Computing Future Values (Supplement C) – On December 31, 2011, Mercury Company created a fund that will be used to pay the principal amount of a $120,000 debt due on December 31, 2014. The company will make four equal annual deposits on each December 31 in 2011, 2012, 2013, and 2014. The fund will earn 7 percent annual interest, which will be added to the balance at each year-end. The fund trustee will pay the loan principal (to the creditor) upon receipt of the last fund deposit. The company’s accounting period ends December 31.
Required (show computations and round to the nearest dollar):
1. How much must be deposited each December 31?
2. What amount of interest will be earned?
3. How much interest revenue will the fund earn in 2011, 2012, 2013, and 2014?