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On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150.
-The amount of principal repayment included in the December 31,2016 payment is:
A)$25,920.
B)$81,150.
C)$74,658.
D)$55,230.

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On January 1,2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note.The principal and interest are repaid by making annual payments beginning on December 31,2016.The annual payment on the loan based on the present value of annuity factor would be $81,150.
-The amount of principal repayment included in the December 31,2016 payment is:
A)$25,920.
B)$81,150.
C)$74,658.
D)$55,230.

Quizplus · Accepted Answer

The 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.

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