Question
TAKE-HOME PROBLEM SET #2: CHAPTERS 6 THROUGH 10 Page 7 of 20 Problem #2: Notes Receivable (26 points) On December 31, 2017, Green Company completed consulting services for a client, Jones & Co., and agreed to accept a promissory in exchange. The note had a face value of $600,000, due in full on December 31, 2019 and bears interest at 5%, payable at the end of each year. The fair value of the services is not determinable and the note is not readily marketable. and Jones & Co. normally borrow at rates of 8% and 10%, respectively. Green Company Green Company received all required payments under the terms of the note. Your Answer Compute the fair value of the transaction implied by the terms of the agreement. (6 points inciuding inputs) a. Identify the inputs that you entered into your Financial Calculator OR the Excel formula (with amounts) that you used to compute the fair value SUPPORTING CALCULATIONS using a Financial Calculator or Excel: EXCEL I/Y PV PMT FV MODE Formula Prepare the journal entry to record the receipt of the note by Green for its consulting services at December 31, 2017. (4 points) b. DATE ACCOUNT NAMES DEBIT CREDIT
Explanation / Answer
Interest Expense from July to Dec 2018 = Sum of all interest expenses = 3750 + 3711 + 3671 + 3631 + 3590 +3550
= 21903
Current Laibilities = Principal part of PMT for 6 months = 5263 + 5302 + 5342 + 5382 + 5422 + 5463 = 32174
Long term laibilities = Ending Balance after Dec 2018 after 6 months = 467825
r= 0.7500% 9%/12 Beginning Balance Monthly Payment =PMT(9%/12,72,500000) Interest = Beginning Balance * 0.75% Principal Part of PMT= Beginning Balance - Interest Ending Balance 1 500000 9013 3750 5263 494737 2 494737 9013 3711 5302 489435 3 489435 9013 3671 5342 484093 4 484093 9013 3631 5382 478711 5 478711 9013 3590 5422 473288 6 473288 9013 3550 5463 467825 7 467825 9013 3509 5504 462321 8 462321 9013 3467 5545 456776 9 456776 9013 3426 5587 451189 10 451189 9013 3384 5629 445560 11 445560 9013 3342 5671 439889 12 439889 9013 3299 5714 434175 13 434175 9013 3256 5756 428419 14 428419 9013 3213 5800 422619 15 422619 9013 3170 5843 416776 16 416776 9013 3126 5887 410889 17 410889 9013 3082 5931 404958 18 404958 9013 3037 5976 398983 19 398983 9013 2992 6020 392962 20 392962 9013 2947 6066 386897 21 386897 9013 2902 6111 380786 22 380786 9013 2856 6157 374629 23 374629 9013 2810 6203 368426 24 368426 9013 2763 6250 362176 25 362176 9013 2716 6296 355880 26 355880 9013 2669 6344 349536 27 349536 9013 2622 6391 343145 28 343145 9013 2574 6439 336706 29 336706 9013 2525 6487 330218 30 330218 9013 2477 6536 323682 31 323682 9013 2428 6585 317097 32 317097 9013 2378 6635 310462 33 310462 9013 2328 6684 303778 34 303778 9013 2278 6734 297044 35 297044 9013 2228 6785 290259 36 290259 9013 2177 6836 283423 37 283423 9013 2126 6887 276536 38 276536 9013 2074 6939 269597 39 269597 9013 2022 6991 262606 40 262606 9013 1970 7043 255563 41 255563 9013 1917 7096 248467 42 248467 9013 1864 7149 241318 43 241318 9013 1810 7203 234115 44 234115 9013 1756 7257 226858 45 226858 9013 1701 7311 219546 46 219546 9013 1647 7366 212180 47 212180 9013 1591 7421 204759 48 204759 9013 1536 7477 197282 49 197282 9013 1480 7533 189749 50 189749 9013 1423 7590 182159 51 182159 9013 1366 7647 174512 52 174512 9013 1309 7704 166808 53 166808 9013 1251 7762 159047 54 159047 9013 1193 7820 151227 55 151227 9013 1134 7879 143348 56 143348 9013 1075 7938 135411 57 135411 9013 1016 7997 127413 58 127413 9013 956 8057 119356 59 119356 9013 895 8118 111239 60 111239 9013 834 8178 103060 61 103060 9013 773 8240 94820 62 94820 9013 711 8302 86519 63 86519 9013 649 8364 78155 64 78155 9013 586 8427 69728 65 69728 9013 523 8490 61238 66 61238 9013 459 8553 52685 67 52685 9013 395 8618 44067 68 44067 9013 331 8682 35385 69 35385 9013 265 8747 26638 70 26638 9013 200 8813 17825 71 17825 9013 134 8879 8946 72 8946 9013 67 8946 0
