Concept explainers
1.
Compute the issue (sale) price on January 1 when the annual market interest rate is 5%.
1.

Answer to Problem 1CCOMP
Particulars | Amount in $ |
Present value (2) | 613,910 |
Present value of annuity (3) | 386,087 |
Issue price | 999,997 |
(Table 1)
Therefore, the issue price on January 1when annual market interest rate is 5% is $999,997.
Explanation of Solution
Present value:
Present value is the current value of an amount that is to be paid or received in future. Present value is determined by using the formula:
Annuity:
An annuity is referred as a sequence of payment of fixed amount of
Working Notes:
Compute the issue (sale) price on January 1 when the annual market interest rate is 5%:
2.
Compute the issue (sale) price on January 1 when the annual market interest rate is 4%.
2.

Answer to Problem 1CCOMP
Particulars | Amount in $ |
Present value (4) | 675,560 |
Present value of annuity (5) | 405,545 |
Issue price | 1,081,105 |
(Table 2)
Therefore, the issue price on January 11when annual market interest rate is 4% is $1,081,105.
Explanation of Solution
Present value:
Present value is the current value of an amount that is to be paid or received in future. Present value is determined by using the formula:
Annuity:
An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time.
Working Notes:
Compute the issue (sale) price on January 1 when the annual market interest rate is 4%:
3.
Compute the issue (sale) price on January 1 when the annual market interest rate is 6%.
3.

Answer to Problem 1CCOMP
Particulars | Amount in $ |
Present value (6) | 558,390 |
Present value of annuity (7) | 368,005 |
Issue price | 926,395 |
(Table 3)
Therefore, the issue price on January 11when annual market interest rate is 6% is $926,395.
Explanation of Solution
Present value:
Present value is the current value of an amount that is to be paid or received in future. Present value is determined by using the formula:
Annuity:
An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time.
Working Notes:
Compute the issue (sale) price on January 1 when the annual market interest rate is 6%:
Want to see more full solutions like this?
Chapter 11 Solutions
FINANCIAL ACCOUNTING (LL)
- Waka Company had cash sales of $78,275, credit sales of $97,450, sales returns and allowances of $1,500, and sales discounts of $4,875. Calculate Waka's net sales for this period.arrow_forwardProvide answerarrow_forwardOn 2015/1/1, Samantha Ltd. purchased machinery for $60,000. The useful life is 8 years with a salvage value of $6,000. The company uses the double declining balance method. What is the second year's annual depreciation expense (2016/12/31)?arrow_forward
- Brenda Confections is preparing its cash budget and expects to have sales of $50,000 in April, $65,000 in May, and $75,000 in June. If 30% of sales are for cash, 50% are credit sales paid in the month after the sale, and 20% are credit sales paid 2 months after the sale, what are the expected cash receipts for June?arrow_forwardRK Co. sells snowboards. Each snowboard requires direct materials for $140, direct labor for $55, and variable overhead of $64. The company expects fixed overhead costs of $673,000 and fixed selling and administrative costs of $160,000 for the next year. It expects to produce and sell 11,900 snowboards in the next year. What will be the selling price per unit if RK uses a mark-up of 17% of the total cost?arrow_forwardSP Company made sales of $32,750 million in 2019. The cost of goods sold for the year totaled $12,500 million. At the end of 2018, Malt's inventory stood at $1,300 million, and SP ended 2018 with an inventory of $1,800 million. Compute Malt's gross profit percentage and rate of inventory turnover for 2019.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





