Whitelock Ltd sells a machine for making rugby balls to the Australian Rugby Union on 1 July 2017. The machine normally sells for $110,000, but to support rugby in Australia Whitelock Ltd agrees to payment terms of 5 annual payments (in arrears) of $26,379.75. The borrowing rate for the Australian Rugby Union is 10%.

Required:

For Whitelock Ltd you are required to:

1. Prepare the journal entry on 1 July 2017 to record the sale

I understand that PV = Annual payment * Present value factor for 5 years @10%

But how do we calculate the PV factor? The answers show that present value factor for 5 years @10% = 3.79079 but I don't understand how the 3.79079 came about. Is someone able to explain it?