Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1,2010.Alden financed $37,908,000,the note agreement will require $10 million in annual payments starting on December 31,2010 and continuing for a total of five years (final payment December 31,2014).Kenworthy will charge Alden Trucking Company the market interest rate of 10% compounded annually.What is the note and interest payable liability on December 31,2010 after the first payment was made?
A)$32,908,000
B)$31,698,800
C)$40,000,000
D)$27,908,000

Question

Quizplus · Accepted Answer

December 31, 2010 note payable liability ($31,698,800) = Initial debt ($37,908,000) + Interest expense ($37,908,000 F1F1F1S1F1F1F10 10%) - First annual payment ($10,000,000).

Alden Trucking Company Is Replacing Part of Their Fleet of Trucks