Lincoln Company purchased merchandise from Grandville Corp. on September 30,2016

Question

Lincoln Company purchased merchandise from Grandville Corp. on September 30,2016. Payment was made in the form of a noninterest-bearing note requiring Lincoln to make six annual payments of 6,200 on each September 30, beginning on September 30,2019. (FV of S1. PV of 1. FVA of 1. PVA of Sl FVAD of S1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Calculate the amount at which Lincoln should record the note payable and corresponding purchases on September 30,2016, assuming that an interest rate of 8% properly reflects the time value of money in this situation.

Explanation / Answer

Amount of note payable to be recorded = $6200 x PVAF@8% for 6years

= $6200 x 4.6229

= $28663

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