Ford Inc. plans to acquire an additional machine on January 1, 2014 to meet the growing demand for its product. Stever Company offers to provide the machine to Ford using either of the options listed below (each option gives Ford exactly the same machine and gives Stever Company approximately the same net present value cash equivalent at 10%).

Option 1 - Cash purchase $2,490,000.
Option 2 - Installment purchase requiring 15 annual payments of $327,370 due December 31 each year.

The expected economic life of this machine to Ford is 15 years. Salvage value at that time is estimated to be $154,500. Straight-line depreciation is used. Interest expense under Option 2 is computed using the effective interest method.

Based upon current generally accepted accounting principles, state how, if at all, the book value of the machine and the liability should appear on the December 31, 2014 balance sheet of Ford Inc., for each option. If an item should not appear in the balance sheet, select "not shown" opposite the option. (Do not leave any answer field blank. Enter 0 for

	Assets			Liabilites
	Acct Name	Amt		Acct Name	Amt
Option 1	Machinery	2,490,00		not shown	0
	Accum Depr	??		not shown	0
Option 2	Machinery	2,490,000		Notes Payable-Current	???
	Accum Depr	???		Notes Payable-Long terms	???

Answer rating: 100% (QA)

Assets Liabilites Acct Name Amt Acct Name Amt Option 1 Machinery 2490000 not show... View the full answer