Answered step by step
Verified Expert Solution
Question
1 Approved Answer
TWO Medhanie Publishing reached an agreement to sell 100,000 copies of the new book, The Eascinating Lives of Accounting Professors, to Mancuso Books, a regional
TWO Medhanie Publishing reached an agreement to sell 100,000 copies of the new book, The Eascinating Lives of Accounting Professors, to Mancuso Books, a regional bookstore. The terms of the deal are that Mancuso Books will receive the books immediately in exchange for a promise to pay Medhanie $100,000 per month at the end of each of the next 15 months (a total of $1,500,000 ). Assume there is no risk to Medhanie that Mancuso will pay all of these payments - Mancuso has an impeccable credit history. Required: 1. What is the value at the time of the delivery of the books (today) of the promised payments? (Hint: this is a time value of money problem - money received in the future is less valuable than money received today). Assume that Mancuso's credit rating suggests an interest rate of 6% per year would be appropriate. Show your calculations. 2. What is the journal entry that Medhanie will make on the date of sale to record this transaction? Assume the cost of the books is $700,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started