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ololo11
16 days ago
6

On December 1, 2021, Liang Chemical provides services to a customer for $90,000. In payment for the services, the customer signs

a three-year, 10% note. The face amount is due at the end of the third year, while annual interest is due each December 1. Required: Record the acceptance of the note on December 1, 2021. Record the interest collected on December 1 for 2022 and 2023, and the adjustment for interest revenue on December 31 for 2021, 2022, and 2023. Record the cash collection on December 1, 2024.
Business
1 answer:
harina [3.2K]16 days ago
8 0
On December 1, 2021, the entry for the Note Receivable would be $90,000 on the debit side and $90,000 on the credit side as Service Revenue. On December 1, 2022, $9,000 in cash is recorded for the interest revenue. This continues in the same manner for December 1 of 2023 and 2024. Interest Receivable of $750 is also recorded on the last day of each year for 2021, 2022, and 2023.
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Answer:

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Explanation:

The Net Present Value (NPV) represents the difference between the present value of cash inflows and outflows. A positive NPV indicates a favorable investment decision, while a negative value suggests otherwise.

NPV of a project

NPV = Present Value of Cash inflows - Present Value of Cash outflow  

The cash inflow is characterized as an annuity.

Present Value of annuity= A × 1 - (1+r)^(-n)/r  

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Calculation for Present Value of cash inflow equals 65,000 × (1 - (1.12)^(-5)/0.12) =  234,310.45.

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Thus, the Net Present Value calculation is  -  234,310.45  -200,000 = 34,310.45  

Net Present Value = $ 34,310.45  

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