Question

Rewind Media Inc. has $629,000 in a 9% interest account. How many years will it take...

  1. Rewind Media Inc. has $629,000 in a 9% interest account. How many years will it take to deplete the account if $148,359 will be taken at the beginning of each year including today?
  2. On March 28, Billingslea Appraising Co. issues $2,500,000 of 6%, 10-year bonds with interest due at each year-end. The market rate is 5% for similar risk bonds. The company calculates that the present value of the bond principal is $1,534,775, while the present value of the bond interest payments is $1,158,260. Record the March 28 bond issuance entry.
  3. Kropp Engineering is planning to purchase new machinery in 4 years for $134,000. How much does the company need to deposit now into a 12% investment fund that compounds interest quarterly?
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Answer #1
1- How many years will it take to deplete the account =using nper function in MS excel nper(rate,pmt,pv,fv,type) rate = 9% pmt =148359 pv =629000 fv =0 type =1 NPER(9%,148359,-629000,0,1) 5.0
2- Issue value of bond
present value of the bond principal 1534775
present value of the bond interest payments 1158260
total market value of bond 2693035
Journal Entry
Date Explanation Debit credit
28-Mar cash 2693035
bonds payable 2500000
premium on bonds payable 193035
3- How much does the company need to deposit now price of machine/(1+r)^n 134000/(1.03)^16 83504.37
price of machinery =134000 r =12% r =12/4 = 3% n =4*4 =16
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