A company will receive payments of $8,000 per year for the next five years under a subscription contract. The first payment will be made at the beginning of the contract. Assuming an annual interest rate of 4% is appropriate, the present value of an ordinary annuity is 4.45182 x $8,000 = $35,615, and the present value of an annuity due is 4.62990 x $8,000 = $37,039. Which amount must the company record for this sale in accordance with generally accepted accounting principles (GAAP) if collection is reasonably assured? $37,039 $0 $40,000 $35,615
A company will receive payments of $8,000 per year for the next five years under a subscription contract. The first payment will be made at the beginning of the contract. Assuming an annual interest rate of 4% is appropriate, the present value of an ordinary annuity is 4.45182 x $8,000 = $35,615, and the present value of an annuity due is 4.62990 x $8,000 = $37,039. Which amount must the company record for this sale in accordance with generally accepted accounting principles (GAAP) if collection is reasonably assured? $37,039 $0 $40,000 $35,615
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company will receive payments of $8,000 per year for the next five years under a subscription contract. The first payment will be made at the beginning of the contract. Assuming an annual interest rate of 4% is appropriate, the present value of an ordinary annuity is 4.45182 x $8,000 = $35,615, and the present value of an annuity due is 4.62990 x $8,000 = $37,039.
Which amount must the company record for this sale in accordance with generally accepted accounting principles (GAAP) if collection is reasonably assured?
- $37,039
- $0
- $40,000
- $35,615
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