Question

Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (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.)

1. On June 30, 2021, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $18,000 on the purchase date and the balance in six annual installments of $6,000 on each June 30 beginning June 30, 2022. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment?
2. Johnstone needs to accumulate sufficient funds to pay a $480,000 debt that comes due on December 31, 2026. The company will accumulate the funds by making five equal annual deposits to an account paying 5% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2021.
3. On January 1, 2021, Johnstone leased an office building. Terms of the lease require Johnstone to make 20 annual lease payments of $128,000 beginning on January 1, 2021. A 10% interest rate is implicit in the lease agreement. At what amount should Johnstone record the lease liability on January 1, 2021, before any lease payments are made?

Required 1 Required 2 Required 3 On June 30, 2021, the Johnstone Company purchased equipme $18,000 on the purchase date and the balance in six annual ins Assuming that an interest rate of 10% properly reflects the time Johnstone value the equipment? (Round your final answers to n Table values are based on: n Cash Flow Amount Present Value Installments Down Payment Value of the equipment Reauired

Answer 1

A Johnstone company is facing Rodi Table values are based on: cash flow Amount Installments $18000 Down payment 6000 value of the equipment Present value $ 18000 26132 44132 $ Table Annuity present value of an ordinary cn=6i-10% = 4.35526 GOOOX 4.35526 = $ 26132 R09:2 Table or calculator function / Future value $ 480,000 i = 5% $182732 Annual Deposit (FUAD = future value of an annuity Due of $i, nosis =) 5.8019 Annuity amount. is 480,000 = 5.8019 $ 82732

Rea 3 Table or calculatos function payment n = i = Liability PUAP OF $1 1280oo 20 10% 1 298,710 present value of an (n=20 - 10%) Annuity due & I 9.36492 liability & 128000 X 9.36492 1,198, HO