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 $7,000 at the end of each year for six years and a one-time payment of $117,000 at the end of the 6th year. b. Established a plant remodeling fund of $491,500 to be available at the end of Year 7. A single sum that will grow to $491,500 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,000 at the end of the first year, $113,500 at the end of the second year, and $151,000 at the end of the third year. d. Purchased a $175,000 machine on January 1 of this year for $35,000 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. Required: 1. In transaction (a), determine the present value of the debt. Note: Round your intermediate calculations and final answer to nearest whole dollar. Present value Req 2a In transaction (b), what single sum amount must the company deposit on January 1 of this year? Note: Round your answer to nearest whole dollar. Amount to deposit Req 2a Req 2b Interest revenue Req 2b What is the total amount of interest revenue that will be earned? Note: Round your intermediate calculations and final answer to nearest whole dollar.
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 $7,000 at the end of each year for six years and a one-time payment of $117,000 at the end of the 6th year. b. Established a plant remodeling fund of $491,500 to be available at the end of Year 7. A single sum that will grow to $491,500 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,000 at the end of the first year, $113,500 at the end of the second year, and $151,000 at the end of the third year. d. Purchased a $175,000 machine on January 1 of this year for $35,000 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. Required: 1. In transaction (a), determine the present value of the debt. Note: Round your intermediate calculations and final answer to nearest whole dollar. Present value Req 2a In transaction (b), what single sum amount must the company deposit on January 1 of this year? Note: Round your answer to nearest whole dollar. Amount to deposit Req 2a Req 2b Interest revenue Req 2b What is the total amount of interest revenue that will be earned? Note: Round your intermediate calculations and final answer to nearest whole dollar.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![Required information
[The following information applies to the questions displayed below.]
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 $7,000 at the end of each year for six years and a one-time payment of $117,000
at the end of the 6th year.
b. Established a plant remodeling fund of $491,500 to be available at the end of Year 7. A single sum that will grow to
$491,500 will be deposited on January 1 of this year.
c. Agreed to pay a severance package to a discharged employee. The company will pay $76,000 at the end of the first
year, $113,500 at the end of the second year, and $151,000 at the end of the third year.
d. Purchased a $175,000 machine on January 1 of this year for $35,000 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.
Required:
1. In transaction (a), determine the present value of the debt.
Note: Round your intermediate calculations and final answer to nearest whole dollar.
Present value
Req 2a
In transaction (b), what single sum amount must the company deposit on January 1 of this year?
Note: Round your answer to nearest whole dollar.
Amount to deposit
Req 2a
Req 2b
Interest revenue
Req 2b
What is the total amount of interest revenue that will be earned?
Note: Round your intermediate calculations and final answer to nearest whole dollar.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdea8ea92-68cc-41bd-a13b-236074c1b3f1%2F5c87ae50-a101-4047-9fdb-36237e354511%2Fiv1o3g6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
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 $7,000 at the end of each year for six years and a one-time payment of $117,000
at the end of the 6th year.
b. Established a plant remodeling fund of $491,500 to be available at the end of Year 7. A single sum that will grow to
$491,500 will be deposited on January 1 of this year.
c. Agreed to pay a severance package to a discharged employee. The company will pay $76,000 at the end of the first
year, $113,500 at the end of the second year, and $151,000 at the end of the third year.
d. Purchased a $175,000 machine on January 1 of this year for $35,000 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.
Required:
1. In transaction (a), determine the present value of the debt.
Note: Round your intermediate calculations and final answer to nearest whole dollar.
Present value
Req 2a
In transaction (b), what single sum amount must the company deposit on January 1 of this year?
Note: Round your answer to nearest whole dollar.
Amount to deposit
Req 2a
Req 2b
Interest revenue
Req 2b
What is the total amount of interest revenue that will be earned?
Note: Round your intermediate calculations and final answer to nearest whole dollar.
Transcribed Image Text:3. In transaction (c), determine the present value of this obligation.
Note: Round your intermediate calculations and final answer to nearest whole dollar.
Present value
Req 4a
In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?
Note: Round your answer to nearest whole dollar.
Note payable
Req 4b
Req 4a
Req 4b
What is the total amount of interest expense that will be incurred?
Note: Round your intermediate calculations and final answer to nearest whole dollar.
Interest expense
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