Temple Corporation purchased a piece of real estate, paying $4,000,000 cash and financing$7,000,000 of the purchase price with a 10-year, 15% installment note. The note calls forequal monthly payments that will result in the debt being completely repaid by the end ofthe tenth year. In this situation:The aggregate amount of the monthly payments is $7,000,000.B. Each monthly payment is greater than the amount of interest accruing each month.C.A.The portion of each payment representing interest expense will increase over the 10-year period, since principal is being paid off, yet the payment amount does notdecrease.The portion of each monthly payment representing repayment of principal remains thesame throughout the 10-year period.D.

Accrued InterestAccrued interest is the amount of interest earned on a debt, such as a bond, but not…

Answered: Temple Corporation purchased a piece of…

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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A corporation has decided to use borrowed capital to finance a portion of an equipment purchase. The equipment will be partially financed by borrowing $40,000 on a 2-year contract at 7% interest compounded annually, with the loan to be repaid in two equal EOY installments. The average inflation rate during this period is expected to be 2%. Determine the loan payment amount.
The payment necessary to amortize a 4.9% loan of $86,000 compounded annually, with 4 annual payments is $24,196.70. The total of the payments is $96,786.80 with a total interest payment of $10,786.80. The borrower made larger payments of $25,000.00. Calculate (a) the time needed to pay off the loan, (b) the total amount of the payments, and (c) the amount of interest saved. a. The time needed to pay off the loan with payments of $25,000.00 is _____ years. (Round up to the nearest year.) b. The total amount of the payments is $______ (Round to the nearest cent as needed.) c. The amount of interest saved is $______. (Round to the nearest cent as needed.)
Culver Inc. bought an Internet domain name by issuing a $276,000, 6-year, non-interest-bearing note to Ti-Mine Corp. with an effective yield of 10%. The note is repayable in 6 annual payments of $46,000 made at the end of each year. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Prepare the journal entry to record the purchase of the intangible asset. (Round factor values to 5 decimal places, eg. 1.25124 and final answer to O decimal places, eg. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Notes Payable
Rachel Corporation purchased a building by paying $91,500 cash on the purchase date, agreeing to pay $50,300 every year for the next nine years and one payment of $101,500 ten years from the purchase date. The first payment is due one year after the purchase date. Rachel's incremental borrowing rate is 10%. (FV of $1, PV of $1, FVA of $1, and PVA of $1) The building reported on the balance sheet as of the purchase date is closest to: Note: Use the appropriate factor(s) from the tables provided.
An FI purchases a $9.982 million pool of commercial loans at par. The loans have an interest rate of 8 percent, a maturity of five years, and annual payments of principal and interest that will exactly amortize the loan at maturity. What is the duration of this asset? A. 2.122822 years. B. 3.072837 years. C. 3.528992 years. D. 2.846472 years. E. 5.000000 years.
Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of $5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of $1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of $1 at 15% for 5 periods is 6.74. The present value of $1 at 15% for 5 periods is O. 5. How much should Electro record as the cost of the machine? a. $12,500 b. $16,750 c. $25,000 d. $33,700
Sheridan Company receives a three-year, $9,200, zero-interest-bearing note, and the related present value with a market interest rate of 8% is $7,303.24. The total discount of $1,896.76 under the straight-line method is amortized over the three-year period in equal amounts each year. Therefore, the annual amortization is $1,896.76 ÷ 3 or $632.25. Date of issue End of Year 1 End of Year 2 End of Year 3 Cash Received Click here to view factor tables $0 0 $0 Schedule of Note Discount Amortization Effective Interest Method 0% Note Discounted at 8% Interest Income Discount Amortized $584.26 631.00 681.50 $1,896.76 $584.26. 631.00. 681.50 $1,896.76 Carrying Amount of Note $7,303.24 7,887.50 8,518.50 9,200 Prepare the entry to record the annual interest for years 1 and 2 under the straight-line method and the effective interest method. (Credit account titles are automatically indented when the amount is entered. Do not Indent manually. If no entry is required, select "No Entry" for the…
Tri-States Gas Producers expects to borrow $800,000 for field engineering improvements. Two methods of debt financing are possible—borrow it all from a bank or issue debenture bonds. The company will pay an effective 8% per year to the bank for 8 years. The principal on the loan will be reduced uniformly over the 8 years, with the remainder of each annual payment going toward interest. The bond issue will be for 800 ten-year bonds of $1000 each that require a 6% per year dividend payment. (a) Which method of financing is cheaper after an effective tax rate of 40% is considered? (b) Which is the cheaper method using a before-tax analysis? Is it the same as the after-tax choice?
Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,673,000, or it can make annual payments of $347,100 for 15 years, each payment due on the last day of the year. Click here to view factor tables. Which method of payment do you recommend, assuming an expected effective interest rate of 10% during the future period? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value of annual payments Recommended payment method Annual Payments 44
The Grewals agreed to monthly payments on a mortgage of $336,000.00 amortized over 20 years. Interest for the first five years was 4.5% compounded semi-annually.(using calculator) a. Determine the Grewals’ monthly payments. b. Determine the balance owing after the 5-year term. c. Before renewing for another term of 5 years at 4.3% compounded semiannually, the Grewals make an additional payment of $12,000. If they keep the same monthly payments, by how much will the amortization period be shortened?
Barrett Greenhouses obtained a $647,000 mortgage amortized over 20 years at 6% compounded semiannually for a 5-year term. The mortgage is now at the end of the initial 5-year term, and will be renewed at 7.5% compounded semiannually for the next 5-year term. How much will the monthly mortgage payments increase upon renewal as a result of the higher interest rate if the original amortization period is retained?
Your company borrows $300,000 from the investment bank for building upgrades. It agrees for a (5) years loan with annual payment of $45,000 for first four payments, and the final payment on the 5th year should be $170,000. Calculate the annual payment in the first four years, interest rate, and the final payment at year 5. |

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