Answer:
To find the interest expense, first get the present value of the note.
2021 interest 2022 Interest
Present value = 35,000 / (1 + 12%)³ = 12% * (24,912 + 2,989)
= $24,912 = $3,348
2021 interest is added because
Interest = 12% * 24,912 it is now part of the liabilities.
= $2,989
2021 Liability
= Present value of Note payable + Interest for the year
= 24,912 + 2,989
= $27,901
2022 Liability
= 27,901 + 3,348
= $31,249
Figures are different from yours as yours lacks the complete details so I used a similar question.
