[The following information applies to the questions displayed below.] On January
ID: 2466227 • Letter: #
Question
[The following information applies to the questions displayed below.]
On January 1, 2014, Boston Company completed the following transactions (use a 9 percent annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
Borrowed $118,000 for six years. Will pay $10,620 interest at the end of each year and repay the $118,000 at the end of the 6th year.
Established a plant addition fund of $520,000 to be available at the end of year 6. A single sum that will grow to $520,000 will be deposited on January 1, 2014.
Agreed to pay a severance package to a discharged employee. The company will pay $86,000 at the end of the first year, $123,500 at the end of the second year, and $149,000 at the end of the third year.
Purchased a $300,000 machine on January 1, 2014, and paid cash, $39,000. A six-year note payable is signed for the balance. The note will be paid in six equal year-end payments starting on December 31, 2014.
1.
In transaction (a), determine the present value of the debt.
2-a.
In transaction (b), what single sum amount must the company deposit on January 1, 2014?
2-b.
What is the total amount of interest revenue that will be earned?
3.
In transaction (c), determine the present value of this obligation.
4-a.
In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?
4-b.
What is the total amount of interest expense that will be incurred?
Purchased a $300,000 machine on January 1, 2014, and paid cash, $39,000. A six-year note payable is signed for the balance. The note will be paid in six equal year-end payments starting on December 31, 2014.
1.
In transaction (a), determine the present value of the debt.
2-a.
In transaction (b), what single sum amount must the company deposit on January 1, 2014?
2-b.
What is the total amount of interest revenue that will be earned?
3.
In transaction (c), determine the present value of this obligation.
4-a.
In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?
4-b.
What is the total amount of interest expense that will be incurred?
Borrowed $118,000 for six years. Will pay $10,620 interest at the end of each year and repay the $118,000 at the end of the 6th year.
Established a plant addition fund of $520,000 to be available at the end of year 6. A single sum that will grow to $520,000 will be deposited on January 1, 2014.
Agreed to pay a severance package to a discharged employee. The company will pay $86,000 at the end of the first year, $123,500 at the end of the second year, and $149,000 at the end of the third year.
Purchased a $300,000 machine on January 1, 2014, and paid cash, $39,000. A six-year note payable is signed for the balance. The note will be paid in six equal year-end payments starting on December 31, 2014.
On January 1, 2014, Boston Company completed the following transactions (use a 9 percent annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
a.Borrowed $118,000 for six years. Will pay $10,620 interest at the end of each year and repay the $118,000 at the end of the 6th year.
b.Established a plant addition fund of $520,000 to be available at the end of year 6. A single sum that will grow to $520,000 will be deposited on January 1, 2014.
c.Agreed to pay a severance package to a discharged employee. The company will pay $86,000 at the end of the first year, $123,500 at the end of the second year, and $149,000 at the end of the third year.
.Purchased a $300,000 machine on January 1, 2014, and paid cash, $39,000. A six-year note payable is signed for the balance. The note will be paid in six equal year-end payments starting on December 31, 2014.
1.
In transaction (a), determine the present value of the debt.
2-a.
In transaction (b), what single sum amount must the company deposit on January 1, 2014?
2-b.
What is the total amount of interest revenue that will be earned?
3.
In transaction (c), determine the present value of this obligation.
4-a.
In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?
4-b.
What is the total amount of interest expense that will be incurred?
Explanation / Answer
1)
Year Cash flow PV factor = 1/(1+R)^n Present value 1 $ 10,620.00 0.91743 $ 9,743.12 2 $ 10,620.00 0.84168 $ 8,938.64 3 $ 10,620.00 0.77218 $ 8,200.59 4 $ 10,620.00 0.70843 $ 7,523.48 5 $ 10,620.00 0.64993 $ 6,902.27 6 $128,620.00 0.59627 $ 76,691.90 Present value of the obligation $118,000.00Related Questions
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