Homework Answers
Ans 4-
Calculation of yearly interest =Principal*rate of interest
=20000*12/100
=2400
Calculation of monthly interest= Total interest for one year/12
=2400/12
=200
Q. What is amount of each payment?
ans=200
Amount shown on income statement(for 2 months)
Interest for the 2 months (200*2=400) will be shown as "interest expense" on income statement.
Amount shown on Statement of cash flows(for 2 months)
interest expense of (200*2=400) will be included in 'cash flow from operations' on the cash flow statement
on balance sheet
periodic note of 20,000 will be shown on liability side of balance sheet
Q5=amount, company required to repay=
A= amount to repay
r=rate of interest
n=time
A=20000(1+
)4*2
=20000(1+0.03)8
=20000(1.03)8
=25335.40
Amount to be repaid=25335.40
Calculation of interest for first 2 quarters=
A=20000(1+)4*2/4
=20000(1+)2
=20000(1.03)2
=21218
interest for 2 quarter= A-P
=21218-20000
=1218
Amount shown on income statement(for 2 quarters)
Interest for the 2 quarters(1218) will be shown as "interest expense" on income statement.
Amount shown on Statement of cash flows(for 2 quarters)
interest expense of 1218 will be included in 'cash flow from operations' on the cash flow statement
on balance sheet
Lump sum payment note of 20,000 will be shown on liability side of balance sheet
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