Question

1a. On January 1, 2020, Wildhorse Corporation sold a building that cost $259,320 and that had accumulated depreciation of $102,520 on the date of sale. Wildhorse received as consideration a $249,320 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 11%. 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 =

1.b On January 1, 2020, Wildhorse Corporation purchased 311 of the $1,000 face value, 11%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2030, and pay interest annually beginning January 1, 2021. Wildhorse purchased the bonds to yield 11%. How much did Wildhorse pay for the bonds?

Wildhorse must pay for the bonds

1.c Wildhorse Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,570 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 Wildhorse record as the cost of the machine?

Cost of the machine to be recorded

1.d Wildhorse Corporation purchased a special tractor on December 31, 2020. The purchase agreement stipulated that Wildhorse should pay $18,650 at the time of purchase and $5,190 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%?

Cost of the tractor to be recorded =

1. e Wildhorse Corporation wants to withdraw $123,180 (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%?

Required initial investment =

Answer 1

Please refer the following image for the solution: