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

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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ů Ĉ On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): ( FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $7,100 at the end of each year for nine years and a one-time payment of $117,200 at the end of the 9th year. Show Transcribed Text b. Established a plant remodeling fund of $491,650 to be available at the end of Year 10. A single sum that will grow to $491,650 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,100 at the end of the first year, $113,600 at the end of the second year, and $151,100 at the end of the third year. d. Purchased a $175,500 machine on January 1 of this year for $35,100 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year. 1. In transaction (a), determine the present value of the debt. 2. In transaction (b), what single sum amount must the company deposit on January 1 of this year? What is the total amount of interest revenue that will be earned? 3. In transaction (c), determine the present value of this obligation. 4. In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note? What is the total amount of interest expense that will be incurred? Note: Round your intermediate calculations and final answer to nearest whole dollar.
Transcribed Image Text:ů Ĉ On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): ( FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $7,100 at the end of each year for nine years and a one-time payment of $117,200 at the end of the 9th year. Show Transcribed Text b. Established a plant remodeling fund of $491,650 to be available at the end of Year 10. A single sum that will grow to $491,650 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,100 at the end of the first year, $113,600 at the end of the second year, and $151,100 at the end of the third year. d. Purchased a $175,500 machine on January 1 of this year for $35,100 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year. 1. In transaction (a), determine the present value of the debt. 2. In transaction (b), what single sum amount must the company deposit on January 1 of this year? What is the total amount of interest revenue that will be earned? 3. In transaction (c), determine the present value of this obligation. 4. In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note? What is the total amount of interest expense that will be incurred? Note: Round your intermediate calculations and final answer to nearest whole dollar.
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