Present and future value tables of $1 at 11% are presented below.

-On October 1, 2018, Justine Company purchased equipment from Napa Inc. in exchange for a noninterest-bearing note payable in five equal annual payments of $500,000, beginning Oct 1, 2019. Similar borrowings have carried an 11% interest rate. The equipment would be recorded at:
A) $2,500,000.
B) $2,225,000.
C) $1,847,950.
D) $2,115,270.

Question

Present and future value tables of $1 at 11% are presented below.

-On October 1, 2018, Justine Company purchased equipment from Napa Inc. in exchange for a noninterest-bearing note payable in five equal annual payments of $500,000, beginning Oct 1, 2019. Similar borrowings have carried an 11% interest rate. The equipment would be recorded at:
A) $2,500,000. 
B) $2,225,000. 
C) $1,847,950. 
D) $2,115,270.

Quizplus · Accepted Answer

PVA = $500,000 × 3.69590* = $1,847,950
*PVA of $1: n = 5; i = 11%

Present and Future Value Tables of $1 at 11% Are