On January 1, 2012, your brother\'s business obtained a 30-year amortized mortga
ID: 2620232 • Letter: O
Question
On January 1, 2012, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 4.35%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest deduction in 2016 tax return? ($10,007.56) Can you show the work . On January 1, 2012, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 4.35%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest deduction in 2016 tax return? ($10,007.56) Can you show the work .Explanation / Answer
Amount of monthly payment =Using PMT function in MS excel
pmt(rate,nper,pv,fv,type)
PMT(4.35%/12,360,250000,0,0)
($1,244.53)
period
beginning balance
Monthly payment
Amount of interest = beginning balance*4.35%/12
principal paid =monthly payment-amount of interest
month end balance = previous balance-amount of principal paid
0
250000
1
250000
1244.53
906.25
338.28
249661.7
2
249661.7
1244.53
905.02374
339.5063
249322.2
3
249322.2
1244.53
903.79302
340.737
248981.5
4
248981.5
1244.53
902.55785
341.9721
248639.5
5
248639.5
1244.53
901.3182
343.2118
248296.3
6
248296.3
1244.53
900.07406
344.4559
247951.8
7
247951.8
1244.53
898.82541
345.7046
247606.1
8
247606.1
1244.53
897.57223
346.9578
247259.2
9
247259.2
1244.53
896.31451
348.2155
246911
10
246911
1244.53
895.05223
349.4778
246561.5
11
246561.5
1244.53
893.78537
350.7446
246210.7
12
246210.7
1244.53
892.51392
352.0161
245858.7
Amount of interest to be used for deduction in tax purpose
10793.081
Amount of monthly payment =Using PMT function in MS excel
pmt(rate,nper,pv,fv,type)
PMT(4.35%/12,360,250000,0,0)
($1,244.53)
period
beginning balance
Monthly payment
Amount of interest = beginning balance*4.35%/12
principal paid =monthly payment-amount of interest
month end balance = previous balance-amount of principal paid
0
250000
1
250000
1244.53
906.25
338.28
249661.7
2
249661.7
1244.53
905.02374
339.5063
249322.2
3
249322.2
1244.53
903.79302
340.737
248981.5
4
248981.5
1244.53
902.55785
341.9721
248639.5
5
248639.5
1244.53
901.3182
343.2118
248296.3
6
248296.3
1244.53
900.07406
344.4559
247951.8
7
247951.8
1244.53
898.82541
345.7046
247606.1
8
247606.1
1244.53
897.57223
346.9578
247259.2
9
247259.2
1244.53
896.31451
348.2155
246911
10
246911
1244.53
895.05223
349.4778
246561.5
11
246561.5
1244.53
893.78537
350.7446
246210.7
12
246210.7
1244.53
892.51392
352.0161
245858.7
Amount of interest to be used for deduction in tax purpose
10793.081
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