Question

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?

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