On January 1, 2023 Birch Limited acquired equipment by signing a $40,000 note payable with a government lending agency. Related information includes: The $40,000 note payable must be paid in full at the end of three years, on December 31, 2025. There will be no principal payments before this date. The note bears interest at 2%. Interest payments of $800 must be made on each of December 31, 2023, 2024, and 2025. Birch's market rate or normal cost of borrowing is 8%. You are to work with the present value of all payments on January 1, 2023 correctly calculated as $33,664. What will be Birch's interest expense for 2023 using the effective interest method?

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To calculate Birch Limiteds interest expense for 2023 using the effective interest method we need to ... View the full answer