Row,Inc.needed some long-term financing and arranged for a 10-year,$100,000,7% mortgage loan on January 1,2010.Annual payments of $14,238 will be made on December 31 each year.After the first payment,Mortgage payable will have a balance of ________.
A)$100,000
B)$85,762
C)$92,762
D)$93,000

Question

Quizplus · Accepted Answer

The mortgage loan has an annual interest rate of 7%, so the interest expense for the first year would be 7% of $100,000, or $7,000. Since the loan payments are made at the end of each year, the first payment of $14,238 would include $7,000 in interest expense and $7,238 in principal payment. Therefore, after the first payment, the remaining balance on the mortgage payable would be $100,000 - $7,238 = $92,762.

Row,IncNeeded Some Long-Term Financing and Arranged for a 10-Year,$100,000,7% Mortgage