Question

On January 2, 20X1, Ziegler Company issues a four-year note in exchange for a license agreement requiring four annual payments of $27,956. The market value of the four-year agreement is $100,000. The first payment is due on the day the agreement is signed. The effective interest rate is 8%. The second payment includes interest of:

Answer 1

$5,763.52

Step-by-step explanation:

1st payment is due on the day the agreement is signed.

The 2nd payment interest is computed as bellow:

=> ($100,000 - First payment) * 8%

=> ($100,000 - $27,956) * 8%

=> $72,044 * 8%

=> $5,763.52

So, the second payment includes interest of $5,763.52.