BRIDGEWATER STATE UNIVERSITY
Joseph M. D’Adamo
ACFI 340 INTERMEDIATE ACCOUNTING I
SPRING 2020
Individual Homework #6
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Individual Homework #5
Page 6 of 23
Due Date: Tuesday, April 14
In this assignment, you will solve problems relative to material that we covered in Outline #6. I will be happy to answer any questions that you may have about this assignment.
Please submit your solutions to these problems as a pdf file on Blackboard.
As this assignment is an outside assignment, I hope that you will work together. However, you must complete and submit your own unique solution.
By submitting this solution with your name in the space below, you are acknowledging that you completed the work in accordance with the Academic Honesty and Integrity policy for the course as described in the syllabus.
Instances of noncompliance that I detect will result in a grade of zero.
Your Name
Your
Time Section
Date
SOLUTION
Point Value Assigned
Points You Earned
Problem #1: Time Value of Money and Recognizing Revenue
50
Totals
50
Problem #1: Time Value of Money and Recognizing Revenue (50 points)
1. MMMM Corporation produced fire suppression equipment system for the main factory of Morrison Door Inc. Upon delivery of the equipment of June 1, 2020, MMMM Corporation accepted a zero-interest note with a total face value of $1,500,000 payable in three years.
MMMM Corporation determined that an interest rate of 9.25% was appropriate for providing financing to Morrison Door Inc. over three years.
Your Answer
a. Compute the fair value of the sales transaction implied by the terms of the agreement. (6 points including inputs in table below)
SUPPORTING CALCULATIONS using a Financial Calculator and Excel:
Financial Calculator:
N
I/Y
PV
PMT
FV
MODE
CPT [PV]
Excel Formula:
Answer:
b. Determine the amounts of sales revenue and interest revenue that MMMM Corporation should recognize in its income statement for the year ended December 31, 2020. (4 points)
Your Answers
Sales Revenue
Interest Revenue
SUPPORTING CALCULATION:
2. MMMM Corporation produced pollution abatement equipment at a cost of $950,000 for the main production facility of Quest Aeronautics. Upon delivery of the equipment on June 30, 2020, MMMM Corporation accepted a zero-interest note with a total face value of $2,000,000 payable in semi-annual installments of $250,000 over four years from Quest Aeronautics to finance the equipment. The first semi-annual payment of $250,000 was due from Quest Aeronautics on December 31, 2020.
MMMM Corporation determined that an interest rate of 8.5% was appropriate for providing financing to Quest Aeronautics over four years.
Your Answer
a. Compute the fair value of the sales transaction implied by the terms of the agreement. (6 points including inputs in table below)
SUPPORTING CALCULATIONS using a Financial Calculator and Excel:
Financial Calculator:
N
I/Y
PV
PMT
FV
MODE
CPT [PV]
Excel Formula:
Answer:
b. Determine the amounts of sales revenue and interest revenue that MMMM Corporation should recognize in its income statement for the year ended December 31, 2020. (4 points)
Your Answers
Sales Revenue
Interest Revenue
SUPPORTING CALCULATION:
3. MMMM Corporation produced waste removal equipment at a cost of $380,000 for the Camden, New Jersey plant of GLF Petrochemicals. Upon delivery of the equipment on November 1, 2020, MMMM Corporation accepted a five-year, $850,000 note bearing 4% (APR) interest from GLF Petrochemicals to finance the equipment. Under the terms of the note, interest was due quarterly with the $850,000 face value of the note due in full at maturity in five years.
MMMM Corporation determined that an interest rate of 9.6% was appropriate for providing financing to GLF Petrochemicals over five years.
Your Answer
a. Compute the fair value of the sales transaction implied by the terms of the agreement. (6 points including inputs in table below)
SUPPORTING CALCULATIONS using a Financial Calculator and Excel:
Financial Calculator:
N
I/Y
PV
PMT
FV
MODE
CPT [PV]
Excel Formula:
Answer:
b. Determine the amounts of sales revenue and interest revenue that MMMM Corporation should recognize in its income statement for the year ended December 31, 2020. (4 points)
Your Answers
Sales Revenue
Interest Revenue
SUPPORTING CALCULATION:
4. MMMM Corporation produced cleaning equipment at a cost of $380,000 for the Callahan Auto Parts factory in Sandusky, Ohio. Upon delivery of the equipment on October 1, 2020, MMMM Corporation accepted a 10-year, $1,200,000 note bearing 3% (APR) interest from Callahan Auto Parts to finance the equipment. Under the terms of the note, interest was due semi-annually with the $1,200,000 face note due in full at maturity in 10 years.
MMMM Corporation determined that an interest rate of 10.5% was appropriate for providing financing to Callahan Auto Parts over 10 years.
Your Answer
a. Compute the fair value of the sales transaction implied by the terms of the agreement. (6 points including inputs in table below)
SUPPORTING CALCULATIONS using a Financial Calculator and Excel:
Financial Calculator:
N
I/Y
PV
PMT
FV
MODE
CPT [PV]
Excel Formula:
Answer:
b. Determine the amounts of sales revenue and interest revenue that MMMM Corporation should recognize in its income statement for the year ended December 31, 2020. (4 points)
Your Answers
Sales Revenue
Interest Revenue
SUPPORTING CALCULATION:
5. MMMM Corporation produced waste collection equipment at a cost of $480,000 for the main production facility of Quinto Enterprises. Upon delivery of the equipment on January 2, 2020, MMMM Corporation accepted a zero-interest note with a total face value of $1,000,000 payable in annual installments of $100,000 over ten years from Quinto Enterprises to finance the equipment. The first annual payment of $100,000 was due from Quinto Enterprises on January 2, 2020.
MMMM Corporation determined that an interest rate of 10.2% was appropriate for providing financing to Quinto Enterprises over ten years.
Your Answer
a. Compute the fair value of the sales transaction implied by the terms of the agreement. (6 points including inputs in table below)
SUPPORTING CALCULATIONS using a Financial Calculator and Excel:
Financial Calculator:
N
I/Y
PV
PMT
FV
MODE
CPT [PV]
Excel Formula:
Answer:
b. Determine the amounts of sales revenue and interest revenue that MMMM Corporation should recognize in its income statement for the year ended December 31, 2020. (4 points)
Your Answers
Sales Revenue
Interest Revenue
SUPPORTING CALCULATION:
Time Value Of Money And Recognizing Revenue Essay
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