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Company A sells a machine to Company B on September 1 for $30,000. The down payment to be paid by Company B is $5,000. Company B must pay monthly minimum payments of $200. 12% interest rate per annum on the unpaid balance is deducted from each payment and the balance is applied to reduce the principal outstanding.
Company B makes the following payments to Company A:
October 1: $500
November 1: $500
December 1: $1,000
January 2: $500
How can a partial amortization schedule be made in order to answer the following question.
Question 1: In preparing an amortization schedule, what is the amount of interest paid for December?
a. None of the other alternatives are correct
b. $500
c. $260
d. $250
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