A. What is the interest expense incurred by Ferner in 2017? B. What is the total

Question

A. What is the interest expense incurred by Ferner in 2017? B. What is the total amount Ferner owes the bank on the December 31, 2017? C. What is the interest expense incurred by Ferner in 2018? (2) Ferner Co. borrowed $25,000 from a bank on June 1, 2017. Ferner signed a 9 month (due March 1, 2018), 6% note. Required (show calculations) A. What is the interest expense incurred by Ferner in 2017? B. what is the total amount Ferner owes the bank on December 31, 2017? C. What is the interest expense incurred by Ferner in 2018? D. How much cash will Ferner pay the bank on March 1, 2018?

Explanation / Answer

A.Interest expense incurred in 2017 (there were 7 months in 2017 for which amount was used), = $25,000 * 6% * (7 months / 12 months)

=>$875.

B.Total amount owed by end of december 31,2017 =>$25,000 + $875 =>$25,875.

C.Interest expense in 2018...(two months in 2018) =>$25,000* 6%*2/12 =>$250.

d.cash paid to bank on march 1,2018 => borrowed money + interest

=>$25,000 + $875 + $250 =>$26,125.

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