On January 1, 2017, Aggie Security Systems purchased a new piece of high-tech se

Question

On January 1, 2017, Aggie Security Systems purchased a new piece of high-tech security equipment. Aggie financed this purchase by making a cash down payment of $8,000 and agreeing to pay $60,000 at the end of 8 years. Assume interest is compounded annually 1. The equipment should be recorded on January 1,2017, at what amount, assuming an appropriate interest rate of 5%. A. $40,620 B. $68,000 C. $46,036 D. $48,620 E. $46,778 2. What is the carrying value of the note on December 31,2018? A. $42,651 B. S53,604 C. $44,682 D. $45,466 E. $44,784 Use the following information to answer the next 2 questions: On January 1,2017, a company purchased land for a future warehouse site. A S50,000 down payment is made on that date. Annual payments of $70,000 for the 7%, 10-year loan are to start on Dec. 31, 2017 3. Determine the total cost to be allocated to the land. A. C. E. Determine the interest expense for 2018 and the carrying value of the note on Dec. 31,2018, after the $517,080 $491,680 S541,680 $750,000 $405,600 4. adjusting entry for interest expense has been made. (Round to the nearest dollar.) 2018 Interest Expense 12/31/18 Carrying Value A. ?. E. $31,927 $35,672 $25,479 $33,829 $47,530 $418,025 $475,270 S319,471 $447,105 S656,530 Payment Interest Expense Reduction of Principle Date Carrying Value Issuance

Explanation / Answer

Req 1: Down payment 8000 Payment at the end of 8 years 60000 Present value of payment 40608 ($ 60000*0.6768) Cost of asset to be recorded 48608 Answer is D. $ 48620 Req 2: Note balance on Jan120107 40620 Add: Interest @5% 2031 (40608*5%) 42651 Add: Interest for 2018 2132.55 (42638.40 *5%) Notes balance in Dec31 2018 44783.55 Answer is E. $ 44784 Req 3: Down payment 50000 Annual payment for 10 yrs 70000 Annuity factor at 7% for 10 yrs 7.0236 Present value of Instalment 491652 Cost to be allocated for assets 541652 Answer is C. $ 541680 Req 4: Date Cash Intereest Reduction of Carrying Payment expense Principle Value issuance 491680 Dec31 2017 70000 34417.6 35582.4 456097.6 Dec31 2018 70000 31927 38073 418024.6 Answer is A. $ 31927 ;   $ 418025

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---