The equipment upgrade that Koebel's Family Bakery decided to undertake proved to be a little more expensive than initially budgeted. Natalie, Janet, and Brian had originally thought that the project could be paid for with cash in the bank. Instead, an operating line of credit was obtained. At November 25, 2015, the balance used on the line of credit, and recorded in the Bank Indebtedness account, was $25,000.
At June 25, 2015, the balance of the 5% mortgage payable was $49,050. Monthly blended principal and interest instalment payments are $667 paid on the 25th of each month.
The mortgage is up for renewal on November 25, 2015, and Janet, Brian, and Natalie would like the mortgage term to be five years, instead of the seven years remaining. The current interest rate is 4%. Brian and Natalie are considering transferring the balance of the line of credit onto the mortgage payable balance outstanding instead of trying to pay the balance outstanding from cash generated from operations. The bank is happy to accommodate this request and has estimated the monthly blended principal and interest instalment payments to be $1,320 for the combined amounts, commencing December 25, 2015.
Instructions
(a) If the amount of mortgage owing was $49,050 on June 25, and blended payments are $667 per month as indicated above, what is the amount of the mortgage owing at November 25, 2015, immediately before it is renegotiated? Round all amounts to the nearest dollar.
(b) Assume that the Koebels increase the mortgage payable amount you determined in part (a) by $25,000, the amount of the line of credit outstanding at November 25, 2015. What is the revised amount of the mortgage payable at November 26? Record the increase in the mortgage payable on November 26.
(c) Prepare a revised instalment payment schedule using the blended instalment payments of $1,320, from December 25, 2015, to June 25, 2017. Round all amounts to the nearest dollar.
(d) Record the first two instalment payments for December 25, 2015, and January 25, 2016.
(e) From the information provided in part (c), show the presentation of the current and non-current portions of the mortgage payable on the statement of financial position at June 30, 2016.