Emily, Bev, and Doug had originally thought that the computer equipment upgrade that ABC decided to undertake could be paid for with cash in the bank. As at June 25, 2024, the balance of the 5% mortgage payable after making the payment on that day was $44,796. Monthly principal and interest instalment payments are $626, paid on the 25th of each month. The mortgage is up for renewal on November 25, 2024. Because interest rates have fallen since the original mortgage was signed, it can be renewed at an interest rate of 4%. In addition, Emily has decided to reduce the mortgage term to five years, instead of the seven years remaining. The ABC upgraded its server and other computing equipment. Unfortunately, there was not enough cash to pay for the equipment. ABC arranged for a $40,000 operating line of credit with its bank, using $23,000 of this line to finance this upgrade. Emily would like to pay off the operating line of credit by transferring the $23,000 owed on the line to 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 both of these requests and has advised that the monthly instalment payments will be $1.208 for the combined amounts and revised term, with payments starting on December 25, 2024.

Emily, Bev, and Doug had originally thought that the computer equipment upgrade that ABC decided to undertake could be paid for with cash in the bank. As at June 25, 2024, the balance of the 5% mortgage payable after making the payment on that day was $44,796. Monthly principal and interest instalment payments are $626, paid on the 25th of each month. The mortgage is up for renewal on November 25, 2024. Because interest rates have fallen since the original mortgage was signed, it can be renewed at an interest rate of 4%. In addition, Emily has decided to reduce the mortgage term to five years, instead of the seven years remaining. The ABC upgraded its server and other computing equipment. Unfortunately, there was not enough cash to pay for the equipment. ABC arranged for a $40,000 operating line of credit with its bank, using $23,000 of this line to finance this upgrade. Emily would like to pay off the operating line of credit by transferring the $23,000 owed on the line to 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 both of these requests and has advised that the monthly instalment payments will be $1.208 for the combined amounts and revised term, with payments starting on December 25, 2024.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 61P

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