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Sunday, November 14, 2010

Valix Finacc vol 1 Problem 12-31 to 34

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 12-31 to 34


Problem 12-31  Answer  B


Acquisition cost – July 1, 2008                                                                                    4,614,000
Discount amortization from July 1 to December 31, 2008:
     Interest accrued (5,000,000 x 8% x 6/12)                                          200,000
     Interest income (4,614,000 x 10% x 6/12)                                         230,700               30,700
Book value – December 31, 2008                                                                              4,644,700

Problem 12-32  Answer  D


Acquisition cost                                                                                                         4,766,000
Discount amortization:
      Interest income (4,766,000 x 12%)                                                  571,920
      Interest received (5,000,000 x 10%)                                     500,000               71,920
Total                                                                                                                          4,837,920
Annual installment on December 31, 2008                                                               (1,000,000)
Book value –December 31, 2008                                                                               3,837,920                                   

Problem 12-33  Answer  A                                     


Annual effective (5,000,000 x 14%)                                                                               700,000
Annual nominal (5,000,000 x 12%)                                                                                 600,000                                                  
Difference                                                                                                                    100,000     
Multiply by present value factor using effective rate of 14%                                            5.216
Discount                                                                                                                      521,600
Face value                                                                                                                5,000,000
Purchase price                                                                                               4,478,400

 

Problem 12-34  Answer  A


12/31/2008 (1,250,000 + 600,000 x .9091)                                                                   1,681,835
12/31/2009 (1,250,000 + 450,000 x .8264)                                                                   1,404,880
12/31/2010 (1,250,000 + 300,000 x .7513)                                                                   1,164,515
12/31/2011 (1,250,000 + 150,000 x .6830)                                                                      956,200
                                                                                                                                 5,207,430

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