On January 1 of this year Shannon Company completed the foll

On January 1 of this year, Shannon Company completed the following transactions (assume a 8% annual interest rate): (FV of $1, PV of $1, FVA of $1, and PVA of S1) (Use the appropriate factor(s) from the tables provided.) a. Bought a delivery truck and agreed to pay $60,800 at the end of three years. b. Rented an office building and was given the option of paying $10,800 at the end of each of the next three years or paying $28,800 immediately. c. Established a savings account by depositing a single amount that will increase to $91,600 at the end of seven years. d. Decided to deposit a single sum in the bank that will provide 8 equal annual year-end payments of $40,800 to a retired employee (payments starting December 31 of this year). Required: 1. What is the cost of the truck that should be recorded at the time of purchase? (Round your answer to nearest whole dollar.) Cost of the truck 2. Which option for the office building results in the lowest present value? O Pay in single installment O Pay in three installments 3. What single amount must be deposited in this account on January 1 of this year? (Round your answer to nearest whole dollar.) Amount to deposit o 4. What single sum must be deposited in the bank on January 1 of this year? (Round your answer to nearest whole dollar.) Amount to deposit

Solution

Required 1)
Cost of the truck- $48,265

Explanation:-
$60,800 × 0.79383 = $48,265

Required 2)
Pay in three installment

Explanation:-
$10,800 × 2.57709 = $27,833
The present value of the three installment is less than paying the $28,800. Less costly $27,833 is better.

Required 3)
Amount to deposit- $53,448

Explanation:-
$91,600 × 0.58349 = $53,448

Required 4)
Amount to deposit- $234,463

Explanation:-
$40,800 × 5.74664 = $234,463