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
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.) |
a. | 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. |
b. | 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. |
c. | 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. |
d. | 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. |
Required: | |||||||||||||
1. | In transaction (a), determine the present value of the debt. Present Value: ______________
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