Explanation:
The interest expense that will be paid on August 31, 2018, is $2,100.
Explanation: The interest expense that will be paid on August 31, 2018 is $175 ($300,000 x 7% x 1/12).
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Learn more about this topic:
from Finance 102: Personal FinanceChapter 7 / Lesson 4