Q1) On January 1, Alan King decided to deposit $59,500 in a savings account that will provide funds four years later to send his son to college. The savings account will earn 7% annually. Any interest earned will be added to the fund at year-end (rather than withdrawn)
How much will be available in four years.
Prepare the journal entry that Alan should make on January 1.
What is the total interest for the four years.
Prepare the journal entry that Alan should make on December 31 of the first year and December 31 of the second year.
Record the appropriate entry on December 31, Year 1.
Record the appropriate entry on December 31 Year 2.
Q2) On January 1, a Company completed the following transactions (use a 7% annual interest rate for all transactions):
Borrowed $115,200 for eight years. Will pay $6,100 interest at the end of each year and repay the $115,200 at the end of the 8th year.
Established a plant remodeling fund of $490,150 to be available at the end of Year 9. A single sum that will grow to $490,150 will be deposited on January 1 of this year.
Agreed to pay a severance package to a discharged employee. The company will pay $75,100 at the end of the first year, $112,600 at the end of the second year, and $150,100 at the end of the third year.
Purchased a $170,500 machine on January 1 of this year for $34,100 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year.
In transaction (a), determine the present value of the debt.
In transaction (b), what single sum amount must the company deposit on January 1 of this year?
What is the total amount of interest revenue that will be earned?
In transaction (c), determine the present value of this obligation.
In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?
What is the total amount of interest expense that will be incurred?
Q3) Three intangible assets at the end of 2017 (end of the accounting year):
a. A copyright purchased on January 1, 2017, for a cash cost of $15,300. The copyright is expected to have a 10-year useful life to Springer.
b. Goodwill of $73,000 from the purchase of the Hartford Company on July 1, 2016.
c. A patent purchased on January 1, 2016, for $48,000. The inventor had registered the patent with the U.S. Patent Office on January 1, 2012.
Compute the acquisition cost of each intangible asset.
Copyright ?
Goodwill ?
Patent ?
Compute the amortization of each intangible at December 31, 2017. The company does not use contra-accounts.
copyright ?
goodwill?
patent?
Show how these assets and any related expenses should be reported on the balance sheet and income statement for 2017
income statement ?
balance sheet ?
Q4) January 1 of this year, a Company completed the following transactions (assume a 9% annual interest rate):
Bought a delivery truck and agreed to pay $60,400 at the end of three years.
Rented an office building and was given the option of paying $10,400 at the end of each of the next three years or paying $28,400 immediately.
Established a savings account by depositing a single amount that will increase to $90,800 at the end of seven years.
Decided to deposit a single sum in the bank that will provide 9 equal annual year-end payments of $40,400 to a retired employee (payments starting December 31 of this year).
What is the cost of the truck that should be recorded at the time of purchase?
Which option for the office building results in the lowest present value?
Pay in three installments
Pay in single installment
What single amount must be deposited in this account on January 1 of this year?
What single sum must be deposited in the bank on January 1 of this year?