Straight Industries purchased a large piece of equipment from Curvy Company on January 1,2019.Straight Industries signed a note,agreeing to pay Curvy Company $400,000 for the equipment on December 31,2021.The market rate of interest for similar notes was 8%.The present value of $400,000 discounted at 8% for three years was $317,532.On January 1,2019,Straight Industries recorded the purchase with a debit to equipment for $317,532 and a credit to notes payable for $317,532.
-(FV of $1,PV of $1,FVA of $1,and PVA of $1)(Use the appropriate factor(s)from the tables provided. ) On Straight Industries' balance sheet for the year ended December 31,2019,the book value of the liability for notes payable,including accrued interest would be closest to:
A)$342,935.
B)$349,520.
C)$345,013.
D)$347,213.

Question

Quizplus · Accepted Answer

The correct answer is A because the book value of the liability for notes payable, including accrued interest, would be $342,935. This is calculated by taking the present value of the note ($317,532) and adding the interest that has accrued over the two years since the note was issued ($25,403).

Straight Industries Purchased a Large Piece of Equipment from Curvy