Short Company purchased land by paying $10,000 cash on the purchase date and agreeing to pay $10,000 for each of the next ten years beginning one-year from the purchase date.Short's incremental borrowing rate is 10%.At what amount would the land be reported at on the balance sheet?

Question

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The land cost ($71,446) is equal to the present value of the ten remaining payments [$10,000 F1F1F1S1F1F1F10 6.1446 (present value of a 10%, 10-period ordinary annuity)] plus the initial payment ($10,000).

Short Company Purchased Land by Paying $10,000 Cash on the Purchase