38) On December 31, 2010, a company purchased a $100,000 building by signing a $100,000, 20-year mortgage note. The annual interest rate is 6%, with payments of $8,718 made on December 31 each year.
Required:
1. Complete the last line of the table below. ROUND YOUR ANSWERS TO THE NEAREST DOLLAR.
Mortgage balance
Annual payment
Interest portion of payment
Amount of mortgage reduction
Beginning
balance
$100,000
1st
$8,718
$6,000
$2,718
After 1st payment
$97,282
2nd
$8,718
$5,837
$2,881
After 2nd payment
$
3rd
$
$
$
2. Use the information from the previous table to complete the statements below.
Circle the name of a financial statement where needed using the following code:
IS = Income Statement for the Year Ended December 31, 2011
BS = Balance Sheet at December 31, 2011
SOCF = Statement of Cash Flows for the Year Ended December 31, 2011
AFTER THE FIRST PAYMENT IS MADE ON DECEMBER 31, 2011:
a. Mortgage payable of $______________________ will appear on the
(circle one) IS BS SOCF
b. Interest expense of $______________________ will appear on the
(circle one) IS BS SOCF
c. Cash paid for interest of $______________________ will appear on the
(circle one) IS BS SOCF as
part of (circle one) operating investing financing activities.
d. Cash paid on loan principal of $______________________ will appear on the
(circle one) IS BS SOCF as
part of (circle one) operatinginvesting financing activities.
e. With each payment that is made, the amount of each payment that is used for interest
expense (circle one) increases decreases stays the same
f. With each payment that is made, the amount still owed on the loan, mortgage payable,
(circle one) increases decreases stays the same
g. With each payment that is made, the amount of the payment that goes toward the balance
owed on the mortgage loan (circle one) increases decreases stays the same
39) Mini Storage Company needed some long-term financing and arranged for a $100,000,
10-year mortgage loan on January 1, 2010. The annual interest rate is 9%, with a payment of $15,582 made December 31 each year.
Required:
1. Complete the amortization schedule for the first TWO YEARS of the note.
Mortgage balance
Annual payment
Interest portion of mortgage
Amount of mortgage reduction
Beginning balance
$100,000
1st
$
$
$
After 1st payment
$
2nd
$
$
$
2. Complete the table below for the first TWO YEARS of the note. Fill in the correct dollar amount AND put an X in the appropriate box to indicate the financial statement where the amount will be found.
Amount
At or for the Year
ended 12/31/10
Amount
At or for the YEAR
ended 12/31/11
IS
BS
SOCF
Interest expense
$
$
Notes payable
$
$
Cash paid on loan principal
$
$
Cash paid for loan interest
$
$
40) Ace Electronics, Inc. needed some long-term financing and arranged for a 20-year, $200,000, 8% mortgage loan on January 1, 2011. Equal annual payments of $20,370 will be made on December 31 each year.
Required:
a. Record the first loan payment made on December 31, 2011 in the accounting equation below. Fill in both the correct dollar amount and the letter of the account title from the list of accounts below.
A. Cash C. Interest payable E. Interest income
B. Interest expense D. Notes payable
Shareholders' equity
Assets
Liabilities
CC
Retained earnings
b. Fill in the correct dollar amount AND put an X in the appropriate box to indicate the financial statement where the amount will be found.
Amount
At or for the Year
ended 12/31/11
Amount
At or for the YEAR
ended 12/31/12
IS
BS
SOCF
Notes payable
$
$
Interest expense
$
$
