Question

On January 1, New York 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)

1. Promised to pay a fixed amount of $6,900 at the end of each year for eight years and a one-time payment of $116,800 at the end of the 8th year.
2. Established a plant remodeling fund of $491,350 to be available at the end of Year 9. A single sum that will grow to $491,350 will be deposited on January 1 of this year.
3. Agreed to pay a severance package to a discharged employee. The company will pay $75,900 at the end of the first year, $113,400 at the end of the second year, and $150,900 at the end of the third year.
4. Purchased a $174,500 machine on January 1 of this year for $34,900 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.

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?

Answer 1