Purchase of Asset William Thomas intends to purchase a tractor on credit. Two local implement dealers have offered him the following payment plans for identical tractors: 1. Redd Truck & Tractor’s plan calls for five annual payments of $10,350, with the first payment now and the remaining payments at the beginning of each of the next four years. 2. Greene Farm Implements requires semiannual payments of $5,750 at the end of each of the next 10 semiannual periods, with the first payment to be in six months. Required Determine which of the preceding plans offers Thomas the lower present value. The applicable annual interest rate is 10% for both alternatives.

Question

Purchase of Asset William Thomas intends to purchase a tractor on credit. Two local implement dealers have offered him the following payment plans for identical tractors:

1. Redd Truck & Tractor’s plan calls for five annual payments of $10,350, with the first payment now and the remaining payments at the beginning of each of the next four years.

2. Greene Farm Implements requires semiannual payments of $5,750 at the end of each of the next 10 semiannual periods, with the first payment to be in six months.

Required

Determine which of the preceding plans offers Thomas the lower present value. The applicable annual interest rate is 10% for both alternatives.

 

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Financial Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Which of the following statements about an accounting information system (AIS) is incorrect ?(CPA ad...

A: There are 4 options given with regards to the given concept and one of them is them is incorrect and...

Q: If manufacturing overhead has been over-applied, the adjusting entry will O increase cost of goods s...

A: In case applied Overheads are not equal to actual overhead, it may lead to over-applied or under app...

Q: Question: How many preference shares were issued and outstanding? How many ordinary shares were iss...

A: Shareholder's Equity:-It is the capital invested by the investors in the company. It is the balance ...

Q: on customer value changing managerial Explain the meaning of customer value. How is focusing account...

A: Customer value: The customers play a wider role in the business. The major business transactions rev...

Q: What would be the total WIP during the period before less WIP inventory for December 20Y6? I know th...

A: Cost of Goods Sold - Cost of goods sold refers to the total expenses incurred by the firm in manufac...

Q: I am in ACCT 201 managerial accounting and I'm having the worst time with formulas.  In this questio...

A: Formula: Break even point in units = Fixed cost / Unit contribution margin Division of fixed costs w...

Q: Info In Images

A: Plantwide overhead rate = (1000*1.2+4000*2.2+15500)/5000 = 5.10 per machine hour

Q: The price of computers has been dropping steadily for the past ten years. If a desktop PC cost $6,70...

A: Click to see the answer

Q: Characteristics of Production Process, Cost Measurement Vince Melders, of EcoScape Company, designs ...

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for y...

Q: The Canadian Company in Dubai uses a job-costing system at its production plant. The plant has a mac...

A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts f...

Q: Prime Cost and Conversion Cost Grin Company manufactures digital cameras. In January, Grin produced...

A: total prime cost = direct material =+ direct labor conversion cost = direct labor+ manufacturing o/h

Q: If a bank finds that its ROE is too low because it has toomuch bank capital, what can it do to raise...

A: ROE (Return on Equity):-It is the ratio that helps in analyzing a company's profit from shareholder ...

Q: Beginning next year, a foundation will supportan annual event on campus with the earnings of a$420,0...

A: Present value is defined as the current value of the future sum of amount of the cash flows given a ...

Q: Joshua borrowed $500 for one year and paid $50 in interest. The bank charged him a service charge of...

A: Annual Percentage Rate (APR)= (2 * N * FC) / [ (P * (N+1)]

Q: 15.  Watson Corporation has provided the following data concerning its finished goods inventories la...

A: Cost of goods sold (COGS) indicates the cost incurred by the corporation for making product ready to...

Q: The Sit-N-Spin Corporation manufactures and assembles office chairs. Sit-N-Spin uses an activity-bas...

A: The allocation base for materials handling is the number of parts used by a chair. As per the data, ...

Q: The company applies overhead to products at a rate of 50 percent of direct labor cost.

A: Step 1 Manufacturing overhead is all indirect costs incurred during the production process.

Q: Pro-Leather Company is a manufacturer of leather cases for tablets. The following information pertai...

A: Computation of Raw material used: Particulars Amount Raw Material Inventory on 01-01-2020 7,50,...

Q: Currumbin Ltd sells a product for which they have a target profit of $30000. This product has variab...

A: "Since you have asked multiple questions, we will solve the first question (question 1) for you". If...

Q: Indicate which principles are violated: Purchased a hammer at a cost of PHP500. This was recorded as...

A: While making accounting entries in the books, the accounting principles must be complied with in ord...

Q: Kellman Company Year 2 Year 1 Total current assets $600,000 $560,000 Total investments 60,000 40,000...

A: Particulars Year 2 Year 1 Total current assets $600000 $560000 Total investments 60000 40000 T...

Q: A Department Store paid its supplier $2500 for a Smart TV Set On January 8, the department store mar...

