Question

The following information applles to the questions displayed below On January 1, Boston Company completed the following transactions use a 7% annual interest rate or all transactions provided.) g 0 0 and 0 ) Use the appropriate factor s etables om a. Borrowed $117,800 for six years. Will pay $7,400 interest at the end of each year and repay the $117,800 at the end of the 6th year. b. Established a plant remodeling fund of $492100 to be available at the end of Year 7. A single sum that will grow to $492,100 will be deposited on January 1 of this year c. Agreed to pay a severance package to a discharged employee. The company will pay $76,400 at the end of the first year, $113,900 at the end of the second year, and $151,400 at the end of the third year. d. Purchased a $177,000 machine on January 1 of this year for $35,400 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. References Section Break P9-11 Computing Present Values LO9-7, 9-8 value: Required information 15.00 points P9-11 Part 1 Required: 1. In transaction (a), determine the present value of the debt. (Round your answer to nearest whole dollar.) t value 2-a. In transaction (b), what single sum amount must the company deposit on January 1 of this year? (Round your answer to nearest whole dollar.) 2-b. What is the total amount of interest revenue that will be eaned? (Round your answer to nearest whole dollar.) References eBook & Resources Worksheet P9-11 Part 2 3. In transaction (c), determine the present value of this obligation. t value References eBook&Resources Worksheet P9-11 Part 3 5.15.00 points value: P9-11 Part 4 4-a. In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note? payments 4-b. What is the total amount of interest expense that will be incurred? t expens

Answer 1

Requirement 1:-

Interest expenses	7400
PVA of $1 (7%,6)	4.76654
PV of interest		35272
Principal payment	117800
PV of $1,(7%,6)	0.66634
PV of principal Total PV		78495 113767

Requirement 2 (a):-

Future value	492100
PV of $1 (7%,7)	0.62275
Amount of deposit	306455

Requirement 2 (b):-

Interest revenue (492100-306455)

185645

Requirement 3:-

Year	Payment. (a)	PV of $1 (7%) (b)	PV (a*b)
1	76400	0.93458	71402
2	113900	0.87344	99485
5	151400	0.81630	123588

PV of obligation = 294475

Requirement 4(a):-

Note amount ( 177000-35400)	141600
PVA of $1(7%,5)	4.1002
Annual payment	34535

Requirement 4(b):-

Interest expenses (34535*5-141600)

31075