The liability reported on the balance sheet as of the purchase date,after the initial $5,000 payment was made,is closest to:

A) $45,000.
B) $33,664.
C) $38,664.
D) $40,000.

Question

The liability reported on the balance sheet as of the purchase date,after the initial $5,000 payment was made,is closest to:A) $45,000.B) $33,664.C) $38,664.D) $40,000.

Andreas Yoan Wisnu · Accepted Answer

Final Answer : B, Explanation :  The liability reported on the balance sheet after the initial $5,000 payment is the present value of the remaining payments. Given the incremental borrowing rate of 8% and payments every six months for four years (8 payments), we use the Present Value of an Annuity (PVA) formula. The PVA of $5,000 paid semi-annually at an 8% annual rate (4% per period) for 8 periods is calculated using the PVA factor from the tables. Subtracting the initial $5,000 payment from the total value gives us the liability amount, which is closest to $33,664.

The liability reported on the balance sheet as of the purchase date,after the initial $5,000 payment was made,is closest to:

A) $45,000.
B) $33,664.
C) $38,664.
D) $40,000.

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