Problem 1 - Assume that after we are done with class today, you will invest $1,000. This investment will pay you 8% (annual rate). How much money will you have at the end of 1 year under each of the following scenarios?
Interest will be paid annually.
Interest will be paid quarterly.
Problem 2 - Jamie has decided to start saving $4,000 a year for the next 10 years to be able to pay for his son's college tuition. He will earn 4% interest compounded annually. He decides to make the first deposit immediately.
How much will Jamie have available in his account at the end of 10 years?
Problem 3 - Assume that you borrow $5,000 from the bank with an agreement to repay the amount in three equal annual installments beginning in one year. The loan is at 6% per year. What is the required annual payment?
Problem 4 - On January 1, 2014, Canes Inc. sold $300 million of 9% bonds. The bonds pay interest semi-annually and mature in 10 years.
1. What is the selling price of the bonds if the market (yield) is 10%?
2. What is the selling price of the bonds if the market (yield) is 8%?
3. What is the selling price of the bonds if the market (yield) is 9%?
Problem 4 - On May 13, we purchase land and building for $200,000 cash. The appraised value of the building is $162,500, and the land is appraised at $87,500.
How should the $200,000 purchase price be recorded?
Problem 5 - In 2014, MeLo, Inc. sold equipment for $6,350 cash. The equipment was purchased on January 1, 2012 at a cost of $15,000. Depreciation through the disposal date was $8,000.
Prepare the journal entry necessary to record the disposition of this equipment.
Assume that it was sold for $12,500. Prepare the journal entry necessary to record the disposition of this equipment.