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nekit [7.7K]
3 years ago
15

E14-18 Note with unrealistic interest rate; lender; amortization schedule. Amber Mining and Miling, Inc., contracted with Truax

Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2016. Amber paid for the lathe by issuing a $600,000, 3 year note that specified 4% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions that 12% was a reasonable rate of interest.1. Prepare the journal entry on January 1, 2016 for Truax Corporation's sale of the lathe.2. Prepare and amortization schedule for the three-year term of the note.3. prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at the maturity for Truax.
Business
1 answer:
Serhud [2]3 years ago
7 0

Answer:

Explanation:

To find the fair value of bond we calculate the present value of future cashflows at 12% market rate.

No. of cashflows Cashflows Discount factor Present value

     3                  24000           2.401831268 57643.95044

     1                 600000           0.711780248 427068.1487

                                                                  484712.0991

1) Entries

invest at amortized cost   600000

               Asset                      484712

               Gain                        115287.91

2) Amortization Schedule

Year Amount           IRR 7%             CR 4%     Closing

 1     600000          72000         -24000     648000

 2     648000         77760      -24000     701760

 3     701760    84211.2    -24000    761971

3)

Year-1

Cash                  24000

Investment        48000

     interest Income         72000

To record the interest income  

Year-2

Cash                  24000

Investment        53760

     interest Income         77760

To record the interest income  

Year-3

Cash                  24000

Investment        60211

     interest Income         84211

To record the interest income  

year-3

Cash 761971

     Investment 761971

To record the maturity of investment

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Consider the following information for Maynor Company, which uses a periodic inventory system:
katrin [286]

Answer:

A. FIFO - 78 units and $7,770 and Cost of Goods Sold $12,738

B. LIFO - Inventory Valuation $7,312 and Cost of Goods Sold $13,196

C. Weighted Average - inventory Valuation $7,304 and Cost of Goods Sold $13,204

Explanation:

Detailed calculation as under:

<u>A. FIFO</u>

First 73 Units are sold from the inventory on May 1. Therefore, we first take the beginning inventory units and then we take the next in line purchases made during the period. In this case the first 34 units are completely taken and then out of the 44 units only 39 units are taken.

Next 68 units are sold from the inventory on October 28. Now we will take the remainder 5 units bought on March 28 (which are not yet sold). Then we take 63 units out of the 68 units purchased on August 22.

The company's ending inventory on FIFO Basis is remaining 5 units bought on 22 August and 73 units bought on 14 October. There total value is (5 x 94) + (73 x 100) = $7,770

Cost of Goods Sold = Total Goods Cost available for sale - Inventory ending valuation

$12,738 = $20,508 - $7,770

<u>B. LIFO</u>

First 73 Units are sold from the inventory on May 1. Therefore, we first take the units purchased on 28 March and then we take the beginning inventory. In this case the first 44 units are completely taken and then out of the 34 units only 29 units are taken.

Next 68 units are sold from the inventory on October 28. Now we will take the units bought on 14 October i.e. 68 units out of the 73 units bought.

The company's ending inventory on LIFO Basis is remaining 5 units in the beginning inventory, remaining 5 units bought on 14 October and 68 units bought on 22 August. There total value is (5 x 84) + (5 x 100) + (68 x 94) = &7,312

Cost of Goods Sold = Total Goods Cost available for sale - Inventory ending valuation

$13,196 = $20,508 - $7,312

<u>C. Weighted Average</u>

In order to calculate Weighted average cost method we divide the total cost of inventory (Beginning and Purchased) with the total units, this yields average cost per unit. Then we multiple the average cost per unit with the units remaining after sales. As shown below:

$20,508 / 219 = $93.64 per unit

$93.64 x 78 units = $7,304

8 0
3 years ago
Inflation is 14 percent. Debt is $4 trillion. The nominal deficit is $360 billion. What is the real deficit or surplus
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Answer:

Real Surplus is $200 billion

Explanation:

Inflation = 14%

Debt = $4 trillion = $4,000 billion

Nominal deficit = $360 billion

Real Deficit = Nominal deficit - (Inflation*Debt)

= $360 - 14% * 4,000

= $360 - 560

= -$200

Hence, the answer is Real Surplus of $200 billion

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Carlisle Enterprises, a specialty pharmaceutical manufacturer, has been losing market share for three years because several key
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Answer:

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

\frac{8,500,000}{(1 + 0.15)^{1} } = PV

\frac{7,500,000}{(1 + 0.15)^{2} } = PV

\frac{5,000,000}{(1 + 0.15)^{3} } = PV

\frac{2,000,000}{(1 + 0.15)^{4} } = PV

\frac{500,000}{(1 + 0.15)^{5} } = PV

Year      Nominal Cash Flow Present Value

1   8,500,000.00      7,391,304.35

2   7,000,000.00    5,293,005.67

3   5,000,000.00       3,287,581.16

4   2,000,000.00      1,143,506.49

5      500,000.00       248,588.37

Total Present value  17,363,986.04

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