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Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 8%. The liability reported on the balance sheet as of the purchase date, after the initial $5,000 payment was made, is closest to:_____.
A) $44,596.
B) $62,100.
C) $51,496.
D) $55,200.

Respuesta :

abiolataiwo2015

Answer:

B. $33,664.

Explanation:

Calculation to determine what The liability reported on the balance sheet as of the purchase date, after the initial $5,000 payment was made, is closest to:

Using this formula

Liability= Present value of eight remaining payments *Present value of a 4%, 8-period ordinary annuity

Let plug in the formula

Liability=$5,000*6.7327

Liability=$33,664

Therefore The liability reported on the balance sheet as of the purchase date, after the initial $5,000 payment was made, is closest to:$33,664

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