On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interestrate): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)a. Bought a delivery truck and agreed to pay $60,000 at the end of three years.b. Rented an office building and was given the option of paying $10,000 at the end of each of the next three yearsor paying $28,000 immediately.c. Established a savings account by depositing a single amount that will increase to $90,000 at the end of sevenyears.d. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $40,000 toa retired employee (payments starting December 31 of this year).Required:a. What is the cost of the truck that should be recorded at the time of purchase? (Round your answer to nearestwhole dollar.)Cost of the truckb. Which option for the office building results in the lowest present value?O Pay in single installmentO Pay in three installmentsc. What single amount must be deposited in this account on January 1 of this year? (Round your answer to nearestwhole dollar.)Amount to deposit38,259d. What single sum must be deposited in the bank on January 1 of this year? (Round your answer to nearest wholedollar.)

Solution a: Cost of truck = $60,000 * PV Factor at 10% for 3rd period = $60,000 * 0.75131 = $45,079…

a. Bought a delivery truck and agreed to pay $60,000 at the end of three years. b. Rented an office building and was given the option of paying $10,000 at the end of each of the next three years or paying $28,000 immediately. c Ectabliche

a. Bought a delivery truck and agreed to pay $60,000 at the end of three years. b. Rented an office building and was given the option of paying $10,000 at the end of each of the next three years or paying $28,000 immediately. c Ectabliche

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7MC: Using the information provided, what transaction represents the best application of the present...

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