Question

an Dayle started a business by issuing an $94,000 face value note to First State Bank on January 1, Year 1. The note had an 6 percent annual rate of interest and a five-year term. Payments of $22,315 are to be made each December 31 for five years. Required What portion of the December 31, Year 1, payment is applied to interest expense and principal

Answer 1

• Interest expense = $5,640
• Principle = $16,675

Step-by-step explanation:

The interest expense for the year is;

= 6% * 94,000

= $5,640

The amount applied to Principle will be;

= Annual Payment - Interest expense

= 22,315 - 5,640

= $16,675