Chapter 6 Homework instructions | help
Johnstone Company is facing several decisions regarding investing and financing activities. Address each
decision independently. (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.)
1. On June 30 2013 the Johnstone Company purchased equipment from Genovese Corp. Johnstone
agreed to pay Genovese $12000 on the purchase date and the balance in six annual installments of
$10000 on each June 30 beginning June 30 2014. Assuming that an interest rate of 12% properly
reflects the time value of money in this situation at what amount should Johnstone value the
equipment?
Table values are based on:
n =
i =
Cash Flow Amount Present Value
Installments
Down Payment
Value of the equipment
2. Johnstone needs to accumulate sufficient funds to pay a $420000 debt that comes due on December
31 2018. The company will accumulate the funds by making five equal annual deposits to an account
paying 8% interest compounded annually. Determine the required annual deposit if the first deposit is
made on December 31 2013.
Table or calculator function:
Future Value:
n =
i =
Deposit:
3. On January 1 2013 Johnstone leased an office building. Terms of the lease require Johnstone to make
20 annual lease payments of $122000 beginning on January 1 2013. A 12% interest rate is implicit in
the lease agreement. At what amount should Johnstone record the lease liability on January 1 2013
before any lease payments are made?
Intermediate Accounting: Fall 2013 TR 7pm Bianca Dillon10/10/13 Chapter 6Homework
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Table or calculator function:
Payment:
n =
i =
Liability: