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    Accounting Problems

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    For each of the following cases, indicate (1) to what interest rate columns and (2) to what number of periods you would refer in looking up the future value factor.

    1. In Table 1 ( Future value of 1):

    Annual Number of
    Rate Years Invested Compounded
    A 6% 5 Annually
    B 5% 3 Semiannually

    2. In Table 2 (future value of an annuity of of 1)

    Annual Number of
    Rate Years Invested Compounded
    A 5% 10 Annually
    B 4% 6 Semiannually

    BE 2-19
    Porter Company signed a lease for an office building for a period of 10 years. Under
    The lease agreement, a security deposit of $10,000 is made. The deposit will be
    Returned at the expiration of the lease with interest compounded at 5% per year.
    What amount will Porter receive at the time the lease expires?

    BE 2-20
    Gordon Company issued $1,000,000, 10-year bonds and agreed to make annual
    sinking fund deposits of $80,000. The deposits are made at the end of each year into
    an account paying 5% annual interest. What amount will be in the sinking fund at the
    end of 10 years?

    Page 2

    1. In Table 3 (present value of 1):
    Annual Number of Discounts
    Rate Years Invested Per Year
    A 12% 6 Annually
    B 10% 15 Semiannually
    C 8% 8 Quarterly

    2. In Table 4 (present value of an annuity of 1):
    Annual Number of Number of Frequency of
    Rate Years Involved Payments Involved Payments
    A 12% 20 20 Annually
    B 10% 5 10 Semiannually
    C 8% 4 16 Quarterly

    BE 2-25
    Smolinski Company is considering an investment which will return a lump sum of $500,000 five years from now. What amount should Smolinski Company pay for this Investment to earn a 15% return?

    BE 2-27
    Kilarny Company is considering investing in an annuity contract that will return $20,000 annually at the end of each year for 15 years. What amount should Kilarny Company pay for this investment if it earns a 6% return?

    BE 2-32
    Galway Bay Enterprises issued 10%, 8-year, $2,000,000 par value bonds that pay interest semiannually on October 1 and April 1. The Bonds are dated April 1, 2002, and are issued on that date. The discount rate of interest for such bonds on April 1, 2002, is 12%. What cash proceeds did Galway Bay receive from issuance of the bonds?

    Page 3

    E 2-17: Prepare an answer to the following problem.

    Selected data from a February payroll register for Andrew Manion Company are presented below. Some amounts are intentionally omitted.

    Gross earnings:
    Regular $8,900 State income taxes $(3)
    Overtime (1) Union dues 100
    Total (2) Total deductions (4)
    Deductions: Net pay $7,660
    FICA taxes $ 800 Accounts debited:
    Federal income taxes 1,140 Warehouse wages (5)
    Store wages $4,000

    FICA taxes are 8%. State income taxes are 3% of gross earnings.

    A Fill in the missing amounts.
    B Journalize the February payroll and the payment of the payroll.

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    Solution Summary

    The solution has various accounting problems relating to time value of money and payroll calculations.