INSTALLMENT SALE USING T-ACCOUNTS. Johnson Properties owns land on which natural-gas wells are located. Columbus Gas Company
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INSTALLMENT SALE USING T-ACCOUNTS. Johnson Properties owns land on which natural-gas wells are located. Columbus Gas Company has offered to buy this land from Johnson on January 1, 19x5, by paying Johnson $775,000 per year for 25 years. The first payment is to be made on December 31, 19x5. The appropriate interest rate is 9% compounded annually.
REQUIRED:
1. Prepare a diagram of the appropriate cash flows from Columbus Gas Company’s perspective.
2. What is the present value of the payments?
3. What entry in its T-accounts should Columbus Gas make at January 1, 19x65, if Johnson accepts the offer?
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Saud Ur Rehman
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