On August 1, a $42,000, 7%, 3-year installment note payable is issued by a company. The note requires equal payments of principa

Question

3 years ago

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On August 1, a $42,000, 7%, 3-year installment note payable is issued by a company. The note requires equal payments of principa

l plus accrued interest of $16,004.17. The entry to record the first payment on July 31 would include:a. $14,000.00.
b. $16,004.17.

c. $14,800.00.

d. $14,400.00.

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1 answer:

Anvisha [2.4K] · Answer 1 · 2022-03-20T07:23:55+03:00

Answer:

b. $16,004.17

Explanation:

The bond pays annual interest of 7% over the 3 years. The annuity factor at 7% for 3 years is 2.6243. The amount of bond is divided by annuity factor to calculate the annual payment of bond. The payment includes bond principal repayment and interest payment. The first payment on July 31 will be for $16,004.17.