On April 1, 2010, the Resendez Company purchased a bulldozer.Payment, totaling $70, 000, is not due until April 1, 2012.Assuming interest at a 12% annual rate, Resendez should debit Machinery on April 1, 2010, in the amount of
A)$70, 000
B)$62, 500
C)$61, 600
D)$55, 804

Question

Quizplus · Accepted Answer

The present value of the payment is calculated by discounting $70,000 at a 12% annual rate for 2 years: $70,000 / (1 + 0.12)^2 = $55,804.

On April 1, 2010, the Resendez Company Purchased a Bulldozer