On January 1, 2014, Shannon Company completed the following transactions (assume a 10 percent annual interest rate):
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 (show computations and round to the nearest dollar):
1. In ( a ), what is the cost of the truck that should be recorded at the time of purchase?
2. In ( b ), which option for the office building should the company select?
3. In ( c ), what single amount must be deposited in this account on January 1, 2014?
4. In ( d ), what single sum must be deposited in the bank on January 1, 2014?

  • CreatedJuly 01, 2014
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