Rusty Corporation Purchased a Rust-Inhibiting Machine by Paying $50,000 Cash

question 65

Multiple Choice

Rusty Corporation purchased a rust-inhibiting machine by paying $50,000 cash on the purchase date and agreeing to pay $10,000 every three months during the next two years. The first payment is due three months after the purchase date. Rusty's incremental borrowing rate is 8%. The liability reported on the balance sheet as of the purchase date, after the initial $50,000 payment was made, is closest to:

• A)$123,255.
• B)$130,000.
• C)$80,000.
• D)$73,255.

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Definitions:

Plant, Property

Long-term tangible assets owned by a business, used in operating activities, and not expected to be consumed or converted into cash short term.

Equipment

Tangible assets used in the operation of a business that have a useful life beyond a single accounting period.

Classified Balance Sheet

A balance sheet that organizes assets and liabilities into subcategories for more detailed and informative reporting.

Store Equipment

Fixed assets owned by a retail business, used in the operation and display of merchandise.