Lincoln Company purchased merchandise from Grandville Corp. on September 30, 201

Question

Lincoln Company purchased merchandise from Grandville Corp. on September 30, 2018 Payment was made in the form of a noninterest-bearing note requiring Lincoln to make six annual payments of $5,600 on each September 30, beginning on September 30, 2021. (FV of $1. PV of $1. EVA of $1, PVA of $1, EVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tables provided.) Required: Calculate the amount at which Lincoln should record the note payable and corresponding purchases on September 30, 2018, assuming that an interest rate of 8% properly reflects the time value of money in this situation. Amount recorded

Explanation / Answer

PVA = $5,600 × 4.62288* = $25,888

*Present value of an ordinary annuity of $1: n = 6, i = 8% (from PVA of $1)

PV = $25,888 × 0.85734* = $22,195 *Present value of $1: n = 2, i = 8% (from PV of $1)

Amount Recorded    $22,195   Answer.

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