A is corrent. If the FV of the goods sold and the FV of the note received are not known, the transaction should be recorded at the PV of the note by imputing interest at the prevailing rate (10%) for this type of note. This series of seven payments is an annuity in advance, or annuity due, as illustrated in the diagram below. In a PV computation, one must look at the first rent to see if it is an ordinary annuity or an annuity in advance. The first rent falls on the same day as the PV computation, so these are beginning-of-year payments. However, annuity in advance factors are not given. If the first rent is ignored, the series of the remaining six payments is an ordinary annuity. The PV of the note is equal to the first payment ($60,000) plus the PV of the remaining six payments (60,000 × 4.36 = $261,600). Thus, sales revenue of $321,600 is recorded ($60,000 + $261,600 = $321,600). Alternatively, the “6” period PV of ordinary annuity factor could be converted to an annuity in advance by adding 1.00 to obtain 5.36 which is then multiplied by $60,000 to obtain $321,600.B is incorrect. If the FV of the goods sold and the FV of the note received are not known, the transaction should be recorded at the PV of the note by imputing interest at the prevailing rate (10%) for this type of note. This series of seven payments is an annuity in advance, or annuity due, as illustrated in the diagram below.In a PV computation, one must look at the first rent to see if it is an ordinary annuity or an annuity in advance. The first rent falls on the same day as the PV computation, so these are beginning-of-year payments. However, annuity in advance factors are not given. If the first rent is ignored, the series of the remaining six payments is an ordinary annuity. The PV of the note is equal to the first payment ($60,000) plus the PV of the remaining six payments (60,000 × 4.36 = $261,600). Thus, sales revenue of $321,600 is recorded ($60,000 + $261,600 = $321,600). Alternatively, the “6” period PV of ordinary annuity factor could be converted to an annuity in advance by adding 1.00 to obtain 5.36 which is then multiplied by $60,000 to obtain $321,600.C is incorrect. If the FV of the goods sold and the FV of the note received are not known, the transaction should be recorded at the PV of the note by imputing interest at the prevailing rate (10%) for this type of note. This series of seven payments is an annuity in advance, or annuity due, as illustrated in the diagram below.In a PV computation, one must look at the first rent to see if it is an ordinary annuity or an annuity in advance. The first rent falls on the same day as the PV computation, so these are beginning-of-year payments. However, annuity in advance factors are not given. If the first rent is ignored, the series of the remaining six payments is an ordinary annuity. The PV of the note is equal to the first payment ($60,000) plus the PV of the remaining six payments (60,000 × 4.36 = $261,600). Thus, sales revenue of $321,600 is recorded ($60,000 + $261,600 = $321,600). Alternatively, the “6” period PV of ordinary annuity factor could be converted to an annuity in advance by adding 1.00 to obtain 5.36 which is then multiplied by $60,000 to obtain $321,600.D is incorrect. If the FV of the goods sold and the FV of the note received are not known, the transaction should be recorded at the PV of the note by imputing interest at the prevailing rate (10%) for this type of note. This series of seven payments is an annuity in advance, or annuity due, as illustrated in the diagram below.In a PV computation, one must look at the first rent to see if it is an ordinary annuity or an annuity in advance. The first rent falls on the same day as the PV computation, so these are beginning-of-year payments. However, annuity in advance factors are not given. If the first rent is ignored, the series of the remaining six payments is an ordinary annuity. The PV of the note is equal to the first payment ($60,000) plus the PV of the remaining six payments (60,000 × 4.36 = $261,600). Thus, sales revenue of $321,600 is recorded ($60,000 + $261,600 = $321,600). Alternatively, the “6” period PV of ordinary annuity factor could be converted to an annuity in advance by adding 1.00 to obtain 5.36 which is then multiplied by $60,000 to obtain $321,600. |
