Question

Lincoln Company purchased merchandise from Grandville Corp. on September 30, 2021. Payment was made in the form of a noninterest-bearing note requiring Lincoln to make six annual payments of $7,600 on each September 30, beginning on September 30, 2024. (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. Round your final answer to nearest whole dollar amount.) Required: Calculate the amount at which Lincoln should record the note payable and corresponding purchases on September 30, 2021, assuming that an interest rate of 10% properly reflects the time value of money in this situation.

Answer 1

Answer:

$27,355

Explanation:

Calculation for the amount at which Lincoln should record the note payable and corresponding purchases

First step is to find the PVA

Present value of an ordinary annuity of $1:

n= 6

Interest rate = 10% (from PVA of $1)

PVA = $7,600 × 4.35526

PVA= $33,099.976

Second step is to the Present value

Present value of $1:

n= 2

Interest rate = 10% (from PV of $1)

PV = $33,099.976 × 0.82645

PV = $27,355

Therefore the amount at which Lincoln should record the note payable and corresponding purchases will be