Business, 14.02.2020 05:49 tilacohen

American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. In payment for the $4 million machine, American Food Services issued a four-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. Prepare the journal entry for American Food Services’ purchase of the machine on January 1, 2021.
2. Prepare an amortization schedule for the four-year term of the installment note.
3. Prepare the journal entry for the first installment payment on December 31, 2021.
4. Prepare the journal entry for the third installment payment on December 31, 2023.

Answers: 3

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Answers

Answer from: daniel1480

TODAY value of the future obligation ($4,000,000 payable in 4 years’ time, at 10% interest rate)

Present Value = Future Value / (1+r)^4 = 4000000/(1+0.1)^4 = 2,732,053.82

Explanation:

Calculations

TODAY value of the future obligation ($4,000,000 payable in 4 years’ time, at 10% interest rate)

Present Value = Future Value / (1+r)^4 = 4000000/(1+0.1)^4 = 2,732,053.82

1. Prepare the journal entry for American Food Services’ purchase of the machine on January 1, 2021.

Dr. Machinery 2,732,053.82

Cr. Future Obligation 2,732,053.82

Being Purchase of Machine for deferred payment of $4m in 4 years @ 10%

2. Prepare an amortization schedule for the four-year term of the installment note.

AMORTIZATION TABLE

Year Future Obligation Unwinding of Interest Balance

1. 2,732,053.82 273,205.38 3,005,259.2

2. 3,005,259.2 300,525.92 3,305,785.12

3. 3,305,785.12 330,578.51 3,636,363.63

4. 3,636,363.63 363,636.36 4,000,000.00

3. Prepare the journal entry for the first installment payment on December 31, 2021.

At the end of 2021, the obligation will increase because we are one year closer to having to pay the $4,000,000

The amount by which it increases is the unwinding of the interest

10% x 2,732,053.82 = 273,205.38 and the double entry to record that increase is:

Dr Finance charges273,205.38

Cr Obligation account273,205.38

Being the unwinding of 10% interest on deferred finance obligation on machinery for the year.

4. Prepare the journal entry for the third installment payment on December 31, 2023.

10% x 3,305,785.12 = 330,578.51 and the double entry to record that increase is:

Dr Finance charges330,578.51

Cr Obligation account330,578.51

Being the unwinding of 10% interest on deferred finance obligation on machinery for the year.

Answer from: Quest

$527.7.if the following was the question $527.7 is the answer.students who are trying to raise funds have an agreement with a local pizza chain. the chain has agreed to sell them pizzas at a discount, which the students can then resell to families in the local community for a profit. it is expected that of the 500 families in the community, at most 70% will buy pizza. based on a survey of their personal preferences, the students believe that they should order no more than 120 cheese pizzas, no more than 150 pepperoni pizzas, and no more than 100 vegetarian pizzas. they also want to make sure that at least 20% of the total pizzas are cheese and at least 50% of the pizzas are pepperoni. they make a profit of $1.45, $1.75, and $1.98, respectively, for each cheese, pepperoni, and vegetarian pizza they resell. how many pizzas of each type should they buy?

Answer from: Quest

y=mx+b is the right slope of velocity carry the 4 over