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On January 1, Year 1, Echols Company borrowed $100,000 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 $25,045.65.

-What is the amount of principal repayment included in the payment made on December 31,Year 1?
A)$20,000.00
B)$8,000.00
C)$25,045.65
D)$17,045.65

Question

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On January 1, Year 1, Echols Company borrowed $100,000 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 $25,045.65.

-What is the amount of principal repayment included in the payment made on December 31,Year 1?
A)$20,000.00
B)$8,000.00
C)$25,045.65
D)$17,045.65

Quizplus · Accepted Answer

Year 1 Interest expense = Principal balance on January 1 of $100,000 × 8% = $8,000
Year 1 Principal repayment = Payment of $25,045.65 - Interest expense of $8,000 = $17,045.65

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