Oriole Company purchased a building on January 2 by signing a long-term $3564000 mortgage with monthly...

Oriole Company purchased a building on January 2 by signing a long-term $3564000 mortgage with monthly payments of $32600. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be

$3564000.

$3561100.

$3534300.

$3531400.

A $500,000 bond is retired at 97 when the carrying value of the bond is $483,000. Which of the following is one effect of recording the retirement?

A $15,000 gain

A $2,000 loss

A $2,000 gain

A $15,000 loss

Expert Solution

Question 1

The answer is Option 2: $ 3,561,100

Particulars	Amount (in $)
Mortgage Loan	3,564,000
Interest for first month	29,700
(3,564,000 x 10% x 1/12)
Total mortgage outstanding after one month	3,593,700
including interest (3,564,000 + 29,700)
Monthly payment (given)	32,600
Amount owed after the first monthly payment	3,561,100
(3,593,700 - 32,600)


Question 2

The answer is Option 3: $ 2,000 Gain

Particulars	Amount (in $)
Value of Bond	500,000
Retirement value of bond (500,000 x 97%)	485,000
Carrying Value of Bond (given)	483,000
Gain on retirement (Retirement Value - Carrying Value)	2,000
(485,000 - 483,000)

ekkarill92 answered 2 years ago

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