On September 3, 20X8, Jackson Corporation purchases goods for a U.S. dollar equivalent of $17,000 from a Swiss company. The tran
saction is denominated in Swiss francs (SFr). The payment is made on October 10. The exchange rates were: September 3: 1 Swiss franc = $0.85 October 10: 1 Swiss franc = 0.90 What entry is required to revalue foreign currency payable to U.S. dollar equivalent value on October 10?
1 answer:
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Answer:
Ans. The annuity that will be equivalent to the publisher´s advance would be $26.40 per year, for 9 years at 7% interest rate.
Explanation:
Hi, first, let´s bring that $500 to be paid in 9 years to present value, we need to use the following formula.
Where: r is our discount rate (7%) and n the periods from now when she will receive that $500 amount. This should look like this.
Ok, so the equivalent amount of money today of those $500 in nine years is $271.97, but the author wants $100 today so the remaining amount has to be used to find the equal annual payments to be made in order to be equivalent to re remaining balance ($171.97). We now need to use the following equation.
And we solve for "A" like this
Therefore, the equivalent amount of money of $500 in 9 years is $100 today and $26.40 every year, at the end of the year, for nine years.
Best of luck.