After completing a long and successful career as senior vice president for a large bank, you are
Question:
After completing a long and successful career as senior vice president for a large bank, you are preparing for retirement. After visiting the human resources office, you have found that you have several retirement options: (1) you can receive an immediate cash payment of $1 million, (2) you can receive
$60,000 per year for life (you have a life expectancy of 20 years), or (3) you can receive $50,000 per year for 10 years and then $70,000 per year for life (this option is intended to give you some protection against inflation). You have determined that you can earn 8 percent on your investments. Which option do you prefer and why?
Computing Amounts for a Fund with Journal Entries (P9-11)
On January 1, 2003, Jalopy Company decided to accumulate a fund to build an addition to its plant.
The company will deposit $320,000 in the fund at each year-end, starting on December 3 1 , 2003. The fund will earn 9 percent interest, which will be added to balance at each year-end. The accounting period ends December 3 1
.
Required: 1. What will be the balance in the fund immediately after the December 31, 2005, deposit? 2. Complete the following fund accumulation schedule:
3. Give journal entries on December 31. 2003. 2004. and 2005. 4. The plant addition was completed on January 1 . 2006 for a total cost of S 1 .060.000. Give the entry, assuming that this amount is paid in full to the contractor.
Step by Step Answer:
