On september 30, 2018, corso steel acquired a patent from thermo steel. the agreement specified that corso will pay thermo $1,000,000 immediately and then another $1,000,000 on september 30, 2020. an interest rate of 8% reflects the time value of money for this type of loan agreement. (pv of $1, pva of $1) (use appropriate factor(s) from the tables provided.) what amount of interest expense, if any, would corso record on december 31, 2018, the company’s fiscal year end?

$17,146

Explanation:

Given:

Acquisition cost of patent = $2,000,000. $1,000,000 is paid immediately. Remaining $1,000,000 is paid after 2 years on September 30, 2020.

We have to calculate present value of $1,000,000 @8%, 2 years. Present value factor is 0.8573.

Present value of $1,000,000 = 1,000,000×0.8573 = $857,300.

Calculation of interest expense:

Principal amount = $857,300

Rate = 0.08

Time period = = \

Interest expense =

                             = $17,146

Therefore, interest expense to be recorded as on December 31, 2018 is $17,146