For Scenario #2, determine the Total Interest Revenue ABC will recognize over the entire three-year lending agreement. 1. On January 1, 2015, ABC rendered services to Z Corp. in exchange for a $105,000, 3-year note. The terms of the agreement require Z Corp. to make semi-annual installment payments of P&I with the first installment due immediately. An annual interest rate of 8% is imputed. Each payment is to be received on Jan 1 and July 1. ABC s year-end is Dec 31. 2. On January 1, 2015, ABC rendered services in exchange for a $20,000 cash down payment (this down payment is NOT a PVAD; it is simply made to reduce the amount being financed) and a 3 year $90,000, 6% note. Interest is to be remitted each June 30 and Dec 31. The principal will be remitted at maturity. This customer has a credit rating that requires that money be borrowed at 10%.
For Scenario #2, determine the Total Interest Revenue ABC will recognize over the entire three-year lending agreement. 1. On January 1, 2015, ABC rendered services to Z Corp. in exchange for a $105,000, 3-year note. The terms of the agreement require Z Corp. to make semi-annual installment payments of P&I with the first installment due immediately. An annual interest rate of 8% is imputed. Each payment is to be received on Jan 1 and July 1. ABC s year-end is Dec 31. 2. On January 1, 2015, ABC rendered services in exchange for a $20,000 cash down payment (this down payment is NOT a PVAD; it is simply made to reduce the amount being financed) and a 3 year $90,000, 6% note. Interest is to be remitted each June 30 and Dec 31. The principal will be remitted at maturity. This customer has a credit rating that requires that money be borrowed at 10%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:For Scenario #2, determine the Total Interest Revenue ABC will recognize over the entire three-year
lending agreement.
1. On January 1, 2015, ABC rendered services to Z Corp. in exchange for a $105,000, 3-year note. The
terms of the agreement require Z Corp. to make semi-annual installment payments of P&I with the
first installment due immediately. An annual interest rate of 8% is imputed. Each payment is to be
received on Jan 1 and July 1. ABC s year-end is Dec 31.
2. On January 1, 2015, ABC rendered services in exchange for a $20,000 cash down payment (this
down payment is NOT a PVAD; it is simply made to reduce the amount being financed) and a 3 year
$90,000, 6% note. Interest is to be remitted each June 30 and Dec 31. The principal will be remitted
at maturity. This customer has a credit rating that requires that money be borrowed at 10%.
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