Johnny took $20,000 loan from his employer, with an agreement to pay $1000 instalment every month,...

Johnny took $20,000 loan from his employer, with an agreement to pay $1000 instalment every month, at 3% interest when the government rate was 5%. Johnny had paid 3 instalments. Calculate the taxable benefit in the 4th month.

Expert Solution

Notes :

1) Taxable Income = Interest chargeble at Governement Interest rate - Interest Charged by employer

2) It is logical to assume that Installment is paid on last date of Month, Hence we have to calculate interest on amount outstanding beginning of the month. Alternative if assumed installment paid in months start date than we can calculate Interest on closing balance

3) Formula for Amount of Interest =

Amount Outstanding * Rate Of Interest * 1 month

12 month

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ekkarill92 answered 2 years ago

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