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Homework answers / question archive / Whitelock Ltd sells a machine for making rugby balls to the Australian Rugby Union on 1 July 2017
Whitelock Ltd sells a machine for making rugby balls to the Australian Rugby Union on 1 July 2017. The machine normally sells for $110,000, but to support rugby in Australia Whitelock Ltd agrees to payment terms of 5 annual payments (in arrears) of $26,379.75. The borrowing rate for the Australian Rugby Union is 10%.
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The answers say it's debit receivables of $100,000 and credit revenue of $100,000. Can someone explain how and why the PV of the annual payment is $100,000? Thank you!
Annual Payments = $26379.75
Interest rate = 10%
Present Value = Annual payment * Present value factor for 5 years @10%
Present value factor for 5 years @10% = 3.79079
= $26379.75 * 3.79079 = $100000
