HP10Bii Tutorial
To amend the number of payment periods in a year.
If a question gives you information
where interest is compounded
annually, then you need to ensure
that your calculator is in the correct
mode.
Do the following:
1. Press 1
2. Press SHIFT key
3. Press P/YR key
4. Press SHIFT key
5. Press C ALL button
Alternatively,
if
interest
is
compounded monthly, then the
calculator needs to be changed to
12 payment periods per year.
Do the following:
1. Press 12
Step 2 – 5 remain unchanged.
1
HP10Bii Tutorial
To perform a PV calculation.
1.
Ensure that your calculator is set
to the correct number of periods
per year. (Refer Page 1)
Compound annually - 1 P/YR
Compound monthly - 12 P/YR
Compound bi-annually - 2 P/YR
2.
Then
input
the
information
provided in the question
1. Future Value - FV
2. Number of months/years - N
3. Interest rate - I
4. Calculate PV
Example: (Study guide page 16, example 5)
Machine 1, with an original cost price of R300 000 on 1 January 20.2, a residual value of nil and a
carrying amount of R180 000 on 1 January 20.4, was sold on 30 June 20.4 for R210 000. The
payment will only be received on 30 June 20.5 from the buyer.
The current interest rate for asset financing is 12% per annum.
Solution:
FV = R210 000
N = 1 year (payment is deferred from 30 June 20.4 to 30 June 20.5)
I = 12
PV = ?
Ensure calculator is set to 1 P/YR, input the above values and calculate PV.
PV = R187 500
The difference between the present value of R187 500, and the amount to be received in 1 year
(R210 000) is the interest component which is to be recognised in the statement of comprehensive
income.
2
HP10Bii Tutorial
To calculate Value in use
1.
Ensure that your calculator is set
to the correct number of periods
per year. (Refer Page 1)
Compound annually - 1 P/YR
Compound monthly - 12 P/YR
Compound bi-annually - 2 P/YR
2.
Then
input
the
information
provided in the question
1. Net cash flows (Inflow –
outflow) - PMT
2. Number of months/years - N
3. Interest rate - I
4. Calculate PV
Example: (Study guide page 112, example 1)
Extract from example
“On 1 April 20.0 Toys For You Limited obtained a licence to sell Bogus Toys for 25 years. The total
cost of the licence amounted to R2 500 000. The licence is amortised on the straight-line basis over
a period of 25 years, as it is expected that economic benefits relating to the licence will flow to the
entity over this period.
On 31 March 20.2 it is estimated that the licence will generate cash inflows amounting to R750 000
per annum. The annual cash outflow required to generate the inflow amounts to R325 000).
Assume that all cash flows occur annually at 31 March. A pre-tax discount rate of 20% is regarded
as appropriate”
Solution (calculation 2 – Recoverable amount)
1 P/YR
PMT = (750 000 – 325 000) = 425 000
N= 23 (25 years useful life – 2 years until 31 March 20.2 therefore 23 years remaining)
I = 20
PV = ?
The value in use is calculated as the present value of future cash flows at the given interest rate.
PV = R2 092 923
3
HP10Bii Tutorial
To perform an amortisation table
1.
Ensure that your calculator is set
to the correct number of periods
per year. (Refer Page 1)
Compound annually - 1 P/YR
Compound monthly - 12 P/YR
Compound bi-annually - 2 P/YR
2.
Then
input
the
information
provided in the question
1. Net cash flows - PMT
2. Number of months/years - N
3. Interest rate - I
4. Calculate PV
5. Create amortisation table – 1
INPUT SHIFT AMORT
Example: (Study guide page 208, example 9)
Mon Limited purchased a discounted bond from Day Limited and paid R914 350 for it on 1 Janaury
20.1. The date of maturity is 31 December 20.4
The following details are applicable to the bond:
Market rate 15%
Interest rate 12%
Future Value R1 000 000
Period
4 years
Payment
R120 000
Solution:
Input the following into the calculator: 1 P/YR
FV = R1 000 000
N=4
PMT = (1 000 000 x 12%)
I = 15
PV = R914 350
1 INPUT SHIFT AMORT
2 INPUT SHIFT AMORT
3 INPUT SHIFT AMORT
4 INPUT SHIFT AMORT
Principal
17 153
19 725
22 684
26 087
Amortisation table as per the
calculator. Use the figures and slot
them into the full table as per the
solution.
Interest
137 153
139 725
142 684
146087
4
Balance
931 503
951 229
973 913
1 000 000