RESEARCH ESSAY TOPIC
In recent years there has been a general trend for accounting standard setters to issue accounting standards that measure assets and liabilities at ‘fair value’. Nevertheless, other valuation approaches (for example, historical cost, net realisable value and present value) are required for particular classes of assets and liabilities (as stipulated by particular accounting standards), with the result that we have a ‘mixed approach’ to measuring financial performance and financial position.
(Adapted from Deegan 2009, Financial Accounting Theory, p204)
- Discuss two AASB accounting standards that utilise different measurement approaches.
- Describe the application of your chosen standards.
QUESTION 2: Long term debt financing
Casino.com Corporation is building a $25 million office building in Las Vegas
and is financing the construction at an 80 percent loan to value ratio, where the
loan is in the amount of $20,000,000. This loan has a ten year maturity, calls for
monthly payments, and is contracted at an interest rate of 8 percent.
Required: Using the above information, answer the following questions.
a) What is the monthly payment?
b) How much of the first payment is interest?
c) How much of the first payment is principal?
d) How much will Casino.com Corporation owe on this loan after making
monthly payments for three years (the amount owed immediately after the
thirty sixth payment)?
e) Should this loan be refinanced after three years with a new seven year 7
percent loan, if the cost to refinance is $250,000? To make this decision,
calculate the new loan payments and then the present value of the difference
in the loan payments.
f) Returning to the original ten year 8 percent loan, how much is the loan
payment if these payments are scheduled for quarterly rather than monthly
payments?
g) For this loan with quarterly payments, how much will Casino.com
Corporation owe on this loan after making quarterly payments for three
years (the amount owed immediately after the twelfth payment)?
Attachments:
assignment du….docx