Interest Expense

Interest Expense is the interest payments the company pays for its outstanding borrowings. Just like the interest we pay on credit cards or a car loan, corporations must make regular interest payments (interest expense) on debt owed to banks or other lenders.

Interest Expense Is Often Presented on the Income Statement as Net Interest Expense

Net Interest Expense accounts for the interest income a company earns from its cash and investment holdings (just like the interest income we make off of our savings or money-market bank accounts).

14. Interest Expense
Exercise
Q1:At the start of 2007, a firm decides to take out a $100,000 10-year loan, which at that time has an interest rate of 5%. Calculate how much interest expense this company would record for the entire year, assuming it takes out this loan on January 1, 2007.
$50,000
$5,000
$10,000
$500
Q2:How much interest expense ...

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