Question

On January 1, 2021, Laramie Inc. acquired land for $6.2 million. Laramie paid $1.2 million in cash and signed a 6% note requiring the company to pay the remaining $5 million plus interest on December 31, 2022. An interest rate of 6% properly reflects the time value of money for this type of loan agreement. For what amount should Laramie record the purchase of land

Answer 1

6.2 mil dollars

Step-by-step explanation:

Answer 2

$6.2 Million

Step-by-step explanation:

The purchase of land will be recorded as the amount paid for purchasing it. In this case the note which bears interest rate of 6% will be as per its face value plus the cash paid for purchasing of the land.

Note (at interest rate of 6%) + Cash Paid = Purchase of Land

5,000,000 + 1,200,000 = 6,200,000 or 6.2 Million

Hence, the amount of purchase of land is to be recorded as $6.2 Million.