Collins Company borrowed $750,000 from BankTwo on January 1, 2013 in order to expand its mining capabilities. The five-year note required annual payments of $195,327 and carried an annual interest rate of 9.5%. What is the balance in the notes payable account at December 31, 2014?
A) $750,000
B) $490,059
C) $625,923
D) $607,500

Question

Quizplus · Accepted Answer

The correct answer is B. The balance in the notes payable account at December 31, 2014 is $490,059. This is because the company has made two annual payments of $195,327, which reduces the principal balance by $390,654. The remaining balance of $490,059 is the amount that is still owed on the note.

Collins Company Borrowed $750,000 from BankTwo on January 1, 2013