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Loan Amortization

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Problem 3 Loan Amortisation WXYZ Ltd has purchased a 2014 Nissan delivery truck. The accounting department needs to record the monthly principal payments and interest expense. The fiscal year end for WXYZ Ltd is 30 June. Information from the dealer’s sales ticket: Base Price: 65,000 Rear Tow bar: 400 Heavy Duty Front bumper: 1,500 Company Name printed on the side 600 Navigation System & Stereo 935 Alarm System 235 GST 6,867 Total 75,537 Months 60 Interest rate: 5% annually Interest calc: monthly Monthly Payment ??? Purchase date: 1 September 2014 First Payment due: 1 October 2014 Final Payment: 1 September 2019 Fiscal year end: 30 June Down Payment $ 10,000 Amount Financed ??? Required: a. Calculate the amount needs to be capitalised? Marks: .5 b. Calculate the amount that needs to be financed? c. Prepare the journal entry to record the purchase of the truck. Marks: .5 Marks: 1 d. Create an amortisation schedule that shows each monthly payment. Include the principal and the interest portions of each payment and the ending balance of the loan after each payment. Also, include the amount of principal, interest, total payments for each fiscal year. Marks: 2 e. Create the monthly depreciation entry using reducing-balance method so your staff can record depreciation expense each month. Expected residual value of the truck is $7,000 and has an expected useful life is 8 years. Show your complete calculation and round to the nearest whole dollar. Marks: 2 Suggestion: Create the amortisation schedule in excel so you can easily copy it into MS Word for lodging.