Various Time Value Situations Answer each of these unrelated questions. (a) On January 1, 2008, Aaron Brown

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Various Time Value Situations Answer each of these unrelated questions.

(a) On January 1, 2008, Aaron Brown Corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Brown received as consideration a $275,000 zero-interest-bearing note due on January 1, 2011. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2008, was 9%. At what amount should the gain from the sale of the building be reported?

(b) On January 1, 2008, Aaron Brown Corporation purchased 200 of the $1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2018, and pay interest annually beginning January 1, 2009. Brown purchased the bonds to yield 11%. How much did Brown pay for the bonds?

(c) Aaron Brown Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,000 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 8% applies to this contract, how much should Brown record as the cost of the machine?

(d) Aaron Brown Corporation purchased a special tractor on December 31, 2008. The purchase agreement stipulated that Brown should pay $20,000 at the time of purchase and $5,000 at the end of each of the next 8 years. The tractor should be recorded on December 31, 2008, at what amount, assuming an appropriate interest rate of 12%?

(e) Aaron Brown Corporation wants to withdraw $100,000 (including principal) from an investment fund at the end of each year for 9 years. What should be the required initial investment at the beginning of the first year if the fund earns 11%?


Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For  answer-question

Intermediate Accounting principles and analysis

ISBN: 978-0471737933

2nd Edition

Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso

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