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 of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Promised to pay a fixed amount of $7,900 at the end of each year for nine years and a one-time payment of $118,800 at the end of the 9th year. In transaction (1), determine the present value of the debt. In transaction (2), what single sum amount must the company deposit on January 1 of this year, as well as the total interest revenue earned. In transaction (3), determine the present value of this obligation. In transaction (4), what is the amount of each of the equal annual payments that will be paid on the note? As well as the total interest expense incurred?

1. Promised to pay a fixed amount of $7,900 at the end of each year for nine years and a one-time payment of $118,800 at the end of the 9th year.
2. Established a plant remodeling fund of $492,850 to be available at the end of Year 10. A single sum that will grow to $492,850 will be deposited on January 1 of this year.
3. Agreed to pay a severance package to a discharged employee. The company will pay $76,900 at the end of the first year, $114,400 at the end of the second year, and $151,900 at the end of the third year.
4. Purchased a $179,500 machine on January 1 of this year for $35,900 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

Answer 1