Question

- 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?
- 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**. - 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?

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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