   # Everglades Consultants takes out a loan in the amount of \$375,000 on April 1. The terms of the loan include a repayment of principal in eight, equal installments, paid annually from the April 1 date. The annual interest rate on the loan is 5%, recognized on December 31. (Round answers to the nearest cent, if needed.) A. Compute the interest recognized as of December 31 in year 1. B. Compute the principal due in year 1. FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

Chapter
Section FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 12, Problem 1EB
Textbook Problem
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## Everglades Consultants takes out a loan in the amount of \$375,000 on April 1. The terms of the loan include a repayment of principal in eight, equal installments, paid annually from the April 1 date. The annual interest rate on the loan is 5%, recognized on December 31. (Round answers to the nearest cent, if needed.)A. Compute the interest recognized as of December 31 in year 1.B. Compute the principal due in year 1.

To determine

(a)

Concept introduction:

Interest is paid by the loan taker to the person who gives loan to him. For calculation of interest on loan company wants interest rate, time period and amount of loan.

Installments include both part of interest and principle of loan. In starting there is more interest in installments but it reduces as the period of loan passes.

To calculate:

Interest recognized as of December 31.

### Explanation of Solution

 Calculation of Interest Rate Loan Amount 375000 Interest Rate 5% Periods 8 Compounding periods per year 1 Interest on dec. 31 22,500...
To determine

(b)

Concept introduction:

Interest is paid by the loan taker to the person who gives loan to him. For calculation of interest on loan company wants interest rate, time period and amount of loan.

Installments include both part of interest and principle of loan. In starting there is more interest in installments but it reduces as the period of loan passes.

To calculate:

Principle due at end of year 1.

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