Question

A) On January 1, yumati electric borrows $333,333 at an interest rate of 6% today and will repay this amount by making 20 semi annual payments beginning May 31. What is the approximate amount of each payments that Yumati will need to make?

B) Which of the following items would not appear in the operating section of the multi-step income statement of a retailer?

1. Sales of Products

2. Depreciation Expense of Store Equipment

3. Gain or Loss of Disposal of Store Equipment

4. Costs of Goods Sold

Answer 1

A

Semi annual payment	=	[P * R * (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	333,333.00
Rate of interest per period:
Annual rate of interest		6.000%
Frequency of payment	=	Once in 6 month period
Numer of payments in a year	=	12/6 =	2
Rate of interest per period	R	0.06 /2 =	3.0000%
Total number of payments:
Frequency of payment	=	Once in 6 month period
Number of years of loan repayment	=	10
Total number of payments	N	10*2 =	20
Period payment using the formula	=	[ 333333*0.03*(1+0.03)^20] / [(1+0.03 ^20 -1]
Semi annual payment	=	22,405.2135

B

Option - #3. Gain or loss on disposal of store equipment is not part of operating section of the multi-step income statement of a retailer