Question

The Esquire Clothing Company borrowed a sum of cash on October 1, 2018, and signed a note payable. The annual interest rate was 12% and the company's year 2018 income statement reported interest expense of $1,260 related to this note. What was the amount borrowed?

Answer 1

Answer:

$ 44262,74

Explanation:

The interest Paid was about october, november an december 2018 (3 months).

Interest rate  is 12% anual, but to convert to monthly is necessary  to apply compound interest formula:

MonthlyRate = ((1 + Anual Rate) ^1/12 − 1)

Monthly Rate= ((1 + 0,12)^(1/12) - 1) = 0,9488%

3 months= 3 * 0,9488% =  2,8466%

1260 is equivalent to 2,8466%, so 100% is equal to original debt :

1260 * 100% / 2,8466%  = $44262,74