Question

Fifty percent of the purchase price is debt. The debt has an interest rate of 4%...

Fifty percent of the purchase price is debt. The debt has an interest rate of 4% per annum and you must repay $25,000 in principal at the end of each year.

Questions

  1. How much mortgage is recorded at the time of purchase?
    1. 400,000
    2. 500,000
    3. 550,000
    4. 600,000
  2. What is your mortgage balance at the time of sale?
    1. 375,000
    2. 475,000
    3. 500,000
    4. 625,000

Homework Answers

Answer #1

Working Notes:

Loan Payment / Principal Paid at the end of each year = $25,000

Interest Rate = 4% p.a.

Mortgage Balance (at the time of Sale) = Loan Payment / Interest Rate = $25,000 / 4% = $625,000

Mortgage Recorded at the time of Purchase = Total Balance at year end – Principal paid at year end

= $625,000 - $25,000 = $600,000

Questions

1. How much mortgage is recorded at the time of purchase?

The Correct Answer is Option D = $600,000

2. What is your mortgage balance at the time of sale?

The Correct Answer is Option D = $625,000

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Prepare an amortization schedule for a three-year loan of $75,000. The interest rate is 8 percent...
Prepare an amortization schedule for a three-year loan of $75,000. The interest rate is 8 percent per year, and the loan agreement calls for a principal reduction of $25,000 every year. How much total interest is paid over the life of the loan? (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Leave no cells blank. You must enter '0' for the answer to grade correctly.) Year Beginning Balance Total Payment Interest Payment Principal Payment...
Audrey Sanborn has just arranged to purchase a $460,000 condo in Vancouver with a 10 percent...
Audrey Sanborn has just arranged to purchase a $460,000 condo in Vancouver with a 10 percent down payment. The mortgage has a 7.6 percent stated annual interest rate, compounded monthly, and calls for equal monthly payments over the next 24 years. Her first payment will be due one month from now. However, the mortgage has an eight-year balloon payment, meaning that the balance of the loan must be paid off at the end of year 8. There were no other...
Karen Kurtz purchased a home for $380,000 during 2009, borrowing $300,000 of the purchase price, which...
Karen Kurtz purchased a home for $380,000 during 2009, borrowing $300,000 of the purchase price, which was secured by a 20-year mortgage. In 2018, when the home was worth $425,000 and the balance of the first mortgage was $240,000, Karen obtained a second mortgage on the home in the amount of $130,000, using the proceeds to purchase a car and to pay off personal loans. For 2018, what amount of karen's $370,000 of mortgage debt will qualify for "qualified residence...
Ms. Maili Sirrus obtained a balloon loan of $235,000 at a nominal rate of interest of...
Ms. Maili Sirrus obtained a balloon loan of $235,000 at a nominal rate of interest of 3.35 percent for four years. If repayment is scheduled at the end of every fifth day, obtain the level of the first few payments, assuming he will pay $41,000 at the end of the term. 710.86 716.86 722.86 728.86 Miss Sun Tzi obtained a level principal and interest on the balance loan of $7,541,000. The nominal rate of interest is 0.9% with a term...
LCC HCC Purchase Price $400,000 $480,000 Useful Life (years) 4 6 Depreciation (reducing balance method) 40%...
LCC HCC Purchase Price $400,000 $480,000 Useful Life (years) 4 6 Depreciation (reducing balance method) 40% p.a. 30% p.a. Salvage value at the end of useful life $80,000 $48,000 Annual interest expense $48,000 $48,000 Annual scrap revenue $450,000 $600,000 Annual operating costs: – Variable overheads $50,000 $150,000 – Salaries $80,000 $110,000 – Marketing $45,000 $60,000 Salaries represent the costs of employing two new machine operators at a salary of $40,000 per annum each. For the HCC machine, the company will...
A bond has the following features: Coupon rate of interest (paid annually): 11 percent Principal: $1,000...
A bond has the following features: Coupon rate of interest (paid annually): 11 percent Principal: $1,000 Term to maturity: 8 years What will the holder receive when the bond matures? __________ If the current rate of interest on comparable debt is 8 percent, what should be the price of this bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $________ Would you expect the...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will...
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would charge interest at the rate of 1 percent per month and require the company to repay interest and principal on May 31. In considering the loan, the bank requested a projected income statement and cash budget for May. The following information...
ABC Company, a retailer, prepares its master budget on a quarterly basis. The following data has...
ABC Company, a retailer, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master for the first quarter. a. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances. ASSETS LIABILITIES AND EQUITY Cash $ 47,000 Accounts Payable $ 92,000 Accounts Receivable 224,000 Capital Stock 500,000 Inventory 60,000 Retained Earnings 109,000 Buildings and Equipment (net of depreciation) 370,000 TOTAL ASSETS...
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January...
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2014, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year. Placid Lake’s 2015 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000. Placid Lake declared $100,000 in dividends during this period;...
​(Preparation of a cash budget​) Lewis Printing has projected its sales for the first 8 months...
​(Preparation of a cash budget​) Lewis Printing has projected its sales for the first 8 months of 2016 as​ follows: January ​$120,000 April ​$280,000 July ​$200,000 February   140,000 May   275,000 August   200,000 March   170,000 June   200,000 ​(Click on the icon located on the​ top-right corner of the data table above in order to copy its contents into a spreadsheet.​) PrintDone . Lewis collects 30 percent of its sales in the month of the​ sale, 50 percent in the month following...