Problem 6-01

Answer each of these unrelated questions.

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On January 1, 2020, Pearl Corporation sold a building that cost $274,760and that had accumulated depreciation of $101,930on the date of sale. Pearl received as consideration a $264,760non-interest-bearing note due on January 1, 2023. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2020, was9%. At what amount should the gain from the sale of the building be reported?(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

The amount of gain should be reported$enter a dollar amount of gain should be reported

On January 1, 2020, Pearl Corporation purchased327of the $1,000face value,9%,10-year bonds of Walters Inc. The bonds mature on January 1, 2030, and pay interest annually beginning January 1, 2021. Pearl purchased the bonds to yield11%. How much did Pearl pay for the bonds?(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Pearl must pay for the bonds$enter a dollar amount should be paid for the bonds

Pearl Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,700at the end of each of the next10years. Assuming that a prevailing interest rate of8% applies to this contract, how much should Pearl record as the cost of the machine?(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Cost of the machine to be recorded$enter cost of the machine to be recorded in dollars

Pearl Corporation purchased a special tractor on December 31, 2020. The purchase agreement stipulated that Pearl should pay $20,970at the time of purchase and $5,430at the end of each of the next8years. The tractor should be recorded on December 31, 2020, at what amount, assuming an appropriate interest rate of12%?(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Cost of tractor to be recorded$enter cost of tractor to be recorded in dollars

Pearl Corporation wants to withdraw $115,500(including principal) from an investment fund at the end of each year for9years. What should be the required initial investment at the beginning of the first year if the fund earns11%?(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Required initial investment$enter the required initial investment in dollars