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Kirk Company purchased equipment by making a down payment of P400,000 and issuing a note payable for P1,800,000. A payment of P600,000 is to be made at the end of each year for three years. The applicable rate of interest is 8%. The present value of an ordinary annuity of 1 for three years at 8% is 2.58, and the present value for the future amount of a single sum for three years at 8% is .735. Shipping charges for the equipment of P200,000 and installation charges of P350,000 were incurred. What is the capitalized cost of the equipment?

Kirk Company purchased equipment by making a down payment of P400,000 and issuing a note payable for P1,800,000. A payment of P600,000 is to be made at the end of each year for three years. The applicable rate of interest is 8%. The present value of an ordinary annuity of 1 for three years at 8% is 2.58, and the present value for the future amount of a single sum for three years at 8% is .735. Shipping charges for the equipment of P200,000 and installation charges of P350,000 were incurred. What is the capitalized cost of the equipment?

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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Kirk Company purchased equipment by making a down payment of P400,000 and issuing a note payable for P1,800,000. A payment of P600,000 is to be made at the end of each year for three years. The applicable rate of interest is 8%. The present value of an ordinary annuity of 1 for three years at 8% is 2.58, and the present value for the future amount of a single sum for three years at 8% is .735. Shipping charges for the equipment of P200,000 and installation charges of P350,000 were incurred. What is the capitalized cost of the equipment?
Transcribed Image Text:Kirk Company purchased equipment by making a down payment of P400,000 and issuing a note payable for P1,800,000. A payment of P600,000 is to be made at the end of each year for three years. The applicable rate of interest is 8%. The present value of an ordinary annuity of 1 for three years at 8% is 2.58, and the present value for the future amount of a single sum for three years at 8% is .735. Shipping charges for the equipment of P200,000 and installation charges of P350,000 were incurred. What is the capitalized cost of the equipment?
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