EVALUATING AND RECORDING DEFERRED PAYMENT PURCHASES. The purchasing agent for your company has come to you for advice in selecting one of the following bids for the purchase of computer hardware:

a) $150,000 cash upon delivery of the hardware

b) $185,000 cash payable 2 years after delivery of the hardware ce) Three annual payments of $58,000 each, with the first payment due 1 year after delivery of the hardware Your company pays 8% per year compounded annually for borrowed money.

REQUIRED:

1. Which alternative bid do you recommend that the company accept? Explain your recommendation.

2. Give the journal entry to record the purchase under each of the three bids.

3. Would your recommendation to the purchasing agent change if the company pays 12% per year compounded annually for borrowed money?