A construction company buys a tractor, paying $10,000 in cash and agreeing to pay $5,000 every six months for three years. During the first six months of operation, the company receives an unexpected court settlement from a totally different case of $25,000. The company had not yet made the

A construction company buys a tractor, paying $10,000 in cash and agreeing to pay $5,000 every six months for three years. During the first six months of operation, the company receives an unexpected court settlement from a totally different case of $25,000. The company had not yet made the

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 88P

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Question

A construction company buys a tractor,
paying $10,000 in cash and agreeing to pay
$5,000 every six months for three years.
During the first six months of operation, the
company receives an unexpected court
settlement from a totally different case of
$25,000. The company had not yet made the
first semiannual installment for the tractor.
When should the company make a payment
of $25,000 to discharge its obligation for the
purchase in a lump sum settlement, if the
interest rate is 12% compounded
semiannually?

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