Question

At the beginning of 2021, VHF Industries acquired a machine with a fair value of $4,973,700 by issuing a three-year, noninterTABLE 1 Future Value of $1 FV = $1(1+i) 20.0% 1.20000 1.44000 ndi 1.0% 1 1.01000 2 1.02010 3 1.03030 4 1.04060 5 1.05101 1.5TABLE 2 Present Value of $1 $1 PV (1+1) wi 1.0% 1 0.99010 2 0.98030 3 0.97059 4 0.96098 5 0.95147 1.5% 0.98522 0.97066 0.956TABLE 3 Future Value of an Ordinary Annuity of $1 EVA_ (1 + i) - 1 ni 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0%TABLE 4 Present Value of an ordinary Annuity of $1 1- (+1) PVA== ni 1 2 3 4 5 1.0% 1.5% 0.99010 0.98522 1.97040 1.95588 2.940TABLE 5 Future Value of an Annuity Due of $1 (1+i) -11 FVAD - = *(1+i) wi 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5,5%TABLE 6 Present Value of an Annuity Due of $1 PVAD= |x (1+i) ni 1 2 3 4 5 1.0% 1.00000 1.99010 2.97040 3.94099 4.90197 1.5% 1

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Answer #1

1. Implicit Rate of Interest will be 10%.

Implicit Rate of Return=

present value=future value of payments

4973500= 2000000*(1+r/100)n

4973500/2000000=2.4865

2.4865 is value of N=3, with rate of interest of 10%.

5. Machine Account Dr. 49773500

Interest Account Dr. 1775300

To Bank 6748800

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