FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter AG, Problem G.15BE
To determine
Present Value: The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value. The following formula is used to calculate the present value of an amount:
To Determine: The present value of the note if compounded annually.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
arla Vista Co. receives a $60,400, 6-year note bearing interest of 7% (paid annually) from a customer at a time when the discount rate is 6%.Click here to view the factor table.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)What is the present value of the note received by Carla Vista? (Round answer to 2 decimal places, e.g. 25.25.)
Present value of note received
$
Carla Vista Co. receives a $60,400, 6-year note bearing interest of 7% (paid annually) from a customer at a time when the discount rate is 6%.Click here to view the factor table.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)What is the present value of the note received by Carla Vista? (Round answer to 2 decimal places, e.g. 25.25.)
An individual purchased a 5-year, $10,000 promissory note with an interest rate of 4.5%/year compounded semiannually. How much did the note cost? (Round your answer to the nearest cent.)
Chapter AG Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Roth Company received from a Customer a one-year, P500,000 note bearing an annual interest of 8%. After holding the note for six months, the entity discounted the note at 10%. What is the discount from the discounting of note?arrow_forwardCrane Taco Company receives a $94,500, 6-year note bearing interest of 8 % (paid annually) from a customer at a time when the discount rate is 10%. Click here to view the factor table. What is the present value of the note received by Crane? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 25.25.) Present value of note received e Textbook and Media Save for Later $ Attempts: unlimited Submit Answerarrow_forwardA promissory note is a written statement agreeing to pay a sum of money either on demand or at a definite future time. When a note is purchased for its present value at a given interest rate, the note is said to be discounted and the interest rate is called the discount rate. Suppose a $10,000 note due 7 years from now is sold to a financial institution for $5600. What is the nominal discount rate with quarterly compounding? The nominal rate is %. (Type an integer or decimal rounded to two decimal places as needed.)arrow_forward
- A company received in payment for the merchandise sold an interest bearing note with a face amount of 100,000, an annual interest rate of 12%, and a term of 6 months. The company sold this note to bank, at discount rate of 15%, when the note had 90 days remaining to maturity. How much interest expense should the company report as a result of discounting, assuming the discounting is accounted for as a secured borrowing?arrow_forwardA one year note payable is issued by a bank to ABC company to purchase a photocopy machine valued at $7,000. The amount owing to the bank for the note must be paid back in one year. Hence, this is a short-term note payable. The interest rate charged by the bank is 12%. Interest charged on the note is included in the payment of $10,000 to be paid to the bank at the end of the year. Required: (a) Calculate the present value of the note (PV). (a) (b) Record the journal entry: i. on the day the asset is purchased General Journal POST DATE ACCOUNT TITLE AND EXPLANATION REF DEBIT CREDIT ii. on the day the note payable is paid back to the bank. General Journal POST DATE ACCOUNT TITLE AND EXPLANATION REF. DEBIT CREDIT AND Earrow_forwardHappy Company sold a machine in exchange for a P750,000, 5-year, 14% note; interest is payable annually. How much is the total amount of interest collected for this note for 5 years? tart How much cash will be collected at the end of the term of the note? ssments ( Previous rences fessorsarrow_forward
- Anderson Co. issued a $55,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay?arrow_forwardForemost Company received from a customer a one-year, P500,000 note bearing annual interest of 8%. Alter holding the note for six months, the entity discounted the note at the bank at an effective interest rate of 10%. What is the loss on note receivable discounting?arrow_forwardA 7-year, $5,000 promissory note bearing interest at j12-7.20% was sold to a buyer after 2 years. The buyer purchased the note at a price that would yield them j4=6.00%. a) Calculate the maturity value of the note: b) Calculate the price the buyer paid (at the 2 year mark): c) What rate did the original holder of the note earn over the 2 year period that they held it? Express your answer as an annual effective rate (j1) to 2 decimal places. Do not include the % symbol.arrow_forward
- Mark signs a note promising to pay $825 in 3.5 years with simple interest at 10.75%. Then, 9 months before the note comes due, the holder of the note sells it to a local bank which discounts the note based on a bank discount rate of 18%. (a) What did the bank pay the holder of the note when it was sold 9 months before maturity? $ Xarrow_forwardOn March 1, 2020 Giant Jumbo Clown Costumes borrowed money from Second Friendly National Bank by issuing a $125,000, 180-day, non-interest bearing note. The note was discounted on a 13.5% basis. Assume 360 days in a year. Required: Compute the following: 1. How much money did Giant Jumbo receive? 2. What was the total amount of interest paid? 3. What is the effective 180-day interest rate on this note payable? 4. What is the approximate annual effective interest rate on this note payable? 5. Record the journal entry(ies)for the issuance of the note.arrow_forwardA consumer gave ABS-CBN COMPANY a one-year, $500,000 note with an annual interest rate of 8%. ABS-CBN COMPANY discounted the note at Asia United Bank at an effective interest rate of 10% five months before maturity. Assuming the note was discounted without recourse, compute the amount of revenues from the note discounting and submit the discounting entries.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
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:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY