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Question 4: Suppose Hammer Consulting Co. provided consulting services to Duder Inc. on December 31, 2016, but has decided to allow Duder to pay the
Question 4: Suppose Hammer Consulting Co. provided consulting services to Duder Inc. on December 31, 2016, but has decided to allow Duder to pay the balance due over time. Hammer Consulting is considering several different note options below. The market rate of interest for a company of Duder's risk level is 10% For each option, determine the appropriate amount of service revenue that Hammer would record on December 31, 2016 and the amount of interest revenue Hammer would record for the full year ended December 31, 2018. Use the Present Value tables provided at the end of chapter 7 notes, and do not round the factors. Round all answers to the nearest whole dollar (including interest and cash payments for each year in your calculation) A. Service Revenue at 12/31/2016 Interest Revenue for the year ended 12/31/2018 Option 1: Hammer Consulting Co. wil require Duder to make a down payment of $30,000 on 12/31/2016 and the remainder in the form of a $90,000, 6% note due in 6 years. Interest payments will be due semi- annually Option 2: Hammer Consulting Co. will provide the consulting services in exchange for a 4-year, $150,000 non-interest bearing note. Interest is compounded quarterly For requirements B-C below, assume that Hammer Consulting Co. opts for Option # 1 above. B. Prepare an amortization table. Use the following headings Date Cash Interest Rev Disc. Amortized CV C. What is the total amount of interest revenue Hammer will earn over the life of the
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