Question

On January 1, 2020, Sandhill Corporation sold a building that cost $273,840 and that had accumulated depreciation of $109,280 on the date of sale. Sandhill received as consideration a $263,840 non-interest-bearing note due on January 1, 2023. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2020, was 10%. At what amount should the gain from the sale of the building be reported? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) The amount of gain should be reported $enter a dollar amount of gain should be reported LINK TO TEXT LINK TO TEXT

On January 1, 2020, Sandhill Corporation purchased 345 of the $1,000 face value, 10%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2030, and pay interest annually beginning January 1, 2021. Sandhill purchased the bonds to yield 11%. How much did Sandhill pay for the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Sandhill must pay for the bonds $enter a dollar amount should be paid for the bonds LINK TO TEXT LINK TO TEXT

Sandhill Corporation bought a new machine and agreed to pay for it in equal annual installments of $5,440 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 8% applies to this contract, how much should Sandhill record as the cost of the machine? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Cost of the machine to be recorded $enter cost of the machine to be recorded in dollars LINK TO TEXT LINK TO TEXT

Sandhill Corporation purchased a special tractor on December 31, 2020. The purchase agreement stipulated that Sandhill should pay $20,010 at the time of purchase and $4,720 at the end of each of the next 8 years. The tractor should be recorded on December 31, 2020, at what amount, assuming an appropriate interest rate of 12%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Cost of tractor to be recorded $enter cost of tractor to be recorded in dollars LINK TO TEXT LINK TO TEXT

Sandhill Corporation wants to withdraw $123,730 (including principal) from an investment fund at the end of each year for 9 years. What should be the required initial investment at the beginning of the first year if the fund earns 11%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Required initial investment $enter the required initial investment in dollars

Answer 1

Solutions
1.	Fair value of consideration as on 1st Jan 2020 that will be due on 1st Jan 2023
	Prevailing Rate of Interest			10%
	Consideration Receivable on 1st Jan 2023		$       2,63,840
	PVAF, 3year, 10%				0.75131
	Fair value of consideration arson 1st Jan 2020		$       1,98,226
	($263840*.75131)
	Less-Book Value of Assets Sold			$       1,64,560
	($273840-$109280)
	Amount of Gain Reported			$          33,666
2.	Face Value of 10% Bond	345000
	Interest Rate	10%
	Calculation of Fair value of Bond
	Sr No.	Date	(Outflow)/ Inflow	PVF	Present Value
	0	01-Jan-20	-$       3,24,682		-$      3,24,682
	1	01-Jan-21	$          34,500	0.90090	$          31,081
	2	01-Jan-22	$          34,500	0.81162	$          28,001
	3	01-Jan-23	$          34,500	0.73119	$          25,226
	4	01-Jan-24	$          34,500	0.65873	$          22,726
	5	01-Jan-25	$          34,500	0.59345	$          20,474
	6	01-Jan-26	$          34,500	0.53464	$          18,445
	7	01-Jan-27	$          34,500	0.48166	$          16,617
	8	01-Jan-28	$          34,500	0.43393	$          14,970
	9	01-Jan-29	$          34,500	0.39092	$          13,487
	10	01-Jan-30	$          34,500	0.35218	$       1,33,654
	Sandhill Corporation must pay $ 324682
3.	Annual Equal Instalments	5440
	Prevailing Interest Rate	8%
	It is assumed that machine was purchased at beginning of the year
	Calculations of Cost of Machine recorded in Books
	SR No	Instalments	PVF	Present Value
	1	$            5,440	0.92593	$            5,037
	2	$            5,440	0.85734	$            4,664
	3	$            5,440	0.79384	$            4,318
	4	$            5,440	0.73503	$            3,999
	5	$            5,440	0.68059	$            3,702
	6	$            5,440	0.63017	$            3,428
	7	$            5,440	0.5835	$            3,174
	8	$            5,440	0.54027	$            2,939
	9	$            5,440	0.50025	$            2,721
	10	$            5,440	0.4632	$            2,520
		Cost of Machine recorded	$          36,503
4.	Consideration paid in cash	$          20,010
	Rate of Interest		12%
	Annual Equal Instalments	4720
	SR No	Instalments	PVF	Present Value
	1	$            4,720	0.89286	$            4,214
	2	$            4,720	0.7972	$            3,763
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