Question

On June 30, 2017, real estate was purchased with a 20-year mortgage or $300,000. The terms of the mortgage were monthly payments of $1,250 on the principle and 8 percent interest on the unpaid balance, with payments beginning July 30 and due on the 30th of the month thereafter.

a. Show how the mortgage would be presented on the balance sheet for June 30, 2017.

b. Show how the mortgage would be presented on the balance sheet for July 31, 2017.

c. Show how the mortgage would be presented on the balance sheet for June 30, 2018.

Answer 1

A. On june 30,2017 ie inception of loan. We need to segregate that what needs to be paid in net month as current liability and balance as non-current or long term liability. Accordingly

• Current liability= 1250*12 = 15000 $
• Non current liability = 300,000-15000= $ 285000.

B. On July 30, 2017 one monthly instalment will made. So,

• Current liability = 15000-1250 = 13,750
• Non current liabilities = $ 285000.

C. The balance sheet at 30th june 2018 would-be

• Current liability = $ 15000
• Non current liability = 285000-15000 = $ 270,000