Response:
The interest rate is 5.7% $21.204
Clarification:
The formula for calculating simple interest is
I =
Given that
I = Interest, T = time;;R is rate; P = principal
John earned this interest by July 1, 1993 as follows:
I = 
= 72
Consequently, the total amount in John's account by July 1, 1993 would then be
= $300 + $72= $372
This indicates he utilized these funds at an interest rate of q.
On July 1, 1998, John’s total was $520, meaning the interest accumulated in these five years equals $520 - $372 = $148.
Using the simple interest formula: Interest = PRT/100
148 =
= 14,800 =2600q
q =
Thus, the rate is found to be 5.7%
The interest amount between July 1, 1993, and July 1, 1994 calculates as
I = 
= $21.204
First, it is necessary to record the depreciation expenses for January, February, and March: Depreciation expense over the three months is calculated as ($42,000 - $5,000) x 3/60 = $1,850. As of April 1, the journal entries for the depreciation expense for January, February, and March shall reflect Dr Depreciation Expense 1,850 and Cr Accumulated Depreciation 1,850. Consequently, the book value of the truck becomes $12,400 - $1,850 = $10,550. 1) In the scenario where the truck sells for $12,000 on April 1, the entries will be: Dr Cash 12,000, Dr Accumulated Depreciation 31,450, Cr Gain from Sale 1,450, and Cr Truck 42,000. If it instead sells for $9,000, the entries will adjust to: Dr Cash 9,000, Dr Accumulated Depreciation 31,450, Dr Loss from Sale 1,550, and Cr Truck 42,000. 2) Any gain or loss from the truck's sale should be recorded on the income statement under gains or losses from asset sales. 3) If Swann adopts IFRS and there was a revaluation surplus recorded on the truck, upon selling it for $12,000 on April 1, the entries should show: Dr Cash 12,000, Dr Revaluation Surplus 4,000, Dr Loss from Sale 1,450, and Cr Truck 14,550.
Answer:
- Net present value for each project:
For Project A: $37,193
For Project B: $4,629
=> Project A should be selected based on the NPV approach due to its higher NPV.
- The internal rate of return for each project:
For Project A: 20%
For Project B: 12%
=> Project A is preferable when considering the IRR approach as it boasts a higher IRR
Explanation:
- The calculations for net present value are as follows:
For Project A: NPV = -111,000 + (37,116/0.08) x [1-1.08^(-5)] = $37,193
For Project B: NPV = -43,000 + (11,929/0.08) x [1-1.08^(-5)] = $4,629.
- Regarding the internal rate of return;
IRR represents the discount rate that results in an NPV of zero for the project's cash flows. Thus:
For Project A: -111,000 + (37,116/IRR) x [1-(1+IRR)^(-5)] = 0 <=> IRR = 20%
For Project B: -43,000 + (11,929/IRR) x [1-(1+IRR)^(-5)] = 0 <=> IRR = 12%
