Answer and Explanation:
According to the given situation, the income statement and balance sheet as per parts is shown below:-
<u>Accounts Account Title Financial statements </u>
<u>For Part A</u>
Debit Accounts receivable Liability account Balance sheet
Credit Consulting service Income statement
revenue
<u>For Part B</u>
Debit Interest receivable Liability account Balance sheet
Credit Interest revenue Income statement
<u>For Part C</u>
Debit Accounts receivable Assets account Balance sheet
Credit Service Revenue Income statement
<u>For Part D</u>
Debit Janitorial expense Income statement
Credit Janitorial expense Liability account Balance sheet
Payable
<u>For Part E</u>
Debit Rent expenses Income statement
Credit Rent expenses Liability account Balance sheet
payable
Answer:
$9,600,000
Explanation:
The computation of the projected operating cash flow is given below:
= EBIT × (1 - tax rate) + depreciation expense
where
EBIT should be
= $20,000,000 - $8,000,000 - $6,000,000
= $6,000,000
Now the operating cash flow should be
= $6,000,000 × (1 - 0.40) + $6,000,000
= $3,600,000 + $6,000,000
= $9,600,000
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Answer: Make immediate payment of $2,458,000
Explanation:
The recommended payment option will be the one with a lower present value.
It can make a payment of $2,458,000 now which would be the PV of the first option.
Second option is a constant amount for 15 years to be paid on the first day of every year making it an annuity due.
Present Value of annuity due;
= Annuity * Present value factor of Annuity due, 15 periods, 11%
= 336,800 * 7.9819
= $2,688,303.92
<em>Lower and recommended option is to make immediate payment of $2,458,000. </em>