On 12-31-21, Austin entered into an agreement that required Austin to pay a supplier $4,000 every year on 12-31 until 12-31-30. The agreementrequired Austin to make the first annual payment on 12-31-24. Assume the market rate of interest for Austin is 6%. As of 12-31-21 what was thepresent value of Austin's obligation?

First, we need to identify the parameters for the calculation. The annual payment is $4,000. The…

Answered: On 12-31-21, Austin entered into an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On 1st of December 2020, Mohamed entered in a Forward rate agreement 2*4 FRA with a fixed rate of 6.00% and a notional amount of $2,000,000. What will be the value of this contract on 11th of December, if the LIBOR-110 days is 6.15% & LIBOR - 50 days is 5.85%? * $-770 $-400 $740
On January 1, 2019, BTS Company enters into a 10-year lease of machinery with annual lease payments of P800,000 payable at the beginning of each year. The contract specifies that the lease payments will increase every two years on the basis of the increase in consumer price index for the preceding 24 months. The consumer price index at the commencement date is 140. The rate implicit in the lease is not readily determinable. Lessee’s incremental borrowing rate is 8% per annum, which reflects the fixed rate at which lessee could borrow an amount similar to the value of the right-of-use asset, in the same currency, for a ten-year term and with similar collateral. At the beginning of third year (January 1, 2021) of the lease, the consumer price index is 160. How much is the balance of the lease liability as of December 31, 2021?
ont 23) A two-year certificate of deposit pays an annual effective rate of 8.25%. The purcnaser is offered two options for prepayment penalties in the event of early withdrawal: A) A reduction in the rate of interest to 6.25%; B) Loss of three months interest. In order to assist the purchaser in deciding which option to select, compute the ratio of the proceeds under Option A to those under Option B if the certificate of deposit is surrendered: a) At the end of 7 months. ANSWER = b) At the end of 18 months. ANSWER =
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A floating rate mortgage loan is made for $185,000 for a 30-year period at an initial rate of 12 percent interest. However, the borrower and lender have negotiated a monthly payment of $1,480. Required: a. What will be the loan balance at the end of year 1? b. If the interest rate increases to 13 percent at the end of year 2, how much is the payment plus negative amortization in year 2 and year 5 if the payment remains at $1,480?
On 1st of December 2020, Mohamed entered in a Forward rate agreement 2*4 FRA with a fixed rate of 6.00% and a notional amount of $2,000,000. What will be the value of this contract on 11th of December, if the LIBOR-110 days is 6.15% & LIBOR - 50 days is 5.85%? * $-770 $740 $-4
A lender offers a 1-year loan at what he calls 8 percent interest but requires the interest to be paid at the beginning rather than at the end of the year , as the usual practlce is to what interest ratc computed in the conventional manner does this interest charge correspond?
On January 1, 2020, Dan Co. entered into a ten-year noncancelable lease lease requiring year-end payments of P 1,000,000. Dan's incremental borrowing rate is 12%, while the lessor's implicit interest rate, known to Dan, is 10%. PV factors for an ordinary annuity for ten periods are 6.145 at 10%, and 5.650 at 12%. On the same date, Dan Co. paid initial direct cost of P 200,000 in negotiating and securing the leasing arrangement. Ownership of the property remains with the lessor at expiration of the lease. There is no bargain purchase option. The leased property has an estimated economic life of 12 years. What amount should be capitalized initially as cost of the leased property?
3. A company buys a machine for $15,000. It agrees to pay for it in ten equal annual payments beginning one year after the date of purchase. The interest rate is 7.8461% per year compounded semiannually. Immediately after the fifth payment, the terms of the agreement are changed to allow the balance due to be paid off in a single payment the next year. What is the final single payment?
On July 01, 2021, Emerald Corporation sold a set of washing machine and a dryer for a total contract price of P200,000. The stand-alone selling prices of the washing machine and the dryer if sold separately are: 150,000 and 70,000, respectively. A 20% down payment was made and the balance is payable in six (6) equal installment payments of P28,564, inclusive of 2% interest, payable quarterly starting September 30 and December 31, 2021. How much is the total amount of interest earned in 2021?
On 1 October 2020, ABC Limited sold three machines to a customer for a total amount of R 1 900 000. The three machines were delivered to the premises of the customer on the same day. Included in the sales contract are 1-year warranties for all three of the machines. A warranty for each of these machines may cost R 20 000 to obtain. The customer received a trade discount of 10 % for both tractors. ABC Limited awards a settlement discount of 6% to any customer who settles their account in full within 30 days of making a purchase. This particular customer often buys machinery from ABC Limited and based on past dealings with the customer ABC Limited expects that the customer will settle their account within 30 days. The customer settled their account in full on 3 November 2020. How many performance obligations are contained in the contract? 01 2 3 06
Kit Company leased equipment at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Kit is given the option to purchase the asset for P75,000 at the end of the lease term and Kit is reasonably certain to exercise this option. The appropriate interest rate is 12%. Present value of 1 at 12% for 5 periods is 0.5674. Present value of an annuity due of 1 at 12% for 5 periods is 4.0373. What is the capitalized cost of right of use equipment? a. 225,000 b. 300,000 c. 224,234 d. 189,679

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