Problem 10-13A Grace Herron has just approached a venture capitalist for financi

Question

Problem 10-13A Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $210,000 at an annual interest rate of 6%. The loan is repayable over 5 years in annual installments of $49,853, principal and interest, due each June 30. The first payment is due June 30, 2014. Grace uses the effective-interest method for amortizing debt. Her ski hill company’s year-end will be June 30. Prepare an amortization schedule for the 5 years, 2013–2018. (Round answers to 0 decimal places, e.g. 125.) Period Cash Payment Interest Expense Principal Reduction Balance July 1, 2013 $ $ $ $ June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018 * * Amount may be off due to rounding.

Explanation / Answer

Solution:-

Note:- small differnce of 1$ will come because of approximation .

Date Amount($) Principal=Amount-Interest payment($) Interest payment($) Balance($)=loan amount-Amount piad evry year) 1 july 2013 0 0 0 210,000 30 June 2014 49,853 37253 12,600 (210,000*6%) 1,72,747 (210,000-37,253) 30 June 2015 49,853 39488 10,365 (172747*6%) 1,33,259 (1,72,747-39,488) 30 June 2016 49,853 41857 7,996 (133259*6% 91,402 (1,33,259-41,857) 30 June 2017 49,853 44369 5,484 (91402*6%) 47,033 (91,402-44,369) 30 June 2018 49,853 47033 2,821 (47,033*6%) Nil (47,033-47,033)

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