Darvin Company purchased equipment with a fair value of $100,000 on a 6 percent,4-year installment note.What would be Darvin's annual payment on the note,assuming that payments are made at year end?

Question

Quizplus · Accepted Answer

The annual payment can be calculated using the formula for an installment loan: Payment = P * [r(1+r)^n] / [(1+r)^n - 1], where P is the principal ($100,000), r is the annual interest rate (0.06), and n is the number of payments (4). Solving this gives an annual payment of approximately $28,859.

Darvin Company Purchased Equipment with a Fair Value of $100,000