Installment Sale

Use Present Value Tables or your calculator to complete the requirements below.

Bello Real Estate owns land on which natural gas wells are located. Youngblood Oil & Gas signs a note to buy this land from Bello on January 1, 2020. The note requires Youngblood to pay Bello $732,000 per year for 25 years. The first payment is to be made on December 31, 2020. The appropriate interest rate is 9% compounded annually.

Required:

1. Complete the information needed to prepare a diagram of the appropriate cash flows from Youngblood Oil & Gas's perspective. If an amount is zero, enter "0".

n =	years
i =	% per year

Amount of Payment or Deposit
1/1/20	12/31/20	12/31/21	12/31/22	12/31/44
$	$	$	$	$

2. Determine the present value of the payments. Round your answer to the nearest cent, if rounding is required. $

3. Indicate what entry Youngblood Oil & Gas should make at January 1, 2020.

January 1, 2020
	(Record purchase of land)