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On January 1, 2018, Tustumena Company purchased a used tractor. Tustumena paid $4,000 down and...

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Accounting

On January 1, 2018, Tustumena Company purchased a used tractor. Tustumena paid $4,000 down and signed a noninterest-bearing note requiring $20,000 to be paid on December 31, 2020. The fair value of the tractor is not determinable. An interest rate of 5% properly reflects the time value of money for this type of loan agreement. The company's fiscal year-end is December 31. Question Interest expense for 2019 would be: $1,000 $1,117 $864 $907

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