Common Ground Corporation Issued $8,000,000, 10-Year Bonds and Agreed to Make

question 248

Multiple Choice

Common Ground Corporation issued $8,000,000, 10-year bonds and agreed to make annual sinking fund deposits of $620,000. The deposits are made at the end of each year into an account paying 6% annual interest. Common Ground has the following values related to the time value of money and compounded interest decisions. To the closest dollar, what amount will be in the sinking fund at the end of 10 years?

• A) $4,467,120
• B) $4,563,256
• C) $8,172,090
• D) $12,800,000

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Definitions:

Permanent Account

An account that is not closed at the end of the accounting period and its balances are carried forward into the next period.

Temporary Account

An account used in accounting that is closed at the end of each accounting period, transferring its balance to a permanent account.

Cash Sales

Transactions where payment for goods or services is made at the time of sale in cash or equivalent forms.

Credit Sales

Sales made by a business where payment is delayed, allowing the customer to purchase goods or services on account.