Greely Corporation is a publicly-traded corporation with a calendar year end. Fo

Question

Greely Corporation is a publicly-traded corporation with a calendar year end. For purposes of classifying current assets and current liabilities, it uses a one year period.

1. On January 1, 2016, Greeley Corporation borrowed $1,500,000 cash from First Source Bank by signing a three-year note bearing 4% interest. The bank requires equal annual payments on January 1st of each year. The first payment was due on January 1, 2017.

2. On March 15, 2016, Greeley Corporation borrowed $750,000 cash from JP Morgan Chase Bank by signing a four-year note bearing 3.75% interest. The bank requires equal monthly payments on the 15th of each month. The first payment was due on April 15, 2016.

3. On June 1, 2016, WTM Corporation borrowed $500,000 cash from Fifth Third Bank by signing a two-year note bearing 3.25% interest. The bank requires bi-monthly payments on the 1st and 15th of each month. The first payment is due on June 15, 2016.

4. On October 1, 2016, WTM Corporation issued an eighteen-month zero-interest bearing note for $200,000 note to Lake City Bank and received $189,223. WTM amortizes the discount at the end of each month using the effective interest rate method.

Required:

1. Compute the required payments for the notes to First Source, JP Morgan Chase, and Fifth Third Bank using Excel’s PMT function.

2. Compute the interest rate on the note to Lake City Bank using Excel’s RATE function.

3. Construct amortization tables for each of the four notes for the entire term of the loans. Provide labels for the dates of the payment, the payment, interest expense, principal reduction, and book value of the debt.

4. Complete a partial balance sheet for Greeley Corporation for December 31, 2016 and December 31, 2017.

7. Prepare the ‘Cash Flow from Financing Activities’ section of the Statement of Cash Flows for Greeley Corporation for 2016 and 2017, assuming that the only debt issued during the year was the borrowing from First Source Bank.

Explanation / Answer

1. Required Payments to

    First Source       - $ 1594295.2

    JP Morgan         - $ 8008824.78

     Fifth third Bank - $ 517102.58

2. Interest rate = (200000/189223)1/18 -1 = 0.308% on montyly basis

3. (1)     ________________________________________________________________________________

              Year                starting Balance            Interest        principal          EMI                Ending balance________

3. (2) _______________________________________________________________________________________

        Year                          Starting bal.             Interest                  Prinipal             EMI                End Bal.__________

        2018                          435646.70            12517.69                189688.50      202206.19         246549.13

       2019                          246549.13             5280.82                 196925.          202206.19              0 _____      

7. CASH FLOW FROM FINANCIN ACTIVITIEES FOR 2016

   DEBT ISSUED                                 $ 1500000.00

      Cash from Financing activities         1500000.00

    CASH FLOW FROM FINANCING ACTIVITIES FOR 2017

    iNTEREST PAID                              (51260.32)

Note; Due to time constraint, not able to do all parts      

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