A: Prepare the first 6 month's amortization table: Payment # Payment Interest Expense 123456 $3,000 $3,000 $3,000 Principle Reduction $3,000 $3,000 $3,000 B: In how many months is the $100,000 remainder payment due? Balance $200,000

A: Prepare the first 6 month's amortization table: Payment # Payment Interest Expense 123456 $3,000 $3,000 $3,000 Principle Reduction $3,000 $3,000 $3,000 B: In how many months is the $100,000 remainder payment due? Balance $200,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

The IOU Inc recently took a note on a property for $200,000 with $100,000 payment due. The annual interest is 7,5%
annually and the monthly payment is $3,000.
A: Prepare the first 6 month's amortization table:
Payment #
Payment
Interest Expense
1
2
$3,000
$3,000
$3,000
$3,000
$3,000
$3,000
B: In how many months is the $100,000 remainder payment due?
Principle Reduction
3
4
5
Balance
$200,000

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