Table 3 Present Value of 1 (n)Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 96154
ID: 2577520 • Letter: T
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Table 3 Present Value of 1 (n)Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 96154 95238 94340 0.93458 92593 91743 .90909 90090 89286 86957 2 92456 90703 89000 0.87344 85734 .84168 82645 81162 .79719 75614 3 88900 86384 83962 0.81630 .79383 .77218 75132 .73119 .71178 .65752 4 .85480 .82270 .79209 0.76290 .73503 .70843 .68301 .65873 .63552 .57175 5 82193 78353 .74726 0.71299 .68058 64993 62092 .59345 56743 49718 6 .79031 .74622 .70496 0.66634 .63017 .59627 .56447 .53464 .50663 .43233 7 .75992 .71068 .66506 0.62275 .58349 .54703 .51316 .48166 .45235 .37594 8 73069 67684 62741 0.58201 .54027 .50187 .46651 43393 40388 32690 9 .70259 .64461 .59190 0.54393 .50025 .46043 .42410 .39092 .36061 .28426 10 67556 .61391 55839 0.50835 46319 42241 .38554 .35218 .32197 24719 11 64958 58468 .52679 0.47509 42888 .38753 35049 31728 .28748 .21494 12 62460 55684 49697 0.44401 39711 35554 31863 .28584 .25668 .18691 13 .60057 .53032 .46884 0.41496 .36770 .32618 .28966 .25751 .22917 .16253 14 57748 50507 44230 0.38782 34046 .29925 26333 .23199 .20462 .14133 15 55526 48102 41727 0.36245 .31524 27454 .23939 20900 .18270 .12289 16 53391 45811 39365 0.33873 29189 25187 .21763 .18829 .16312 .10687 17 .51337 .43630 .37136 0.31657 .27027 .23107 .19785 .16963 .14564 .09293 18 49363 41552 35034 0.29586 .25025 .21199 .17986 .15282 .13004 .08081 19 47464 .39573 33051 0.27615 23171 .19449 .16351 13768 .11611 .07027 45639 .37689 .31180 0.25842 .21455 .17843 .14864 .12403 .10367 .06110 9Explanation / Answer
Sl No. Date Account Name Debit Credit 1 Dec 1,2017 Building 300000 LT Mortgage payable 300000 (Purchased a building by creating a mortgage) 2 Dec 25,2017 Common stock (1000*1.5) 1500 (At par value) Paid in capital in excess of par-CS [1000*(6-1.5)] 4500 Cash 6000 (Issued common stock) 3 Dec 29,2017 Retained earnings 213000 Dividend payable 213000 (Note:1) (Cash dividend declared) 4 Dec 31,2017 Interest expense 2000 LT Mortgage payable 1800 Cash 3800 (Note:2) (Mortgage monthly instalment paid) 5 Dec 31,2017 Interest expense 200 Interest payable 200 (15000*8%*2/12) (Accrued interest on ST note payable for last 2 months) 6 Dec 31,2017 Interest expense 16000 Premium on bonds payable 4000 Interest payable 20000 (Note:3) (Premium on bond amortised) 7 Dec 31,2017 Unearned revenue 4000 Sales revenue 4000 (14000-10000) (Completed sales which were recorded as unearned) 8 Dec 31,2017 Treasury stock (50*11) 550 Cash 550 (Purchased own preferred stock) Notes: 1. Computation of cash dividend Cash dividend=Number of common stock*$3 per share Number of common stock shares Existing as on 30/11/2017 (Common stock/Par value) 70000 (105000/1.5) Issued on Dec 25 1000 Total 71000 Cash dividend=71000*3=213000 2. Monthly payment toward LT mortgage=$3800 Interest expenses=LT mortgage amount*interest rate=300000*8%*1/12=2000 Principal component in Monthly payment=3800-2000=1800 3. Amortization of premium on bond under effective interest method: Bond premium to be amortized=Interest payment-Interest expense Interest payment=Face value of bond*Interest rate of bond=200000*10%=20000 Interest expense=Book value of bond*Market rate=200000*8%=16000 Bond premium to be amortized=20000-16000=4000 Answers to supplemental questions. 1 Monthly payment toward LT mortgage=$3800 Interest expenses=LT mortgage amount*interest rate=300000*8%*1/12=2000 Principal component in Monthly payment=3800-2000=1800 Balance in mortgage payable=LT mortgage amount-Principal component in monthly payment=300000-1800=298200 2 Issue price of bond=present value of interest payment+present value of face value of a bond on its repayment Interest payment=2000000*12%*6/12=120000 Term of payment=5*2=10 semi annual payments Discount rate=Market rate=10% Per annum=5% semi-annually Present value of interest at 5% for 10 years=120000*7.72173=926607.6……….(a) (Refer Table-4) Present value of repayment of bond at the end of 10th year at 5%=2000000*0.61391=1227820………(b) Issue price of bond=(a)+(b)=926607.6+1227820=2154428
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