Libby Company Purchased Equipment by Paying $5,000 Cash on the Purchase

Multiple Choice

Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 8%. The liability reported on the balance sheet as of the purchase date, after the initial $5,000 payment was made, is closest to:

A) $45,000.
B) $33,664.
C) $38,664.
D) $40,000.