Becky is the owner of Brooksone Farm. On January 1,2007, the beginning of the co

Question

Becky is the owner of Brooksone Farm. On January 1,2007, the beginning of the company's fiscal year, Becky borrowed750,000 at 5% annual interest to purchase equipment. The loanis to be repaid over six years in equal installments. (Roundeach amount to the nearest dollar.) A. What is the amount of Becky's loan payment eachyear? B. Prepare an amortization table for the loan. C. What will be the amount of interest expense reportedby Brookstone Farm for the loan in 2007 and in 2008? Becky is the owner of Brooksone Farm. On January 1,2007, the beginning of the company's fiscal year, Becky borrowed750,000 at 5% annual interest to purchase equipment. The loanis to be repaid over six years in equal installments. (Roundeach amount to the nearest dollar.) A. What is the amount of Becky's loan payment eachyear? B. Prepare an amortization table for the loan. C. What will be the amount of interest expense reportedby Brookstone Farm for the loan in 2007 and in 2008?

Explanation / Answer

Year OpeningPrincipal EMI Interest Principal ClosingPrincipal 2007    750,000    147,764         3,125    144,639    605,361 2008    605,361    147,764         2,522    145,242    460,119 2009    460,119    147,764         1,917    145,847    314,273 2010    314,273    147,764         1,309    146,455    167,818 2011    167,818    147,764           699    147,065       20,753 2012       20,753    147,764            86       20,753             -

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