Firewood, inc. signed a? three-year note payable for? $59,000 at? 7% annual interest. what is the interest expense for 2017 if the note was signed on august? 1, 2017?

a. ? $12,390

b. ? $1,721

c. ? $4,130

d. ? $2,065

The interest rate for a year or 12 months is 7% (0.07).

Counting the months from August to December is 5 months.

So the interest rate for 5 months is equivalent to:

i = 0.07 * (5/12)

i = 0.0292

The interest expense would be:

expense = $59,000 * 0.0292

expense = $1721

Therefore the answer is letter B.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23