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    girlygoth91's Avatar
    girlygoth91 Posts: 6, Reputation: 1
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    #1

    Jan 22, 2012, 11:59 AM
    Calculate interest expense?
    Franklin Co. Borrowed $60,000 from a bank on July 1, 2007 and agreed to pay it back in ten months
    At an interest rate of 14% per year.
    Calculate the amount of interest expense related to this loan reported in Franklin Co.'s 2008
    Income statement. Do not use decimals in your answer.

    I'm confused as to how many months I should multiply it to.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Jan 22, 2012, 02:38 PM
    The loan is for 10 months starting on Jul 1, 2007 so there was 6 months used in 2007 (Jul-Dec). So there is 4 months of interest remaining in 2008.

    Interest = Principal * Rate * Time
    Interest = $60,000 * 14% * 4/12
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