What is the cost of the truck that should be recorded at the time of purchase?
On January 1, 2011, Shannon Company completed the following transactions (assume a 8 percent annual interest rate):
(Use Table 1, Table 2):
1. Bought a delivery truck and agreed to pay $54,000 at the end of three years.
2. Rented an office building and was given the option of paying $17,000 at the end of each of the next three years or paying $35,000 immediately.
3. Established a savings account by depositing a single amount that will increase to $50,000 at the end of seven years.
4. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $23,000 to a retired employee (payments starting December 31, 2011).
Required, please answer:
1. What is the cost of the truck that should be recorded at the time of purchase? (Round “PV Factors” to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Cost of the truck $
2. Which option for the office building should the company select? (Round “PV Factors” to 4 decimal places.)
a) Pay in three installments
b) Pay in single installment
3. What single amount must be deposited in this account on January 1, 2011? (Round “PV Factors” to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Amount to be deposited $
4. What single sum must be deposited in the bank on January 1, 2011? (Round “PV Factors” to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Amount to be deposited $