On January 1, Year 1, Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a 5-year, 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan equals $81,150.What is the amount of principal repayment included in the payment made on December 31, Year 1?

Question

Quizplus · Accepted Answer

The annual interest for the first year is $324,000 * 8% = $25,920. The total payment is $81,150, so the principal repayment is $81,150 - $25,920 = $55,230.

On January 1, Year 1, Mahoney Company Borrowed $324,000 Cash