Question

Present and future value tables of 1 at 11% are presented below.

	PV of $1	FV of $1	PVA of $1	FVA of $1
1	0.90090	1.11000	0.90090	1.0000
2	0.81162	1.23210	1.71252	2.1100
3	0.73119	1.36763	2.44371	3.3421
4	0.65873	1.51807	3.10245	4.7097
5	0.59345	1.68506	3.69590	6.2278
6	0.53464	1.87041	4.23054	7.9129

Polo Publishers purchased a multi-color offset press with terms of $50,000 down and a noninterest-bearing note requiring payment of $30,000 at the end of each year for five years. The interest rate implicit in the purchase contract is 11%. Polo would record the asset at:

Multiple Choice

• $80,000.

• $184,795.

• $110,877.

• $160,877.

Answer 1

CALCULATION OF VALUE OF MULTI - COLOR OFFSET
Cash Flow		"x"	Cumulative PV Factor of $ 1 @ 11%	"="	Present Value
Annual Cash OutFlow	$             30,000.0	"x"	3.69590	"="	$                        1,10,877
Total present value of cash Outflow					$                        1,10,877
Less: Inintial Cash Paid					$                            50,000
Value of the Asset					$                        1,60,877
Answer = Option 4 = Value of the asset to be recorded in Book = $ 160,877