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kow [346]
3 years ago
15

An author just signed a lucrative contract with a publisher that offers to pay her the amount of $600 at the end of year 9 when

the book is scheduled to be released. The author, being profligate, desires to receive a different package: an immediate payment of $100 that is followed by an annuity (an equal amount) to be paid at the end of each year for 9 consecutive years. What annuity will make his package equivalent to the publisher's advance. Use an interest rate is 6%.
Business
1 answer:
Mademuasel [1]3 years ago
3 0

Answer:

annuity = $37.51

Explanation:

future value of the annuity = $600 - future value of the initial $100 paid

$100 x 1.06⁹ = $168.95

future value of the annuity = $600 - $168.95 = $431.05

FV of an annuity = payment x {[(1 + r)ⁿ - 1] / r}

payment = FV / {[(1 + r)ⁿ - 1] / r}

  • FV = $431.05
  • r = 6%
  • n = 9

payment = $431.05 / {[1.06⁹ - 1] / 0.06} = $431.05 / {0.68948 / 0.06} = $431.05 / 11.4913 = $37.51

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Answer:

ABC

In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would: __________

Journal Entries:

May 1, 2019:

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Debit Interest Expense $2,000

Debit Notes Payable $100,000

Credit Cash $103,000

To record the payment of the note plus accrued interest at maturity.

Explanation:

a) Data and Calculations:

November 1, 2018:

6% 6-month Note Payable = $100,000

December 31, 2018:

Accrued interest = $1,000 ($100,000 * 6% * 2/12) for 2 months

May 1, 2019:

Interest Expense = $2,000 ($100,000 * 6% * 4/12) for 4 months

Transaction Analysis on May 1, 2019:

Interest Payable $1,000 Interest Expense $2,000 6% Notes Payable $100,000 Cash $103,000

6 0
2 years ago
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<h3>What is a withdrawal?</h3>

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6 0
1 year ago
In hierarchical organizational structure, communication between employees tends to
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Multiple times and divide
6 0
3 years ago
1. All of the factors below create a change in demand for alcohol except: a. Change in cigarette prices given that cigarettes an
Gnesinka [82]

Answer:

d. Rise in price of alcohol

Explanation:

Change in Quantity demanded occurs due to change in Price. Change in Demand happens due to factors other than price - Income, Substitute & Complementary good's price, Taste.

Change in alcohol demand - due to substitute Cigarette price change , Change [Decrease] in alcohol demand - due to change in taste based on anti drinking sentiments, higher risk of alcohol liver cirrhosis , Change [Increase] in alcohol demand - due to change [rise] in Income : These all are due to factors other than price & hence are 'Change in Demand'

Rise in price of Alcohol leads to 'Change [Expansion] in Quantity Demanded' due to price change [rise] .

5 0
3 years ago
The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for t
elena55 [62]

Answer and Explanation:

Revenue                              $160,000

Rental Costs                      $30,000

Variable Costs                      $50,000

Depreciation                      $10,000

Profit before tax              $70,000

Tax(35%)                              $24,500

Net Income                      $45,500

Operating cash flow

a) Dollars in minus dollars out

Revenue ? rental costs ? variable costs ? taxes = $160000 -$30000-$50000-$24,500 = $55,500

b) Adjusted accounting profits

Operating cash flow = Net income + depreciation = $45,500 + $10,000 = $55,500

c) Add back depreciation tax shield

Operating cash flow = [(Revenue ? rental costs ? variable costs) × (1 ? 0.35)] + (depreciation × 0.35)]

= ($160,000-$30000-$50,000)*0.65 + $10,000*0.35 = $55,500

Yes, the above approaches result in the same value for cash flow

4 0
3 years ago
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