Question
In: Accounting
Facts · Mortgage Principal at origination 1/1/2020: $10,000,000 · Annual Interest Rate at origination: 6% · ...
Facts
· Mortgage Principal at
origination 1/1/2020: $10,000,000
· Annual Interest Rate at
origination: 6%
· Term of Mortgage from
origination 1/1/2020: 20 years
· Purchase Price: $10,000,000
on 1/1/2020
· The mall owner has stopped
paying principal beginning April, 2021, and anticipates being
unable to pay even the interest portion beginning September, 2021
unless the CDC allows less strict mask and social distancing
requirements.
· The mall had a fair market
value of $20 million on 1/1/2020, and expects a current appraisal
to be at about $16 million.
· Ignore refinancing
costs.
· The securitizations do not
qualify for sale accounting, and the creditor retains legal title
to the mortgage as well as a 10% participation in the
mortgage.
· Today is August 31,
2021.
1.Create an amortization table that allows for an input each period
of the amount that the borrower actually pays. Using the facts of
the case, use the amortization table structure to find the
principal amount owed as of September 1, 2021.
2.Create a separate restructured loan that is a reasonable alternative to the current unaffordable mortgage.
3.Create an amortization table for the restructured
loan with the modifications and expected mortgage payments. If the
creditor and borrower would have different accounting treatments
for the loan, create an amortization table for the creditor and the
borrower.
Solutions
Expert Solution
| 1] | AMORTISATION SCHEDULE | |||||
| 6% | ||||||
| PARTICULARS | DATE | AMOUNT OUTSTANDING | EMI | INTEREST | PRINCIPAL REPAID | AMOUNT OUTSTANDING |
| Principal at origination | 01-01-2020 | 1,00,00,000 | 1,00,00,000 | |||
| 01-02-2020 | 1,00,00,000 | 71,643 | 50,000 | 21,643 | 99,78,357 | |
| 01-03-2020 | 99,78,357 | 71,643 | 49,892 | 21,751 | 99,56,606 | |
| 01-04-2020 | 99,56,606 | 71,643 | 49,783 | 21,860 | 99,34,746 | |
| 01-05-2020 | 99,34,746 | 71,643 | 49,674 | 21,969 | 99,12,776 | |
| 01-06-2020 | 99,12,776 | 71,643 | 49,564 | 22,079 | 98,90,697 | |
| 01-07-2020 | 98,90,697 | 71,643 | 49,453 | 22,190 | 98,68,507 | |
| 01-08-2020 | 98,68,507 | 71,643 | 49,343 | 22,301 | 98,46,207 | |
| 01-09-2020 | 98,46,207 | 71,643 | 49,231 | 22,412 | 98,23,795 | |
| 01-10-2020 | 98,23,795 | 71,643 | 49,119 | 22,524 | 98,01,271 | |
| 01-11-2020 | 98,01,271 | 71,643 | 49,006 | 22,637 | 97,78,634 | |
| 01-12-2020 | 97,78,634 | 71,643 | 48,893 | 22,750 | 97,55,884 | |
| 01-01-2021 | 97,55,884 | 71,643 | 48,779 | 22,864 | 97,33,020 | |
| 01-02-2021 | 97,33,020 | 71,643 | 48,665 | 22,978 | 97,10,042 | |
| 01-03-2021 | 97,10,042 | 71,643 | 48,550 | 23,093 | 96,86,949 | |
| 01-04-2021 | 96,86,949 | 48,435 | 48,435 | - | 96,86,949 | |
| 01-05-2021 | 96,86,949 | 48,435 | 48,435 | - | 96,86,949 | |
| 01-06-2021 | 96,86,949 | 48,435 | 48,435 | - | 96,86,949 | |
| 01-07-2021 | 96,86,949 | 48,435 | 48,435 | - | 96,86,949 | |
| 01-08-2021 | 96,86,949 | 48,435 | 48,435 | - | 96,86,949 | |
| 01-09-2021 | 96,86,949 | - | - | - | 96,86,949 |
2] RESTRUCTURING-
AS DUE TO SPECIAL SITUATION OF PANDEMIC THE MALL OWNER CANNOT REPAY THE DEBT . HE IS WILLING TO RESTRUCTURE THE LOAN AND HENCE TO BENEFIT FROM THE ABOVE THE CREDITOR SHOULD EXTEND A ADDITIONAL LOAN AT SAME RATE
NOW , HERE THE BENEFIT OF ADDITIONAL LOAN IS THAT ,WE ARE PROPOSING THE CREDITOR TO EXTEND A LOAN EQUAL TO 12 INSTALLMENTS TO BE PAID BY THE MALL OWNER WHICH IS SUBSTANTIALLY LOW W.R.T TO THE 60% INCREASE IN THE MALL'S MARKET VALUE
NOW WHEN THE ADDITIONAL LOAN IS DISBURSED A NEW AMORTISATION SCHEDULE WILL BE GENERATED IN WHICH THE MALL OWNER AS WELL AS THE CREDITOR BENEFITS HENCE A WIN WIN SITUATION
ADDITIONAL LOAN - 12*71643=8,59,717.20
NEW OUTSTANDING PRINCIPAL - 105466676
NEW EMI - 75560
NEW TENURE - 240 MONTHS
NEW [SAME] INTEREST RATE - 6%
AS THERE IS A LIMIT ON THE SIZE OF ANSWER I CANNOT INSERT THE WHOLE RESTRUCTURED AMORTISATION TABLE BUT I HAVE SHOWN GLIMPSE WHICH WILL HELP YOU TO UNDERSTAND THE SAME
| 2] | RESTRUCTURED LOAN | |||||
| 6% | ||||||
| PARTICULARS | DATE | AMOUNT OUTSTANDING | EMI | INTEREST PAID | PRINCIPAL REPAID | AMOUNT OUTSTANDING |
| Principal at origination | 01-09-2021 | 96,86,949 | - | - | 96,86,949 | |
| 01-09-2021 | 1,05,46,667 | 75,560 | 52,733 | 22,826 | 1,05,23,840 | |
| 01-10-2021 | 1,05,23,840 | 75,560 | 52,619 | 22,940 | 1,05,00,900 | |
| 01-11-2021 | 1,05,00,900 | 75,560 |
 ekkarill92 answered 1 year agoRelated SolutionsFacts · Mortgage Principal at origination 1/1/2020: $10,000,000 · Annual Interest Rate at origination: 6% ·...Facts
· Mortgage Principal at origination 1/1/2020: $10,000,000
· Annual Interest Rate at origination: 6%
· Term of Mortgage from origination 1/1/2020: 20 years
· Purchase Price: $10,000,000 on 1/1/2020
· The mall owner has stopped paying principal beginning April,
2021, and anticipates being unable to pay even the interest portion
beginning September, 2021 unless the CDC allows less strict mask
and social distancing requirements.
· The mall had a fair market value of $20 million on 1/1/2020,
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