On October 1, 2013, Justine Company purchased equipment from Napa Inc. in exchange for a noninterest-bearing...
On October 1, 2013, Justine Company purchased equipment from Napa Inc. in exchange for a noninterest-bearing note payable in five equal annual payments of $500,000, beginning Oct 1, 2014. Similar borrowings have carried an 11% interest rate. The equipment would be recorded at:
A. $2,500,000.
B. $2,225,000.
C. $1,847,950.
D. $2,115,270.
Homework Answers
| Answer: | ||||
| Caculation Cost of Equipment | ||||
| Period | Instalment | PVAF@11% | Present value | |
| 1-5 | 500000 | 3.6959 | 1847950 | |
| Therefore Cost of Equipment = $ 18,47,950 | ||||
| The Option 'c' is Correct |
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