Allstar Company signed a $300,000 mortgage on July 1, 2018 for the purchase of their new garage building

Accounting Sep 14, 2020

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 4.0% per year. How much interest expense will be paid on August 31, 2018? (Round your answer to the nearest whole dollar.)

Expert Solution

Carrying value of loan= beginning balance *(1+i%/12) - monthly payment

= (300000* (1+ 4%/ 12) - 2500

= 298500

Interest expense= Carrying value * interest rate/12

= 298500* 4%/12

= $995

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