Question

E9-13 (Algo) Computing Four Present Value Problems LO 9-7 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 $61,800 at the end of three years. b. Rented an office building and was given the option of paying $11,800 at the end of each of the next three years or paying $33,000 immediately. C. Established a savings account by depositing a single amount that will increase to $93,600 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 $41,800 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.) Cost of the truck

Answer 1

Amount to be Yeurded at the time o purchase future value x Present Value factor (Y,n) 61,800 x Preset value facto 0, 3) 61, 800 x 0.75 131 (2 The Presert value of the thee instalments is less than paging33,000 mredidty i-e $24/315 $11800 x 2. 48685 Should select the installment payment optin Com pany - Future value x Prejent vaue facto(10 ,3) AMOUnt to deposit $13,600 X 0.st316 18,03 AMount deposit = Euted mstaliment x PVAF (10, 10 $41, 800 X 6. 14 45 256,843