Problem 6-1 Answer each of these unrelated questions. On January 1, 2017, Cullum
ID: 2539317 • Letter: P
Question
Problem 6-1 Answer each of these unrelated questions. On January 1, 2017, Cullumber Corporation sold a building that cost $257,510 and that had accumulated depreciation of $102,150 on the date of sale. Cullumber received as consideration a $247,510 non-interest-bearing note due on January 1, 2020. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2017, was 9%. At what amount should the gain from the sale of the building be reported? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to decimal places, e.g. 458,581.) The amount of gain should be reported On January 1, 2017, Cullumber Corporation purchased 325 of the $1,000 face value, 996, 10-year bonds of Walters Inc. The bonds mature on January 1, 2027, and pay interest annually beginning January 1, 2018. Cullum ber purchased the bonds to yield 11%. How much did Cullumber pay for the bonds? (Round factor values to 5 decimal places, e.g. 1.251 24 and final answer to O decimal places, e.g. 458,581.) Cullumber must pay for the bonds s Cullum ber Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,800 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 6% applies to this contract, how much should Cullumber record as the cost of the machine? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Cost of the machine to be recorded Cullumber Corporation purchased a special tractor on December 31, 2017. The purchase agreement stipulated that Cullumber should pay $21,960 at the time of purchase and $5,430 at the end of each of the next 8 years. The tractor should be recorded on December 31, 2017, at what amount, assuming an appropriate interest rate of 12%? (Round factor values to 5 decimal places, eg, 1.25124 and final answer to O decimal places, e.g. 458,581.) Cost of tractor to be recorded Cullumber Corporation wants to withdraw $126,920 (including principal) from an investment fund at the end of each year for 9 years. What should be the required initial investment at the beginning of the first year if the fund earns 11%? (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, eg. 458,581.) Required initial investment sExplanation / Answer
Cullumber Corporation 1) Cost of Building $ 257,510.00 Less: Accumulated Depreciation $ 102,150.00 Book Value of Building $ 155,360.00 F.V of Lum sum factor(9% for 3 years) 1.295029 P.Value of Note received=($247510*1.295029) $ 320,532.63 Gain on sale($32053.63-$257510) $ 63,022.63 2) Cullumber Corporation Face Value=FV $ 1,000.00 Coupon Rate 9% Year=N 10 Coupon Amount=(1000*9%)=PMT $ 90.00 Yield=I 11% Present Value in excel(=PV(I,n,PMT,FV)) PV(11%,10,90,1000) $ (882.22) Cullumber must pay for the bond=(325*$882.22) $ 286,721.50 3) Cullumber Corporation Annual Installment for machine $ 4,800.00 N= 10 yers Interest Rate 6% P.V of annity @6% for 10 years 7.360 Cost of Machine to be recorded=($4800*7.360) $ 35,328.00 4) Cullumber Corporation Amount paid at the time of purchase of special Tractor $ 21,960.00 Amount paid at the end of 8 years assuming interest rate =12% $ 5,430.00 P. V of annuity factor(12% for 8 years)= 4.968 P.V of Amount paid at the end of 8 years=($5430*4.968) $ 26,976 Cost of Tractor to be recorded=($21960+$26976) $ 48,936 5) Cullumber Corporation Amount withdraw (including Principal from Investment at the end of each year for 9 years ) $ 126,920.00 Fund earns 11% P.V of Annity factor 11% fro 9 years 5.53705 Required Initail Investment=($126920*5.53705) $ 702,762