Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Useful Information

Financial Accounting

1. Introduction to Accounting

Useful Information

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Multiple Choice

If Zach takes out a $10,000 loan at an annual interest rate of 6% for 5 years with monthly payments, what percentage of his total first-year payments is paid as interest?

Approximately 35%

Approximately 25%

Approximately 10%

Approximately 55%

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Verified step by step guidance

Step 1: Calculate the monthly interest rate by dividing the annual interest rate by 12. Use the formula: $ \text{Monthly Interest Rate} = \frac{\text{Annual Interest Rate}}{12} $.

Step 2: Determine the monthly payment amount using the loan amortization formula: $ M = \frac{P \cdot r \cdot (1 + r)^n}{(1 + r)^n - 1} $, where $ M $ is the monthly payment, $ P $ is the loan principal, $ r $ is the monthly interest rate, and $ n $ is the total number of payments (months).

Step 3: Calculate the total payments made in the first year by multiplying the monthly payment amount by 12 (since there are 12 months in a year).

Step 4: Compute the total interest paid in the first year. For each monthly payment, the interest portion is calculated as $ \text{Interest} = \text{Remaining Loan Balance} \cdot \text{Monthly Interest Rate} $. Sum up the interest amounts for all 12 months.

Step 5: Determine the percentage of the total first-year payments that is paid as interest. Use the formula: $ \text{Percentage of Interest} = \frac{\text{Total Interest Paid in First Year}}{\text{Total Payments Made in First Year}} \cdot 100 $.