Page 3 ACC 2101- Extra Credit Problem ding items on the 12/31/x1 post-closing tr
ID: 2560015 • Letter: P
Question
Page 3 ACC 2101- Extra Credit Problem ding items on the 12/31/x1 post-closing trial balance: n December 1, 20x1 for 1) A four-month note receivable (note receivable "1") was initiated 6% was the stated interest rate on the note and it was considered appropriate for this type of note. The full principal and interest is due on Ap S 5,832 2) A three-year liability insurance policy was purchased on March 1, 201 fernn $ 134,000 3) The fitness equipment was acquired on February 1, 20x1 for a cash payment of The life of the fitness equipment is estimated to be (number of years): 13y,000 The residual value (as a percentage of original cost) is estimated at: x 30 30% 4) The office furniture was acquired on January 1, 20x1. Terms of purchase were as follows: date of first payment: 1/1/x1 Amount of first payment: $ 1,275 Five additional payments due semi-annually, starting on 7/1/x1 (continuing with 1/1/x2, 7/1/x2, 1/1/x3 and 7/1/x3) were accepted as zero-interest bearing notes The semi-annual payment is: 1,275 The appropriote annual interest rate in the circumstances was determined to be: 5% The note payable described above is referred to as Note Payable "A"] The life of the office furniture is estimated to be (number of years); The residual value (as a percentage of original cost) is estimated at: 20 15%Explanation / Answer
4. TO calculate the cost of furniture interest rate is imputed into the stream of future paymnets and present value of the payments is calculated.
In the given case yearly rate is 5%, semi annual rate turns out to be 5%/2= 2.5%
Present value of future payments at the discount rate of 2.5% is:
Cost of furniture will be= 14115
Liabilitiy amortisation schedul:
Furniture amortisation:
Amortisation:
Period 1.1.X1 7.1.X1 1.1.X2 7.1.X2 1.1.X3 7.1.X3 Payment 2500 2500 2500 2500 2500 2500 Discount factor@ 2.50% 1 0.97561 0.951814 0.928599 0.905951 0.883854 Present value 2,500.000 2,439.024 2,379.536 2,321.499 2,264.877 2,209.636 Total present value 14,114.57 14,115 Rounded offRelated Questions
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