Question
On January 1, 2020, Bing Company acquired equipment on credit. The terms were $8,000 cash down payment plus payments of $6,000 on January 1 for
On January 1, 2020, Bing Company acquired equipment on credit. The terms were $8,000 cash down payment plus payments of $6,000 on January 1 for each of the next four years. The implicit interest rate was 6%. The equipments list price was $30,000. Additional costs of $2,000 were incurred to install the equipment.
Required:
Determine the value at which Ling should report the acquired asset. Show your calculations. For any measurement involving present value concepts, provide your calculations.
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Table 1
Future Value of 1
Periods 2% 3% 4% 6% 8%
1 1.02000 1.03000 1.04000 1.06000 1.08000
2 1.04040 1.06090 1.08160 1.12360 1.16640
3 1.06121 1.09273 1.12486 1.19102 1.25971
4 1.08243 1.12551 1.16986 1.26248 1.36049
5 1.10408 1.15927 1.21665 1.33823 1.46933
Table 2
Present Value of 1
Periods 2% 3% 4% 6% 8%
1 0.98039 0.97087 0.96154 0.94340 0.92593
2 0.96117 0.94260 0.92456 0.89000 0.85734
3 0.94232 0.91514 0.88900 0.83962 0.79383
4 0.92385 0.88849 0.85480 0.79209 0.73503
5 0.90573 0.86261 0.82193 0.74726 0.68058
Table 3
Future Value of Ordinary Annuity of 1
Periodic Rents 2% 3% 4% 6% 8%
1 1.00000 1.00000 1.00000 1.00000 1.00000
2 2.02000 2.03000 2.04000 2.06000 2.08000
3 3.06040 3.09090 3.12160 3.18360 3.24640
4 4.12161 4.18363 4.24646 4.37462 4.50611
5 5.20404 5.30914 5.41632 5.63709 5.86660
Table 4
Present Value of Ordinary Annuity of 1
Periodic Rents 2% 3% 4% 6% 8%
1 0.98039 0.97087 0.96154 0.94340 0.92593
2 1.94156 1.91347 1.88609 1.83339 1.78326
3 2.88388 2.82861 2.77509 2.67301 2.57710
4 3.80773 3.71710 3.62990 3.46511 3.31213
5 4.71346 4.57971 4.45182 4.21236 3.99271
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