On January 1, 2003, Dodge Company completed the following transactions (use a 10 percent annual interest rate

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On January 1, 2003, Dodge Company completed the following transactions (use a 10 percent annual interest rate for all transactions):

a. Deposited $200,000 in a debt retirement fund. Interest will be computed at six-month intervals and added to the fund at those times (i.e.. semiannual compounding). (Hint: Think carefully about n and /'.)

b. Established a plant addition fund of $ 1 ,000,000 to be available at the end of year 10. A single sum that will grow to $1,000,000 will be deposited on January 1, 2003.

c. Established a pension retirement fund of $800,000 to be available by the end of year 1 by making 10 equal annual deposits each at year-end, starting on December 31, 2003.

d. Purchased a $750,000 machine on January 1, 2003, and paid cash, $400,000. A four-year note payable is signed for the balance. The note will be paid in four equal year-end payments starting on December 3 1,2003.

Required (show computations and round to the nearest dollar): 1. In transaction

a, what will be the balance in the fund at the end of year 5? What is the total amount of interest revenue that will be earned? 2. In transaction

b, what single sum amount must the company deposit on January 1, 2003? What is the total amount of interest revenue that will be earned? 3. In transaction

c, what is the required amount of each of the 1 equal annual deposits? What is the total amount of interest revenue that will be earned? 4. In transaction

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Financial Accounting

ISBN: 9780070891739

1st Canadian Edition

Authors: Robert Libby

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