Question

USE THE FOLLOWING INFORMATION TO ANSWER THE QUESTION:

*For all PV calculations, use the tables presented in below

On January 1, 2018, ABC rendered services to Smith Corporation and accepted a $200,000 note. In exchange, Smith agreed to make (5) annual payments of P&I with the first payment to be made on December 31, 2018. An interest rate of 8% is imputed.  

Required: Use the information above to answer the problem

1. Determine the amount of (1) PMT of P&I	$________________________________
2. What amount of Service Revenue should ABC recognize on January 1, 2018?	$________________________________
3. What amount of Interest Revenue should ABC recognize on this note for the year ending December 31, 2019?	$________________________________
4. What is the Carrying Value of the Note Receivable at December 31, 2019?	$________________________________

PV of $1 Periods 3 5 9 10 4% 89 .82 70 .68 84 74 .59.56 6% 8% 79.68 .50.46 9% 77 .65 46 42 Present Value of an Ordinary Annuity 4% 2.77 4.45 7.43 8.11 6% 2.67 4.21 6.80 7.36 8% 2.57 3.99 6.25 6.71 9% 2.53 3.89 5.99 6.41

Answer 1

Rounded Answer 1 Determine the amount of (1) PMT of P&I $ 50,125.31 Note 1 50,125 2. What amount of Service Revenue should ABC recognize on January 1, 2018? 3. What amount of Interest Revenue should ABC recognize on this note for the 200,000 Note 2 200,000 year ending December 31, 2019? 4. What is the Carrying Value of the Note Receivable at December 31, 2019? 13,269.97 Note 3 13,270 129,019.35 Note 4 129,019 Note 1 A Face value of not 200,000 B Present Value of Ordinary Annuity 3.99 C Annual payment (A/B) 50,125.31 Note 2 Total value of Note is to be recognized as service revenue Note 3 and Note 4 eduction in Carrying Valu Installment Carrying Value Date Interest $ Jan 1 2018 200,000.00 34,125.31 $ 50,125.31 $ Dec 31 2018 $ 16,000.00 $ 165,874.69 13,269.97 $ 10,321.55 $ 7,137.25 $ 50,125.31 $ 50,125.31 $ 50,125.31 $ Dec 31 2019 S 36,855.34 $ 129,019.35 39,803.77 $ S Dec 31 2020 89,215.58 42,988.07 $ 46,427.11 $ S Dec 31 2021 46,227.52 S 3,698.20 $ 50,125.31 $ (199.60) Dec 31 2022 Please comment if you have any doubt