Emily, Bev, and Doug had originally thought that the computer equipment upgrade that ABC decided to undertake could be paid for with cash in the bank. As at June 25, 2024, the balance of the 5% mortgage payable after making the payment on that day was $44,796. Monthly principal and interest instalment payments are $626, paid on the 25th of each month. The mortgage is up for renewal on November 25, 2024. Because interest rates have fallen since the original mortgage was signed, it can be renewed at an interest rate of 4%. In addition, Emily has decided to reduce the mortgage term to five years, instead of the seven years remaining. The ABC upgraded its server and other computing equipment. Unfortunately, there was not enough cash to pay for the equipment. ABC arranged for a $40,000 operating line of credit with its bank, using $23,000 of this line to finance this upgrade. Emily would like to pay off the operating line of credit by transferring the $23,000 owed on the line to the mortgage payable balance outstanding instead of trying to pay the balance owed on the line of credit from cash generated from operations. The bank has agreed to accommodate both of these requests and has advised that the monthly instalment payments will be $1.208 for the combined amounts and revised term, with payments starting on December 25, 2024.
Emily, Bev, and Doug had originally thought that the computer equipment upgrade that ABC decided to undertake could be paid for with cash in the bank. As at June 25, 2024, the balance of the 5% mortgage payable after making the payment on that day was $44,796. Monthly principal and interest instalment payments are $626, paid on the 25th of each month. The mortgage is up for renewal on November 25, 2024. Because interest rates have fallen since the original mortgage was signed, it can be renewed at an interest rate of 4%. In addition, Emily has decided to reduce the mortgage term to five years, instead of the seven years remaining. The ABC upgraded its server and other computing equipment. Unfortunately, there was not enough cash to pay for the equipment. ABC arranged for a $40,000 operating line of credit with its bank, using $23,000 of this line to finance this upgrade. Emily would like to pay off the operating line of credit by transferring the $23,000 owed on the line to the mortgage payable balance outstanding instead of trying to pay the balance owed on the line of credit from cash generated from operations. The bank has agreed to accommodate both of these requests and has advised that the monthly instalment payments will be $1.208 for the combined amounts and revised term, with payments starting on December 25, 2024.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Your answer is incorrect.
If the amount of mortgage owing was $44,796 on June 25, and instalment payments are $626 per month, as indicated above, what
is the amount of the mortgage owing at November 25, 2024, after making the payment on that date, immediately before it is
renegotiated? (Round answer to O decimal places, e.g. 5,275.)
Amount of the mortgage owing at November 25, 2024
$
Transcribed Image Text:Current Attempt in Progress
Emily, Bev, and Doug had originally thought that the computer equipment upgrade that ABC decided to undertake could be paid for
with cash in the bank. As at June 25, 2024, the balance of the 5% mortgage payable after making the payment on that day was
$44,796. Monthly principal and interest instalment payments are $626, paid on the 25th of each month. The mortgage is up for
renewal on November 25, 2024. Because interest rates have fallen since the original mortgage was signed, it can be renewed at an
interest rate of 4%. In addition, Emily has decided to reduce the mortgage term to five years, instead of the seven years remaining.
The ABC upgraded its server and other computing equipment. Unfortunately, there was not enough cash to pay for the equipment.
ABC arranged for a $40,000 operating line of credit with its bank, using $23,000 of this line to finance this upgrade. Emily would like to
pay off the operating line of credit by transferring the $23,000 owed on the line to the mortgage payable balance outstanding instead
of trying to pay the balance owed on the line of credit from cash generated from operations. The bank has agreed to accommodate
both of these requests and has advised that the monthly instalment payments will be $1,208 for the combined amounts and revised
term, with payments starting on December 25, 2024.
(a)
Your answer is incorrect.
A
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