On January 1, 2014, Shannon Company completed the following transactions (assume
ID: 2491439 • Letter: O
Question
On January 1, 2014, Shannon Company completed the following transactions (assume a 10 percent annual interest rate): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) a. Bought a delivery truck and agreed to pay $60,000 at the end of three years. b. Rented an office building and was given the option of paying $10,000 at the end of each of the next three years or paying $28,000 immediately. c. Established a savings account by depositing a single amount that will increase to $90,000 at the end of seven years. d. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $40,000 to a retired employee (payments starting December 31, 2014). Required: a. What is the cost of the truck that should be recorded at the time of purchase? What single amount must be deposited in this account on January 1, 2014?
Explanation / Answer
Answer:a Cost of Truck that should be recorded at the time of Purchase:
=$60,000 x 0.7513
= $45078
Answer: Single Amount:
=$49,000 x 0.5132
= $46188
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