Question

A company purchased some large machinery on a deferred payment plan. the contract calls for $40,000 down on january 1 and $40,000 at the beginning of each of the next 4 years. there is no stated interest rate in the contract, and there is no established exchange price for the machinery. what should be recorded as the cost of the machinery

Answer 1

The recorded cost of the machinery should be =40,000 (down payment) + 40,000 *4 = 200,000

Since there is no interest payment, the recorded cost of the machinery = $200,000