Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 8%. The liability reported on the balance sheet as of the purchase date, after the initial $5,000 payment was made, is closest to:
A)$45,000.
B)$33,664.
C)$38,664.
D)$40,000.

Question

Quizplus · Accepted Answer

The Answer of Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 8%. The liability reported on the balance sheet as of the purchase date, after the initial $5,000 payment was made, is closest to:
A)$45,000.
B)$33,664.
C)$38,664.
D)$40,000.

Libby Company Purchased Equipment by Paying $5,000 Cash on the Purchase