Posted: May 11th, 2022

create a loan amortization schedule for an example mortgage loan. Imagine the mortgage is for a nonresidential real

On this problem, you’ll create a mortgage amortization schedule for an occasion mortgage mortgage. Take into consideration the mortgage is for a nonresidential precise property your group has purchased.The property comprises land and a developing. As quickly as you’ve created the amortization schedule, it’s best to use it to rearrange totally different financial paperwork. Your problem is cut up into a variety of steps in an effort to observe. Each step comprises figures that illustrate the concepts.Step 1: Create a Mortgage Amortization ScheduleIn this major step of your problem, you’ll must create a loanamortization schedule. The subsequent desk illustrates the paymentsand curiosity portions for a fixed-rate, 30-year mortgage mortgage. All the amount of the mortgage is $300,000, and the price of curiosity is 6 %. This mortgage requires month-to-month funds of $1,798.65, with a final value of $1,800.23. The desk was created in Excel.The subsequent is a proof of the columns inside the desk:? The first column inside the desk, with the heading “Payment Amount,” reveals the 360 funds required to repay the mortgage mortgage (30 years, with 12 month-to-month paymentsPayment NumberPayment Amount6% Curiosity ExpensePrincipal BalanceCurrentNon-CurrentAnnual Curiosity Expense0 $300,000.00 $three,684.02 $296,315.98 $01 $1,798.65 $1,500.00 $298.65 $299,701.35 $three,702.44 $295,998.912 $1,798.65 $1,498.51 $300.14 $299,401.21 $three,720.95 $295,680.26————————————-Break in Sequence————————————-359 $1,798.65 $17.86 $1,780.79 $1,791.28 $1,791.27 $zero360 $1,800.23 $eight.96 $1,791.27 $zero $zero $zero $685.50Totals $347,515.58 $300,000.00The second column, with the heading “Payment Amount,” reveals the month-to-month value amount.? The third and fourth columns current the portion of the month-to-month value paid for curiosity, and the portion paid in course of the principal.? The fifth column, headed “Steadiness,” reveals the starting stability of $300,000, and the remaining stability each month after the principal is subtracted.? The sixth column, headed “Current,” shows the current portion of the principal (12 months).? The portions inside the “Non-Current” column are calculated by subtracting the current portion of the principal from the full stability.? The “Annual Curiosity Expense” column provides a working full of the curiosity expense on the mortgage for the full 12-month interval.? The “Totals” under the “6% Curiosity Expense” and “Principal”columns current the final totals for the 30-year lifetime of theOnce you’ve determined how each of the portions inside the tableare obtained, you can calculate them and fill them in for all 360 funds.Discover that the desk reveals solely the figures for the major twopayments and the ultimate two funds; you’ll must calculatethe portions for the remaining funds and fill them in.As quickly as this mortgage amortization schedule is completely stuffed in, itcan be printed out and used to rearrange totally different financial statements.For example, when the major value of $1,798.65 ismade, the subsequent accounting journal entry could be madeDebit CreditMortgage Payable $298.65Curiosity Expense $1,500.00Cash $1,798.65The steadiness of this mortgage, after the major value, is$299,701.35. If a categorized stability sheet have been prepared on this date, the current portion of the mortgage could be $three,702.44, and the noncurrent portion of the mortgage could be $295,998.91.As quickly as the month-to-month schedule is completed, generate an annualizedversion, using the subsequent hottest format:Step 2: Create a Depreciation ScheduleThe subsequent step in your problem is to create a depreciation schedule for the (fictional) property purchased with this mortgage. When the property was purchased, an appraisal was carried out. The property included separate components of land and enhancements (the developing), and likewise included some fixtures (dwelling gear, just like a fridge). You paid a barely higher appraisal worth than typical, and instructed the appraiser to give you the subsequent breakdown of values:Graded Mission 13312 months PaymentNumber Steadiness Current Non-CurrentAnnualInterestExpense0 $300,000.00 $three,684.02 $296,315.98 $01 12 $296,315.98 $three,911.24 $292,404.75 $17,899.782 24 $292,404.75 $4,152.47 $288,252.27 $17,672.56————————————-Break in Sequence————————————-28 336 $40,584.10 $19,684.22 $20,899.88 $three,043.1329 348 $20,899.88 $20,899.88 $zero $1,899.5830 360 $zero $zero $zero $685.50Full $347,515.58The next step in your problem is to create a depreciationschedule for the (fictional) property purchased with this mortgage. When the property was purchased, an appraisal was carried out. The property included separate components of land and enhancements (the developing), and likewise included some fixtures (dwelling gear, just like a fridge). You paid a barely higher appraisal worth than typical, and instructed the appraiser to give you the