Your company has negotiated the purchase of some land, a building, equipment, and vehicles for $2,000,000. The appraised values of these assets is as follows: Land 1,000,000 Building 550,000 Equipment 630,000 Vehicles 120,000 total 2,300,000
| There are two choices to finance the acquisition of these assets: one, would be to obtain an installment loan from |
| City National Bank at 9.0% for 6 years (compounded annually). The other choice would be to issue non-cumulative, |
| $125 par value, 10% preferred stock. |
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| Required: |
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| Compute the values of the acquired assets based on the appraised values (5 points) and prepare the resulting |
| journal entry (5 points). |
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| Compute the payment on the loan (5 points) and prepare the repayment schedule (10 points). |
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| Prepare a written analysis of the two financing options (at least 100 words), discussing the advantages (5 points) and |
| disadvantages ( 5 points) of each (for a total of 20 points). |
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| Finally, provide your recommendation (5 points), based on the advantages and disadvantages mentioned in your |
| analysis. Be specific, and be sure to show all work. |