Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Semester Case - Cowboy Ice Cream, Inc. (CIC) Last class period we discussed a possible expansion by CIC whereby they would purchase a building, land,

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Semester Case - Cowboy Ice Cream, Inc. (CIC) Last class period we discussed a possible expansion by CIC whereby they would purchase a building, land, and new equipment. In order to finance such an expansion CIC would borrow $800,000. CIC is currently considering possible options for this borrowing. Prepare amortization schedules for each of the following, rounding all computations to the nearest whole dollar. Assume 8% interest applies to each option and all borrowings would originate on January 1, 2019. Option #1: Issue a note with the principal and interest due in 18 months. Interest and principal are payable in cash on June 30, 2020, Option #2 Issue a note with the principal due in 5 years with interest payable annually on December 31. Option #3 Issue a note to repay $160,000 of the principal due each year on December 31 for 5 years along with the annual interest due. Option #4 Issue a note to make equal annual payments of $200.365 each year on December 31 for 5 years. Year Pmt # Balance Total Cash Interest Principal January 1 Paid Expense Reduction 800,000 $ 64,000 $ 864,000 $ 896,000 $ 32,000 $ 864,000 Balance December 31 $ 864.000 3 4 5 2019 2020 2021 2022 2023 1 2 3 4 5 Year Pmt # Principal Reduction 2019 2020 2021 2022 2023 CAN 2 3 4 5 Balance Total Cash Interest January 1 Paid Expense $ 800,000 $ 64,000 $ 64,000 $ 800,000 $ 64,000 $ 64,000 $ 800,000 $ 64,000 $ 64,000 $ 800,000 $ 64,000 $ 64,000 $ 800.000 $ 864,000 $ 64,000 Balance December 31 $ 800,000 $ 800,000 $ 800,000 $ 800,000 Year Pmt # Balance Total Cash January 1 Paid $ 800,000 $ 224,000 $ $ 6,400 Interest Expense 64,000 Principal Reduction Balance December 31 $ 640,000 2019 2020 2021 2022 2023 1 2 3 4 5 $ 160,000 $ 172,800 $ 12,800 Year Pmt # Balance January 1 Total Cash Paid Interest Expense Principal Reduction Balance December 31 2019 2020 2021 2022 2023 2 3 4 5 . 0 1 2

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Risk Management In Organizations An Integrated Case Study Approach

Authors: Margaret Woods

1st Edition

0415591732, 9780415591737

More Books

Students also viewed these Accounting questions

Question

11.7. Derive Eq. (11.33) and Eq. (11.34).

Answered: 1 week ago

Question

finding entry-level positions;

Answered: 1 week ago