Reference no: EM132705862
Questions - Answer each of these unrelated questions.
Q1. On January 1, 2020, Pearl Corporation sold a building that cost $274,760 and that had accumulated depreciation of $101,930 on the date of sale. Pearl received as consideration a $264,760 non-interest-bearing note due on January 1, 2023. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2020, was 9%. At what amount should the gain from the sale of the building be reported?
Q2. On January 1, 2020, Pearl Corporation purchased 327 of the $1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2030, and pay interest annually beginning January 1, 2021. Pearl purchased the bonds to yield 11%. How much did Pearl pay for the bonds?
Q3. Pearl Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,700 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 8% applies to this contract, how much should Pearl record as the cost of the machine?
Q4. Pearl Corporation purchased a special tractor on December 31, 2020. The purchase agreement stipulated that Pearl should pay $20,970 at the time of purchase and $5,430 at the end of each of the next 8 years. The tractor should be recorded on December 31, 2020, at what amount, assuming an appropriate interest rate of 12%?
Q5. Pearl Corporation wants to withdraw $115,500 (including principal) from an investment fund at the end of each year for 9 years. What should be the required initial investment at the beginning of the first year if the fund earns 11%?
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