ACC 100 Chapter Notes - Chapter 9: Accounts Payable, Retained Earnings, Current Liability

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raspberrymosquito892

13 Jun 2018

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ACC 100- Week 10

Liabilities

Loans

Principal- amount borrowed from the bank

- do’t hae to pa ak at a speifi date

Interest- cost of borrowing money

- due after you use the money for a period of time (ex. end of every month)

- never pay in advance

- must pay on specific date

Operating Line of Credit

- creditor sets a maximum loan amount and the business may borrow on the line of credit as

needed but only up to the maximum amount allowed

- variable interest rate (changes every day depending on market)

Traditional Bank Loan

- Set amount of money with due date (maturity date)

- interest rate set for period of the loan (ex. 4.5% for 5 years) OR variable interest rate

INTREST IS AN ANNUAL RATE

- If interest is 3%, and you have to pay at the end of every month, you take 3% of the whole

loan and divide by 12 to get the monthly interest fee

- Iterest effet the Iterest Epese aout

Accrued Interest

- You last paid interest on Dec 12th, it is the end of the year and you have not paid for Interest

from Dec 12th- Dec 31st, this will go under Interest Payable

- record the Interest Payable and Interest Expense at the end of EVERY month because you

OWE the interest for the use of the money

How to Calculate Interest

Principal Amount * Interest Rate * Period Outstanding

12 months

$20,000 * 3% * 1 month

12 months

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Document Summary

Do(cid:374)"t ha(cid:448)e to pa(cid:455) (cid:271)a(cid:272)k at a(cid:374)(cid:455) spe(cid:272)ifi(cid:272) date. Due after you use the money for a period of time (ex. end of every month) Creditor sets a maximum loan amount and the business may borrow on the line of credit as needed but only up to the maximum amount allowed. Variable interest rate (changes every day depending on market) Set amount of money with due date (maturity date) Interest rate set for period of the loan (ex. 4. 5% for 5 years) or variable interest rate. If interest is 3%, and you have to pay at the end of every month, you take 3% of the whole loan and divide by 12 to get the monthly interest fee. You last paid interest on dec 12th, it is the end of the year and you have not paid for interest from dec 12th- dec 31st, this will go under interest payable.

Related Questions

Card Name (APR %)	Existing Balance	Credit Limit
MarK2 (8.2%)	$1,692.45	$3,000.00
Bee4 (10.5%)	$2,138.90	$2,500.00

You have $400.00 each month to payoff these 2 credit cards. Youdecide to pay only the interest on the lowest interest card and theremaining amount to the other card.

How long does it take to pay off the higher interest card?

What is the amount of the last payment? Why?

What is the balance of the lowest interest card when the higherinterest card is paid off? Why?

Rework the problem so that you pay off the lower-interest cardfirst. How much money do you save by paying off the higher-interestcard first?

Be sure to include in your response:

All parts of the table are complete and calculations correct

The answers to the additional questions above

Higher Interest Card (Payoff Option)

Month	1	2	3	4	5	6	7	8	9	10
Principal
Interest accrued
Payment (on due date)
End-of-month balance

Lower Interest Card (Payoff Option)

Month	1	2	3	4	5	6	7	8	9	10
Principal
Interest accrued
Payment (on due date)
End-of-month balance

turquoisebear985

Interest and Loan Concepts Assignment (Total 40Points)

Question 2: (10Points)

You decide to take out a loan for $6,000, at 7% yearly intereston the date that Unit 4 starts. If you repay the loan on December31st (at the end of the current year).

Exact time (days) of loan: __________

Using ordinary interest, calculate the interest and totalowed.

Using exact interest, calculate the interest and total owed.

Question 3: (10 Points)

You decide to take out an ordinary interest loan of $30,000 at4%, on a 90 day note.

In 45 days you decide to make a payment of $10,000 on the loan.What is your new principal? Explain how you got the answer.

