Use the following 8% interest factors for questions 102 through 105.
-What amount should be recorded as the cost of a machine purchased December 31, 2014, which is to be financed by making 8 annual payments of $9,000 each beginning December 31, 2015? The applicable interest rate is 8%.
A) $63,000
B) $56,222
C) $95,730
D) $51,719

Question

Use the following 8% interest factors for questions 102 through 105. 
-What amount should be recorded as the cost of a machine purchased December 31, 2014, which is to be financed by making 8 annual payments of $9,000 each beginning December 31, 2015? The applicable interest rate is 8%.
A) $63,000 
B) $56,222 
C) $95,730 
D) $51,719

Quizplus · Accepted Answer

The cost of the machine should be recorded as the present value of the 8 annual payments of $9,000 each, discounted at the 8% interest rate. Using the formula for the present value of an annuity or a financial calculator, the present value of these payments is approximately $51,719. This calculation takes into account the time value of money, where future payments are worth less in today's dollars.

Use the Following 8% Interest Factors for Questions 102 Through