Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 35

Present value calculations Using a present value table, your calculator, or a computer program present value function, answer the following questions:
Required:
a. ? What is the present value of nine annual cash payments of $36,000, to be paid at the end of each year using an interest rate of 6%?
b. ? What is the present value of $135,000 to be paid at the end of 20 years, using an interest rate of 18%?
c. ? How much cash must be deposited in a savings account as a single amount in order to accumulate $2,700,000 at the end of 12 years, assuming that the account will earn 10% interest?
d. ? How much cash must be deposited in a savings account (as a single amount) in order to accumulate $450,000 at the end of seven years, assuming that the account will earn 12% interest?
e. ? Assume that a machine was purchased for $540,000. Cash of $180,000 was paid, and a four-year, 8% note payable was signed for the balance.
1. ? Use the horizontal model, or write the journal entry, to show the purchase of the machine as described.
2. ? How much is the equal annual payment of principal and interest due at the end of each year? Round your answer to the nearest $1.
3. ? What is the total amount of interest expense that will be reported over the life of the note? Round your answer to the nearest $1.
4. ? Use the horizontal model, or write the journal entries, to show the equal annual payments of principal and interest due at the end of each year.