Question

On January 1, 2024, ABC Company borrowed $215,000 from the bank. The loan requires annual payments...

On January 1, 2024, ABC Company borrowed $215,000 from the
bank. The loan requires annual payments of $29,100 every
December 31, beginning December 31, 2024. Assume the loan
has an interest rate of 10% compounded annually.

Calculate the amount of the note payable at December 31, 2025
that would be classified as a current liability.
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Answer #1

Ans:

The interest would be accrued every year and would get added up to the notes payable account. The total notes payables as at 31 December 2025 would be as follows :

$

Principal

Interest

Annual payment

Closing

31st Dec 2024

       215000

       21,500

       29100

207,400

31st Dec2025

       207,400

       20,740

       29100

199,040

Of the above, only $ 29,100 would be classified as currently liability as that would be the amount that would be paid in the next 1 year.


Hope this helped ! Let me know in case of any queries.

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