A local ski hill has just approached a venture capitalist for financing for its new business venture, the development of another local ski hill. On April 1, 2013, the venture capitalist loaned the company $100,000 at an interest rate of 13%. The loan is payable over four years in annual blended principal and interest instalments of $33,619, due each March 31. The first payment is due March 31, 2014. The ski hill's year end is March 31.
Instructions
(a) Prepare an instalment payment schedule for the loan period. Round all amounts to the nearest dollar.
(b) Record the receipt of the loan on April 1, 2013.
(c) Record the first two instalment payments, on March 31, 2014, and March 31, 2015.
(d) Show the statement of financial position presentation of the loan payable as at March 31, 2015.
(e) Explain how the annual and total interest expense would change if the loan had been payable in fixed principal payments of $25,000, plus interest, rather than in blended principal and interest payments.