BTB110
Assignment 1 - Value 5%
Due: Tuesday, March 8
1.
Consider the following explanation for creating an amortization schedule using EXCEL:
Example:
A debt of $5000 was amortized by making equal payments at the end of every three months for 2 years. If
interest is 8% compounded quarterly, construct an amortization schedule.
Initially, we computed the size of the annuity payment made every quarter to meet the conditions of the
problem, and then we created an amortization schedule to determine just how much of each payment
would be allocated to principal and how much to interest.
We determined the size of the annuity payment as follows:
PV = R (1 – (1+I)-n)
I
And with the data given above: PV = $5000, n = 2x4 = 8, and I = 8%/4 = 2%,
We computed a payment of $682.55.
We took this payment to an amortization schedule that we set up as follows:
Payment #
Amt. Paid
Interest Pd.
I = .02
Principal
Repaid
0
1
2
3
4
5
6
7
8
TOTAL
682.55
682.55
682.55
682.55
682.55
682.55
682.55
682.55
5460.39
100.00
88.35
76.47
64.34
51.98
39.37
26.50
13.38
460.39
582.55
594.20
606.08
618.21
630.57
643.18
656.05
669.16
$5000.00
Reminder:
1.
2.
3.
4.
Outstanding
Prin Balance
5000.00
4417.45
3823.25
3217.17
2598.96
1968.39
1325.21
669.16
0.00
the amount paid column reflects the annuity payment per period.
the interest paid is 2% of the outstanding principal for each period.
the principal repaid is $682.55 – interest paid
the outstanding principal balance is the principal balance of the previous period – the
principal repaid in the current period.
The purpose of this lab is to create a generic amortization schedule that can recreate the table above, and,
with minor modifications, create any other amortization schedule.
The formulae required, and the layout of the spreadsheet is given below:
1
A
Payment
#
2
3
4
5
6
7
8
8
10
11
0
1
2
3
4
5
6
7
8
Totals
WORKBOOK
B
Amt. Pd.
=$F$2
=$F$2
=$F$2
=$F$2
=$F$2
=$F$2
=$F$2
=C10+D10
=SUM(B3:B10)
1
C
Interest Pd.
=$F$4*E2
=$F$4*E3
=$F$4*E4
=$F$4*E5
=$F$4*E6
=$F$4*E7
=$F$4*E8
=$F$4*E9
=SUM(C3:C10)
D
Principal
Repaid
=B3-C3
=B4-C4
=B5-C5
=B6-C6
=B7-C7
=B8-C8
=B9-C9
=E9
=SUM(D3:D10)
E
Outstanding
Prin.
Balance
5000.00
=E2-D3
=E3-D4
=E4-D5
=E5-D6
=E6-D7
=E7-D8
=E8-D9
=E9-D10
F
682.55
=0.08/4
Note that the $ is used in EXCEL to indicate an absolute cell reference.
Based upon the explanation given above, solve the following problem:
a)
Find the payment necessary to amortize a loan of $10,100 at 12%
compounded semiannually, if there are to be 8 semiannual payments.
b) Prepare an amortization schedule for these payments using the EXCEL model given above.
2 Selected data for the Mork Company for the year 2013 are as follows (including all earning statement
data):
Revenue from services rendered on account
Revenue from services rendered for cash
Cash collected from customers on account
Retained Earnings. January 1, 2013
Expenses incurred on account
Expenses incurred for cash
Dividends paid
Cash received for additional shares issued
Retained Earnings, December 31, 2013
$55,000
15,000
42,000
90,000
30,000
20,000
5,000
10,000
105,000
a) Compute the net earnings for 2013 using the formula for the income statement.
b) Compute the net earnings for 2013 by analyzing the retained earnings account
c) If, during 2012, retained earnings increased by $12,000 and expenses amounted to $34,500, and
dividends declared and paid were $5,000, what were the revenues and net earnings for the year?