Example of Interest Expense on Loan | Note 13
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NOTE 13 - INTEREST EXPENSE FROM LOAN
In December 200W, the Company will receive a $20,000 loan to help finance the initial product development costs. An annual interest rate of 10% has been applied to the loan, thus resulting in an interest expense of $2,000. Below shows the balances in the interest expense account during the forecasted periods.
| YEAR 1 | YEAR 2 | YEAR 3 | |
| Interest Expense from Operating Loan | $2,000 | $ nil | $ nil |
Please note: The principal and interest of this loan is assumed to be paid in a lump sum in December 1998. In reality, J&B would pay monthly principal and interest payments (immaterial effect on forecasted financial statements).