Reference no: EM131959113
On January 1, a Company completed the following transactions (use a 7% annual interest rate for all transactions):
Borrowed $115,200 for eight years. Will pay $6,100 interest at the end of each year and repay the $115,200 at the end of the 8th year.
Established a plant remodeling fund of $490,150 to be available at the end of Year 9. A single sum that will grow to $490,150 will be deposited on January 1 of this year.
Agreed to pay a severance package to a discharged employee. The company will pay $75,100 at the end of the first year, $112,600 at the end of the second year, and $150,100 at the end of the third year.
Purchased a $170,500 machine on January 1 of this year for $34,100 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.
In transaction (a), determine the present value of the debt.
In transaction (b), what single sum amount must the company deposit on January 1 of this year?
What is the total amount of interest revenue that will be earned?
In transaction (c), determine the present value of this obligation.
In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?
What is the total amount of interest expense that will be incurred?
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