Question :
81. Rudy Corporation looking to purchase a building costing $500,000 by : 1228546
81. Rudy Corporation is looking to purchase a building costing $500,000 by paying $100,000 cash on the purchase date, and agreeing to make annual payments for the next ten years; the first payment is due one year after the purchase date. Rudy’s incremental borrowing rate is 10%. How much will each of the annual payments be?
A. $65,098
B. $86,821
C. $55,098
D. $44,000
82. Grant Corporation is looking to purchase a building costing $900,000 by paying $300,000 cash on the purchase date, and agreeing to make payments every three months for the next five years; the first payment is due three months after the purchase date. Grant’s incremental borrowing rate is 8%. How much will each of the payments be?
A. $55,041
B. $61,112
C. $36,694
D. $32,400
83. Husky Corporation is looking to purchase a building costing $500,000 by agreeing to make payments every three months for the next five years; the first payment is due three months after the purchase date. Husky’s incremental borrowing rate is 12%. How much will each of the payments be?
A. $28,000
B. $66,940
C. $37,981
D. $33,608
84. Huck Corporation is looking to purchase a truck costing $49,000 by agreeing to make payments every three months for the next two years; the first payment is due three months after the purchase date. Huck’s incremental borrowing rate is 8%. How much will each of the payments be?
A. $6,248
B. $6,689
C. $8,527
D. $5,709
85. You have been asked to compute the cash equivalent price of a machine assuming the cost (including principal and interest) is to be paid in two unequal payments after the acquisition date. Which of the following table values would be used to find the cost of the machine?
A. Present value of a single amount.
B. Present value of an annuity.
C. Future value of a single amount.
D. Future value of an annuity.
86. Straight Industries purchased a large piece of equipment from Curvy Company on January 1, 2010. Straight Industries signed a note, agreeing to pay Curvy Company $400,000 for the equipment on December 31, 2012. The market rate of interest for similar notes was 8%. The present value of $400,000 discounted at 8% for three years was $317,520. On January 1, 2010, Straight Industries recorded the purchase with a debit to equipment for $317,520 and a credit to notes payable for $317,520. On December 31, 2010, Straight recorded an adjusting entry to account for interest that had accrued on the note. Assuming no adjusting entries have been made during the year, how much interest expense would have accrued at December 31, 2010?
A. $25,402
B. $32,000
C. $29,693
D. $27,493
2010 interest expense ($25,402) = Note payable liability at the beginning of 2010 ($317,520) ? Interest rate (8%)
87. Straight Industries purchased a large piece of equipment from Curvy Company on January 1, 2010. Straight Industries signed a note, agreeing to pay Curvy Company $400,000 for the equipment on December 31, 2012. The market rate of interest for similar notes was 8%. The present value of $400,000 discounted at 8% for three years is $317,520. On January 1, 2010, Straight recorded the purchase with a debit to equipment for $317,520 and a credit to notes payable for $317,520. On Straight Industries’ balance sheet for the year ended December 31, 2010, the book value of the liability for notes payable, including accrued interest would be which of the following?
A. $342,922
B. $349,520
C. $345,013
D. $347,213
2010 interest expense ($25,402) = Note payable liability at the beginning of 2010 ($317,520) ? Interest rate (8%)
December 31, 2010 liability book value ($342,922) = January 1, 2010 balance ($317,520) + 2010 accrued interest expense ($25,402)
88. Straight Industries purchased a large piece of equipment from Curvy Company on January 1, 2010. Straight Industries signed a note, agreeing to pay Curvy Company $400,000 for the equipment on December 31, 2012. The market rate of interest for similar notes was 8%. The present value of $400,000 discounted at 8% for three years is $317,520. On January 1, 2010, Straight recorded the purchase with a debit to equipment for $317,520 and a credit to notes payable for $317,520. How much is the 2011 interest expense, assuming that the December 31, 2010 adjusting entry was made?
A. $27,434
B. $27,962
C. $32,000
D. $29,693
2010 interest expense ($25,402) = Note payable liability at the beginning of 2010 ($317,520) ? Interest rate (8%).
December 31, 2010 liability book value ($342,922) = January 1, 2010 balance ($317,520) + 2010 accrued interest expense ($25,402).
2011 interest expense ($27,434) = Note payable liability at the beginning of 2011 ($342,922) ? Interest rate (8%).
89. Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2010. Alden financed $37,908,000, the note agreement will require $10 million in annual payments starting on December 31, 2010 and continuing for a total of five years (final payment December 31, 2014). Kenworthy will charge Alden Trucking Company the market interest rate of 10% compounded annually. What is the note and interest payable liability on December 31, 2010 after the first payment was made?
A. $32,908,000
B. $31,698,800
C. $40,000,000
D. $27,908,000
90. Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2010. Alden financed $37,908,000, the note agreement will require $10 million in annual payments starting on December 31, 2010 and continuing for a total of five years (final payment December 31, 2014). Kenworthy will charge Alden Trucking Company the market interest rate of 10% compounded annually. How much is the 2011 interest expense?
A. $3,169,880
B. $3,290,800
C. $4,000,000
D. $2,790,800
