On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Bought a delivery truck and agreed to pay $61,800 at the end of three years. Rented an office building and was given the option of paying $11,800 at the end of each of the next three years or paying $33,000 immediately. Established a savings account by depositing a single amount that will increase to $93,600 at the end of seven years. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $41,800 to a retired employee (payments starting December 31 of this year).

On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

1. Bought a delivery truck and agreed to pay $61,800 at the end of three years.
2. Rented an office building and was given the option of paying $11,800 at the end of each of the next three years or paying $33,000 immediately.
3. Established a savings account by depositing a single amount that will increase to $93,600 at the end of seven years.
4. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $41,800 to a retired employee (payments starting December 31 of this year).

Required:

1. What is the cost of the truck that should be recorded at the time of purchase?

Here

Explanation:

1.

Cost of the truck = $61,800 × 0.75131 = $46,431

2.

$11,800 × 2.48685 = $29,345

The present value of the three installments is less than paying the $33,000 immediately.

3.

Amount to deposit = $93,600 × 0.51316 = $48,032

4.

Amount to deposit = $41,800 × 6.14457 = $256,843