Trego Corporation purchased equipment with a fair value of $150,000 on a 6 percent note.The note requires four end-of-year payments of $43,290.How much of the first payment would be principal?
A)$43,290
B)$ 43,290 / 4 = $10,822.50
C)$9,000
D)unable to determine from the information given

Question

Quizplus · Accepted Answer

The first payment includes interest and principal. To find the principal portion, first calculate the interest for the first year: 6% of $150,000 = $9,000. The total first payment is $43,290, so subtract the interest ($9,000) from this to find the principal portion: $43,290 - $9,000 = $34,290. However, the correct principal amount is not listed among the options, indicating a mistake in my explanation. The correct approach is to recognize that the interest for the first year is indeed $9,000 (6% of $150,000), making the principal portion of the first payment $43,290 - $9,000 = $34,290. The error was in the interpretation of the provided options, not in the calculation.

Trego Corporation Purchased Equipment with a Fair Value of $150,000