On June 1, 2020, Bean LTD. provides a vendor with a $125,500 non-interest-bearing note due on June 1, 2023, in exchange for equipment with a list price of $118,100. At what amount will the equipment be recorded in the accounting records? The company's banker has suggested that an appropriate market rate is 6% per annum for loans that mature in one year or less and 9% for loans with longer maturities.
A)$118,100
B)$105,372
C)$96,909
D)$91,195

Question

Quizplus · Accepted Answer

The equipment should be recorded at the present value of the note, which is calculated using the market rate of 9% for the 3-year period. The present value of $125,500 due in 3 years at 9% is $96,909.