How much did you pay at the end of the loan overall? How doesthis differ from how much you would have paid overall had you notmade a payment of $10,000 after 45 days?

Question 4: (10 Points)

Find the bank discount and proceeds using ordinaryinterest on an unsecured promissory note made toLeslie Smith for $12,000 at 7% annual simpleinterest from June 15 to September 15 for this year.Use the steps below to find your answers.

Explain the difference between a simple interest note and asimple discount note.

Exact time (days) of note: __________

What is the bank discount?

What are the proceeds that Leslie Smith receives?

What is the amount Leslie Smith repays?

puceeagle823

5. An investment proposal has an outlat of $60.000 today and annual cash inflow of $15,000 from year 1 to year 6. Find its net present value of the required rate of return is 15%. Is the investment viable?

6. A debt of $5,300 due in four years and another $11,500 due in twelve years will be settled by making two equal payment, one at the end of six years and the other at the end of 9 years, Find the total payment assuming that money is worth 8% compounded quarterly. Use the twelve years as a focal date.

7. On 5 februrary 2012, Anna borrows $80,000 and agree to repay the loan in 110 days at 9% per annum simple interest, Find the simple amount of the loan and the settlement date of the loan, Using the bankers rule

8. The net price of an item listed for $1,500 after deducting trade discount of 20%, 15% and x% is $969. FInd X

9. AAA and BBB need an additional $6565 for a down payment on a home they hope to buy in 2 years, They invest $808 at the end of each quarter in an account earning6% compounded quarterly. Find the amount of the annuity and the interest earned.

10. Find the value in 2 years time of $4,444 invested at 5% compounded annually. In the following 2 years, the interest rate is expected to rise to 8%. Find the value of the investment at the end of the 4 years period, and find the overall percentage increase.

11. A debt of $5,555 due 5 month ago and another $8,888 due in 12 month are to be settled by making three equal payment. One at the end of the two months, One at the end of six months and the other at the end of ten months. Find the size of payment using. the seconf month as the focal date. Assuming money is worth 9% per annum simple interest.

12. Four years ago John borrowed $3000 from Arlette. The principal with interest at 10% compounded semi-annually is to be repaid six years from the date of the loan. Fifteen month ago, John borrowed another $1500 for 3 and haly year at 9% compounded quarterly. John is now proposing to settle both debts with two equal payment to be made 2 and 3 and half years from now. what should the payment be if money now earns 8% compounded quarterly.

13. Mathew buys a house for $250,000, He makes a 10% down payment and finances the balance through a bank for 25 years. A. if the interest rate is 7% compounded monthly, find the monthly payment that Mathew has to make to settle the loan. How much is the total interest charged? B. Suppose Mathew misses the first four payments. How much should he pay on the fifth month if he wants to settle the outstanding arrears? C. Immediately after paying for 15 years, Mathwe wants to settle the loan in full, How much is the amount he needs to pay?

14. Nania bough a piece of land for $150,000, She made an initial down payment of $40,000 and the balanced is financed through a bank. For the repayment of the bank loan, She has to pay $1975.50 a month. A) If the bank rate is 12% compounded monthly, Find the number of monthly payment that will settle the loan. B) If Nania intends to settle the loan by making a final payment immediately after paying the first 40 monthly payment, Find the value of this payment. What is the total interest payment she has to pay? C) If Nania intends to settle the loan by making a final payment on the 41st payment immediately after paying the first 40 monthly payments, Find the value of this payment.

15a. What is an annuity?

b. Fatimah purchased a house costing $450,000. She made a down payment of 10%, The balance was borrowed from Capital one bank which charges 9% compounded monthly. to setle the loan, Fatimah had to make equal monthly payment for 15 years.

i) How much is the down payment ii) Find Fatimah's Monthly payment iii) Find the total interst that she has to pay.

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ACC 100 Chapter Notes - Chapter 9: Accounts Payable, Retained Earnings, Current Liability

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