Straight Industries purchased a large piece of equipment from Curvy Company on January 1,2010.Straight Industries signed a note,agreeing to pay Curvy Company $400,000 for the equipment on December 31,2012.The market rate of interest for similar notes was 8%.The present value of $400,000 discounted at 8% for three years is $317,520.On January 1,2010,Straight recorded the purchase with a debit to equipment for $317,520 and a credit to notes payable for $317,520.On Straight Industries' balance sheet for the year ended December 31,2010,the book value of the liability for notes payable,including accrued interest would be which of the following?
A)$342,922
B)$349,520
C)$345,013
D)$347,213

Question

Quizplus · Accepted Answer

2010 interest expense ($25,402) = Note payable liability at the beginning of 2010 ($317,520) F1F1F1S1F1F1F10 Interest rate (8%)December 31, 2010 liability book value ($342,922) = January 1, 2010 balance ($317,520) + 2010 accrued interest expense ($25,402)

Straight Industries Purchased a Large Piece of Equipment from Curvy