Cullumber Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $160,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance. The note would require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period of two years. Cullumber has a proposal from its bank for an instalment loan for two years that requires a fixed blended monthly payment (including both principal and interest) starting August 1, 2020. The loan would be for 80% of the equipment’s purchase price. The current market rate of interest is 6%. Both contracts have an interest rate of 6%.
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Cullumber Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $160,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance.
Sunland Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $130,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance. The note would require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period of two years. Sunland has a proposal from its bank for an instalment loan for two years that requires a...
Cullumber Engineering Corporation purchased conveyor equipment
with a list price of $52,200. Three independent cases that are
related to the equipment follow. Assume that the equipment
purchases are recorded gross.
1.
Geddes paid cash for the
equipment 25 days after the purchase, along with 5% GST
(recoverable) and provincial sales tax of $3,500, both based on the
purchase price. The vendor’s credit terms were 2/10, n/30.
2.
Geddes traded in equipment
with a book value of $2,100 (initial cost $40,200),...