1 Prepare jou Because of uncertainty of estimale IIO How muc

1. Prepare jou Because of uncertainty of estimale, IIO .How much is warranty expense in each year from 20X5 to 203 . What is the balance in the provision for warranty at 31 December 20xs, 20x6, and 20x7! 4. What warranty work is left to do at the end of 20X7? excel connect A 12-15 Discounting-No-Interest Note: Bay Lake Soeplier, agreeing to pay $425,000 on 31 July 20X9. There is no interest in the note. The equipment purchased fining Ltd., purchases earth-moving equipment on 1 August 20x6 and signs a three-year note with the does not have a readily determinable market value. Required 1. Does Bay Lake Mining Ltd. actually have a no-interest loan? Explain. 2. Calculate the present value of the note payable, using an interest rate of 6%. 3. Explain the factors that would be considered in determining the 6% discount rate.

Solution

1.No, they dont actually have no interest loan because there must be some difference between current market value of the machine and $ 425000. This difference is interest. In practical life it cannot be possible that value of machine remains same for 3 years.

2. PV = FV x (PV of 1 Factor for n = 3 years. i = 6% per year) = $ 450000 x 0.8396 = $ 377828.67

3. Factors that majorly determine discount rate are price level, risk factor, duration, marker or bank rates.

4.

Note : In case of multipart question, an expert is allowed to answer only 4 initial sub parts. Thanks, I hope this will be helpful.

	Interest	Balance of Notes Payable
1st year	$ 24057.11	$ 401885.78
2nd year	$ 24057.11	$ 425942.89
3rd year	$ 24057.11	$ 450000.00