Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 5, Problem 5.7P
Deferred annuities
• LO6–7
On January 1, 2018, the Montgomery Company agreed to purchase a building by making six payments. The first three are to be $25,000 each, and will be paid on December 31, 2018, 2019, and 2020. The last three are to be $40,000 each and will be paid on December 31, 2021, 2022, and 2023. Montgomery borrowed other money at a 10% annual rate.
Required:
1. At what amount should Montgomery record the note payable and corresponding cost of the building on January 1, 2018?
2. How much interest expense on this note will Montgomery recognize in 2018?
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Prim
erences
Exercise 5-20 (Algo) Deferred annuities; solving for annuity amount (LO5-8,5-9]
On April 1, 2024, Antonio purchased appliances from the Acme Appliance Company for $1100. In order to increase sales, Acme allows
customers to pay in installments and will defer any payments for six months. Antonio will make 18 equal monthly payments, beginning
October 1, 2024. The annual interest rate implicit in this agreement is 24%
Required:
Calculate the monthly payment necessary for Antonio to pay for his purchases
Note: Use tables, Excel, or a financial calculator. Do not round intermediate calculations. Round your final answers to nearest
whole dollar amount. (EY of 51. PV of 51, EVA of SJ. EVA of $1. EVAD. of $1 and PVAD of $1)
Monthly payment
S
A
51
On January 1, 2022, Affable Co. contracted with a contractor to construct a building for P20,000,000. The entity
is required to make five payments in 2022 with the last payment scheduled on the date of completion. The
building was completed on December 31, 2022. The entity made the following payments during 2022:
January 1
P 2,000,000
March 31
4,000,000
June 30
6,100,000
September 30
4,400,000
December 31
3,500,000
20,000,000
The entity had the following debt outstanding on December 31, 2022:
12% 4-year note dated January 1,
8,500,000
2022, with interest compounded
quarterly, both principal and interest
due December 31, 2025, relating
specifically to the building project.
Round off future value factors to four
(4) decimal places (e.g., 6.6667)
QUESTION 40
On January 1, 2020, Smith Company signed a six-year Note for the acquisition of equipment. Annual
interest and principal payments of $21,980, based on an interest rate of 9% are to be made every
December 31, beginning with December 2020. Compute the value of the Note at 1/1/20. Following are
appropriate factors from tables:
Table
% / n
9%/6
Present Value of
annuity due $1
$131,880
O $98,600.52
O $101,975.34
O $107,474.51
4.88965
Present Value of
ordinary annuity of $1
4.48592
Present value of $1
.59627
Future Value of
ordinary annuity of
$1
7.52333
Chapter 5 Solutions
Intermediate Accounting, 10 Ed
Ch. 5 - Prob. 5.1QCh. 5 - Explain compound interest.Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - Prob. 5.5QCh. 5 - Prob. 5.6QCh. 5 - What is an annuity?Ch. 5 - Explain the difference between an ordinary annuity...Ch. 5 - Prob. 5.9QCh. 5 - Prepare a time diagram for the present value of a...
Ch. 5 - Prepare a time diagram for the present value of a...Ch. 5 - What is a deferred annuity?Ch. 5 - Assume that you borrowed 500 from a friend and...Ch. 5 - Compute the required annual payment in Question...Ch. 5 - Explain how the time value of money concept is...Ch. 5 - Prob. 5.1BECh. 5 - Prob. 5.2BECh. 5 - Prob. 5.3BECh. 5 - Present value; single amount LO63 John has an...Ch. 5 - Present value; solving for unknown; single amount ...Ch. 5 - Future value; ordinary annuity LO66 Leslie...Ch. 5 - Future value; annuity due LO66 Refer to the...Ch. 5 - Prob. 5.8BECh. 5 - Prob. 5.9BECh. 5 - Prob. 5.10BECh. 5 - Solve for unknown; annuity LO68 Kingsley Toyota...Ch. 5 - Price of a bond LO69 On December 31, 2018,...Ch. 5 - Lease payment LO69 On September 30, 2018,...Ch. 5 - Prob. 5.1ECh. 5 - Future value; single amounts LO62 Determine the...Ch. 5 - Prob. 5.3ECh. 5 - Prob. 5.5ECh. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.10ECh. 5 - Deferred annuities LO67 Required: Calculate the...Ch. 5 - Solving for unknowns; annuities LO68 For each of...Ch. 5 - Solving for unknown annuity amount LO68 Required:...Ch. 5 - Prob. 5.15ECh. 5 - Price of a bond LO69 On September 30, 2018, the...Ch. 5 - Price of a bond; interest expense LO69 On June...Ch. 5 - Prob. 5.18ECh. 5 - Prob. 5.19ECh. 5 - Lease payments LO69 On June 30, 2018,...Ch. 5 - Lease payments; solve for unknown interest rate ...Ch. 5 - Analysis of alternatives LO63, LO67 Esquire...Ch. 5 - Analysis of alternatives LO63, LO67 Harding...Ch. 5 - Investment analysis LO63, LO67 John Wiggins is...Ch. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Deferred annuities LO67 On January 1, 2018, the...Ch. 5 - Prob. 5.8PCh. 5 - Noninterest-bearing note; annuity and lump-sum...Ch. 5 - Prob. 5.10PCh. 5 - Solving for unknown lease payment LO68, LO69...Ch. 5 - Solving for unknown lease payment; compounding...Ch. 5 - Lease v s. buy alternatives LO63, LO67, LO69...Ch. 5 - Prob. 5.14PCh. 5 - Prob. 5.15PCh. 5 - Prob. 5.1DMPCh. 5 - Prob. 5.2DMPCh. 5 - Prob. 5.3DMPCh. 5 - Prob. 5.4DMPCh. 5 - Judgment Case 65 Replacement decision LO63, LO67...Ch. 5 - Prob. 5.6DMPCh. 5 - Prob. 5.7DMP
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- Exercise 5-20 (Algo) Deferred annuities; solving for annuity amount [LO5-8, 5-9] On April 1, 2024, Antonio purchased appliances from the Acme Appliance Company for $500. In order to increase sales, Acme allows customers to pay in installments and will defer any payments for six months. Antonio will make 18 equal monthly payments, beginning October 1, 2024. The annual interest rate implicit in this agreement is 24%. Required: Calculate the monthly payment necessary for Antonio to pay for his purchases. Note: Use tables, Excel, or a financial calculator. Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Monthly paymentarrow_forwardProblem 8-7 (with solution) On January 1, 2021, South Company acquired a building for 5,000,000. The entity paid 500,000 down and signed a noninterest bearing note for the balance which is payable in 3 equal annual installments every December 31 of each year. The prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of 1 for three periods is 2.4018. Required: 1. Prepare journal entries to record purchase of building on January 1, 2021, first installment payment on December 31, 2021` and interest expense for 2021.arrow_forward> Question 9 Lilac Industries purchased a supply of electronic components from Norton Corporation on October 31, 2024. In payment for the $1,200,000 purchase, Lilac issued a 1-year installment note to be paid in equal monthly payments of $110,016 at the end of each month. The payments include interest at the rate of 18%. What is the amount of interest expense that Lilac will report in its income statement for the year ended December 31, 2024? O $35,240. $34,620. O $34,980. O $36,000.arrow_forward
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