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

Question

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

Polo Publishers purchased a multi-color offset press with terms of $55,000 to be paid at the date of purchase, and a noninterest-bearing note requiring payment of $40,000 at the end of each year for two years. The interest rate implicit in the purchase contract is 11%. Polo would record the asset at:

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

Asset value = Down payment + PVA ($40000, 11%, 2 years) = $55000 + ($40000 x 1.71252) = $55000 + $68500.8 = $123500.80

Polo would record the asset at $123500.80

Note: Answer has not been rounded off since no instructions given in the question regarding the same.

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