A Machine Is Purchased by Making Payments of $8,000 at the Beginning

question 124

Multiple Choice

A machine is purchased by making payments of $8,000 at the beginning of each of the next five years. The interest rate was 10%. The future value of an ordinary annuity of 1 for five periods is 6.10510. The present value of an ordinary annuity of 1 for five periods is 3.79079. What was the cost of the machine?

• A) $53,725
• B) $48,841
• C) $33,359
• D) $30,327

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Definitions:

Accrued Interest

Interest that has been incurred but not yet paid, reflecting money owed on loans or credit extended.

Dishonored Note

A dishonored note is a promissory note that has not been paid upon its maturity date.

Journal Entries

Records of financial transactions in the chronological order by which they occur, entered in the accounting records.

Accounting Problems

Challenges or difficulties encountered in the process of recording, classifying, summarizing, and interpreting financial transactions and events.