PRESENT VALUES. Ramon Company made the following two purchases on January 1, 19x3: a) Purchased a new

Question:

PRESENT VALUES. Ramon Company made the following two purchases on January 1, 19x3:

a) Purchased a new truck for $60,000, with payment deferred until December 31, 19x4. The appropriate interest rate is 9% compounded annually.

b) Purchased a small office complex from Wandrow Builders. The terms of the purchase require a $75,000 payment at the end of each quarter, beginning March 31, 19x3, and ending June 30, 19x5. The appropriate interest rate is 2% per quarter.

REQUIRED:

1. Prepare the cash flow diagrams for these two purchases.

2. Prepare the entries to record these purchases in Ramon’s journal.

3. Prepare the cash payment and interest expense entries for purchase b at March 31, 19x38, and June 30, 19x38.

4. Prepare the adjusting entry for purchase a at December 31, 19x3.

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