Answer each of these unrelated questions.

(a)
On January 1, 2015, Yang Corporation sold a building that cost ¥25,000,000 and that had
accumulated depreciation of ¥10,000,000 on the date of sale. Yang received as consideration a
¥24,000,000 non-interest-bearing note due on January 1, 2018. 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 type on January 1, 2015, was 9%. At what amount should the gain from the sale
of the building be reported?
Ans

The present value of the note = ¥24,000,000 / (1 + 0.09)^3

= ¥24,000,000 / 1.295029

= ¥18,532,403

Actual cost of building = ¥25,000,000 - ¥10,000,000

= ¥15,000,000

Gain form the sale of the building = ¥18,532,403 - ¥15,000,000

= ¥3,532,403

(b)
On January 1, 2015, Yang Corporation purchased 300 of the ¥100,000 face value, 9%, 10-year
bonds of Walters Inc. The bonds mature on January 1, 2025, and pay interest annually beginning
January 1, 2016. Yang purchased the bonds to yield 11%. How much did Yang pay for the
bonds?
Ans :
Par value of the bonds = 300 x ¥100,000
= ¥30,000,000

Annual interest on bond = ¥30,000,000 x 9%

= ¥2,700,000

Market value = Present value of interest + Present Value of maturity

=
(c)
Yang Corporation bought a new machine and agreed to pay for it in equal annual installments of
¥400,000 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 8%
applies to this contract, how much should Yang record as the cost of the machine?
Ans
Cost of the machine = ¥400,000 x (1-(1/1.08)^10) / 0.08
= ¥400,000 x (0.536807) / 0,08
= ¥2,684,035
(d)
Yang Corporation purchased a special tractor on December 31, 2015. The purchase agreement
stipulated that Yang should pay ¥2,000,000 at the time of purchase and ¥500,000 at the end of
each of the next 8 years. The tractor should be recorded on December 31, 2015, at what amount,
assuming an appropriate interest rate of 12%?
Ans
Present value = ¥2,000,000 + (¥500,000 x 4.9676)
= ¥2,000,000 + ¥2,483,800
= ¥4,483,800

(e)
Yang Corporation wants to withdraw ¥12,000,000 (including principal) from an investment fund
at the end of each year for 9 years. What should be the required initial investment at the
beginning of the first year if the fund earns 11%?
Ans
Present value of annuity = ¥12,000,000 x (1-(1.11)^9)/0.11
= ¥12,000,000 x (5.537047532)
= ¥66,444,570