On July 9, Mifflin Company receives a $8,600, 90-day, 12% note from customer Payton Summers as payment on account. What entry sh
1 answer:
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Answer:
(a) $43,656.90
(b) $33,698.70
(c) $43,967.70
Explanation:
Future Value of annuity shall be:
(a) 10% for 8 years, Semiannually compounded
In this since the interest is compounded semiannually, the effective interest rate = 10/2 = 5%
Future Value of $1 in 8 years with 10% interest compounded semiannually = 2.0789
Value of $21,000 = $21,000 2.0789 = $43,656.90
(b) 12% for 4 years, Quarterly Compounded
In this since the interest is compounded quarterly, that is 4 times in a year, effective interest rate = 12/4 = 3%
Future value of $1 in 4 years with 12% interest compounded quarterly = 1.6047
Value of $21,000 = $21,000 1.6047 = $33,698.70
(c) 36% 25 months, Monthly
In this since the interest is compounded monthly effective interest rate = 36/12 = 3%
Therefore, Future Value of $1 in 25 months @36% compounded monthly = $2.0937
Value of $21,000 = $21,000 2.0937 = $43,967.70
Morgan will get $1600 with the process of simple interest.
<h3>what is simple interest?</h3>Simple interest is calculated based on a loan's principal or the initial deposit into a savings account. Simple interest doesn't compound, therefore a creditor will only charge interest on the principal sum, and a borrower will never be required to pay further interest on the interest that has already accrued.
Rate of interest = 12%
principal = $1000
Time = 5 years
Simple interest
Now amount = 1000+600 = 1600.
Therefore, Morgan will get $1600.
To learn more about simple interest from the given link
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