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Accounting questions

BE2-19 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?

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?

BE2-25 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?

BE2-27 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?

BE2-32 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?

Solution Preview

BE2-19 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?

The amount that Proter Company will receive will be the future value of 10,000. The time period is 10 years and the rate is 5%. We use the FVIF table to get the future value factor. For 10 years and 5% the FV factor is 1.629. The amount received after 10 years is 10,000X1.629=$16,290

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 ...

Solution Summary

The solution has 5 accounting questions dealing with time value of money calculations.

$2.19