Purchase Solution

Bonds and sinking fund deposits

Not what you're looking for?

Ask Custom Question

I would just like someone to check this and tell me if I'm on the right track with this or totally off. Thanks!

---
BE2-20 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?

80,000 is deposited each year for ten years and 5% of 80,000? Which is 4,000 so, is this right?
Fund dep. Interest Total
Year 1 80,000 4,000 84,000
Year 2 80,000 4,200(5% of 84,000) 168,200
Year 3 80,000 8,410(5% of 168,200) 256,610

Before I go any further, should I be adding the 80,000 to the total before I calculate the 5% interest of just calculate the 5% on the total from the previous year. Also, does the term "sinking fund" mean something special? Please advise me if I'm on the right track here.

Attachments
Purchase this Solution
Solution Summary

The solution explains how to calculate the future value of sinking fund deposits

Purchase this Solution
Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

View More Free Quizzes
Related BrainMass Solutions

  • Annual sinking fund

    65320 Annual sinking fund 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.

  • Sinking Fund

    42110 Sinking Fund A 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.

  • Time value of money

    13946 Time value of money calculations: Amount in the sinking fund Gordon Company issued $1,000,000, 10-year bonds and agreed to make annual sinking fund deposits of $80,000.

  • Bonds- Sinking Funds

    80014 Bonds- Sinking Funds Problem 1: Gordon company issued $1,000,000 10 year bonds and agreed to make annual sinking fund deposits of $80,000.00. the deposit are made at the end of each year into an account paying 5% annual intrest.

  • Bond Funds or Deficiency

    The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not, what will the deficiency be? (Round answers to 0 decimal places, e.g. $458,581.)

  • Time Value of Money: Gordon Company

    BE2-20 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.

  • Future and Present Value: Dwayne Wade, Serena Williams and Rex Walters

    b) Serena Williams Corporation, having recently issued a $20 million, 15-year bond issue, is committed to make annual sinking fund deposits of $600,000. The deposits are made on the last day of each year and yield a return of 10%.

  • Accounting questions

    BE2-20 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.

  • Future and present value problems: Dwayne Wade, Serena Willi

    (b) Serena Williams Corporation, having recently issued a $20 million, 15-year bond issue, is committed to make annual sinking fund deposits of $600,000. The deposits are made on the last day of each year and yield a return of 10%.

View More Related Solutions