Question

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments consisting of principal and interest of $15,179, beginning on December 31 of the current year. Of the first payment due on December 31 of Year 1, how much of the $15,179 payment will go toward paying down the principal balance of the note payable?

Answer 1

$ 11,799 is the principal balance of the note payable.

Step-by-step explanation:

The Interest expense for the installment note on the year of the December 31, year can be determined by the following equation that are mention below

`= 52,000 * 6.5\ percent`

`52,000 * (6.5)/(100)`

`= $\ 3,380`

Now the Principal balance of the component in $15,179 payment of the December 31, year 1 can be determined by the

`principal\ and \ interest\ of \ note\ annual\ payments - Interest\ expense \ for\ the\ installment\ note`

`= 15,179 -3,380`

=$ 11,799