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Lincoln Company purchased merchandise from Grandville Corp. on September 30, 2016. Payment was made in the form of a noninterest-bearing note requiring Lincoln to make six annual payments of $8,000 on each September 30, beginning on September 30, 2019. (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.) Calculate the amount at which Lincoln should record the note payable and corresponding purchases on September 30, 2016, assuming that an interest rate of 12% properly reflects the time value of money in this situation.
Expert Answer
Present value of an ordinary annuity(n= 6,i= 12%) = 8000*4.11141= | 32891 | |||||
Present value(n= 2,i= 12%) = 32891*0.79719= | 26220 | |||||
Amount recorded = 26220 |