Question

Charlie Corp. is purchasing new equipment with a cash cost of $300,000 for an assembly line. The manufacturer has offered to accept $68,900 payment at the end of each of the next six years. How much interest will Charlie Corp. pay over the term of the loan

Answer 1

Answer:

D. $113,400

Explanation:

Given that

Cash cost = 300,000

Installmental payments = $68900 each year for 6 years.

Therefore

Interest = total installment payment - cash cost

= (68900 × 6) - 300,000

= 413,400 - 300,000

= $113,400.

Answer 2

Answer:

The answer is D) 113 400

Explanation:

Interest are the amounts that exceed the capital repayment ( the original $ 300 000 represents the capital repayment ). By multiplying the annual payment by the number of years ( 6 x 68900 ) and subtracting the original capital amount of  $300 000 we're left with $ 113 400. This represents the amount of interest expense over the period