Question
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
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) (Use the appropriate factor(s) from the tables provided.)
Promised to pay a fixed amount of $6,600 at the end of each year for six years and a one-time payment of $116,200 at the end of the 6th year.
Established a plant remodeling fund of $490,900 to be available at the end of Year 7. A single sum that will grow to $490,900 will be deposited on January 1 of this year.
Agreed to pay a severance package to a discharged employee. The company will pay $75,600 at the end of the first year, $113,100 at the end of the second year, and $150,600 at the end of the third year.
Purchased a $173,000 machine on January 1 of this year for $34,600 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-a. In transaction (b), what single sum amount must the company deposit on January 1 of this year?
2-b. What is the total amount of interest revenue that will be earned?
3. In transaction (c), determine the present value of this obligation.
4-a. In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?
4-b. What is the total amount of interest expense that will be incurred?
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