Afrojack Company acquired two items of machinery as follows: On December 30, 2017, Afrojack Company purchased a machine in exchange for a noninterest bearing note requiring three payments of P1,000,000. The first payment was made on December 31, 2017, and the others are due annually on December 30. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of P1 at 12% is 1.69 for two periods and 2.40 for three periods. The new machine was damaged during its installation and the repair cost amounted to P50,000. On January 1, 2017, Afrojack Company acquired used machinery by issuing to the seller a three-year, noninterest bearing note for P3,000,000. In recent borrowing, Afrojack has paid a 12% interest for this type of note. The present value of P1 at 12% for 3 years is 0.71. What is the total cost of the machinery? A . 4,820,000 B. 4,580,000 C. 4,530,000 D. 4,870,000
Afrojack Company acquired two items of machinery as follows:
On December 30, 2017, Afrojack Company purchased a machine in exchange for a noninterest
bearing note requiring three payments of P1,000,000. The first payment was made on December 31,
2017, and the others are due annually on December 30. The prevailing rate of interest for this type of
note at date of issuance was 12%. The present value of an ordinary annuity of P1 at 12% is 1.69 for
two periods and 2.40 for three periods. The new machine was damaged during its installation and the
repair cost amounted to P50,000.
On January 1, 2017, Afrojack Company acquired used machinery by issuing to the seller a three-year,
noninterest bearing note for P3,000,000. In recent borrowing, Afrojack has paid a 12% interest for this
type of note. The present value of P1 at 12% for 3 years is 0.71.
What is the total cost of the machinery?
A
.
4,820,000 B. 4,580,000 C. 4,530,000 D. 4,870,000
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