Smith Inc. purchased a piece of equipment for $850,000 on March 1, 2019 paying $80,000 in down payment and signing a note for the rest of the amount. Smith has agreed to make twenty equal quarterly payments for five years beginning June 1, 2019. The interest rate on this loan is 10%.

Instructions

a. On December 31, 2020, what should be the balance in Smith Inc.s interest payable related to this note?

b. What is the carrying value of the note on June 1, 2021 after the payment on that day has been made?

c. Assume Smith refinances the carrying value of the loan on September 1, 2022 after the payment on that date has been made. The new interest rate is 8%. What will be the size of new quarterly payments?