Comparison of Simple and Compound Interest On June 30, 2010, Rolf Inc. borrowed $25,000 from its bank,
Question:
Comparison of Simple and Compound Interest On June 30, 2010, Rolf Inc. borrowed $25,000 from its bank, signing an 8%, two-year note.
Required
1. Assuming that the bank charges simple interest on the note, prepare the journal entry Rolf will record on each of the following dates:
December 31, 2010
December 31, 2011
June 30, 2012
2. Assume instead that the bank charges 8% on the note, which is compounded semiannually. Identify and analyze the effect on the dates in part (1).
3. How much additional interest expense will Rolf have in part (2) than in part (1)?
Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. Thought to have originated in 17th century Italy, compound...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
1 The effect of the adjustment on December 31 2010 can be identified and analyzed as follows Operati...View the full answer
Answered By
Asim farooq
I have done MS finance and expertise in the field of Accounting, finance, cost accounting, security analysis and portfolio management and management, MS office is at my fingertips, I want my client to take advantage of my practical knowledge. I have been mentoring my client on a freelancer website from last two years, Currently I am working in Telecom company as a financial analyst and before that working as an accountant with Pepsi for one year. I also join a nonprofit organization as a finance assistant to my job duties are making payment to client after tax calculation, I have started my professional career from teaching I was teaching to a master's level student for two years in the evening.
My Expert Service
Financial accounting, Financial management, Cost accounting, Human resource management, Business communication and report writing. Financial accounting : • Journal entries • Financial statements including balance sheet, Profit & Loss account, Cash flow statement • Adjustment entries • Ratio analysis • Accounting concepts • Single entry accounting • Double entry accounting • Bills of exchange • Bank reconciliation statements Cost accounting : • Budgeting • Job order costing • Process costing • Cost of goods sold Financial management : • Capital budgeting • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback period • Discounted cash flows • Financial analysis • Capital assets pricing model • Simple interest, Compound interest & annuities
65+ Reviews
86+ Question Solved
Related Book For 
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton
Question Posted:
