Question

A company borrows $70,000 by signing a $70,000, 8%, 6-year note that requires equal payments of $15,142 at the end of each year. The first payment will record interest expense of $5,600 and will reduce principal by:

Answer 1

$9,542

Step-by-step explanation:

A loan is amortized by the equal annual payment, each payment is sum of the two payment made against the principal and interest for the period on due balance.

The Equal Payment of $15,142 includes the payment of interest for the period and Principal.

The Principal Payment is the net of Payment made and Interest expenses in the period.

Principal portion = $15,142 - $5,600 = $9,542

The principal will be reduced by $9,542.