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##### Asked by: Kimi Zharmuhamedov

business and finance interest rates# How do you find the interest expense model?

**Model**future

**Interest Expense**as the average

**Cost**of Debt multiplied by the average amount of Debt on the Balance Sheet in each year. This is usually calculated as: (Beginning Debt Balance + Ending Debt Balance) ÷ 2.

Besides, how do you find interest expense?

The simplest way to calculate **interest expense** is to multiply a company's debt by the average **interest** rate on its debts. If a company has $100 million in debt at an average **interest** rate of 5%, its **interest expense** would be $100 million multiplied by 0.05, or $5 million.

**Interest**is found in the

**income statement**, but can also be calculated through the debt schedule. In

**financial**modeling,

**interest**expense flows into the

**income statement**, closing debt balance flows onto the balance sheet, principal repayments flow through the cash flow

**statement**, completing the scheudle.

Correspondingly, how do you calculate interest on a balance sheet?

Simply divide the **interest** expense by the principal **balance**, and multiply by 100 to convert it to a **percentage**. This will give you the periodic **interest rate**, or the **interest rate** for the time period covered by the income statement. If the information came from the company's annual income statement, you're done.

Form 1099-INT **Accrued Interest**. The **accrued interest** is **taxable** to the seller, whereas the **interest** that is earned from the date of purchase to the end of the year is **taxable** to the purchaser. However, at year end the purchaser will receive a Form 1099 showing the total **interest** received during the tax year.