subsequent breakdown of values:Graded Mission 13312 months PaymentNumber Steadiness Current Non-CurrentAnnAppraisedValues PercentageLand $45,000 14.29%Enhancements $260,000 82.54%Fixtures $10,000 three.17%Full $315,000 100.00%Your mortgage mortgage worth of $300,000 must be allotted betweenthese fully totally different asset classes, so it’s best to use the appropriatedepreciable life to rearrange a depreciation schedule, as confirmed inside the following illustration:Now, you’ll need to make use of the MACRS tables to seek out out the amount of depreciation expense. Assume that the “improvements” characterize 39-year, nonresidential rental property and the “fixtures” characterize 7-year property. Create a depreciation schedule using the MACRS tables on pages 308–309 of your textbook. Create annual measures and a provide doc for annual financial assertion preparation. Your textbook didn’t current a depreciation schedule for the 39-year, nonresidential precise property, so we’ve provided one beneath. Themeasures inside the desk characterize the share by which theimprovements to the precise property may be depreciated, per 12 months, primarily based totally on the month positioned in service, which on this case was January:The portions on this desk are carried out to the third decimal place, so some rounding errors will forestall the enhancements from being completely depreciated by the use of 12 months 39. It is best to place collectively the depreciation schedule solely by the use of 12 months 30, to match the mortgage amortization schedule you prepared in Step 1 of the problem. To look at your work, it’s best to use the subsequent decide, which reveals a a part of the completed depreciation schedule:134Graded ProjectAppraisedValues Proportion CostAllocationLand $45,000 14.29% $42,857Enhancements $260,000 82.54% $247,619Fixtures $10,000 three.17% $9,524Full $315,000 100.00% $300,00012 months Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec1 2.461 2.247 2.033 1.819 1.695 1.391 1.177 zero.963 zero.749 zero.535 zero.321 zero.1072by means of392.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564The portions on this desk are carried out to the third decimal place, so some rounding errors will forestall the enhancements from being completely depreciated by the use of 12 months 39. It is best to place collectively the depreciation schedule solely by the use of 12 months 30, to match the mortgage amortization schedule you prepared in Step 1 of the problem. To look at your work, it’s best to use the subsequent decide, which reveals a a part of the completed depreciation scheduleYear Land Enhancements Fixtures Total1$zero $6,094 $1,361 $7,4552$zero $6,349 $2,332 $eight,681————————————-Break in Sequence————————————-29$zero $6,349 $zero $6,34930$zero $6,349 $zero $6,349Full$zero $190,213 $9,524 $199,737Step three: Create a Schedule CombiningInterest Payments and DepreciationExpensesIn this step, you’ll must create a schedule that mixes curiosity payments and depreciation payments, nonetheless simply for the major 10 years of the lifetime of the asset. Proper right here is how the completed schedule ought to look:Step 4: Convert the Curiosity Expenseand Depreciation ExpenseIn this step of your problem, you’ll must convert the curiosity expense and depreciation expense from pretax to aftertax . Assume the company is subject to a 34 % marginal tax cost, andRemember out of your lessons that working and curiosity expense ends in a cash outflow,and depreciation expense ends in a cash inflow,from the depreciation tax defend. Subsequently, on this step, you’re computing a internet cash outflow. The subsequent illustration reveals how the completed schedule ought to look, with the blended annual curiosity expense and depreciation expense, every remodeled to aftertax phrases.Step 5: Calculate the Aftertax CashOutflowsIn this step of your problem, you’ll must calculate the present values and internet present values of the aftertax cash flows orexpenses for the problem. On this case, that is the present value, aftertax cash outflow.You’ve calculated the aftertax cash flows for the curiosity expense and the depreciation expense associated to the acquisition of this piece of non-residential precise property. Now, the final step requires you to calculate the present value of these ATCFs for yearly, and the NPV for these payments, together.Using a discount cost of 10 %, lengthen the desk completed in Step 4 by together with a column for the present value of ATCFs. You’ll uncover a “present value of $1” desk on pages A-4 and A-5 of your textbook (near the once more of the information). The subsequent illustration reveals how the completed desk ought to look.136Graded ProjectYearPretaxAnnualInterestExpensePretaxAnnualDepreciationExpense(a)AT CForPosttax(1 –T)InterestExpense(b)AT CForPosttax(T)DepreciationExpense(a) – (b)AT CForPosttaxCombinedInterest &DepreciationExpense1 $17,900 $7,455 $11,814 $2,535 $9,279————————————-Break in Sequence————————————-10 $15,271 $6,349 $10,zero79 $2,159 $7,920

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