78. Rusty Corporation purchased a rust-inhibiting machine by paying $50,000 cash on the purchase date and agreeing to pay $10,000 every three months during the next two years; the first payment is due three months after the purchase date. Rusty's incremental borrowing rate is 8%. At what amount would the liability be reported at on the balance sheet as of the purchase date, after the initial $50,000 payment was made? A. $123,255 B. $130,000 C. $80,000 D. $73,255
80. Rachel Corporation purchased a building by paying $90,000
cash on the purchase date, agreeing to pay $50,000 every year for
the next nine years and $100,000 ten years from the purchase date;
the first payment is due one year after the purchase date. Rachel's
incremental borrowing rate is 10%. At what amount would the
liability be reported at on the balance sheet as of the purchase
date, after the initial $90,000 payment was made?
A. $326,500
B. $460,000
C. $287,950
D. $416,500
Question No. (78)
Answer -
Step - (1) - Calculation of Present value of remaining payments -
Formula =
p [1 - (1+r)-n / r] |
Here,
p = Quarterly payment = $10000
r = Adjusted Rate = (8% / 4) = 2%
n = Number of payments = (4 * 2 years) = 8
Putting the values in the above formula, we get
= $10000 [1 - (1+0.02)-8 / 0.02]
= $10000 * 7.325481
= $73255
.
Step - (2) - Calculation of amount of liability to be reported on the balance sheet as of the purchase date -
= Initial cash payment made on the purchase date + Present value of remaining payments
= $50000 [Given in question] + $73255 [As per step - (1)]
= $123255
Therefore, Option - (A) is Correct.
.
Question No. (80)
Answer -
Calculation of amount of liability to be reported on the balance sheet as of the purchase date -
Particulars | Formula used | Calculation | Amount($) | ||
A. | Initial cash payment made on the purchase date | - | Given in question | 90000 | |
B. | Present value of remaining payments |
p = Annual payment = $50000 r = Rate = 10% n = Number of payments = 9 |
$50000 [1 - (1+0.1)-9 / 0.1] | 287950 | |
C. | Present value of the payment due at 10th year from the purchase date |
C = Payment due in 10th year = $100000 r = Rate = 10% n= 10 |
$100000 / (1+0.1)10 | 38550 | |
Liability to be reported on the balance sheet as of the purchase date |
A + B + C | 416500 | |||
Therefore, Option - (D) is Correct.
78. Rusty Corporation purchased a rust-inhibiting machine by paying $50,000 cash on the purchase date and...
75. Rae Company purchased a new vehicle by paying $10,000 cash on the purchase date and agreeing to pay $3,000 every three months during the next five years; the first payment is due three months after the purchase date. Rae's incremental borrowing rate is 12%. At what amount would the liability be reported at on the balance sheet as of the purchase date, after the initial $10,000 payment was made? A. $44,633 B. $50,000 C. $54,633 D. $60,000 76. Rae...
72. Short Company purchased land by paying $10,000 cash on the purchase date and agreeing to pay $10,000 for each of the next ten years beginning one-year from the purchase date. Short's incremental borrowing rate is 10%. At what amount would the land be reported at on the balance sheet? A. $100,000 B. $38,550 C. $110,000 D. $71,446 74. Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during...
Libby Company purchased equipment by paying $5,200 cash on the purchase date and agreed to pay $5,200 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 6%. The liability reported on the balance sheet as of the purchase date, after the initial $5,200 payment was made, is closest to: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s)...
Short Company purchased land by paying $10,000 cash on the purchase date and agreeing to pay $10,000 for each of the next ten years beginning one-year from the purchase date. Short's incremental borrowing rate is 10%. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) The land reported on the balance sheet is closest to: Multiple Choice $100,000. $110,000. Oo oo $71,446. $38,550.
ZIL 14. Short Company purchased land by paying $10,000 cash on the purchase date and agreeing to pay $10,000 for each of the next ten years beginning one-year from the purchase date. Short's incremental borrowing rate is 10%. (FV of $1; PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) The land reported on the balance sheet is closest to: a. $100,000. Pie b. $38,550. . C. $110,000. d. $71,446.
why is the answer a and not c? Jackson Company purchased land by paying $12,000 cash on the purchase date and agreeing to pay $12,000 for each of the next ten years beginning one-year from the purchase date. Jackson's incremental borrowing rate is 10%. 000 At what amount would the land be reported at on the balance sheet? Seeis bo CIONI OG, \21000,PMTPN A$ 85,735 B. $120,000 C.$ 73,735 D.$132,000 E. $191,249 ds owol od Iliw OL ol od Iliw...
Poe Company purchased equipment by paying $11,400 cash on the purchase date and agreeing to pay $4,400 every three months during the next five years. If Poe records a liability of $79,401, what is the interest rate Poe is being charged (choose the answer closest to the number you calculate)?
Short Company purchased land by paying $24,000 cash on the purchase date and agreed to pay $24,000 for each of the next nine years beginning one-year from the purchase date. Short's incremental borrowing rate is 12%. The land reported on the balance sheet is closest to: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.) $216,000. $77,892. $240,000. $151,878.
Drake Company purchased a building by paying $90,500 cash on the purchase date and pay $50,100 at the end of each of the next at 8 years. Drake also has a final payment of $100,500 that is to be made at the end of the 10th year. Drake's incremental borrowing rate is 8%. How much should Drake report as the purchase price of the building as of the purchase date (choose the answer closest to the number you calculate)?
Solve the following and please show work 4. You wish to withdraw $50,000 every December 31st for the next six years (2018 2023), and you estimate that you will earn 8% on the investment, what is the most you need to invest today? (Round to the nearest S and use tables). 5. Addison Corp issued a 6% note payable in the amount of $4.8 million on October 1, 2017. The note is payable in four equal annual payments of $1.2...