In: Accounting
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1. | Fair value of consideration as on 1st Jan 2020 that will be due on 1st Jan 2023 | |||||
Prevailing Rate of Interest | 10% | |||||
Consideration Receivable on 1st Jan 2023 | $ 2,63,840 | |||||
PVAF, 3year, 10% | 0.75131 | |||||
Fair value of consideration arson 1st Jan 2020 | $ 1,98,226 | |||||
($263840*.75131) | ||||||
Less-Book Value of Assets Sold | $ 1,64,560 | |||||
($273840-$109280) | ||||||
Amount of Gain Reported | $ 33,666 | |||||
2. | Face Value of 10% Bond | 345000 | ||||
Interest Rate | 10% | |||||
Calculation of Fair value of Bond | ||||||
Sr No. | Date | (Outflow)/ Inflow | PVF | Present Value | ||
0 | 01-Jan-20 | -$ 3,24,682 | -$ 3,24,682 | |||
1 | 01-Jan-21 | $ 34,500 | 0.90090 | $ 31,081 | ||
2 | 01-Jan-22 | $ 34,500 | 0.81162 | $ 28,001 | ||
3 | 01-Jan-23 | $ 34,500 | 0.73119 | $ 25,226 | ||
4 | 01-Jan-24 | $ 34,500 | 0.65873 | $ 22,726 | ||
5 | 01-Jan-25 | $ 34,500 | 0.59345 | $ 20,474 | ||
6 | 01-Jan-26 | $ 34,500 | 0.53464 | $ 18,445 | ||
7 | 01-Jan-27 | $ 34,500 | 0.48166 | $ 16,617 | ||
8 | 01-Jan-28 | $ 34,500 | 0.43393 | $ 14,970 | ||
9 | 01-Jan-29 | $ 34,500 | 0.39092 | $ 13,487 | ||
10 | 01-Jan-30 | $ 34,500 | 0.35218 | $ 1,33,654 | ||
Sandhill Corporation must pay $ 324682 | ||||||
3. | Annual Equal Instalments | 5440 | ||||
Prevailing Interest Rate | 8% | |||||
It is assumed that machine was purchased at beginning of the year | ||||||
Calculations of Cost of Machine recorded in Books | ||||||
SR No | Instalments | PVF | Present Value | |||
1 | $ 5,440 | 0.92593 | $ 5,037 | |||
2 | $ 5,440 | 0.85734 | $ 4,664 | |||
3 | $ 5,440 | 0.79384 | $ 4,318 | |||
4 | $ 5,440 | 0.73503 | $ 3,999 | |||
5 | $ 5,440 | 0.68059 | $ 3,702 | |||
6 | $ 5,440 | 0.63017 | $ 3,428 | |||
7 | $ 5,440 | 0.5835 | $ 3,174 | |||
8 | $ 5,440 | 0.54027 | $ 2,939 | |||
9 | $ 5,440 | 0.50025 | $ 2,721 | |||
10 | $ 5,440 | 0.4632 | $ 2,520 | |||
Cost of Machine recorded | $ 36,503 | |||||
4. | Consideration paid in cash | $ 20,010 | ||||
Rate of Interest | 12% | |||||
Annual Equal Instalments | 4720 | |||||
SR No | Instalments | PVF | Present Value | |||
1 | $ 4,720 | 0.89286 | $ 4,214 | |||
2 | $ 4,720 | 0.7972 | $ 3,763 | |||
3 | $ 4,720 |
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