Greely Corporation is a publicly-traded corporation with a calendar year end. Fo
ID: 2423967 • Letter: G
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
Explanation / Answer
1. Annual Payment=$1,500,000/PVAF for 3 years @4%=$1,500,000/3.6299=$413,234.5
first payment we hae to pay with in one year , so the same amount we can treat as Current liability.
Current Liability=$413,234.5
2.Equal Monthly payment=$750,000/PVAF for 48 months @0.2917%=$750,000/44.7304=$16,767.12
the monthly payments to be paid with in one year from the balance sheet date=12
Current liability=$16,767.12*12=$201,205.4
3. bi monthy payment=$500,000/PVAF for 48 bi months @0.1354%=$500,000/46.443=$10,765.89
Current liability =$10,765.89*12*2=$258,381
4.Current liability=Nil because the Zero coupon bond will pay after 18 months , so it will not considered as Current liability.
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