A company receives $150,000 when a deal is reached. After that a $210,000 progress payment end of year 1, and $30,0000 payment after work is done in year 2. What is the contract worth today at 12%. Briefly discuss if it is worth it and why?
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- Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan? A. $94,000 B. $80,000 C. $23,500 D. $14,000Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
- Scrimiger Paints wants to upgrade its machinery and on September 20 takes out a loan from the bank in the amount of $500,000. The terms of the loan are 2.9% annual interest rate and payable in 8 months. Interest is due in equal payments each month. Compute the interest expense due each month. Show the journal entry to recognize the interest payment on October 20, and the entry for payment of the short-term note and final interest payment on May 20. Round to the nearest cent if required.A firm enters into an 8-year contract for materials that cost $90,000 initially and $30,000/yr beginning at the end of the 4th year. The company decides to make a lump sum payment at the end of year 2 to pay off the remainder of the contract. What lump sum is necessary at 8% interest?A company is bidding to buy a fleet of lorries for £ 15,600,000. Payment on delivery 1,000,000 TL in advance is realized as 1,297,200 TL for each subsequent month. Another seller makes the same delivery by applying 1% interest per month to the outstanding amount he suggests. Which offer is more advantageous?
- show your solution A bonus package pays an employee $1000 at the end of the first semi-annual, $1500 at the end of the second semiannual, and so on, for the first nine years of employment. What is the present worth of the bonus package at 6% per year compounded monthly a.$28,233 b.$47,665 c.$66,480 d.$19,090A company buys a machine for $17,000, which it agrees to pay for in six equal annual payments, beginning one year after the date of purchase, at an annual interest rate of 5%. Immediately after the second payment, the terms of the agreement are changed to allow the balance due to be paid off in a single payment the next year. What is the final single payment?A firm sells the same material with two separate payment plans.1. According to the 1st payment plan, the payment period is 12 months, each monthly payment is 10.837.000 TL, and an interim payment of 12 million TL is required at the end of the 6th month.2. In the 2nd payment plan, the payment period is 18 months, each monthly payment is 7.965.000 TL and an interim payment of 36 million TL is required at the end of the 12th month. Annual nominal interest rate for both options is 60%. Which payment plan would you recommend? In payments, discrete compound interest is applied.
- Zoro Company enters into a contract to sell Product A and Product B on July 1, 2020 for an upfront cash payment of P250,000. Product A will be delivered at the end of the year, and Product B will be delivered the following year. Zoro Company sells Product A for P80,000 and Product B for P240,000. 1. How many performance obligations are there in the contract? 2.what is the transaction price? 3.how much is revenue to be recognized in 2020? 4. how much is revenue to be recognized in 2021?CLTV Section A company secured a contract that will result in income payments received of $280,000 today, $400,000 in 2 years and $600,000 in 5 years (these are single or lump sum payments they get). The expenses or outflows will include payments of $10,000 at the beginning of every month for 6 years and a one-time payment (expense) of $50,000 in one year from today. If the cost of money is 17% compounded annually, determine the Net Present Value (NPV) of the contract. a)What is the PV of the inflows? b) What is the PV of the outflows? c) What is the Net Present Value (NPV)?A company entered into a contract with one of the customer to supply a sophisticated machinery for 200,000 on 01/07/2020. The Contract is coming with selling a machinery, 3 years maintenance and a one-year replacement guarantee. The stand-alone selling price of machinery is 120,000, the replacement guarantee costs 10,000 and free services expected to costs the company 20,000. As per the terms of sales, the customer may pay to the firm either on 01/01/2020- 200,000, 01/03/2020- 210,000 or 01/05/2020- 225,000. As per past experience there is high probability that the customer pays on 01/05/2020. You are required to write necessary treatments per IFRS 15. Also show the net effect of this transaction on the financial statements of the firm.
