Grant Corporation Is Looking to Purchase a Building Costing $900,000

question 95

Multiple Choice

Grant Corporation is looking to purchase a building costing $900,000 by paying $300,000 cash on the purchase date,and agreeing to make payments every three months for the next five years; the first payment is due three months after the purchase date.Grant's incremental borrowing rate is 8%.How much will each of the payments be?

• A)$55,041
• B)$61,112
• C)$36,694
• D)$32,400

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Definitions:

Consistent Application

The principle that companies should apply accounting policies uniformly throughout reporting periods to ensure comparability of financial statements over time.

Comparability

A financial accounting concept that ensures financial statements can be compared between periods and with other companies.

Company

A legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise.