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Smith Inc. purchased a piece of equipment for $850,000 on March 1, 2019 paying $80,000 in down payment and signing a note for the rest of the amount. Smith has agreed to make twenty equal quarterly payments for five years beginning June 1, 2019. The interest rate on this loan is 10%. What is the carrying value of the note on June 1, 2021 after the payment on that day has been made?

Respuesta :

jepessoa

Answer:

$469,938

Explanation:

To determine the carrying value of the note (principal's balance), I will prepare a payment schedule in excel:

principal = $850,000 - $80,000 = $770,000

n = 20

interest rate = 2.5%

payment = ?

I will first determine the payment using PMT function =PMT(2.5%,20,770000) = $49,393.29

In June 1, 2021, after the payment has been made, the balance will be $469,938