On January 1 of this year, Shannon Company completed the following transactions (assume a 9% annual interest rate): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Bought a delivery truck and agreed to pay $61,900 at the end of three years. Rented an office building and was given the option of paying $11,900 at the end of each of the next three years or paying $34,000 immediately. Established a savings account by depositing a single amount that will increase to $93,800 at the end of seven years. Decided to deposit a single sum in the bank that will provide 9 equal annual year-end payments of $41,900 to a retired employee (payments starting December 31 of this year). Required: a. What is the cost of the truck that should be recorded at the time of purchase? (Round your answer to nearest whole dollar.) b. Which option for the office building results in the lowest present value? multiple choice Pay in three installments Pay in single installment c. What single amount must be deposited in this account on January 1 of this year? (Round your answer to nearest whole dollar.) d. What single sum must be deposited in the bank on January 1 of this year? (Round your answer to nearest whole dollar.)

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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Question

On January 1 of this year, Shannon Company completed the following transactions (assume a 9% annual interest rate): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Bought a delivery truck and agreed to pay $61,900 at the end of three years.
Rented an office building and was given the option of paying $11,900 at the end of each of the next three years or paying $34,000 immediately.
Established a savings account by depositing a single amount that will increase to $93,800 at the end of seven years.
Decided to deposit a single sum in the bank that will provide 9 equal annual year-end payments of $41,900 to a retired employee (payments starting December 31 of this year).

Required:

a. What is the cost of the truck that should be recorded at the time of purchase? (Round your answer to nearest whole dollar.)

b. Which option for the office building results in the lowest present value?

multiple choice

Pay in three installments
Pay in single installment

c. What single amount must be deposited in this account on January 1 of this year? (Round your answer to nearest whole dollar.)

d. What single sum must be deposited in the bank on January 1 of this year? (Round your answer to nearest whole dollar.)

### Financial Decision Making: Understanding Costs and Present Value

#### Required:
**a.** What is the cost of the truck that should be recorded at the time of purchase? *Round your answer to nearest whole dollar.*

- **Input Box:**
- Label: Cost of the truck
- Placeholder: [ ]

**b.** Which option for the office building results in the lowest present value?

- **Multiple Choice Options:**
- Pay in three installments
- Pay in single installment

**c.** What single amount must be deposited in this account on January 1 of this year? *Round your answer to nearest whole dollar.*

- **Input Box:**
- Label: Amount to deposit
- Placeholder: [ ]

**d.** What single sum must be deposited in the bank on January 1 of this year? *Round your answer to nearest whole dollar.*

- **Input Box:**
- Label: Amount to deposit
- Placeholder: [ ]

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