On March​ 1, 2024, Mandy Services issued a 4​% long-term notes payable for $ 16000. It is payable over a 4-year term in $ 4000 principal installments on March 1 of each​ year, beginning March​ 1, 2025. Each yearly installment will include both principal repayment of $ 4000 and interest payment for the preceding one-year period. What is the amount of total cash payment that Mandy will make on March​ 1, 2025?

Answer 1

To calculate the total cash payment that Mandy Services will make on March 1, 2025, we need to determine both the interest payment for the first year and the principal repayment.

1. Principal Repayment: This is given as $4,000, which is the amount of the principal installment payable every year.

2. Interest Payment: Since the notes payable is for $16,000 with a 4% interest rate, we need to calculate the interest for the first year on the entire amount.

   \[ \text{Interest} = \text{Principal} \times \text{Interest Rate} \]

   \[ \text{Interest} = $16,000 \times 0.04 = $640 \]

3. Total Cash Payment: Now, we sum the interest payment and the principal repayment.

   \[ \text{Total Cash Payment} = \text{Principal Repayment} + \text{Interest Payment} \]

   \[ \text{Total Cash Payment} = $4,000 + $640 = $4,640 \]

Therefore, the total cash payment that Mandy Services will make on March 1, 2025, is $4,640.