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ezto.mheducation.com Question 20 (of 29) ▼ 20. 10.00 points On June 30, 2016, Kimberty Farms purchased custom-made harvesting equipment from a local producer. In payment, Kimberly signed a noninterest-bearing note requiring the payment of $84,000 in two years. The fair value of the equipment is not known, but an6% interest rate properly reflects the time value of money for this type of loan agreement. (FV of $1, PV of $1, FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) At what amount will Kimberly iniially value the equipment? Table or calculator function: Future Value: PV of $1 Present Value How much interest expense will Kimberly recognize in its inoome statement for this note for the year ended December 31, 2016?
Expert Answer
| 20 | Present Value of Money Formula – | |||
| Present Value = | Future Value * 1/(1+ Rate of Interest)rest to “period” | |||
| = | 84000* 1/ (1.06) rest to 2 years | |||
| = | 74,759.70 | |||
| Total interest for Years will be $84,000- $74,759.70 = $9,240.30 | ||||
| So, Interest expenses recognised in year ended 31 December 2016 will be | ||||
| = | $9,240.30 * | 6 months /24 months | ||
| = | $2,310.08 | |||
| 21 | Lawler Purchared Equipment for $87,000 | |||
| Depriciation till date given $74,500 | ||||
| Carring amount of equipment is $87,000 – $74,500 = $12,500 | ||||
| Sale value of equipment is $23,000 | ||||
| Gain on sale of equipment is $23,000 – $12,500 = $10,500 | ||||
| 22 | When any Asset purchased than all other expenses incurred till Machine get available for use should be included in cost of Asset | |||
| Cost of Machine | 37,000.00 | |||
| Freight | 1,700.00 | |||
| Installation | 3,200.00 | |||
| Testing | 2,200.00 | |||
| Property tax on Machine | 600.00 | |||
| Total Cost of Machine | 44,700.00 | |||
| 23 | Value of Amount of Pickup trucks | |||
| Fair value of equipments | 39,000.00 | |||
| Cash paid to equilize deal | 8,000.00 | |||
| Total value of Pickup Trucks | 47,000.00 | |||
| Gain on deal of exchange | ||||
| Total value of Pickup Trucks | 47,000.00 | |||
| Book value of equipments | 30,000.00 | |||
| Cash paid to equilize deal | 8,000.00 | |||
| Total | 38,000.00 | |||
| Gain on Exchange (47,000 -38,000) = 9,000 | ||||
