Question

In: Accounting

1. what is the difference between classification of a note as short term or long term?...

1. what is the difference between classification of a note as short term or long term?

2. at the beginning of year 1, B Co, has a note of $72,000 that calls for an annual payment of $16,246, which includes both principal and interest rate is 8 percent, what is the amount o finterewst expense in year 1 and in year 2? what is the balance of the note at the end of year 2?

3. What is the purpose of a line of credit for a buisness? why would a company choose to obtain a line of credit instead of issuing bonds?

16. what mechanism is used to adjust the stated interest rate to the market rate of interest?

18. what type of transaction is the issuance of bonds by a company?

Expert Solution

1.Notes are classified into 2 categories

(1) Short term notes : Notes which mature within a period of one year or one operating cycle, whichever is longer.

It is used to satisfy an obligation to pay a certain sum within one year.

It is classified as current liability on balance sheet.

(2) Long term notes : Maturity must be longer than one year or one operating cycle.

It usualy takes 2 to 5 years to mature. And it is classifed as long term liability in balance sheet.

2. Interest Expense in Year 1

Value of note = $72,000

Interest Rate = 8%

$72,000 × 8% = $5760

Interest Expense in year 2

( $ 72,000 + $5760^*¹ - $16,246^*2) × 8% = $4921

Note: *1 - Interest for year 1

*2 - Annual payment (given in question)

3.

Period	Principal	Payment	Interest @ 8%	Principal part in annual payment
1	$72,000	$ 16,246	$5760	$ 10,486
2	$61,514^*	$ 16,264	$4921	$ 11,325
3	$50,189**

Note : * $72,000 + $5,760 - $16, 246 = $ 61,514

** $ 61,514 + $ 4,921 - $16,246 =$ 50,189

ekkarill92 answered 2 years ago

1. What is the difference between a short and long-term asset? Provide an example of each...

1. What is the difference between a short and long-term asset? Provide an example of each one. 2. When we record an asset, what are the costs that are capitalized? 3. What are land improvements as it relates to tangible assets? Provide an example of one. 4. Some of the costs that can be incurred when buying an asset include property taxes, insurance. What type of taxes and insurance might be capitalized vs. expensed? Provide an example

Explain the strategic difference between short-term and long-term lobbying in the EU. What are the key...

Explain the strategic difference between short-term and long-term lobbying in the EU. What are the key institutions to approach for efficient EU lobbying? 150 words

What is the difference between short-term debt and long-term debt? Describe in detail how debt relates...

What is the difference between short-term debt and long-term debt? Describe in detail how debt relates to financial management

a) Explain the difference between short-term and long-term investing both from the accounting definition and from...

a) Explain the difference between short-term and long-term investing both from the accounting definition and from the decision to invest. b) Describe a strong investment policy statement; what to ensure is included in the policy statement and why.

Difference between production in the short run and production in the long run: 1. What is...

Difference between production in the short run and production in the long run: 1. What is the difference between the short-run and long-run? Is there a fixed time period associated with short-run and long-run? Explain why or why not. 2. What happens to output in the short-run as production increases? What inputs are "fixed" and which input is variable in the short-run? How does this explain diminishing marginal productivity? 3. What might happen to output in the long-run as the...

1. What is the difference between the short run and the long run for the profit-maximizing...

1. What is the difference between the short run and the long run for the profit-maximizing firm? 2. The number of repairs produced by a computer retail shop depends on the number of workers as follows: Number of Workers Number of Repair Marginal Product (what each additional worker adds to the total production) Average Product (the number of units per worker) 0 0 - 1 8 2 20 3 35 4 45 5 52 6 57 7 60 a. For...

Distinguish between short-term and long-term finance sources.?

Chapter 11 1) What is the difference between the short run and the long run? 2)...

Chapter 11 1) What is the difference between the short run and the long run? 2) What is the law of diminishing returns? Why is this proposition called a "law"? 3) What are the two components of a firm's total cost in the short run, and what are their definitions? 4) What is the difference between average total cost and marginal cost and are they ever equal to each other?

Q # 6: Explain the difference between acute (short-term) and chronic (long-term) fat cell related pharmacokinetics?...

Q # 6: Explain the difference between acute (short-term) and chronic (long-term) fat cell related pharmacokinetics? Q # 7: Compare and contrast endocannabinoids, anandamide, and 2-arachidonoylglycerol. Q # 8: Compare and contrast the differences between CB1 and CB2 receptors functions and where they are distributed within the central nervous system. Q # 9: What are the differences between amotivational syndrome, cannabis use disorder, and cannabis withdrawal syndrome? Q # 10: What are the only clear medicinal uses for prescription (legal...

A. 1. Explain the difference between the short run and the long run as it relates...

A. 1. Explain the difference between the short run and the long run as it relates to a firm’s production function. 2. Why is this distinction important to a firm’s manager? Explain. B. Short-run decisions are frequently referred to as “constrained” decisions, while long-run decisions are frequently referred to as “planning” decisions. Why is this the case? Explain.