a. On January 2, 2009, Hill Company borrowed $10,000 from BankThree. The loan wa

Question

a. On January 2, 2009, Hill Company borrowed $10,000 from BankThree. The loan was to be repaid in equal principal installments of$2,000, payable on December 31 of each year, beginning on December31, 2009. Disregarding interest, the amount of the $10,000 loanthat should be considered a current liability on the company's 2009year-end balance sheet would be? b. Purdum Farms borrowed $10 million by signing a five yearnote on January 1, 2009 and repayments of the principle are payableannually in $2 million dollar installments. Purdum Farmsmakes the first payment December 31, 2009 and then prepares itsbalance sheet. What amount will be reported as current andlong-term liabilities respectively in connection with thenote? c. In 2004, Coca-Cola reported an increase in accountsreceivable of $80 million, and an increase in inventory of $168million. They also experienced an increase in accountspayable of $225 million and a decrease in accrued income taxespayable of $255 million. Calculate the net cash effect ofthese d. George’s grandmother promises to give him $1,000 atthe end of each of the next five years. How much is the money worthtoday, assuming George could invest the money and earn a 6% annualrate of return? (Round to the nearest dollar). a. On January 2, 2009, Hill Company borrowed $10,000 from BankThree. The loan was to be repaid in equal principal installments of$2,000, payable on December 31 of each year, beginning on December31, 2009. Disregarding interest, the amount of the $10,000 loanthat should be considered a current liability on the company's 2009year-end balance sheet would be? b. Purdum Farms borrowed $10 million by signing a five yearnote on January 1, 2009 and repayments of the principle are payableannually in $2 million dollar installments. Purdum Farmsmakes the first payment December 31, 2009 and then prepares itsbalance sheet. What amount will be reported as current andlong-term liabilities respectively in connection with thenote? c. In 2004, Coca-Cola reported an increase in accountsreceivable of $80 million, and an increase in inventory of $168million. They also experienced an increase in accountspayable of $225 million and a decrease in accrued income taxespayable of $255 million. Calculate the net cash effect ofthese d. George’s grandmother promises to give him $1,000 atthe end of each of the next five years. How much is the money worthtoday, assuming George could invest the money and earn a 6% annualrate of return? (Round to the nearest dollar).

Explanation / Answer

$8 million

A. Not considered as a current liabilitybecause this loan is for 5 years( installments). only installments of $2000 which is payable at 31december every year considered as current liability. B. Long term liability Notes-payable $10 million less: I installment ($2million)

$8 million

C. Net cash effect Increase in accounts receivable no-effect increase in inventory( assumed cashpurchased)     Decrease Increase in accounts payable no-effect Decrease in accrued income tax payable Decrease D. PVF- OA 5y 6% = 4.212 Futurevalue        = $1000 every year Present value      = PVF-OA 5y 6% X $1000 4.212 X $1000 $4,212

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