LG 6 Loan interest deductions Liz Rogers just closed a $10,000 business loan tha
ID: 2809468 • Letter: L
Question
LG 6 Loan interest deductions Liz Rogers just closed a $10,000 business loan that she must repay in three equal, end-of-year payments. The interest rate on the loan is 13%. As part of her firm's detailed financial planning, Liz wishes to determine the annual interest deduction attributable to the loan. (Because it is a business loan, the interest portion of each loan payment is tax-deductible to the business.) P5-49 a. Determine the firm's annual loan payment b. Prepare an amortization schedule for the loan. c. How much interest expense will Liz's firm have in each of the next 3 years as a result of this loan?Explanation / Answer
Loan Amount $10,000 No of yrs 3 Interest Rate 13% a Using the PMT function in excel we can calculate the yearly payments ($4,235.22) PMT(13%,3,10000) b Year Beginning Balance Interest Principal Total Payment Closing Balance 1 10000.00 1300.00 2935.22 4235.22 7064.78 2 7064.78 918.42 3316.80 4235.22 3747.98 3 3747.98 487.24 3747.98 4235.22 0.00 c Year 1 - Interest - $1300 Year 2 - Interest - $918.42 Year 1 - Interest - $487.24
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