On January 1, 2020, The Barrett Company purchased merchandise from a supplier. Payment was a noninterest-bearing note requiring five annual payments of $31,000 on each December 31 beginning on December 31, 2021, and a lump-sum payment of $210,000 on December 31, 2025. An 11% interest rate properly reflects the time value of money in this situation. ((FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required: Calculate the amount at which Barrett should record the note payable and corresponding merchandise purchased on January 1, 2021. (Round your final answer to nearest whole dollar amount.)
Computation of Amount of Note payable | |
Five Annual Payment | $31,000 |
PV of annuity of $1, n=0-4, i=11% | 4.1024 |
Present value of Annual Payment (a) | $127,174 |
Lump sump payment | $210,000 |
Pvif@ 11% at end of 5 year | 0.6587 |
Present value of Lump Sum Payment (b) | $138,327 |
Amount of Note Payable to be recorded (a+b) |
$265,501 |
On January 1, 2020, The Barrett Company purchased merchandise from a supplier. Payment was a noninterest-bearing...
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