Question

On January 1, 2020, The Barrett Company purchased merchandise from a supplier. Payment was a noninterest-bearing note requiring five annual payments of $31,000 on each December 31 beginning on December 31, 2021, and a lump-sum payment of $210,000 on December 31, 2025. An 11% interest rate properly reflects the time value of money in this situation. ((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.)

Required: Calculate the amount at which Barrett should record the note payable and corresponding merchandise purchased on January 1, 2021. (Round your final answer to nearest whole dollar amount.)

Answer 1

Computation of Amount of Note payable
Five Annual Payment	$31,000
PV of annuity of $1, n=0-4, i=11%	4.1024
Present value of Annual Payment (a)	$127,174
Lump sump payment	$210,000
Pvif@ 11% at end of 5 year	0.6587
Present value of Lump Sum Payment (b)	$138,327
Amount of Note Payable to be recorded (a+b)	$265,501