Answer:
d. 5704.02
Explanation:
Nper = 30*12 = 360
Rate = 10%/12 = 0.008333
PV = 650,000
Using the MS Excel function:
Monthly payment = PMT(RATE, NPER, -PV)
Monthly payment = PMT(10%/12, 360, -650000)
Monthly payment = $5,704.02
Diaz Manufacturing had current assets worth $2,812,422 and long-term assets worth $300,600 in 2014. In 2013, current assets were $650,208 and long-term assets were $400,600. The firm had accounts payable of $196,522 , accruals of $259,054 , notes payable of $292,361 , and long-term debt of $405,830 in 2014. Calculate the net working capital for Diaz Manufacturing in 2014.
You own factory A and factory B. The next cash flow for each factory is expected in 1 year. Factory A has a cost of capital of 3.5 percent and is expected to produce annual cash flows of $19,300 forever. Factory B is worth $545,000 and is expected to produce annual cash flows of $19,900 forever. Which assertion is true
Answer: See Explanation
Explanation:
First, we have to calculate the worth of factory A which will be:
= Cash flow / Cost of capital
= $19300 / 3.5%
= $19300 / 0.035
= $551428.57
= $551429
Cost of capital of Factory B = Cash flow / Worth
= $19,900 / $545,000
= 0.0365
= 3.65%
Cost of capital of Factory A = 3.5%
Cost of capital of Factory B = 3.65%
Worth of factory A = $551429
Worth of Factory B = $545,000
Therefore, factory A is more valuable than Factory B and Factory B is more risky than Factory A.
On April 1, Ringo Company borrowed $20,000 from its bank by issuing a 9%, 12-month note, with the interest to be paid on the maturity date. Required: Prepare journal entries to record the issuance of the note and the related year-end adjusting entry on December 31.
Answer:
April 1
Issuance of Loan Note
Dr. Cash $20,000
Cr. Loane Note Payable $20,000
December 31
Adjusting Entry of accrued interest
Dr. Interest Expane $1,350
Cr. Interest Payable $1,350
Explanation:
April 1:
First, we need to record the loan note issuance as follow:
Ringo company received the cash against the loan note issuance so the cash will be debited and a liability is created against the receipt of the cash. The Loan note payable account is credited.
December 31:
Now calculate the accrued interest for the year as follow
Accrued Interest = Value of Loan Note x Interest rate x Fraction of accrued months
Where
Value of Loan note = $20,000
Interest rate = 9%
Fraction of accrued months = Accrued months / 12 months = ( December 31 - April 1 ) / 12 months = 9 months / 12 months = 3/4
Placing values in the formula
Accrued Interest = $20,000 x 9% x 3/4
Accrued Interest = $1,350
As the payment of interest is not made so there is no cash involvement. Interest expense is recorded at the end of the period by adjusting entry of debit interest expense and credit interest payable account.
