n 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. Borrowed $2,200. DOD to be repaid in five years. Agreed to pay a fixed amount of $154,000 at the end of each year for five years and a one-time payment of $2,200,000 at the end of the 5th year. Established a plant remodeling fund of $1,400,000
n 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. Borrowed $2,200. DOD to be repaid in five years. Agreed to pay a fixed amount of $154,000 at the end of each year for five years and a one-time payment of $2,200,000 at the end of the 5th year. Established a plant remodeling fund of $1,400,000 to be available at the end of Year 10. A single sum that will grow to $1,400,000 will be deposited on January 1 of this year. Purchased a $758,000 machine on January 1 of this year and paid cash, $404,000, 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 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?
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