Joanna P.

Smith
ACC 550 Homework week 4
Chapter 6
E6-5
Using Tables
a) N= 8
I= 12%
Using present value annuity table pg. 361
50,000 x 4.96764=$248,382
With excel:
0 1 2 3
50,000 50,000 50,000 50,000
PV= ($248,381.99)
b) N= 16
I= 9%
Using present value annuity table pg.361
50,000 X 8.31256= $415,628
With excel:
0 1 2 3
50,000 50,000 50,000 50,000
PV= ($415,627.91)
C) 50,000 is Payable at the end of seventh, eight, night, and tenth periods at 12%
Using the period prior to seventh or N=6
and subtract from tenth period or N=10
From table we get the following values pg.361
(5.65022 - 4.11141) X 50,0000=$76,940.50
Or Table on pgs. 361 and 357
$50,000 X 3.03735 X .50633=$76,940.50
a rounding difference of .13
E6-12
Building A Purchase in Cash
Present Value =$610,000 Useful life is 25 years
Building B N= 25 I=
Using Table of present value of annuity due on pg. 363
N= 25 I= 12%
I=12% (8.78432)
$70,000 x 8.78432=$614,902.4
PV= $614,902.40
Building C
Purchase for $650,000
Sublet for 25 years
Annual Rental Payment of $6,000
Using table for present value of ordinary annuity on pg. 361
$6,000 X 7.84314=$47,058.84
PV= $47,058.84
Purchase Price $650,000
Present Value of rental income -47,058.84
Net Present Value $602,941
I recommend leasing building C since net cost is lower than building A or B.
Chapter 7
E7-2
1. Cash Balance of $925,000, the checking account balance should be reported as cash.
Certificate of deposit of $1,400,000 should be reported as a temporary investment.
Cash advance of $980,000 should be reported as receivable.
The $180 utility deposit should be reported as a receivable from the utility company.
2. Checking Account Balance $500,000
Overdraft ($17,000)
Petty Cash $300
Coins and Currency $1,350
Cash Balance $484,650
Cash held on bond sinking fund of $200,000 is restricted. Cash that is restricted can be reported as noncurrent.
3 Checking Account Balance $590,000
Certified check from customers $9,800
Cash Balance $599,800
Postdated checks of $11,000 from customers should be reported as receivable.
Balance requirement of $100,000 is an arrangement, and the restriction should be noted for the type of arrangement made.
Postage help should be reported as office supplies inventory.
4 Checking balance $42,000
Money market mutual fund $48,000
Cash balance $90,000
NSF checks received from customers $800 should be reported as a receivable.
5 Checking Account Balance $700,000
Cash Advance received from customers $900
Cash Balance $700,900
Cash restricted for expansion for the amount of $500,000 should be reported as an noncurrent asset.
Short-term Treasury bills of $180,000 should be reported as short term investment.
Cash advance of $900 should reported as liability.
Cash advance of $7,000 to company executive should be reported as a receivable.
Refundable deposit of $26,000 paid to federal government should reported as receivable.
E7-5
a) (1) June 3 Accounts Receivable -Bolton 2,000
Sales 2,000
June 12 Cash 1,960
Sales Discounts ($2,000 x 2%) 40
Accounts Receivable-Bolton 2,000
(2) June 3 Accounts Receivable-Bolton 1,960
Sales ($2,000 X 98%) 1,960
June 12 Cash 1,960
Accounts Receivable-Bolton 1,960
b) July 29 Cash 2,000
Accounts Receivable-Bolton 1,960
Sales Discount Forfeited 40
E7-7
(a) Bad Debt Expense 7,500
Allowance for Doubtfull Accounts 7,500*
*(800,000-50,000) X .01=$7,500
(b) Bad Debt Expense 6,000
Allowance for Doubtfull Accounts 6,000**
.05 x 160,000= $8,000 is the desired credit balance in the allowance account
**$8,000- $2,000= $6,000 is the required credit entry to bring allowance account back to $8,000 credit balance
4 5 6 7 8
50,000 50,000 50,000 50,000 50,000
4 5 6 7 8 9 10
50,000 50,000 50,000 50,000 50,000 50,000 50,000
12%
Cash held on bond sinking fund of $200,000 is restricted. Cash that is restricted can be reported as noncurrent.
Balance requirement of $100,000 is an arrangement, and the restriction should be noted for the type of arrangement made.
Cash restricted for expansion for the amount of $500,000 should be reported as an noncurrent asset.
**$8,000- $2,000= $6,000 is the required credit entry to bring allowance account back to $8,000 credit balance
11 12 13 14 15 16
50,000 50,000 50,000 50,000 50,000 50,000