You will recall from Chapter 9 that Emily, Bev, and Doug had originally thought that the equipment upgrade that ABC decided to undertake could be paid for with cash in the bank. Unfortunately, there was not enough cash and an operating line of credit was required. At January 31, 2018, the balance used on the new line of credit, and recorded in the Bank Indebtedness account, was $25,000.
At June 25, 2018, 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, 2018, and Bev, Doug, and Emily would like to reduce the mortgage term to five years, instead of the seven years remaining. The current interest rate is 4%. They are considering transferring the balance of the line of credit onto the mortgage payable balance outstanding instead of trying to pay the balance owed on the line of credit from cash generated from operations. The bank has agreed to accommodate this request and has estimated the monthly blended principal and interest instalment payments would be $1,320 for the combined amounts, starting on December 25, 2018.
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, 2018, immediately before it is renegotiated? Round all amounts to the nearest dollar.
(b) Assume that ABC increases the mortgage payable amount you determined in part (a) by $25,000, which is the amount of the line of credit still outstanding at November 25, 2018. What is the revised amount of the mortgage payable at November 25, 2018? Record the increase in the mortgage payable on November 25.
(c) Prepare an instalment payment schedule using the blended instalment payments of $1,320, from December 25, 2018, to June 25, 2020. Round all amounts to the nearest dollar.
(d) Record the first two instalment payments for December 25, 2018, and January 25, 2019.
(e) From the information provided in part CT10.7(c), show the presentation of the current and non-current portions of the mortgage payable on ABC's statement of financial position at June 30, 2019.