Question

Chris purchased a new piece of equipment to be used in its new facility. The $410,000 piece of equipment was purchased with a $61,500 down payment and with cash received through the issuance of a $348,500, 8%, 5-year mortgage payable issued on January 1, 2022. The terms provide for annual installment payments of $87,284 on December 31. Prepare an installment payments schedule for the first five payments of the notes payable. (Round answers to 0 decimal places, e.g. 125.)

Answer 1

Answer:

Amortization Schedule - Mortgage Payable

Date                      Capital              Interest              Balance

Jan 1                          $0                     $0           $348,500.00

Dec 31 -22         $59,404.00      $27,880.00   $289,096.00

Dec 31 -23         $64,156.32      $23,127.68     $224,939.68

Dec 31 -24         $69,288.83      $17,995.17      $155,650.85

Dec 31 -25         $74,831.93      $12,452.07        $80,818.92

Dec 31 -26         $80,818.49      $6,465.51                 $0

Explanation:

Installation payments consists of payments of the capital amount (amount borrowed) and the interest charge).

These amounts can be determined by constructing an amortization schedule for the mortgage.

Now, using a Financial Calculator, we an set the data for this Mortgage as follows :

PV = $348,500

N = 5

P/Yr = 1

I = 8 %

PMT = - $87,284

FV = $0

Amortization Schedule - Mortgage Payable

Date                      Capital              Interest              Balance

Jan 1                          $0                     $0           $348,500.00

Dec 31 -22         $59,404.00      $27,880.00   $289,096.00

Dec 31 -23         $64,156.32      $23,127.68     $224,939.68

Dec 31 -24         $69,288.83      $17,995.17      $155,650.85

Dec 31 -25         $74,831.93      $12,452.07        $80,818.92

Dec 31 -26         $80,818.49      $6,465.51                 $0