Reference no: EM132497243

Question - On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions):

1. Borrowed $115,000 for seven years. Will pay $6,000 interest at the end of each year and repay the $115,000 at the end of the 7th year.

2. Established a plant remodeling fund of $490,000 to be available at the end of Year 8. A single sum that will grow to $490,000 will be deposited on January 1 of this year.

3. Agreed to pay a severance package to a discharged employee. The company will pay $75,000 at the end of the first year, $112,500 at the end of the second year, and $150,000 at the end of the third year.

4. Purchased a $170,000 machine on January 1 of this year for $34,000 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year.

Required -

a. In transaction (b), what single sum amount must the company deposit on January 1 of this year?

b. What is the total amount of interest revenue that will be earned?