Cullumber Industries Corp. purchased the following assets and also constructed a building. All this was done...
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Cullumber Industries Corp. purchased the following assets and also constructed a building. All this was done during the current year using a variety of financing alternatives. Assets 1 and 2 These assets were purchased together for $110,000 cash. The following information was gathered: Depreciation Initial Cost on to Date on Book Value on Appraised Description Seller's Books Seller's Books Seller's Books Value Machinery $121,000 $58,000 $63,000 $120,000 Equipment 62,000 10,000 52,000 40,000 Asset 3 This machine was acquired by making a $10,900 down payment and issuing a $37,400, two-year, zero-interest-bearing note. The note is to be paid off in two $18,700 instalments made at the end of the first and second years. It was determined that the asset could have been purchased outright for $40,900. What was the effective interest rate used in negotiating the note payable used to acquire the machinery in Asset 3? Use Excel or a financial calculator to arrive at your answer. (Round final answer to 3 decimal places, e.g. 1.234%.) % Effective interest rate Cullumber Industries Corp. purchased the following assets and also constructed a building. All this was done during the current year using a variety of financing alternatives. Assets 1 and 2 These assets were purchased together for $110,000 cash. The following information was gathered: Depreciation Initial Cost on to Date on Book Value on Appraised Description Seller's Books Seller's Books Seller's Books Value Machinery $121,000 $58,000 $63,000 $120,000 Equipment 62,000 10,000 52,000 40,000 Asset 3 This machine was acquired by making a $10,900 down payment and issuing a $37,400, two-year, zero-interest-bearing note. The note is to be paid off in two $18,700 instalments made at the end of the first and second years. It was determined that the asset could have been purchased outright for $40,900. What was the effective interest rate used in negotiating the note payable used to acquire the machinery in Asset 3? Use Excel or a financial calculator to arrive at your answer. (Round final answer to 3 decimal places, e.g. 1.234%.) % Effective interest rate
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