Reference no: EM133308

Question :

(a) On January 1, 2012, Fishbone Corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest-bearing note due on 1^st January, 2015. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this kind on January 1, 2012, was 9%. At what amount should the profit from the sale of the building be reported?

(b) On 1^st January, 2012, Fishbone Corporation purchased 300 of the $1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2022, and pay interest annually starting January 1, 2013. Fishbone purchased the bonds to yield 11%. How much did Fishbone pay for the bonds?

(c) Fishbone Corporation purchases a new machine and agreed to pay for it in equivalent annual installments of $4,000 at the end of each of the next 10 years. Consider that a prevailing interest rate of 8% applies to this contract, how much could Fishbone record as the cost of the machine?

(d) Fishbone Corporation purchased a special tractor on December 31, 2012. The purchase agreement stipulated that Fishbone could pay $20,000 at the time of purchase and $5,000 at the end of each of the next 8 years. The tractor could be recorded on December 31, 2012, at what amount, consider an appropriate interest rate of 12%?

(e) Fishbone Corporation wants to withdraw $120,000 from an investment fund at the end of each year for 9 years. What should be the required initial investment at the starting of the first year if the fund earns 11%?