Dineshbhai Buffalo Limited has been experiencing increased customer demand for its specialty food products. To meet this demand, the compahas bought additional refrigeration units to hold more inventory. To finance this purchase, Buffalo issued a four-year non-interest-bearing note, with a face value of $760,000. The prevailing interest rate for similar instruments is 8%. The company agreed to repaythe note in four equal instalments. Buffalo used the effective interest method to amortize any premium or discount.the factor table PRESENT VALUE OF 1.the factor table PRESENT VALUE OF AN ANNUITY OF 1.(a)Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, prepare the journal entry at the date of purchase. (Hint:Refer to Chapter 3 for tips on calculating.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer toO decimal places e.g. 58,971. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If noentry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)Account Titles and ExplanationDebitCredit

A financial transaction is recorded via a journal entry in an accounting system. With its…

Answered: Buffalo Limited has been experiencing…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 16P

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Sweet Acacia Limited has been experiencing increased customer demand for its specialty food products. To meet this demand, the company has bought additional refrigeration units to hold more inventory. To finance this purchase, Sweet Acacia issued a four-year non-interest-bearing note, with a face value of $800,000. The prevailing interest rate for similar instruments is 9%. The company agreed to repay the note in four equal instalments. Sweet Acacia used the effective interest method to amortize any premium or discount. the factor table PRESENT VALUE OF 1. the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, prepare the journal entry at the date of purchase. (Hint: Refer to Chapter 3 for tips on calculating.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to O decimal places e.g. 58,971. Credit account titles are automatically indented when the amount is…
Sagip Corporation borrowed P 9000 from Kalinga Corporation on Jan 1, 2000 and P 12000 on Jan 1, 2002. Sagip corporation made a partial payment of P 7000 on Jan 1, 2003. It was agreed that the balance of the loan would be amortized by two payments one of Jan 1, 2004 and the other on Jan 1, 2005, the second being 60% larger than the first. If the interest rate is 12%, what is the amount of the larger payment? O P 9426.27 O P 15082.03 O P 8801.25 P 14082.01
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Indigo Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 12% and has a carrying value of $15,000. At year-end, Indigo’s borrowing rate (credit risk) has declined; the fair value of the note payable is now $16,200.
Jones Corporation borrowed P80,000 from Brown Corporation on Jan 1,1993 and P12,000 on Jan 1, 1995. Jones Corporation made a partial payment of P10,000 on Jan 1, 1996. It was agreed that the balance of the loan will be amortized by two payments, one on Jan. 1, 1997 and the other on Jan. 1, 1998, the second being 60% larger than the first. If the interest rate is 12%, what is the amount of each payment?
Southtown Corporation purchased equipment and in exchange signed a two-year promissory note.The note requires Southtown to make a single payment of $100,000 in two years. Southtown hasother promissory notes that charge interest at the annual rate of 6 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Southtown’s typical interest rate of 6 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).3. Show the adjusting journal entry at the end of the first year to record interest on the note.
On January 1, 2002, Cougar Company received a two-year $500,000 loan. The loan calls for payments to made at the end of each year based on the prevailing market rate at January 1 of each year. The interest rate at January 1, 2002, was 10 percent. Aggie company also has a twoyear $500,000 loan, but Aggie's loan carries a fixed interest rate of 10 percent. Cougar Company does not want to bear the risk that interest rates may increase in year two of the loan. Aggie Company believes that rates may decrease and they would prefer to have variable debt. So the two companies enter into an interest rate swap agreement whereby Aggie agrees to make Cougar's interest payment in 2003 and Cougar likewise agrees to make Aggie's interest payment in 2003. The two companies agree to make settlement payments, for the difference only, on December 31, 2003. If the interest rate on January 1, 2003, is 12 percent, what will be Cougar's settlement payment to/from Aggie? $5,000 payment $10,000 payment…
On January 1, 2020, Billy Company sold equipment that originally cost $5,000,000 to Selecta Company. As payment, Selecta gave Crawford a $7,000,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments plus interest on the outstanding balance. The first payment is due on December 31, 2020. The market price of the land is not readily determinable. The prevailing rate of interest for notes of this type is 8%. Determine the unamortized premium/discount balance on December 31, 2021
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Peabody Corporation purchased equipment and in exchange signed a three-year promissory note.The note requires Peabody to make a single payment of $20,000 in three years. Peabody has otherpromissory notes that charge interest at the annual rate of 6 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Peabody’s typicalinterest rate of 6 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).
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On January 1, 2001, XDR Bank extended a P900,000 loan to SRN, Inc. Principal is due on December 31, 2005 but 12% interest is due annually every December 31. On December 31, 2003, SRN, Inc. was delinquent and it was ascertained that the loan is impaired. XDR Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected to be received in three equal annual installments starting on December 31, 2004. Accrued interest receivable on December 31, 2003 amounted to P100,000. The current market rate on December 31, 2003 is 14%. How much is the balance of allowance for impairment loss on December 31, 2003 immediately after impairment testing?

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