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hancial calculator to arrive at your answer. (Round final answer to 3 decimal p % Effective interest rate

hancial calculator to arrive at your answer. (Round final answer to 3 decimal p % Effective interest rate

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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What was the effective interest rate used in negotiating the note payable used to acquire the machinery in Asset 3? Use Excel or a financial calculator to arrive at your answer. (Round final answer to 3 decimal places, e.g. 1.234%.) % Effective interest rate
Transcribed Image Text:What was the effective interest rate used in negotiating the note payable used to acquire the machinery in Asset 3? Use Excel or a financial calculator to arrive at your answer. (Round final answer to 3 decimal places, e.g. 1.234%.) % Effective interest rate
Crane Industries Corp. purchased the following assets and also constructed a building. All this was done during the current year using a variety of financing alternatives. Assets 1 and 2 These assets were purchased together for $124,000 cash. The following information was gathered: Depreciation Initial Cost on to Date on Book Value on Appraised Description Seller's Books Seller's Books Seller's Books Value Machinery $115,000 $52,000 $63,000 $90,000 Equipment 69,000 10,000 59,000 30,000 Asset 3 This machine was acquired by making a $11,000 down payment and issuing a $32,800, two-year, zero-interest-bearing note. The note is to be paid off in two $16,400 instalments made at the end of the first and second years. It was determined that the asset could have been purchased outright for $37,700.
Transcribed Image Text:Crane Industries Corp. purchased the following assets and also constructed a building. All this was done during the current year using a variety of financing alternatives. Assets 1 and 2 These assets were purchased together for $124,000 cash. The following information was gathered: Depreciation Initial Cost on to Date on Book Value on Appraised Description Seller's Books Seller's Books Seller's Books Value Machinery $115,000 $52,000 $63,000 $90,000 Equipment 69,000 10,000 59,000 30,000 Asset 3 This machine was acquired by making a $11,000 down payment and issuing a $32,800, two-year, zero-interest-bearing note. The note is to be paid off in two $16,400 instalments made at the end of the first and second years. It was determined that the asset could have been purchased outright for $37,700.
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