Question

On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): (FV of $1. PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) a. Bought a delivery truck and agreed to pay $60,600 at the end of three years. b. Rented an office building and was given the option of paying $10,600 at the end of each of the next three years or paying $28,600 immediately. c. Established a savings account by depositing a single amount that will increase to $91,200 at the end of seven years. d. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $40,600 to a retired employee (payments starting December 31 of this year). Required: a. What is the cost of the truck that should be recorded at the time of purchase? (Round your answer to nearest whole dollar.) & Answer is complete but not entirely correct. Cost of the truck $ 45,078

Answer 1

Ans:

Answer

	Amount	PV at end of 3 years@10%	Total
a	60,600	0.751315	45529.67
		If rounded off	45530
	Amount	PV at end of each years@10%	Total
b	10,600	0.9090	9635.40
	10,600	0.826	8755.60
	10,600	0.751	7960.60
		PV value of all payments	26352
		One time payment	28,600.00
		It should be in 3 years.
c	Amount	PV value at end of 7 years@10%	Total
	91,200.00	91200*.51315811	46800
d	Amount	PV value at end of each years@10%	Total
	40,600.00	*6.1446	249470.76
		Rounded off	249471

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