Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. If the monthly payment is $2,416.60, by how much will the carrying value decrease when the first payment is made on January 31, 2021?A. $1,791.60 B. $625.00 C. $2,416.60 D. $1,000.60

The answer is A. $1,791.60

Explanation:

Annual interest payment on the loan is:

6% x $125,000

=$7,500

Therefore, monthly interest payment is $625($7,500/12 months).

Monthly payments (which comprise principal and interest payment) is $2,416.60.

The carrying value decrease when the first payment is made on January 31 was made will be:

$2,416.60 - $625

= $1,791.60