Question

Knowledge Check 01 Turing City, Inc., purchased equipment and agreed to pay the supplier $500 per month for 10 months and an additional $5,000 at the end of 10 months. The supplier is charging 12% interest per year, or 1% per month. What is the amount of the liability that should be recorded on the date the note is signed

Answer 1

The amount of the liability that should be recorded on the date the note is signed is $9262.

Step-by-step explanation:

present value of monthly payments

= $500*9.47130

= $4736

present value of additional payment

= 5000*0.90529

= $4526

present value of note =

= $4736 + $4526

= $9262

Therefore, The amount of the liability that should be recorded on the date the note is signed is $9262.