Question
Assignment: Non-Current Liabilities Roberts Co. will borrow $250,000 on June 30th, 2021. The CFO is trying to decide whether to accept principal and interest payments
Assignment: Non-Current Liabilities
Roberts Co. will borrow $250,000 on June 30th, 2021. The CFO is trying to decide whether to accept principal and interest payments over the term of the loan or to pay interest only with a balloon payment at the end. Terms are 12% interest compounded quarterly, the first payment is due Sept 1, 2021, and the last payment is due July 1, 2023. Payments would be made quarterly.
Instructions
Compare total interest paid under both methods, and then calculate the balance sheet presentation as of December 31, 2021.
Fully Amortized Loan
Fully amortized $250,000 loan at 12% APR compounded quarterly with 8 equal payments
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| Beg. Bal. | Payment | New balance | Interest | Ending Bal. |
| 30-Jun-21 | 250,000.00 |
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| 1-Sep-21 |
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| 1-Jan-22 |
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| 1-Apr-22 |
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| 1-Jul-22 |
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| 1-Sep-22 |
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| 1-Jan-23 |
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| 1-Apr-23 |
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| 1-Jul-23 |
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Interest Only Loan
Interest only $250,000 loan at 12% APR compounded quarterly with the balance due July 1, 2023.
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| Beg. Bal. | Payment | New balance | Interest | Ending Bal. |
| 30-Jun-21 | 250,000.00 |
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| 1-Sep-21 |
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| 1-Jan-22 |
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| 1-Apr-22 |
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| 1-Jul-22 |
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| 1-Sep-22 |
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| 1-Jan-23 |
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| 1-Apr-23 |
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| 1-Jul-23 |
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Introduction To Health Care Management
Authors: Sharon B. Buchbinder, Nancy H. Shanks
3rd Edition
128408101X, 9781284081015
