GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
17th Edition
ISBN: 9781260218831
Author: Libby
Publisher: MCG CUSTOM
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Chapter 11, Problem 1CCOMP

1.

To determine

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

1.

Expert Solution
Check Mark

Answer to Problem 1CCOMP

ParticularsAmount in $
Present value (2)613,910
Present value of annuity (3)386,087
Issue price999,997

(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:

Present Value = 1(1+i)n×Amount

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 5%:

Interest payment =Issue price × interest rate=$1,000,000×5%=$50,000 (1)

Present Value = 1(1+i)n×Amount=1(1+0.05)10×1,000,000=0.61391×1,000,000=$613,910 (2)

Present Value of  Annuity= 1(1+i)ni×Amount=1(1+0.05)105%×$50,000(1)=7.72173×$50,000=$386,087 (3)

2.

To determine

Compute the issue (sale) price on January 1 when the annual market interest rate is 4%.

2.

Expert Solution
Check Mark

Answer to Problem 1CCOMP

ParticularsAmount in $
Present value (4)675,560
Present value of annuity (5)405,545
Issue price1,081,105

(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:

Present Value = 1(1+i)n×Amount

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%:

Present Value = 1(1+i)n×Amount=1(1+0.04)10×1,000,000=0.67556×1,000,000=$675,560 (4)

Present Value of  Annuity= 1(1+i)ni×Amount=1(1+0.04)104%×$50,000(1)=8.11090×$50,000=$405,545 (5)

3.

To determine

Compute the issue (sale) price on January 1 when the annual market interest rate is 6%.

3.

Expert Solution
Check Mark

Answer to Problem 1CCOMP

ParticularsAmount in $
Present value (6)558,390
Present value of annuity (7)368,005
Issue price926,395

(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:

Present Value = 1(1+i)n×Amount

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%:

Present Value = 1(1+i)n×Amount=1(1+0.06)10×1,000,000=0.55839×1,000,000=$558,390 (6)

Present Value of  Annuity= 1(1+i)ni×Amount=1(1+0.06)106%×$50,000(1)=7.36009×$50,000=$368,005 (7)

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Chapter 11 Solutions

GB 112/212 MANAGERIAL ACC. W/ACCESS >C<

Ch. 11 - Prob. 11QCh. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Katz Corporation has issued 400,000 shares of...Ch. 11 - Prob. 2MCQCh. 11 - Which of the following statements about stock...Ch. 11 - Prob. 4MCQCh. 11 - Prob. 5MCQCh. 11 - Prob. 6MCQCh. 11 - Prob. 7MCQCh. 11 - Which statement regarding dividends is false? a....Ch. 11 - Prob. 9MCQCh. 11 - Prob. 10MCQCh. 11 - Sources of Equity and Retained Earnings LO11-1...Ch. 11 - Computing the Number of Unissued Shares The...Ch. 11 - Earnings per Share Ratio How is the earnings per...Ch. 11 - Recording the Sale of Common Stock To expand...Ch. 11 - Prob. 11.5MECh. 11 - Determining the Effects of Treasury Stock...Ch. 11 - Determining the Amount of a Dividend Cole Company...Ch. 11 - Prob. 11.8MECh. 11 - Dividend Yield Ratio How is the dividend yield...Ch. 11 - Prob. 11.10MECh. 11 - Prob. 11.11MECh. 11 - Computing Shares Outstanding In a recent annual...Ch. 11 - Computing Number of Shares The charter of Vista...Ch. 11 - Prob. 11.3ECh. 11 - Reporting Stockholders Equity The financial...Ch. 11 - Reporting Stockholders Equity and Determining...Ch. 11 - Finding Amounts Missing from the Stockholders...Ch. 11 - Prob. 11.7ECh. 11 - Reporting Stockholders Equity Ruths Chris...Ch. 11 - Determining the Effects of Transactions on...Ch. 11 - Prob. 11.10ECh. 11 - Prob. 11.11ECh. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - Preparing the Stockholders Equity Section of the...Ch. 11 - Recording and Analyzing Treasury Stock...Ch. 11 - Prob. 11.16ECh. 11 - Prob. 11.17ECh. 11 - Computing Dividends on Preferred Stock and...Ch. 11 - Prob. 11.19ECh. 11 - Prob. 11.20ECh. 11 - Prob. 11.21ECh. 11 - Prob. 11.22ECh. 11 - Prob. 11.23ECh. 11 - Prob. 11.24ECh. 11 - Prob. 11.25ECh. 11 - Finding Missing Amounts At the end of the year,...Ch. 11 - Preparing the Stockholders Equity Section of the...Ch. 11 - Recording Transactions Affecting Stockholders...Ch. 11 - Prob. 11.4PCh. 11 - Prob. 11.5PCh. 11 - Prob. 11.6PCh. 11 - Analyzing Treasury Stock Transactions Apple Inc....Ch. 11 - Comparing Stock and Cash Dividends Chicago Company...Ch. 11 - Prob. 11.9PCh. 11 - Prob. 11.10PCh. 11 - Recording and Comparing Cash Dividends, Stock...Ch. 11 - Prob. 11.12PCh. 11 - Prob. 11.1APCh. 11 - Prob. 11.2APCh. 11 - Prob. 11.3APCh. 11 - Prob. 11.4APCh. 11 - Recording and Reporting Stockholders Equity...Ch. 11 - Case A: The charter for Rogers, Incorporated,...Ch. 11 - Prob. 1BCOMPCh. 11 - Prob. 1CCOMPCh. 11 - Prob. 1DCOMPCh. 11 - Prob. 11.1CPCh. 11 - Prob. 11.2CPCh. 11 - Prob. 11.3CPCh. 11 - Computing Dividends for an Actual Company A recent...Ch. 11 - Prob. 11.5CPCh. 11 - Prob. 11.6CP
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