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On January 1, 2021, The Barrett Company purchased merchandise from a supplier. Payment was a noninterest-bearing note requiring five annual payments of $25,000 on each December 31 beginning on December 31, 2021, and a lump-sum payment of $150,000 on December 31, 2025. A 10% interest rate properly reflects the time value of money in this situation.

Required:
Calculate the amount at which Barrett should record the note payable and corresponding merchandise purchased on January 1, 2021.

User Amaury
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1 Answer

3 votes

Answer:

$187,908

Step-by-step explanation:

Hint : Use time of Value techniques to calculate the price (today) : January 1, 2021.

Pmt = ($25,000)

n = 5

Fv = ($150,000)

i = 10 %

P/yr = 1

Pv = ?

Using a Financial Calculator, the price (today) that is the PV will be $187,907.87 or $187,908.

Thus the amount at which Barrett should record the note payable and corresponding merchandise purchased on January 1, 2021 will be $187,908.

User Bguess
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