On January 1, 2014, Fishbone Corporation (an equipment manufacturer) sold equipment to Lost Company that cost...
- On January 1, 2014, Fishbone Corporation (an equipment manufacturer) sold equipment to Lost Company that cost $150,000. Fishbone received as consideration a non-interest-bearing note requiring payments of $80,000 annually for 3 years. The first note payment is to be made on December 31, 2014. The prevailing rate of interest for a note of this type on January 1, 2014, was 5%.
- What would this look like from a buyers perspective?
Homework Answers
From buyers perspective buying the
equipment by paying 80000 for 3 years is not viable. As buyer has
to pay 67859.84 extra over and above cost and
interest.
We have compared the present value of the outflows with inflow and both are not same thus purchasing the equipment on note of 80000 for 3 years is not viable.
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On January 1, 2014, Fishbone Corporation (an equipment
manufacturer) sold equipment to Lost Company that cost...
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On January 1, 2014, Fishbone Corporation sold equipment to Lost Company that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a 5% interest-bearing note requiring payments of $80,000 annually for 3 years. The first note payment is to be made on January 1, 2014. The prevailing rate of interest for a note of this type on January 1, 2014, was 5%. Record the 1/1/14 transaction for Fishbone Corporation and all...
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