A: Formula: Selling Price= Purchase value× Effective Appreciation %

Q: Diaz Company obtained a loan from Pacific Bank amounting to P720,000.00 secured by a mortgage over i...

A: Far East Bank and Trust Co.'s (FEBTC) contention in not correct.

Q: Piedmont Company segments its business into two regions—North and South. The company prepared the co...

A: For calculating the break even sale with different products , we need use the following formula :- B...

Q: 1. why the discount payable note is $9450? I thought discount payable note value is between notes pa...

A: The discount of note payable is the difference in the value of the tractor and consideration paid.

Q: 1. Harry Company sells a new product. During a move to a new location, the inventory records for the...

A: Since you have asked multiple question, we will solve the first question for you. If you want any sp...

Q: A taxpayer who purchase a series EE US savings bond must report the interest income increase in valu...

A: The taxpayer can report income from the savings bond either every year or at the time of maturity, w...

Q: Haft Construction Company has consistently applied the percentage-of-completion method. On January 1...

A: Contract costing is like job costing where costing constitutes a unit of cost. It is used to measure...

Q: You are the chief financial analyst of Hercules Manufacturing Limited. The company manufactures bowl...

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts fo...

Q: Kellman Company Year 2 Year 1 Total current assets $600,000 $560,000 Total investments 60,000 40,000...

A: Dividend on preferred stock = Par value of preferred shares x rate of dividend = $100000 x 9% = $9,0...

Q: An old automobile is traded for a new automobile with a list price of $30,000. The old automobile ha...

A: Trade-in allowance indicates the reduction in the price of assets allowed by the seller. This amount...

Q: The bank reconciliation for the month of December, Jacks Company provided the following information:...

A: Bank reconciliation statement is prepared by almost every organization at a particular time. It is a...

Q: Which of the following accounts is not one of the accounts transferred to the credit of the 690 peri...

A: - Exchange profits are always credited to the P&L to realise the gains - Returns from sales is a...

Q: Suppose a company's cost of goods sold for years 2 and 3 were $283,310 and $299,390 respectively. Al...

A: Closing inventory is the inventory which is left and computed at the ending of an accounting period....

Q: Vandalay Industries manufactures two products: toasters and blenders. The annual production and sale...

A: Overhead cost per blender = Total Overhead Cost of Blenders / Total Number of Blenders   Total Numbe...

Q: The insurance expense account has a balance of P108,000 before adjustment. This amount represents in...

A: In this case, the journal entry to record the prepaid insurance includes a debit to the prepaid insu...

Q: Can you please break this down for me? I have struggled with this and can't solve it correctly.

A: Given information is: Social security benefits = $8000 Dividend Income = $13000 Interest Income = $2...

Q: A taxpayer with $3,000 in unreimbursed employee expenses and an AGI of $50,000 will have what deduct...

A: Unreimbursed Employee Expenses:-These are those expenses for which employers do not pay back or prov...

Q: At year-end, Slamdunk Company reported cash and cash equivalents which comprised the following: Cash...

A: Click to see the answer

Q: Check my answers. Determine if the timing differences are temporary or permanent. Net income per...

A: Due to the differences between financial accounting and tax accounting there arises some differences...

Q: A taxpayer is itemizing their return and they're trying to calculate the deductible amount of state ...

A: Itemized deductions: It the amount of deduction that can be deducted from the adjusted gross income ...

Q: One of your Taiwanese suppliers has bid on a new line of molded plastic parts that iscurrently being...

A: The above question represents make or buy decisions. Taiwanese suppliers had to analyse whether the ...

Q: Info in images Answer Choices for Q1 a. $104,000 b. $33,600   c. $310,933   d. $137,600 Answer Choic...

A: Total fixed manufacturing overhead cost for Machining Department = $104,000 Variable manufacturing o...

Q: Hope Ltd holds an asset that is traded in three different markets: Adelaide, Brisbane, and Perth. Ho...

A: The value of unit is determined  based on unit price in the primary market or favorable market. In p...

Q: Accounting has supplied the following information from our ERP system:Data: Sales over last 30 days ...

A: Cash conversion cycle is the total time period taken by the firm to complete its operating cycle. It...

Q: 16.  At the end of the year, a company finds that it has under-applied factory overhead by $1,000. W...

A: Factory overheads are the overhead amounts which are indirectly applied to the goods at the time of ...

Q: White Diamond Flour Company manufactures flour by a series of three processes, beginning with wheat ...

A: Click to see the answer

Q: Problem 12 Tecniquip Limited is a public corporation whose head office is located in Toronto, Ontari...

A: Problem 12 Income from distribution operations = $2040000 Canadian source interest income from inves...

Q: Selected sales and operating data for three divisions of different structural engineering firms are ...

A: Investment:- An investment is and asset which is acquired with the view to generate the income or ca...

Q: I am struggling with these questions, please assist.

A: Accounting equation says that total assets should always be equals to total liabilities and equities...