1. On January 1, 2015, Canden Company started to make annual deposits in order to accumulate $1,000,000 by January 1, 2019. This fund will earn annual interest of 9%.
Required:
What are the four annual deposits that Canden should make at the beginning of each year. Round your answers to the nearest whole dollar.
2. John wants to make a deposit on 1/1/2016 to be able to withdraw $1,000 at the beginning of each year starting 1/1/2020 for four years. The interest rate is 6 percent.
Required:
What is the amount of the deposit that John needs to make on 1/1/2016?
3. Bob Smith borrowed $100,000 on January 1, 2015. The interest rate of 10% is compounded semiannually to be repaid January 1, 2025. To repay this Bob wants to start making five equal annual deposits into fund that earns 8% annum on January 1, 2020.
Required:
What is the amount of the five annual deposits that Bob needs to make?
4. Utomis Corp. needs $100,000 in five years for their budgeted capital expenditures. How much does Utomis need to deposit today when the interest rate is 10%.
5. Timken Company issues a $1,000,000 bond at 9% for 10 years. The market interest rate is 10%.
Required:
What is the issue price of these bonds and the bond discount or premium?Assume that Timken uses the effective interest method to amortize the bond discount or premium for the semiannual interest payments, what is the interest expense and the amount of cash paid on the first interest payment?6. On January 1, 2015, Clark Co. leased office space for five years at a monthly rental of $70,000. On the same date, Clark paid the lessor the following amounts:
First month's rent $ 60,000
Last month's rent 60,000
Security deposit (refundable at lease expiration) 80,000
Installation of new walls and offices 360,000
Required:
What should be Clark's 2015 expense relating to utilization of the office space?
7. Howe Co. leased equipment to Kew Corp. on January 2, year 1, for an eight-year period expiring December 31, year 8. Equal payments under the lease are $682,000 and are due on January 2 of each year. The first payment was made on January 2, year 1. The list selling price of the equipment is $4,000,000 and its carrying cost on Howe's books is $3,180,000. The lease is appropriately accounted for as a sales-type lease. The present value of the lease payments is $3,750,000.
Required:
What amount of profit on the sale should Howe report for the year ended December 31, year 1?