An Installment Note Payable for a Principal Amount of $94,000

question 46

Multiple Choice

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, of the first year, for each of the next five years. After the final payment, the carrying amount on the note will be

• A) $1,263
• B) $21,053
• C) $22,315
• D) $0

---

Definitions:

Underestimating

Underestimating refers to the act of evaluating something as less powerful, important, or serious than it actually is, which can lead to miscalculations in finance and planning.

Anchoring And Adjustment

A cognitive heuristic where individuals rely too heavily on an initial piece of information (anchor) when making decisions, adjusting insufficiently from that anchor.

Frame Dependence

The tendency of individuals to make different (and potentially inconsistent) decisions depending on how a question or problem is framed.

Aversion To Ambiguity

A preference to avoid uncertain or ambiguous situations, often reflected in decision-making processes.