Final answer:
The task involves creating an amortization schedule for a mortgage loan, accounting for monthly payments that include both interest and principal reduction. The schedule starts with a loan amount of $220,000 and a first payment of $2,786.87, of which $1,650.00 is interest.
Step-by-step explanation:
This question relates to the construction of an amortization schedule for a mortgage loan. Based on the given information, the mortgage at Birmingham Enterprises has an initial carrying value of $220,000 on January 1, 2024. The first installment of $2,786.87 is due at the end of January, with $1,650.00 of it going towards interest (which is the monthly interest at 9% per annum on the carrying value).
The carrying value after the first payment can be calculated by subtracting the principal part of the payment (total payment - interest) from the initial carrying value. At the end of the first month (January 31), the carrying value will be $220,000 - $1,136.87, which equals $218,863.13.
Now, to fill out the amortization schedule for the next payment due on February 29:
- Calculate the interest for February by multiplying the new carrying value by the monthly interest rate (9% per annum / 12 months).
- Deduct the interest for February from the second payment amount to find the change in carrying value.
- Subtract the principal portion from the carrying value after the January payment to get the new carrying value after the February payment.