Question

On October 1, 20X1, a company purchased a piece of land by agreeing to pay the seller $450,000 in two years. If the company had borrowed the money from a bank to pay the seller immediately, management estimates the bank would have required interest of 9%. For what amount should the company record the land on the date of purchase (rounded to the nearest dollar)?

Answer 1

Cost 450,000

2 years time

9% interest

Calculation

= 450,000 + (9% (40,500) x 2 years)

= 450,000 + 81,000

= 531,000

Further Explanation

Theoretically, the relationship between interest rate movements and stock price movements is inversely proportional, which means that when bank interest rates increase, the price of shares traded on the stock exchange will tend to decrease because investors choose to invest in banking instruments, for example, the deposit.

Debt is an inseparable part of the company's operational activities, and this makes the increase in loan interest rates will certainly add to the burden of costs that must be borne by the company.

High or low-interest rates are the price of the use of money for a certain tenor or period or are the price of the use of money borrowed and will later be returned in accordance with the agreement.

Changes in interest rates will cause fluctuations in the price of securities, especially those that provide fixed income, such as bonds.

There are two types of bonds, namely bonds made and issued by the government and bonds made by companies.

For the second type of bond, there are at least two risks, namely the risk of failure and interest risk, it is caused by the possibility of the company going bankrupt.

Learn More

Interest rate  brainly.com/question/13868903

Bond  brainly.com/question/13868903

Details

Grade: College

Subject: Business

Keyword: interest, bond, low-interest

Answer 2

Answer:

The amount should the company record the land on the date of purchase is $534,870

Explanation:

Given the principal amount, P = $450,000

Interest = 9%

Time, T = 2 years

According to simple interest,

Amount = $P(1+\frac{r}{100})^2$

Substituting the values,

Amount =$450000(1+\frac{9}{100})^2$

Amount = $450000\times \frac{109}{100} \times \frac{109}{100}$

Amount = $534,870

Therefore, the amount is $534,870