On January 1, 2014, Boston Company completed the following transactions (use a 7

Question

On January 1, 2014, Boston Company completed the following transactions (use a 7 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 $105,000 for six years. Will pay $7,350 interest at the end of each year and repay the $105,000 at the end of the 6th year.

Established a plant addition fund of $570,000 to be available at the end of year 7. A single sum that will grow to $570,000 will be deposited on January 1, 2014.

Agreed to pay a severance package to a discharged employee. The company will pay $81,000 at the end of the first year, $129,500 at the end of the second year, and $146,000 at the end of the third year.

Purchased a $160,000 machine on January 1, 2014, and paid cash, $44,000. A seven-year note payable is signed for the balance. The note will be paid in seven equal year-end payments starting on December 31, 2014.

In transaction (a), determine the present value of the debt.

Present Value: ______________

In transaction (b), what single sum amount must the company deposit on January 1, 2014?

Amount to deposit: _____________________

What is the total amount of interest revenue that will be earned?

Interest Revenue: _______________

In transaction (c), determine the present value of this obligation.

Present Value: ________________

In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?

Annual Payments: _______________

What is the total amount of interest expense that will be incurred?

Interest Expense: __________________

On January 1, 2014, Boston Company completed the following transactions (use a 7 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.)

Explanation / Answer

Solution:

Please ask one question per post.

1 Year PVIF @ 7% Interest expense + Repayment Present value of amount 1                0.935 7,350                    6,869.16 2                0.873 7,350                    6,419.77 3                0.816 7,350                    5,999.79 4                0.763 7,350                    5,607.28 5                0.713 7,350                    5,240.45 6                0.666 112,350                  74,863.55 Present value of debt               105,000.00

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.