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On January 1 Saturn Company purchases a piece of test equipment to be used in its engineering department. Terms of the purchase agreement call for
On January 1 Saturn Company purchases a piece of test equipment to be used in its engineering department. Terms of the purchase agreement call for an immediate $2,000 down payment, and subsequent payments of $5,000 each December 31 for the next 4 years. The interest rate stated in purchase agreement is 6%. Determine the amount at which the equipment should be recorded in the books of Saturn Company at time of purchase (i.e. January 1, Year 1) [hint: there are two different cash streams in this problem]
A. $17,325
B. $22,325
C. $5,960
D. $19,325
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