Question

On January 1, Year 1, Barnes Company issued a $100,000 installment note. The note had a 10-year term and an 8 percent interest rate. Barnes agreed to repay the principal and interest in 10 annual payments of $14,903 at the end of each year. The principal balance of the note on January 1, Year 2 is (round your answer to the nearest whole dollar).
a) $100,000
b) $92,000
c) $100,000
d) $92,000
e) $93, 097
f) $96,903

Answer 1

Answer:

e) $93,097

Explanation:

Interest for 1st year = $100,000*8%

Interest for 1st year =$8,000

Principal repayment for 1st year = $14,903 - $8,000

Principal repayment for 1st year = $6,903

Principal balance on January 1,Year 2 = $100,000 - $6,903

Principal balance on January 1,Year 2 = $93,097