Question

On March​ 1, 2018, Everson Services issued a 7​% longminusterm notes payable for $ 25 comma 000. It is payable over a 5minusyear term in $ 5 comma 000 annual principal payments on March 1 of each year plus​ interest, beginning March​ 1, 2019. Each yearly installment will include both principal repayment of $ 5 comma 000 and interest payment for the preceding oneminusyear period. On March​ 1, 2019,​ ________. The accounting period ends on December 31.

Answer 1

$1,750

Step-by-step explanation:

Given,

Annual payment = $5,000

Interest payment = ?

Total value of the note = $25,000

Interest rate = 7%

We know,

Interest expense for one year = Note payable × Interest rate per year

Interest expense for one year = $25,000 × 7%

Interest expense for first year = $1,750.

Therefore, Everson Services has to pay $5,000 + $1,750 = $6,750 on March 1, 2019 for annual payment plus interest expense.