On January 1,20A,Ross Company acquired a truck that had a purchase price of $20,000.The seller agreed to allow Ross to pay for the truck over a two-year period at 10% interest with equal payments due at the end of 20A and 20B.What is the amount of each annual payment the company must make (round to the nearest dollar)?
A)$11,524
B)$14,151
C)$17,751
D)$22,267

Question

Quizplus · Accepted Answer

The truck is being financed with equal payments over two years at 10% interest. To find the annual payment, we use the formula for an annuity payment: P = [r*PV] / [1 - (1 + r)^-n], where P is the payment, r is the interest rate per period, PV is the present value, and n is the number of periods. Plugging in the values: P = [0.10 * 20000] / [1 - (1 + 0.10)^-2] = $11,524.

On January 1,20A,Ross Company Acquired a Truck That Had a Purchase