a) On May 1, 2014, Goldberg company sold some machinery to Newlin Company on an

Question

   a) On May 1, 2014, Goldberg company sold some machinery to Newlin Company on an installment contract basis. The contract required five equal annual payments, with the first payment due on May 1, 2014. What present value concept is appropriate for this situation?

   b) On June 1, 2014, Seymour Inc. purchased a new machine that it does not have to pay for until May 1, 2016. The total payment on May 1, 2016 will include both principal and interest. Assuming interest at a 12% rate, the cost of the machine would be the total payment multiplied by what time value of money concept?

c) Costner inc. wishes to know how much money it will have available in 5 years if five equal amounts of $35,000 are invested, with the first amount invested immediately. What interest table is appropriate for this situation?

d) Megan Hofman invests in a "jumbo" $200,000, 3-year certificate of deposit at first wisconsin bank. What table would be used to determine the amount accumulated at the end of 3 years?

Explanation / Answer

a)Present value of an annuity due of 1 for five periods

b)Present value of an annuity due of 1 table.

c)$35,000 times the present value of a 5-year, ordinary annuity of 1.

d)$20,000 times the present value of a 3year, ordinary annuity of 1.

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