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Drake Company purchased a building by paying $90,500 cash on the purchase date and pay $50,100...

Drake Company purchased a building by paying $90,500 cash on the purchase date and pay $50,100 at the end of each of the next at 8 years. Drake also has a final payment of $100,500 that is to be made at the end of the 10th year. Drake's incremental borrowing rate is 8%.

How much should Drake report as the purchase price of the building as of the purchase date (choose the answer closest to the number you calculate)?

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Answer #1
Purchase price building should be reported
= Cash Paid + Present value of future payment
= $90500 + $50100*(PVAIF 8 years 8%) + $100500*(PV factor 10th year 8%)
=$90500*$50100(5.74664) +$100500*(0.46319)
=$90500+287907+46551
=$424958
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