Question

Knowledge Check 01 On January 1 Year 1. Luring Company purchased equipment and agreed to make a $10.000 cash payment on December 31, Year 5. At an interest rate of 12%, how much will the company need to deposit today to make the required cash payment on December 31, Year 5? Use Table E1. (Round your answer to 2 decimal places.) Present value S 5674 30

Answer 1

A B C E future value required table factor deposit to be made by the company today $ 10,000.00 0.56743 $ 5,674.30 = L $ future value of note table factor value to recorded for note on january 1, year 1 100,000 0.75131 75,131 = $ date general journal I debit credit $ $ 4,500 20,881 31-Dec interest expense note payable cash (to record payment of installment) $ 25,381 $ monthly payment table factor present value of monthly payments 500.00 9.47130 4,736.00 $ $ additional payment at the end of 10 months table factor present value of additional payment 5,000.00 0.90529 4,526.00 $ present value of monthly payments present value of additional payment present value of note $ $ $ 4,736.00 4,526.00 9,262.00 note - the table factors used have been rounded to 5 decimals. If your table requires rounding to some other decimal, kindly let me know in the comments. I'll update the answer accordingly.

for formulas and calculations, refer to the image below -

B2 А future value required table factor deposit to be made by the company today 10000 =ROUND(-PV(12%,5,0,1),5) =E2*E3 future value of note 100000 table factor =ROUND(-PV(10%,3,0,1),5) value to recorded for note on january 1, year 1 =ROUND(E6 E7,0) = date general journal debit credit =90000*5% =F14-E12 43830 interest expense note payable cash (to record payment of installment) 25381 monthly payment table factor present value of monthly payments 500 =ROUND(-PV(1%, 10,1,0),5) =ROUND(E18*E19,0) additional payment at the end of 10 months table factor present value of additional payment 5000 =ROUND(-PV(1%,10,0,1),5) =ROUND(E22*E23,0) present value of monthly payments present value of additional payment present value of note =E24 =E26+E27 note - the table factors used have been rounded to 5 decimals. If your table requires rounding to some other decimal, kindly let me know in the comments. I'll update the answer accordingly.

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