Question

PV = TABLE 2 Present Value of $1 $1 (1+1)" wi 1.0% 1 0.99010 2 0.98030 3 0.97059 4 0.96098 5 0.95147 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 0.98522 0.98039 0.97561 0.97087 0.96618 0.96154 0.97066 0.96117 0.95181 0.94260 0.93351 0.92456 0.95632 0.94232 0.92860 0.91514 0.90194 0.88900 0.94218 0.92385 0.90595 0.88849 0.87144 0.85480 0.92826 0.90573 0.88385 0.86261 0.84197 0.82193 4.5% 5.0% 5.5% 6.0% 7.0% 0.95694 0.95238 0.94787 0.94340 0.93458 0.91573 0.90703 0.89845 0.89000 0.87344 0.87630 0.86384 0.85161 0.83962 0.81630 0.83856 0.82270 0.80722 0.79209 0.76290 0.80245 0.78353 0.76513 0.74726 0.71299 8.0% 0.0% 0.0% 11.0% 12.0% 20.0% 0.92593 0.91743 0.90909 0.90090 0.89286 0.83333 0.85734 0.84168 0.82645 0.81162 0.79719 0.69444 0.79383 0.77218 0.75131 0.73119 0.71178 0.57870 0.73503 0.70843 0.68301 0.65873 0.63552 0.48225 0.68058 0.64993 0.62092 0.59345 0.56743 0.40188 6 0.94205 0.91454 0.88797 0.86230 0.83748 0.81350 0.79031 0.76790 0.74622 0.72525 0.70496 0.66634 0.63017 0.59627 0.56447 0.53464 0.50663 0.33490 7 0.93272 0.90103 0.87056 0.84127 0.81309 0.78599 0.75992 0.73483 0.71068 0.68744 0.66506 0.62275 0.58349 0.54703 0.51316 0.48166 0.45235 0.27908 8 0.92348 0.88771 0.85349 0.82075 0.78941 0.75941 0.73069 0.70319 0.67684 0.65160 0.62741 0.58201 0.54027 0.50187 0.46651 0.43393 0.40388 0.23257 9 0.91434 0.87459 0.83676 0.80073 0.76642 0.73373 0.70259 0.67290 0.64461 0.61763 0.59190 0.54393 0.50025 0.46043 0.42410 0.39092 0.36061 0.19381 10 0.90529 0.86167 0.82035 0.78120 0.74409 0.70892 0.67556 0.64393 0.61391 0.58543 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.16151 11 0.89632 0.84893 0.80426 0.76214 0.72242 12 0.88745 0.83639 0.78849 0.74356 0.70138 13 0.87866 0.82403 0.77303 0.72542 0.68095 14 0.86996 0.81185 0.75788 0.70773 0.66112 15 0.86135 0.79985 0.74301 0.69047 0.64186 0.68495 0.66178 0.63940 0.61778 0.59689 0.64958 0.62460 0.60057 0.57748 0.55526 0.61620 0.58468 0.55491 0.52679 0.47509 0.42888 0.38753 0.35049 0.31728 0.28748 0.13459 0.58966 0.55684 0.52598 0.49697 .44401 0.39711 0.35553 0.31863 0.28584 0.25668 0.11216 0.56427 0.53032 0.49856 0.46884 0.41496 0.36770 0.32618 0.28966 0.25751 0.22917 0.09346 0.53997 0.50507 0.47257 0.44230 0.38782 0.34046 0.29925 0.26333 0.23199 0.20462 0.07789 0.51672 0.48102 0.44793 0.41727 0.36245 0.31524 0.27454 0.23939 0.20900 0.18270 0.06491 16 17 18 19 20 0.85282 0.78803 0.72845 0.67362 0.62317 0.57671 0.53391 0.494470.45811 0.42458 0.39365 0.33873 0.84438 0.77639 0.71416 0.65720 0.60502 0.55720 0.51337 0.47318 0.43630 0.40245 0.37136 0.31657 0.83602 0.76491 0.70016 0.64117 0.58739 0.53836 0.49363 0.45280 0.41552 0.38147 0.35034 0.29586 0.82774 0.75361 0.68643 0.62553 0.57029 0.52016 0.47464 0.43330 0.39573 0.36158 0.33051 0.27651 0.81954 0.74247 0.67297 0.61027 0.55368 0.50257 0.45639 0.41464 0.37689 0.34273 0.31180 0.25842 0.29189 0.25187 0.21763 0.27027 0.23107 0.19784 0.25025 0.21199 0.17986 0.23171 0.19449 0.16351 0.21455 0.17843 0.14864 0.18829 0.16312 0.05409 0.16963 0.14564 0.04507 0.15282 0.13004 0.03756 0.13768 0.11611 0.03130 0.12403 0.10367 0.02608

Answer 1

The non interest bearing note required Lincoln to make payment of $5200 for 6 years starting from September 30, 2024.

Therefore the value of the note as on September 30, 2023 (P₃) was = Present value of annuity of $5200 for 6 years @ 11%

= $5200 * 4.23054 = $21998.8082

Therefore the value of the note 2 years from now = $21998.8082

Therefore the amount at which Lincoln should record the note payable and corresponding purchases = The Present value of the note as on September 30 2021 = Present Value of $21998.8082 for 2 years @11%

= 21998.8082 * 0.81162

=17854.6725

=$17855 (appx)