Question

Jackson Company purchased land by paying $12,000 cash on the purchase date and agreeing to pay $12,000 for each of the next ten years beginning one-year from the purchase date. Jackson's incremental borrowing rate is 10%. At what amount would the land be reported on the balance sheet? Round your answer to the nearest dollar.

Answer 1

Answer:

$85,735

Explanation:

Calculation for what amount would the land be reported on the balance sheet

First step is to calculate the PV using Financial calculator

Down payment: $12,000

Present Value=PV = $73,734.81

PMT: $12,000

Interest rate =10%

Number of years =10 years

Second Step is to calculate the amount that would the land be reported on the balance sheet

Amount to be reported= $12,000+$73,734.81

Amount to be reported= $85,735

Therefore the amount that would the land be reported on the balance sheet will be $85,735