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On January 1, 2021, the Merit Group issued to its bank a $38 million, five-year installment note to be paid in five equal payments at the end of each year. Installment payments of $9.417 million annually include interest at the rate of 7.6%.
Required: What would be the amount(s) related to the note that Merit would report in its statement of cash flows for the year ended December 31, 2021?

Sagot :

Cricetus

Answer:

The correct solution is provided below.

Explanation:

Given:

The cash inflow,

= $38

Interest rate,

= 7.6%

or,

= 0.076

Now,

The annually interest will be:

= [tex]38\times 0.076\times 1[/tex]

= [tex]2.89[/tex] ($)

Or,

The installment payment without interest will be:

= [tex]9.417-2.89[/tex]

= [tex]6.53[/tex] ($)

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