1) Answer each of the following independent situations, showing complete work (with the time value of money). All interest rates are given as annual interest rates.

a) On January 1, 2016, Adelphi Corporation sold a warehouse that cost $411,000 and that had accumulated depreciation of $136,000 on the date of sale. Adelphi received as consideration a $400,000 non-interest-bearing note, due on January 1, 2020. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2016, was 8%. At what amount should the gain or loss from the sale of the building be reported? (2 points) [This is a present value problem, where $400,000 is the FV]

b) On January 1, 2016, Adelphi Corporation issued 1,000 of the 6%, 10-year bonds. The bonds have a par value of $1,000 per bond, and pay interest semi-annually beginning January 1, 2017. Adelphi sold the bonds to yield 8% annually. How much did Adelphi receive as the issue price of the bonds? (2 points) [This is a present value problem. You have to use 3% to calculate the semi-annual interest payment, 4% as the rate to look up the PV factor, and 20 as the number of periods]

c) Adelphi Corporation bought new equipment and agreed to pay for it in five equal annual installments of $10,000 starting on the date of the purchase. Assuming that a prevailing annual interest rate of 10% applies to this contract, how much should Adelphi record as the purchase cost of the equipment? (2 points) [This is a present value of annuity due problem]

d) Adelphi Corporation purchased a special conveyor system on January 1, 2016. The purchase agreement stipulated that Adelphi should pay $15,000 at the time of purchase and $50,000 at the end of each of the 5 years starting with 2016. The conveyor system should be recorded on January 1, 2016 at what amount, assuming an appropriate annual interest rate of 8%? (2 points) [This is a present value of ordinary annuity problem]

e) Adelphi Corporation wants to withdraw $500,000 each year from an investment fund at the end of each of the next 9 years beginning with 2016. What should be the required initial investment at the beginning of 2016 if the fund earns 12% per year? (2 points) [This is a present value of ordinary annuity problem]