Problem 1 - Jonas Smith wants to accumulate a sum of money to pay for his MACC program. Rather than investing a single amount today, he decides to invest $5,000 a year over the next three years in a savings account paying 6% interest compounded annually. He decides to make the first payment to the bank immediately.
How much will Jonas have available in his account at the end of three years?
Problem 2 - Assume that you borrow $1,000 from a friend and intend to repay the amount in five equal annual installments beginning one year from today. Your friend wishes to be reimbursed for the loan at 7% per year.
What is the required annual payment that must be made to repay the loan in five years?
Problem 3 - On June 30, 2014, Greyson Inc. issued $200 million of 10% bonds. The bonds pay interest semi-annually and mature on June 30, 2034. They were sold to yield 12% interest. What is the selling price of the bond?
Problem 4 - Watson Company purchased assets of Holmes Ltd. at auction for $1,300,000. An independent appraisal of the fair value of the assets acquired is listed below:
Land $214,500
Building 357,500
Equipment 572,000
Furniture 286,000
Prepare the journal entry to record the purchase of the assets.
Problem 5 - Cheney Company sold a 20-ton mechanical draw press for $60,000. The old draw press cost $77,000 and had a book value of $55,000.
Prepare the journal entry to record the disposition.