They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Stine estimates that the machinery will have a useful life of 10 years and a residual value of $20,000. If Stine uses straight-line depreciation, annual depreciation will be • $3,760. • $4,072.
Danko uses a predetermined overhead rate to apply overhead to units produced. As of January 1, 2010, Danko anticipated incurring 1,000 hours of direct labor. Danko estimated overhead for 2010 of $5,000 plus $8 per hour. 4. Danko incurred depreciation of $8,000 during 2010, of which $6,000 was factory depreciation and $2,000 was office depreciation.
An investor purchased call options for $2 per option. This investor purchased 1,000 of these call options on a stock that has a standard deviation of 20% and an exercise price of $140/share. The investor has a liquidity problem at this point and needs to sell the call options at current value. The current stock price is $120/share and the option will expire in a ½ year. What is the total profit or loss to the investor?
Problems: Easy Problems 1-6 • 5-1 Bond Valuation with Annual payments Jackson Corporation’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds? 80*7.1607+1000*.3555 = $928 • 5-2 Yield to Maturity for Annual payments Wilson Wonders’s bonds have 12 years remaining to maturity.
Problem 1-20 Effect of product versus period costs on financial statements Hoen Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions. 1. Acquired $50,000 cash by issuing common stock. 2.
It is acquired in exchange for 1,000 shares of common stock in Shabbona Corporation. The stock has a par value per share of $10 and a market price of $13 per share Shabbona Account Titles 1. 2. Debit Truck # 1 Cash Truck #2 Discount on Notes Payable $ Credit 13,900.00 $ $ $ ** $ $ 13,900.00 2,000.00 18,000.00 18,364.00 1,636.00 Cash Notes Payable PV of $18000 @ 10% for 1 year (PV of Single sum 10%, 1 year $14,000) = $18,000*.90909= $16363.62 rnd $16,364 16,634 + $2,000= $18,364 ** 3. 4.
BE10-1 Kananga Company has these obligations at December 31: (a) a note payable for $100,000 due in 2 years – Yes, this is a long term liability. (b) a 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments – No, this would be considered a liquidity. (c) interest payable of $15,000 on the mortgage – No, this would be a current
TIME VALUE OF MONEY Assignment 1. What is the present value of: a. $8,000 in 10 years at 6% b. $16,000 in 5 years at 12% c. $25,000 in 15 years at 8% d. $1,000 in 40 periods at 20% 2. If you invest $12,000 today, how much will you have: a.
If it is compounded continuosly? Explain the results. Annual: PV = -2000, I/YR = 6; N = 10; solve for FV = $3581.70 Quarterly: I/YR = 6/4 = 1.5; N = 10*4 = 40; solve for FV = $3628.04 Continuously: -2000*(e**.06**10) = $3,644.24 FV increases with the number of compounding periods Question 1b What will be the total accumulated amount at the end of 10 years if in addition to the initial $2,000, you also deposit $4,000 in year 4 and $8,000 in year 8? Assume an annual 6% interest rate for all ten years. First cash flow: FV = 3581.70 (already done) Second cash flow: PV = -4000, N = 6, I/YR = 6, solve for FV = 5674.08 Third cash flow: PV = -8000, N=2, I/YR = 6; solve for FV = 8988.80 ANSWER: 3581.70+5674.08+8988.80 = $18,244.58 Question 1c Using the information from Question 1b, what will be the total accumulated value at the end of 10 years, if the interest rate is expected to be 6% for only the first three years, followed by 8% for the next five years, and 10% thereafter?
Product Revenue, Utility Expense, Supplies Expense c. Utility Expense, Supplies Expense d. Product Revenue, Utility Expense, Supplies Expense 3. 1) The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one half of this amount had been earned. a. B. adjustment of an unearned revenue MM-DD-YY | Cash | | | $ 1,500 | | | Unearned Revenue | | $ 1,500 | | Advance collection from client | | | 12-31-YY | Unearned Revenue | | $ 750 | | | Revenue | | | $ 750 | | Adjusting entry for earned portion of prepayment | b. c. Increase total revenue by $750 2) Sally Corporation provided $1,500 of services to Artech Corporation; no billing had been made by December 31. a. D. adjustment to record an accrued revenue 12-31-YY | Accounts Receivable | | $ 1,500 | | | Revenue | | | $ 1,500 | | Adjusting entry to reflect services provided | | b. C. Increase total revenue by $1,500 3) Salaries owed to employees at year-end amounted to $1,000.