Problem 6-2 Present and future value [LO6-6, 6-7, 6-9]

Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1. On June 30, 2016, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $10,000 on the purchase date and the balance in five annual installments of $8,000 on each June 30 beginning June 30, 2017. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment? Answer is not complete able values are based on: 10% Cash Flow Amount S Installments 8.000 Down Payment 10.000 Value of the equipment 2. Johnstone needs to accumulate sufficient funds to pay a $400,000 debt that comes due on December 1, 2021. The company will accumulate the funds by making five equal annual deposits to an account paying 6% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 3 2016 Answer is not complete Table or calculator function FVAD of $1 400,000 Future Value 6% Deposit: 3. On January 1, 2016, Johnstone leased an office building. Terms of the lease require Johnstone to make 20 annual lease payments of $120,000 beginning on January 1, 2016. A 10% interest rate is implicit in the lease agreement. At what amount should Johnstone record the lease liability on January 1, 2016 before any lease payments are made? Answer is not complete Table or calculator function PVAD of $1 120,000V Payment: 20 10% Liability