Question

On May 1 Alpha company purchased a truck for $24,000 +8% sales taxes. Paid $2000 in cash as a down payment and signed a 5% note for remaining that requires 10 payments at the end of each month for 10 months.

1. Compute the amount of monthly payment.
2. Total amount of interest paid on purchase of this equipment.

Answer 1

The monthly payment for Alpha company's truck purchase would be $2,511.60, and the total amount of interest paid would be $1,196.

Step-by-step explanation:

To compute the monthly payment for Alpha company's purchase of the truck, we need to consider the initial loan amount after the down payment and the sales tax. The truck costs $24,000 plus an 8% sales tax, which equals to $24,000 + ($24,000 × 0.08) = $25,920. After the $2,000 down payment, the remaining balance is $25,920 - $2,000 = $23,920.

This remaining balance is to be paid with a 5% note over 10 monthly payments. Assuming the interest rate is simple interest applied to the balance (since the question doesn't specify compounding), the total interest paid would be $23,920 × 0.05 = $1,196. The total amount to be repaid is then $23,920 + $1,196 = $25,116.

Divide the total amount to be repaid by the number of payments to find the monthly payment amount: $25,116 ÷ 10 = $2,511.60.

Now, to calculate the total amount of interest paid on the purchase of the truck, we have already determined it to be $1,196.