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pochemuha
3 years ago
9

Mike has saved $6,000 for a down payment on a car. He qualifies for two car loans. One has a 10% interest rate that does not req

uire a down payment; the other has a 15% interest rate and requires a $5,000 down payment. Mike chooses the first loan and does not make a down payment because he would like to reduce the total cost of the loan as much as possible. Evaluate Mike's decision.
Select the best answer from the choices provided.
A. Mike's decision reduced the total cost of his loan as much as possible because the first loan has a lower interest rate.
B. Mike's decision reduced the total cost of his loan as much as possible because making a down payment would have increased the amount accruing interest.
C. To reduce the total cost as much as possible, Mike should have made a down payment on the first loan even though it was not required.
D. To reduce the total cost as much as possible, Mike should have chosen the second loan even though the interest rate was higher.
Business
1 answer:
adoni [48]3 years ago
5 0
Let's assume the car costs $15,000 and it takes 3 years to pay it.
For option A, the total amount to be paid after applying interest is $19965.

For option B, the total amount to be paid after taking out the down payment and applying interest is $20208.75.

The answer is
<span>A. Mike's decision reduced the total cost of his loan as much as possible because the first loan has a lower interest rate.
</span>
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Answer:

On December 31,2019

Depreciation expense Dr $7,000

          To Accumulated depreciation $7,000

(Being the depreciation expense is recorded)

Explanation:

The journal entry is shown below;

On December 31,2019

Depreciation expense Dr $7,000

          To Accumulated depreciation $7,000

(Being the depreciation expense is recorded)

The computation is shown below:

= ($80,000 - $10,000) ÷ 5 years × 6 months ÷ 12 months

= $7,000

For recording this we debited the depreciation expense as it increased the expenses and decreased the assets so the accumulated depreciation is credited

And, the six months is taken from July 1 to December 31

     

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Willow Trees Inc. should use bottom-up planning

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On January 1, 2019, Amazon issues $100,000 in bonds having a stated rate of 10%. The bonds mature in 2 years (Dec. 31, 2020) and
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Answer:

cash                   96,535 debit

discount on BP    3,465 debit

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We need to determinate the price at which the bonds were issued:

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C \times \frac{1-(1+r)^{-time} }{rate} = PV\\  

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time 4  (2 years x 2 payment per year)

rate 0.06  (12% annual / 2 = 6% semiannual)

5000 \times \frac{1-(1+0.06)^{-4} }{0.06} = PV\\  

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\frac{Maturity}{(1 + rate)^{time} } = PV  

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\frac{100000}{(1 + 0.06)^{4} } = PV  

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