Springer, Inc., plans to acquire a trenching machine on June 1, 2011, with a list price of $52,000, by paying $12,000 down and signing a four-year, $40,000 noninterest-bearing note. The market rate of interest is 9 percent, compounded annually. Springer prepares its budgeted financial statements on a calendar-year basis.
A. What price did Springer pay for the machine?
B. How much interest will Springer pay over the life of the note?
C. What are the cash flows related to the loan shown on the 2011 budgeted statement of cash flows?
D. What is the interest expense shown on the 2011 budgeted income statement?
E. What is the carrying value of the note shown on the budgeted balance sheet for 2011?
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