Question
On December 30, 2020, Axle, Inc. purchased a machine from Grant Corp. in exchange for a zero-interest-bearing note requiring eight payments of $150,000. The first
On December 30, 2020, Axle, Inc. purchased a machine from Grant Corp. in exchange for a zero-interest-bearing note requiring eight payments of $150,000. The first payment was made on December 30, 2020, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note is 11%. Present value factors are as follows:
Present Value of Ordinary Present Value of
Period Annuity of 1 at 11% Annuity Due of 1 at 11%
7 4.712 5.231
8 5.146 5.712
What will be the net realizable value of the note payable on Axle's 12/31/20 balance sheet?
a. | $706,800 | |
b. | $1,050,000 | |
c. | $1,200,000 | |
d. | $856,800 |
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