Chavela Fire Protection Company is replacing part of its fleet of fire trucks by purchasing them under a note agreement with Safety, Inc. on January 1, 2022. Chavela financed $37,908,000, and the note agreement will require $10 million in annual payments starting on December 31, 2022, and continuing for a total of four more years (five years total, with final payment December 31, 2026). Safety, Inc. will charge Chavela the market interest rate of 10% compounded annually.

On January 1, 2022, Chavela will record a note payable in the amount of: (FV of $1, PV of $1, FVA of $1, and PVA of $1)

Multiple Choice

a. $50,000,000.

b. $37,908,000.

c. $40,000,000

d. $41,698,000.