CAC Acquired a Gym in Exchange for Two $200,000 Bonds

question 136

Multiple Choice

CAC acquired a gym in exchange for two $200,000 bonds. The bonds pay 12 percent annual interest and mature at the end of 10 years. They have no determinable market value. The going rate of interest on liabilities with this level of risk is 16 percent. CAC should record the cost of the gymnasium at:

• A) $161,344.
• B) $322,667.
• C) $400,000.
• D) $464,000.

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Definitions:

Revenue Accounts

are ledger accounts that track the income earned by a company from its normal business operations, which is then reported on the income statement.

Expense Accounts

Accounts used in accounting to record all expenses transactions made by a business.

Abbreviations

Shortened forms of words or phrases used for convenience.

Debit

An entry on the left side of an account record, used to increase an asset or expense or decrease a liability, equity, or revenue.