Bramble Inc. developed a new sales gimmick to help sell its inventory of new aut
ID: 2541028 • Letter: B
Question
Bramble Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Bramble offered a low downpayment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers.
On January 1, 2017, a customer purchased a new $29,400 automobile, making a downpayment of $840. The customer signed a note indicating that the annual rate of interest would be 12% and that quarterly payments would be made over 3 years. For the first year, Bramble required a $357 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2018. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2020.
Prepare a note amortization schedule for the first year.
Date cash paid interest expense discount amortized carring amount of note
1/1/17
4/1/17
7/1/17
10/1/17
1/1/18
Indicate the amount the customer owes on the contract at the end of the first year. (Round answer to 0 decimal places, e.g. 38,548.)
Compute the amount of the new quarterly payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
Prepare a note amortization schedule for these new payments for the next 2 years. (Round answers to 0 decimal places, e.g. 38,548.)
Date cash paid interest expense discount amortized carring amount of note
1/1/18
4/1/18
7/1/18
10/1/18
1/1/19
4/1/19
7/1/19
10/1/19
1/1/20
The customer owes on the contract at the end of the first year $Explanation / Answer
Bramble Inc. Cost of new automobile $ 29,400.00 Down Payment $ 840.00 Carrying Amount $ 28,560.00 Quartely Payament $ 357.00 Date Cash Paid=(A) Interest Expense=(B) Discount Amortized=(C )=(B)-(A) Carrying amount of Note 1/1/2017 $ 357.00 $ 28,560 4/1/2017 $ 357.00 $ 882 $ 525 $ 29,085 7/1/2017 $ 357.00 $ 873 $ 516 $ 29,601 10/1/2017 $ 357.00 $ 888 $ 531 $ 30,132 1/1/2018 $ 357.00 $ 904 $ 547 $ 30,679 Interest Expense=($29400*12%*1/4) Carrying Amount 4/1/2017 28560+525 7/1/2017 29085+516 10/1/2017 29601+531 1/1/2018 30132+547 Customer owes on the contract at the end of first year =$30679,which is ($30679-$28560)=$2119 more than at the beginning of year To earn 12% in next two years Amount $ 30,679.00 N=2*4= 8 Years Rate=(12%/4) 3% P.V of annuity (3% for 8 years) 7.02 New Quartely payment= Quartly Payment=($30679/6.210) $ 4,370 Aortization schedule for these new payment for next two years Date Cash Paid=(A) Interest Expense=(B) Discount Amortized=(C )=(B)-(A) Carrying amount of Note 1/1/2018 $ 30,679 4/1/2018 $ 4,370 $ 920 $ 3,450 $ 27,229 7/1/2018 $ 4,370 $ 817 $ 3,553 $ 23,676 10/1/2018 $ 4,370 $ 710 $ 3,660 $ 20,016 1/1/2019 $ 4,370 $ 600 $ 3,770 $ 16,246 4/1/2019 $ 4,370 $ 487 $ 3,883 $ 12,363 7/1/2019 $ 4,370 $ 371 $ 3,999 $ 8,364 10/1/2019 $ 4,370 $ 251 $ 4,119 $ 4,245 1/1/2020 $ 4,370 $ 127 $ 4,245 $ (0)
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