Question

On August 1, a $45,600, 7%, 3-year installment note payable is issued by a company. The note requires equal payments of principal plus accrued interest be paid each year on July 31. The present value of an annuity factor for 3 years at 7% is 2.6243. The payment each July 31 will be:____________.
a. $15,200.00.
b. $17,376.06.
c. $16,000.00.
d. $15,600.00.
e. $2,176.06.

Answer 1

Answer:

b. $17,376.06.

Explanation:

The computation of the payment made each on July 31 is as follows:

Given that

Note Value = $45,600 ;

Time = 3 years

Based on the above information

The payment made each year is

= Value of the note × PVIFA factor at 7% for 3 years

= $45,600 × 2.6243

=  $17,376.06

Hence, the correct option is b.