P1) Rudy Corporation is looking to purchase a building costing $540,000 by payin
ID: 2498074 • Letter: P
Question
P1) Rudy Corporation is looking to purchase a building costing $540,000 by paying $120,000 cash on the purchase date, and agreeing to make annual payments for the next ten years. The first payment is due one year after the purchase date. Rudy's incremental borrowing rate is 9%. Each of the annual payments is closest to:
a) 53,444
b) 65,444
c) 42,000
d) 84,142
p2) A company's January 1, 2014 balance sheet reported total assets of $129,000 and total liabilities of $31,000. During January 2014, the following transactions occurred:
(A) the company issued stock and collected cash totaling $39,000;
(B) the company paid an account payable of $6,900;
(C) the company purchased supplies for $1,900 with cash;
(D) the company purchased land for $51,000 paying $19,000 with cash and signing a note payable for the balance. What is total stockholders' equity after the transactions above?
a) 137,000
b) 211,100
c) 39,000
d) 98,000
Explanation / Answer
Answer P1: (b) i.e. 65444
Working note : Annual payment = ((540000-120000)*0.09)/1-(1+0.09)-10 = 65444
Answer P2: (a) i.e. 137000
Please noteopening stock holder equity in increased stock introduced = 129000-31000+39000 = 137000
other transaction will have net effect to zero i.e debit and credit being balanced out.
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