Question

A company borrows $60,000 by signing a $60,000 8% 6 year note that requires equal payments of $12979 at the end of each year. The first payment will record interest expense of $4800 and will reduce principal by

Answer 1

Answer: $8179

Step-by-step explanation:

The principal is the amount of money that is invested at a particular interest rate.

In this scenario, we are informed that a company borrows $60,000 by signing a $60,000 8% 6 year note that requires equal payments of $12979 at the end of each year.

Since the first payment will record interest expense of $4800, then for us to get the amount that the principal will be reduced by, we subtract the interest expense made from the equal payments that are made at each year end. This will be:

= $12979 - $4800

= $8179