Accounting Chapter 6, Question 34

Answer the following questions related to Windsor Inc. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Click here to view the factor table.

Section 1:

Windsor Inc. has completed the purchase of new Surface computers. The fair value of the equipment is $429,625. The purchase agreement specifies an immediate down payment of $100,000 and semiannual payments of $37,190 beginning at the end of 6 months for 6 years. What is the interest rate, to the nearest percent, used in discounting this purchase transaction?

Interest rate

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% semiannually

Section 2:

WindsorInc. has $323,172 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $48,000 at the end of each year for 8 years, and the other is to receive a single lump-sum payment of $515,089 at the end of the 8 years. Which alternative should Windsor select? Assume the interest rate is constant over the entire investment.

Alternate 1 or 2?

Section 3:

Windsor Inc. wishes to accumulate $1,260,000 by December 31, 2027, to retire bonds outstanding. The company deposits $200,000 on December 31, 2017, which will earn interest at 6% compounded quarterly, to help in the retirement of this debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 10 years to ensure that $1,260,000 is available at the end of 2027. (The quarterly deposits will also earn at a rate of 6%, compounded quarterly.) (Round answer to 0 decimal places, e.g. 458,582.)

Annuity of value of quarterly deposits $

Section 4:

Windsor loans money to Luck Corporation in the amount of $490,000. Windsor accepts an 6% note due in 6 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Windsor needs money and therefore sells the note to Denver National Bank, which demands interest on the note of 8% compounded semiannually. What is the amount Windsor will receive on the sale of the note? (Round answer to 0 decimal places, e.g. 458,581.)

Amount received on sale of note $