Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter B, Problem 13E
1.
Summary Introduction
Concept Introduction:
Present value is the value of money today. Present value of money is calculated using the interest rate and period. The future value of money is multiplied with the present value factor to get the present value.
To calculate: the amount of money that can be borrowed today.
2.
Summary Introduction
Concept Introduction:
Present value is the value of money today. Present value of money is calculated using the interest rate and period. The future value of money is multiplied with the present value factor to get the present value.
To calculate: the amount of money that can be borrowed today.
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Questions # 14-16 are based on the following:
On January 1, 2021, Music Angel issued a four-year installment note in the amount of $5,100,000 in
exchange for a new machine. The note is to be paid in four equal payments of $1,574,210 at the end of
each year. The payments include interest at the rate of 9%.
14. Interest expense will be recorded at December 31, 2021 for:
A. $1,324,981
B. $1,115,210
C. $249,229
D. $459,000
15. By how much will the carrying value decrease when the first payment is made?
A. $1,574,210
B. $459,000
C. $1,115,210
D. $358,631
16. What is the carrying value at December 31, 2022?
A. $2,769,211
B. $5,100,000
C. $3,984,790
D. $1,951,580
Compute the amount that can be borrowed under each of the following circumstances: 1. A promise to repay $90,000 seven years from now at an interest rate of 6%. 2. An agreement made on February 1, 2019, to make three separate payments of $20,000 on February 1 of 2020, 2021, and 2022. The annual interest rate is 10%.
Maris Banking Corporation granted a loan to a borrower on January 1, 2020. The interest rate on the loan is 10% payable annually starting December 31, 2020. The loan matures in five years on December 31, 2025. The data related to the loan are:
Principal amount 6,000,000
Direct origination cost 92,250
Origination fee received from borrower 525,000
Indirect origination cost 100,000
The effective rate on the loan after considering the direct origination cost and origination fee received is 12%. What is the carrying amount of loans receivable on December 31, 2021?
Chapter B Solutions
Loose Leaf for Financial Accounting: Information for Decisions
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