Question

On January 1, Ellsworth Company completed the following transactions (use an 8% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Borrowed $2,400,000 to be repaid in five years. Agreed to pay a fixed amount of $158,000 at the end of each year for five years and a one-time payment of $2,400,000 at the end of the 5th year. b. Established a plant remodeling fund of $1,800,000 to be available at the end of Year 10. A single sum that will grow to $1,800,000 will be deposited on January 1 of this year. c. Purchased a $766,000 machine on January 1 of this year and paid cash, $408,000. A four-year note is signed for the balance. The note will be paid in four equal year-end payments starting on December 31 of this year. Required: 1. In transaction (a), determine the present value of the debt. 2-a. In transaction (b), what single amount must the company deposit on January 1 of this year? 2-b. In transaction (b), what is the total amount of interest revenue that will be earned? 3-a. In transaction (c), what is the amount of each of the equal annual payments that will be paid on the note? 3-b. In transaction (c), what is the total amount of interest expense that will be incurred? In transaction (c), what is the total amount of interest expense that will be incurred? Note: Round your intermediate calculations and final answer to nearest whole dollar. Interest expense

          On January 1, Ellsworth Company completed the following transactions (use an 8% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.

a. Borrowed $2,400,000 to be repaid in five years. Agreed to pay a fixed amount of $158,000 at the end of each year for five years and a one-time payment of $2,400,000 at the end of the 5th year.
b. Established a plant remodeling fund of $1,800,000 to be available at the end of Year 10. A single sum that will grow to $1,800,000 will be deposited on January 1 of this year.
c. Purchased a $766,000 machine on January 1 of this year and paid cash, $408,000. A four-year note is signed for the balance. The note will be paid in four equal year-end payments starting on December 31 of this year.

Required:

1. In transaction (a), determine the present value of the debt.
2-a. In transaction (b), what single amount must the company deposit on January 1 of this year?
2-b. In transaction (b), what is the total amount of interest revenue that will be earned?
3-a. In transaction (c), what is the amount of each of the equal annual payments that will be paid on the note?
3-b. In transaction (c), what is the total amount of interest expense that will be incurred?

In transaction (c), what is the total amount of interest expense that will be incurred?
Note: Round your intermediate calculations and final answer to nearest whole dollar.

Interest expense

On January 1, Ellsworth Company completed the following transactions (use an 8% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.

a. Borrowed 2,400,000 to be repaid in five years. Agreed to pay a fixed amount of158,000 at the end of each year for five years and a one-time payment of 2,400,000 at the end of the 5th year.
b. Established a plant remodeling fund of1,800,000 to be available at the end of Year 10. A single sum that will grow to 1,800,000 will be deposited on January 1 of this year.
c. Purchased a766,000 machine on January 1 of this year and paid cash, 408,000. A four-year note is signed for the balance. The note will be paid in four equal year-end payments starting on December 31 of this year.

Required:

1. In transaction (a), determine the present value of the debt.
2-a. In transaction (b), what single amount must the company deposit on January 1 of this year?
2-b. In transaction (b), what is the total amount of interest revenue that will be earned?
3-a. In transaction (c), what is the amount of each of the equal annual payments that will be paid on the note?
3-b. In transaction (c), what is the total amount of interest expense that will be incurred?

In transaction (c), what is the total amount of interest expense that will be incurred?
Note: Round your intermediate calculations and final answer to nearest whole dollar.

Interest expense

Added by Susan F.

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