On April 1, 2016, Meyers Company purchased a bulldozer. Payment, totaling $70,000, is not due until April 1, 2018. Assuming interest at a 12% annual rate, Meyers should debit Machinery on April 1, 2016, 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 $70,000 payment due in two years, discounted at a 12% annual rate, is $55,804. This is calculated using the formula for present value: PV = FV / (1 + r)^n, where FV is the future value ($70,000), r is the interest rate (0.12), and n is the number of years (2).

On April 1, 2016, Meyers Company Purchased a Bulldozer