Fred Purchased a Farm with a Down Payment of $8,500

question 135

Multiple Choice

Fred purchased a farm with a down payment of $8,500 and 48 semi-annual payments of $3,000. The first of these payments is to be made two years after the date of purchase. What was the purchase price of the farm if the interest rate charged on the balance is 14% compounded semi-annually?

• A) $41,191.42
• B) $31,424.74
• C) $42,124.47
• D) $39,924.74
• E) $49,691.42

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Definitions:

Non-Controlling Interest

The portion of equity in a subsidiary not attributable directly or indirectly to the parent company, also known as minority interest.

Voting Shares

Shares of stock that grant the holder the right to vote on corporate matters.

Cost Method

Accounting for investments where the investor does not exercise significant influence, recording the investment at initial cost and recognizing income only when dividends are received.

Unrealized Intercompany Gain

Profits recorded on the books resulting from transactions among subsidiaries that are not realized until sold to an external party.