Fulton Corporation purchases new manufacturing facilities and assumes a 10 year
ID: 2545965 • Letter: F
Question
Fulton Corporation purchases new manufacturing facilities and assumes a 10 year mortgage of $7 million. The annual interest rate on the mortgage is 5.5% and payments are due at the end of each year.
a. Determine the mortgage payment that Fulton Corporation must make each year.
Round to the nearest dollar.
$Answer
b. Use Excel to prepare a mortgage amortization schedule for the 10 years.
To access an Excel template, click the following link: mortgage amortization schedule
c. At the end of the first year, what amount will Fulton include as "current maturities of long-term debt" on its balance sheet?
Round to the nearest dollar.
$Answer
Explanation / Answer
Answer a. Discount Factor (D) = {[(1 + i) ^n] - 1} / [i(1 + i)^n] Discount Factor (D) = {[(1 + 5.50%) ^10] - 1} / [5.50%(1 + 5.50%)^10] Discount Factor (D) = 7.537626 Annual Payment = $7,000,000 / 7.537626 Annual Payment = $928,674.38 or say $928,674 Answer b. Annual Amortization Schedule Year Beginning Balance Annual Payment Interest Principal Ending Balance 0 - - - - 7,000,000 1 7,000,000 928,674 385,000 543,674 6,456,326 2 6,456,326 928,674 355,098 573,576 5,882,750 3 5,882,750 928,674 323,551 605,123 5,277,627 4 5,277,627 928,674 290,269 638,405 4,639,223 5 4,639,223 928,674 255,157 673,517 3,965,706 6 3,965,706 928,674 218,114 710,560 3,255,146 7 3,255,146 928,674 179,033 749,641 2,505,505 8 2,505,505 928,674 137,803 790,871 1,714,634 9 1,714,634 928,674 94,305 834,369 880,264 10 880,264 928,674 48,410 880,264 (0) Answer c. At the End of First Year: Current maturities of Long-term debt 573,576
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