Question

In: Accounting

Oriole Company receives a $78,000, 10-year note bearing interest of 9% (paid annually) from a customer...

Oriole Company receives a $78,000, 10-year note bearing interest of 9% (paid annually) from a customer at a time when the discount rate is 11%.


(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

What is the present value of the note received by Oriole? (Round answer to 2 decimal places, e.g. 25.25.)

Present value of note received = ??

Solutions

Expert Solution

Present value of note received = $ 68,812.43

Working

Annual Rate Applicable rate Face Value $ 78,000
Discount Rate 11.00% 11.00% Term (in years) 10
Coupon Rate 9.00% 9.00% Total no. of interest payments 10

.

Notes receivable

Face Value

Market Interest rate

(applicable for period/term)
PV of $ 78,000 at 11.00% Interest rate for 10

term

payments
PV of $1 0.35218
PV of $               78,000 = $ 78,000 x 0.35218 = $ 27,470
Interest payable per term at 9.00% on $ 78,000
Interest payable per term $ 7,020
PVAF of 1$ for 11.00%

Interest

rate for

 10

term

payments
PVAF of 1$ 5.88923
PV of Interest payments = $ 7,020 x 5.88923 = $ 41,342
present Value (A+B) $                 68,812.43

ekkarill92 answered 9 months ago
Next > < Previous

Related Solutions

Crane Company receives a $64,000, 7-year note bearing interest of 12% (paid annually) from a customer...
Crane Company receives a $64,000, 7-year note bearing interest of 12% (paid annually) from a customer at a time when the discount rate is 8%.
On October 1, Black Company receives a 10% interest-bearing note from Reese Company to settle a...
On October 1, Black Company receives a 10% interest-bearing note from Reese Company to settle a $22,600 account receivable. The note is due in six months. At December 31, Black should record interest revenue of a.$572 b.$565 c.$575 d.$562 Please answer it asap
On July 9, Mifflin Company receives a $7,400, 90-day, 10% note from customer Payton Summers as...
On July 9, Mifflin Company receives a $7,400, 90-day, 10% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note and interest. (Use 360 days a year.) $7,400 $7,523 $7,065 $7,585 $7,540
On Jan. first, 2018, Snuff Company accepts 60000 non-interest bearing note from a customer for the...
On Jan. first, 2018, Snuff Company accepts 60000 non-interest bearing note from a customer for the sale of goods. The note is to be paid in 3 equal installments every Dec. 31st (first payment on Dec. 31, 2018). An assumed interest rate of 10% is implied. Round installment payments to the nearest dollar. pt 1: Determine the PV of the note. Show all computations or calculator imputs. pt 2: Prepare an amortization table in Excell to show the revenue recognized...
On January 1, 2018 Kimmel Company accepts a $53000 non interest bearing note from a customer...
On January 1, 2018 Kimmel Company accepts a $53000 non interest bearing note from a customer for services provided. The note is to be paid in 4 equal installments every 6 months (payments every July 1 and January 1 with the first payment on July 1, 2018) An assumed interest rate of 9% is implied. Round installments to the nearest dollar. A) Prepare an amortization table for this note. Round amounts to the nearest dollar. Clearly label your rows with...
On January 1, a company issues a $100,000, three-year note that pays 9% interest annually. The...
On January 1, a company issues a $100,000, three-year note that pays 9% interest annually. The market rate on the note is 6%. How much of the note premium should the company amortize in the first year? I know the asnwer is $2,518.85, but I am unsure how they got it.
How is Interest-Bearing Note different from Non-Interest Bearing Note? How are the journal entries different for...
How is Interest-Bearing Note different from Non-Interest Bearing Note? How are the journal entries different for each of them? Provide examples of each joirnal entry.
On January 2, SHB Company receives a 3-year, $10,000, noninterest bearing note, the present value of...
On January 2, SHB Company receives a 3-year, $10,000, noninterest bearing note, the present value of which is $7,722. The rate implicit on this transaction is 9%. You are completing SHB's note receivable account. To prepare each required journal entry: Enter the corresponding debit or credit amount in the associated column. Round all amounts to the nearest whole number. Not all rows in the table might be needed to complete each journal entry. If no journal entry is needed, check...
Company A received a five year $25,000 note bearing interest of 3%. The market rate of...
Company A received a five year $25,000 note bearing interest of 3%. The market rate of the note is 2.5%. What amount of interest revenue will the company record at the end of the first year
GE has a 10%, 10-year bond with interest paid annually. If the bond was issued 2...
GE has a 10%, 10-year bond with interest paid annually. If the bond was issued 2 years ago and is currently quoted at 110, calculate the YTM. Show the (condensed) timeline and key steps of two methods. For the NS method, show the abbreviated equation/expression
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT