![Connect Access Card for Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781259738678/9781259738678_largeCoverImage.gif)
1. (a)
Identify the present value of debt.
1. (a)
![Check Mark](/static/check-mark.png)
Answer to Problem 9.6AP
The present value of debt of Company E is
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:
Calculate the present value of debt for the borrowed money of $2,000,000 to be repaid in five years:
Therefore, the present value of debt for the borrowed money of $2,000,000 to be repaid in five years is $1,361,160.
(1)
Calculate the present value of annuity for an agreed amount interest each year for five years:
Therefore, the present value of annuity for an agreed amount interest each year for five years is $598,907.
(2)
2. (b)
Identify the single amount the company must deposit on January 1 and also identify the total amount of interest revenue that will be earned.
2. (b)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Determine the single amount that Company E must deposit on January 1:
Therefore, the single amount that Company E must deposit on January 1 is $463,190.
Identify the total amount of interest revenue that will be earned by Company E:
The total amount of interest revenue that will be earned by the Company E is $536,810
3.(c)
Identify the amount of each of the equal annual payments that will be paid on the note by Company E and also identify the total amount of interest expense that will be accrued by Company E.
3.(c)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Identify the amount of each of the equal annual payments that will be paid on the note by Company E:
Therefore, The amount of each of the equal annual payments that will be paid on the note by Company E is $105,672.
Working Note:
Identify the total amount of interest expense that will be accrued by Company E:
Therefore, the total amount of interest expense that will be accrued by Company E is $72,688.
Want to see more full solutions like this?
Chapter 9 Solutions
Connect Access Card for Financial Accounting
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305654174/9781305654174_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)