Present and future value tables of $1 at 11% are presented below. On October 1,

Question

Present and future value tables of $1 at 11% are presented below.

On October 1, 2018, Justine Company purchased equipment from Napa Inc. in exchange for a noninterest-bearing note payable in two equal annual payments of $560,000, beginning Oct 1, 2019. Similar borrowings have carried an 11% interest rate. The equipment would be recorded at:

$1,120,000.

$959,011.

$1,368,478.

$996,800.

PV of $1 FV of $1 PVA of $1 FVA of $1 1 0.90090 1.11000 0.90090 1.0000 2 0.81162 1.23210 1.71252 2.1100 3 0.73119 1.36763 2.44371 3.3421 4 0.65873 1.51807 3.10245 4.7097 5 0.59345 1.68506 3.69590 6.2278 6 0.53464 1.87041 4.23054 7.9129

Explanation / Answer

Present Value of Annuity = $560,000 x 1.71252*

Present Value of Annuity = $959,011

* Present value of Annuity for 11% at 2nd year

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