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    Date Cash Flows Payments Interest Total Cash Flows PV of 1 at 6%

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    ambi
    The company issued a 3-year, P3 million note on May 1, 2019 in exchange for equipment. The note requires semi-annual interest payments of P500,000 on May 1 and August 31 each year until 2022, when the principal will be paid off. The prevailing market rate is 12%.

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    Date Cash Flows Payments Interest Total Cash Flows PV of 1 at 6%

    Uploaded by

    ambi
    8 views4 pages
    The company issued a 3-year, P3 million note on May 1, 2019 in exchange for equipment. The note requires semi-annual interest payments of P500,000 on May 1 and August 31 each year until 2022, when the principal will be paid off. The prevailing market rate is 12%.

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    Case_6

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    The company issued a 3-year, P3 million note on May 1, 2019 in exchange for equipment. The note requires semi-annual interest payments of P500,000 on May 1 and August 31 each year until 2022, when the principal will be paid off. The prevailing market rate is 12%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    8 views4 pages

    Date Cash Flows Payments Interest Total Cash Flows PV of 1 at 6%

    Uploaded by

    ambi
    The company issued a 3-year, P3 million note on May 1, 2019 in exchange for equipment. The note requires semi-annual interest payments of P500,000 on May 1 and August 31 each year until 2022, when the principal will be paid off. The prevailing market rate is 12%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 4

    Case 6: The company issued a 8%, 3 year P3,000,000 note in exchange for an equipment on May 1, 2019; The Note

    is payable

    Date Cash Flows


    Payments Interest Total Cash Flows PV of 1 @ 6%
    8/31/2019 500,000 120,000 620,000 0.9434
    5/1/2020 500,000 100,000 600,000 0.8900
    8/31/2020 500,000 80,000 580,000 0.8396
    5/1/2021 500,000 60,000 560,000 0.7921
    8/31/2021 500,000 40,000 540,000 0.7473
    5/1/2022 500,000 20,000 520,000 0.7050
    Total

    Date Interest Paid Interest Expense Amortization Payment


    5/1/2019
    8/31/2019 120,000 169,173 49,173 500,000
    5/1/2020 100,000 142,124 42,124 500,000
    8/31/2020 80,000 114,651 34,651 500,000
    5/1/2021 60,000 86,730 26,730 500,000
    8/31/2021 40,000 58,334 18,334 500,000
    5/1/2022 20,000 29,434 9,434 500,000
    180,446
    May 1, 2019; The Note is payable on semi annual installments of P500,000; Prevailing market rate is 12%

    Entries:
    Present Value 5/1/2019 Equipment 2,819,554
    584,906 Discount on Notes Payable 180,446
    533,998 Notes Payable
    486,979
    443,572 8/31/2019 Interest Expense 169,173
    403,519 Notes Payable 500,000
    366,579 Cash
    2,819,554 Discount on Notes Payable

    5/1/2020 Interest Expense 142,124


    Present Value Notes Payable 500,000
    2,819,554 Cash
    2,368,727 Discount on Notes Payable
    1,910,851
    1,445,502 8/31/2020 Interest Expense 114,651
    972,232 Notes Payable 500,000
    490,566 Cash
    - Discount on Notes Payable

    5/1/2021 Interest Expense 86,730


    Notes Payable 500,000
    Cash
    Discount on Notes Payable

    8/31/2021 Interest Expense 58,334


    Notes Payable 500,000
    Cash
    Discount on Notes Payable

    5/1/2022 Interest Expense 29,434


    Notes Payable 500,000
    Cash
    Discount on Notes Payable
    3,000,000
    #
    8/31/2019 Interest Expense 169,173
    Cash 120,000
    620,000 Discount on Notes Payable 49,173
    49,173
    Note Payable 500,000
    Cash 500,000

    600,000 5/1/2020 Interest Expense 142,124


    42,124 Cash 100,000
    Discount on Notes Payable 42,124

    Note Payable 500,000


    580,000 Cash 500,000
    34,651
    8/31/2020 Interest Expense 114,651
    Cash 80,000
    Discount on Notes Payable 34,651
    560,000
    26,730 Note Payable 500,000
    Cash 500,000

    5/1/2021 Interest Expense 86,730


    540,000 Cash 60,000
    18,334 Discount on Notes Payable 26,730

    Note Payable 500,000


    Cash 500,000
    520,000
    9,434 8/31/2021 Interest Expense 58,334
    Cash 40,000
    Discount on Notes Payable 18,334

    Note Payable 500,000


    Cash 500,000

    5/1/2022 Interest Expense 29,434


    Cash 20,000
    Discount on Notes Payable 9,434
    Note Payable 500,000
    Cash 500,000

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