Calculate the cash equivalent price of this acquisition

Assignment Help Accounting Basics
Reference no: EM132864108

Question - On January 2nd, 2020, Zimmerman Landscaping Inc., decided to purchase some earth-moving equipment (a grader to be precise), from Rabat Graders Ltd., to expand its services to existing customers and to hopefully grow its customer base. Zimmerman issued an $800,000, five-year, non-interest-bearing note to Rabat Graders Ltd., when the prevailing market rate of interest for obligations of this magnitude and risk was 12%. Zimmerman will pay off the note in five equal installments of $160,000 each due at the end of each year of the note's life.

Required -

1. Calculate the cash equivalent price of this acquisition (its Present Value).

2. Prepare the journal entry at the date of purchase of this asset.

3. Assuming the equipment has a 20-year life and a residual value of $15,000, prepare the journal entry to record depreciation expense at the end of the first year. (Assume Zimmerman uses the straight-line method of depreciation).

Reference no: EM132864108

Questions Cloud

Explain role of manager in regards to policy development : Explain the role of a manager in regards to policy development. Policy development is an integral and formative aspect of any WHS system. It is imperative that
Calculate the net present value of the investment : The investment will require an investment of $40,000. It will have a useful life of 2 years, Calculate the net present value of the investment
How if the costing method could be used by eec : Discuss how, when, and if the costing method could be used by EEC. Discuss the advantages and disadvantages of the costing method as it relates to EEC.
Calculate the non-margin buying power : Short Put ETF: IWMPrice: $234.33Expiration 4/9/2021, 28 days
Calculate the cash equivalent price of this acquisition : Zimmerman will pay off the note in five equal installments of $160,000 each due at the end of each year of the note's life. Calculate the cash equivalent price
Discuss cons associated with the potential acquisition : Which costs would be utilized in making the decision to purchase the asset? Are future costs relevant in the decision-making process? Please justify and support
Us securities and exchange commission website : By Using the EDGAR (Electronic Data Gathering, Analysis, and Retrievalsystem) search tools on the US Securities and Exchange Commission website
What are the advantageous to each investing method : Would your answer be the same if EEC's cost of capital were 25%? Why or why not? What are the advantageous to each investing method
How is the internal rate of return calculated : How is the internal rate of return calculated? Explain how simple rate of return has been used in a company you are familiar with related to capital budgeting.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Provide appropriate journal entries for each relevant event

Fujitsu Ltd purchases, Provide appropriate journal entries for each relevant event. (Round amounts to the nearest dollar). Show your working.

  What international tax issues director of taxes consider

What international tax issues regarding these activities should Bailey's director of taxes consider

  Identify and discuss the Agency Problem issues

Identify and discuss the Agency Problem issues in this case study that may have led to the current situation how this can be rectified

  Complete the consolidated workpaper

The separate company statements for P and S appear in the first two columns of the partially completed consolidated workpaper. Complete the consolidated workpaper for P and S for the year 2011.

  What is amount and character that taxpayer must recognize

On July 1, 20x2, taxpayer purchases 100 shares of BIG Corp for $12/share to cover the original short sale. What amount and character that taxpayer recognize

  Estimate the cost of construction for this project

Estimate the cost of construction for this project. Assume the estimates are fully loaded, ie they include labor, materials, applicable indirect costs such as overhead, etc

  How would you describe your path

In your view, what is implied in calling religious practices a "path"? How would you describe your "path"? The response must be typed.

  What is the highest acceptable manufacturing cost

What is the highest acceptable manufacturing cost Leno would be willing to incur to produce the swimsuit if it desired a profit of 26 per unit

  How to prepare the journal entries relating to transaction

How to Prepare the journal entries relating to this transaction for the full three-year period from October 31, 2016, to October 31, 2019

  Prepare a cash payments budget for april through june

Prepare a purchases budget for as many months as is possible. Prepare a cash payments budget for April through June.

  Compute the amount of gain or loss to ludwig

Ludwig, Inc., which owes Giffin Co. $800,000in notes payable, is in financial difficulty. Compute the amount of gain or loss to Ludwig, Inc. on the transfer

  The number of units in work in process inventory at the end

the charges to work in process - assembly department for a period together with information concerning production are

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd