Question

31.  (14 points) On December 1, 2019, Driscoll, Inc. signed a 10 year mortgage in the amount of $275,000 in conjunction with the purchase of an office building.  This note is payable in equal monthly installmentsof $2,784 which include interest computed at an annual rate of 4%. The first monthly payment is made on December 31, 2019.

1. Prepare an amortization table for the first two payments.

2. How much of the first payment made on December 31, 2019, is allocated to  

      repayment of principal?

                                                                                                                    $_______________

3. With respect to this note, Driscoll's December 2019income statement includes interest expense of                                                                                                                      

                                                                                                                 $_______________

4. With respect to this note, Driscoll's January 2020 monthlyincome statement includes interest expense of                                                                                                                        

                                                                                                                 $_______________

e.  Driscoll's balance sheet at December 31, 2019includes a total liability for this mortgage payable of
(Do not separate into current and long-term portions.)

                                                                                                                 $ _______________

f.  The aggregate annual cash payments Driscoll will make over the 10 year life of the mortgage payable amount to                                                                                               

                                                                                                                 $________________

g.  Over the 10 year life of the mortgage, the amount Driscoll will pay for interest amounts to

                                                                                         

                                                                                                                 $_______________

Answer 1

Loan Amortization Schedule: Reduction in Carrying Value 2$ 2$ 2$ $ Interest Expense (4% Per Year = 0.33% Per Month Date 1/12/2019 31/12/2019 $ 31/1/2020 $ 28/2/2020 $ Cash Payment Carry Value 275,000.00 273,123.50 %3D 1,876.50 $ 1,882.69 | $ 1,888.91 | $ 2$ 2,784.00 907.50 $ 2,784.00 901.31 271,240.81 2,784.00 $ 895.09 269,351.90 Interest Expense Portion = Balance Loan x Rate of Interest

b. Amount of first payment of installment, allocated to repayment of principal: From the Loan amortization table presented answer to "a", the amount of $1876.50 allocated to repayment of principal. c. Calculation of Interest expense to be included in December 2019 Income Statement: From the Loan amortization table presented in answer to "a", the amount of $907.50 Interest Expense shall be included in Income Statement of Dec;2019. d. Calculation of Interest expense to be included in January 2020 Income Statement: From the Loan amortization table presented in answer to "a", the amount of $901.31 Interest Expense shall be included in Income Statement of Jan;2020.