Straight Industries Purchased a Large Piece of Equipment from Curvy

Multiple Choice

Straight Industries purchased a large piece of equipment from Curvy Company on January 1,2019.Straight Industries signed a note,agreeing to pay Curvy Company $400,000 for the equipment on December 31,2021.The market rate of interest for similar notes was 8%.The present value of $400,000 discounted at 8% for three years was $317,532.On January 1,2019,Straight Industries recorded the purchase with a debit to equipment for $317,532 and a credit to notes payable for $317,532.
- How much is the 2020 interest expense,assuming that the December 31,2019 adjusting entry was made?

A) $27,435.
B) $27,962.
C) $32,000.
D) $29,693.