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On January 1, 2020, Sandhill Corporation sold a building that cost $273,840 and that had accumulated...

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

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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

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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

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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

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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

Solutions

Expert Solution

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
3 $            4,720

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