Question

Short Company purchased land by paying $10,000 cash on the purchase date and agreeing to pay $10,000 for each of the next ten years beginning one-year from the purchase date. Short's incremental borrowing rate is 10%. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) The land reported on the balance sheet is closest to: Multiple Choice $100,000. $110,000. Oo oo $71,446. $38,550.

Answer 1

CACLULATION OF THE PRESENT VALUE OF PURCHASE OF LAND VALUE
Years	Cash Outflow	PVF of $ 1 @ 10%	Present Value (A XB)
0	10,000	1.00000	$                          10,000.00
1	10,000	0.90909	$                            9,090.91
2	10,000	0.82645	$                            8,264.46
3	10,000	0.75131	$                            7,513.15
4	10,000	0.68301	$                            6,830.13
5	10,000	0.62092	$                            6,209.21
6	10,000	0.56447	$                            5,644.74
7	10,000	0.51316	$                            5,131.58
8	10,000	0.46651	$                            4,665.07
9	10,000	0.42410	$                            4,240.98
10	10,000	0.38554	$                            3,855.43
Total Present Value			$                          71,445.67
Total Present Value (Round Off to nearest $)			$                                71,446
Answer = Option 3 = $ 71,446