Ask Question
23 February, 00:19

On October 1, 20X1, a company purchased a piece of land by agreeing to pay the seller $450,000 in two years. If the company had borrowed the money from a bank to pay the seller immediately, management estimates the bank would have required interest of 9%. Calculate the amount of interest expense the company would record for its year ending December 31, 20X1 (rounded to the nearest dollar).

a. $40,500.

b. $9,289.

c. $10,125.

d. $8,522.

+1
Answers (1)
  1. 23 February, 03:08
    0
    The answer is c. $10,125.

    Explanation:

    interest rate = 9%

    loan amount = 450000

    time = 0.25years

    Interest charge = 450000 * 0.25 * 0.09 = $10,125.

    The interest charge will be $10,125 because the loan was taken in October and the financial year ends in December, which makes it 3 months which is 0.25 years.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “On October 1, 20X1, a company purchased a piece of land by agreeing to pay the seller $450,000 in two years. If the company had borrowed ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers