Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

HQ Ltd. purchased a used truck from Trans Auto Sales Inc. HQ paid a $3,600 down payment and signed a note that calls for 36

HQ Ltd. purchased a used truck from Trans Auto Sales Inc. HQ paid a $3,600 down payment and signed a note that calls for 36 payments of $1,031.00 at the end of each month. The stated rate of interest in the note is 5%. As an incentive for entering into the contract, Trans has agreed to forgive the first two payments under the lease. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)

a. What was the purchase price of the used truck excluding the incentive given?

b. Calculate the present value of the 34 payments of $1,031.00 that will be made by HQ for payments 3 to 36 inclusive. You will need to perform two steps.

  • 1.Calculate the present value of the 34 payments as of the end of the second month following the purchase of the used truck.
  • 2.Take the result from the first calculation and calculate the present value as of the date of purchase.

c. What amount should HQ use to record the purchase of the truck?

d. What amount of interest should be accrued at the end of the first month following the purchase?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Mastering The Five Tiers Of Audit Competency Internal Audit And IT Audit

Authors: Ann Butera

1st Edition

1498738494, 978-1498738491

More Books

Students also viewed these Accounting questions