Potter Company has purchased a patent that requires annual payments of $31,250 to be paid at the end of each of the next 6 years. The appropriate discount rate is 12%. What amount will be used to record the patent?
A) $187,500
B) $128,482
C) $172,679
D) $120,469

Question

Quizplus · Accepted Answer

The amount to record the patent is the present value of the annuity of $31,250 for 6 years at a 12% discount rate. Using the present value of annuity formula, the calculation results in approximately $128,482.

Potter Company Has Purchased a Patent That Requires Annual Payments