Use Excel for the entire assignment. When applicable, you must also use the full financial statement effects template (i.e., no short-hand approach).

 

Question 2 (Mortgages Payable)

Brian M. owes a mortgage on his primary home. The mortgage terms are as follows:

·        Amount due as of 1/1/2013: ?

·        Mortgage loan period: 25 years

·        Annual interest rate: 4.20%

·        Monthly payment amount (starting on 1/31/2013): $1,025.00

 

Required

·        Scenario 1: Using the above information, create a complete amortization table to determine the following information

o  Amount due as of 1/1/2013 (use the appropriate TVM function in Excel to determine this)

o  Total interest to be paid as of the final payment date

·        Scenario 2: Brian M. decides to apply an extra $175.00 per month toward his mortgage. Use the “amount due as of 1/1/2013” calculated in Scenario 1 as the initial mortgage loan balance. Based on above information, create a complete amortization table to determine the following information.

o  Total interest to be paid as of the final payment date

o  Interest savings relative to Scenario 1 (if any)

o  Time savings (i.e., how much sooner the mortgage is repaid) relative to Scenario 1 (if any)

 

Question 3 (Equity)

Rockies Company goes public on April 10, 20x1 and has a 12/31 fiscal year-end. The Company has 300,000 authorized common shares. Related to going public, the Company has the following transactions in 20x1:

 

·        On April 10^th, the Company issues 47,000 common shares at $8.00 per share. The par value of the common shares is $2.00 per share.

·        On May 20^th, the Company repurchases 7,800 common shares at $11.00 per share.

·        On August 10^th, the Company declares a $0.30 per share cash dividend for all common shares outstanding (be careful in determining this). The date of record for the dividend is August 28^th. The date of payment for the dividend is September 15^th.

·        On September 30^th, the Company reissues 4,800 treasury shares for $13.00 per share.

·        On October 10^th, the Company declares a $0.30 per share cash dividend for all common shares outstanding (be careful in determining this). The date of record for the dividend is October 28^th. The date of payment for the dividend is November 15^th.

 

Required

·        Provide the financial statement template effects for all the transactions listed above. Also, include a brief description for memorandum items (i.e., events that occur, but do not result in an accounting transaction) within the template.

·        Show how all relevant equity accounts should be formally reported on the Company’s balance sheet as of December 31, 20x1. In other words, show me a “snapshot” of these accounts on the balance sheet. The 20x1 net income for the Company is $105,000 and its January 1, 20x1 balance in retained earnings is $635,000.