Question

On December 31, 2016, ABC Corporation purchased a building costing $300,000, signing a 10%, 5-year mortgage note payable on December 31, 2016. Five ANNUAL

payments will be made each year to pay back the mortgage beginning on December 31, 2017.

C. Prepare an effective interest amortization table for the five years (5 pts) PS: The Table NEEDS these five categories and nothing else for the five years Date - Periodic Stated Interest - Effective Interest - Amortization - Carrying Value

Answer 1

Face Value of Note = $300,000
Annual Interest Rate = 10%
Number of Payments = 5

Let Annual Payment be $x

$300,000 = $x/1.10 + $x/1.10^2 + $x/1.10^3 + $x/1.10^4 + $x/1.10^5
$300,000 = $x * (1 - (1/1.10)^5) / 0.10
$300,000 = $x * 3.790787
$x = $79,139.24

Annual Payment = $79,139.24