Sheridan Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Sheridan offered a low downpayment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers.

On January 1, 2020, a customer purchased a new $28,200 automobile, making a downpayment of $600. The customer signed a note indicating that the annual rate of interest would be 8% and that quarterly payments would be made over 3 years. For the first year, Sheridan required a $345 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2021. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2023.