A company purchased some large machinery on a deferred payment plan. the contract calls for $40,000 down on january 1 and $40,000 at the beginning of each of the next 4 years. there is no stated interest rate in the contract, and there is no established exchange price for the machinery. what should be recorded as the cost of the machinery

Question

Joyce Conrad

Business

5 October, 06:24

A company purchased some large machinery on a deferred payment plan. the contract calls for $40,000 down on january 1 and $40,000 at the beginning of each of the next 4 years. there is no stated interest rate in the contract, and there is no established exchange price for the machinery. what should be recorded as the cost of the machinery

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Bowers · Answer 1

The recorded cost of the machinery should be = 40,000 (down payment) + 40,000 * 4 = 200,000

Since there is no interest payment, the recorded cost of the machinery = $200,000