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nasty-shy [4]
3 years ago
9

Suppose your opportunity cost rate is 11 percent compounded annually. (a) How much must you deposit in an account today if you w

ant to pay yourself $230 at the end of each of the next 15 years? (b) How m uch must you deposit if you want to pay yourself $230 at the beginning of each of the next 15 years?
Business
1 answer:
BlackZzzverrR [31]3 years ago
3 0

Answer:

a. Amount = $1653.93

b. Amount = $1835.82

Explanation:

a.

The Present Value is the deposited amount of future payments.

The payments are annuity if they are made at the end of each year.

To compute the present value of an annuity with periodic payment, we'll make use of the following formula:

M(1 - (1 + r)^- T)/ r

Where

M = Periodic Payment = $230

T = Periods = 15

r = rate = 11% = 0.11

So, Amount of Deposit = 230(1 - (1 + 0.11)^-15)/0.11

Amount = 230(1 - (1.11)^-15)/0.11

Amount = 230 ( 1 - 0.209)/0.11

Amount = 230 * 0.791/0.11

Amount = 230 * 7.191

Amount = $1653.93

b.

In this case payments are made at the beginning of each period

This means that the payments are an annuity due.

To compute the present value of an annuity due with periodic payment, we'll make use of the following formula

M((1 + r) - ( 1 + r) ^ ( 1 - T))/r

Amount = 230(( 1 + 0.11) - (1 + 0.11) ^ (1 - 15))/0.11

Amount. = 230((1.11 - 1.11^-14))/0.11

Amount = 230(1.11 - 0.232)/0.11

Amount = 230 * 0.878/0.11

Amount = 201.94/0.11

Amount = $1835.82

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Pharoah Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. Du
Alinara [238K]

Answer:

Pharoah Warehouse

Journal Entries:

June 1: Debit Inventory $2,490

Credit Accounts Payable (Catlin Publishers) $2,490

To record the purchase of inventory on account, terms 2/10, n/30.

June 3: Debit Accounts Receivable (Garfunkel Bookstore) $1,300

Credit Sales Revenue $1,300

To record the sale of goods on account with usual credit terms.

Debit Cost of Goods Sold $900

Credit Inventory $900

To record the cost of goods sold.

June 6: Debit Accounts Payable (Catlin Publishers) $90

Credit Inventory $90

To record the return of inventory.

June 9: Debit Accounts Payable (Catlin Publishers) $2,400

Credit Cash $2,352

Credit Cash Discount $48

To record the payment on account.

June 15: Debit Cash $1,300

Credit Accounts Receivable (Garfunkel Bookstore) $1,300

To record the cash collection on account.

June 17: Debit Accounts Receivable (Bell Tower) $1,700

Credit Sales Revenue $1,700

To record the sale of goods on account.

Debit Cost of Goods Sold $800

Credit Inventory $800

To record the cost of goods sold.

June 20: Debit Inventory $800

Credit Accounts Payable (Priceless Book Publishers) $800

To record the purchase of goods on account, terms 2/15, n/30.

June 24: Debit Cash $1,666

Debit Cash Discounts $34

Credit Accounts Receivable (Bell Tower) $1,700

To record the collection of cash on account.

June 26: Debit Accounts Payable (Priceless Book Publishers) $800

Credit Cash $784

Credit Cash Discounts $16

To record payment on account.

June 28: Debit Accounts Receivable (General Bookstore) $2,650

Credit Sales Revenue $2,650

To record the sale of goods on account.

Debit Cost of Goods Sold $850

Credit Inventory $850

To record the cost of goods sold.

June 30: Debit Sales Returns $260

Credit Accounts Receivable (General Bookstore) $260

To record sales returns on account.

Debit Inventory $90

Credit Cost of Goods Sold $90

To record the cost of goods returned by a customer.

Explanation:

a) Data and Analysis:

Credit terms to all customers = 2/10, n/30.  This means that 2% discount is granted to customers who pay within 10 days.  Customers are expected to settle their accounts within 30 days after which, interest is charged on their accounts.

b) June 1: Inventory $2,490 Accounts Payable (Catlin Publishers) $2,490,  terms 2/10, n/30.

June 3: Accounts Receivable (Garfunkel Bookstore) $1,300 Sales Revenue $1,300

Cost of Goods Sold $900 Inventory $900

June 6: Accounts Payable (Catlin Publishers) $90 Inventory $90

June 9: Accounts Payable (Catlin Publishers) $2,400 Cash $2,352 Cash Discount $48

June 15: Cash $1,300 Accounts Receivable (Garfunkel Bookstore) $1,300

June 17: Accounts Receivable (Bell Tower) $1,700 Sales Revenue $1,700

Cost of Goods Sold $800 Inventory $800

June 20: Inventory $800 Accounts Payable (Priceless Book Publishers) $800, terms 2/15, n/30.

June 24: Cash $1,666 Cash Discounts $34 Accounts Receivable (Bell Tower) $1,700

June 26: Accounts Payable (Priceless Book Publishers) $800 Cash $784 Cash Discounts $16

June 28: Accounts Receivable (General Bookstore) $2,650 Sales Revenue $2,650

Cost of Goods Sold $850 Inventory $850

June 30: Sales Returns $260 Accounts Receivable (General Bookstore) $260

Inventory $90 Cost of Goods Sold $90

6 0
3 years ago
Coastal Bank uses activity-based costing to determine the cost of servicing customers. There are three activity pools: teller tr
rosijanka [135]

Answer:Allocated MOH= $16

Explanation:

Giving the following information:

teller transaction processing ($2.80 per teller transaction)

check processing ($0.25 per canceled check)

ATM transaction processing ($0.20 per ATM transaction).

<u>To allocate overhead, we need to use the following formula:</u>

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 2.8*4 + 0.25*12 + 0.2*9

Allocated MOH= $16

4 0
3 years ago
Cindy goes to the lumber yard to buy lumber for a deck that she is building. She tells the salesperson at the lumber yard that s
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Answer:

<em>c. Implied warranty of fitness for a particular purpose </em>

Explanation:

The warranty of fitness for a particular purpose is inferred whenever a purchaser depends on the supplier to pick the products to fit a particular query.

For instance, if a customer asks a mechanic to supply winter tires and receives tires that are unfit for use in weather, this warranty is breached.

It is also possible to explicitly revoke this implicit warranty by name, thus moving the threat of unfitness back to the purchaser.

7 0
3 years ago
A produce distributor uses 779 packing crates a month, which it purchases at a cost of $12 each. The manager has assigned an ann
labwork [276]

Answer:

$1,498.86

Explanation:

Given that;

Packing of crates per month(u) = 779

Annual carrying cost of 39% of the purchase price per crate

Ordering cost (S) = $27

D = 779 × 12 = $9,348 crates per year

H = 0.39P

H = 0.39 × $12

H = $4.68 crates per year

Total ordering cost = D/Q × S

= ( $9,348 / 779 ) × $27

= $324

Total Holding cost = Q / 2 × H

= ( 779 / 2 ) × $4.68

= $1,822.86

Annual savings = Total holding cost - Total ordering cost

= $1,822.86 - $324

= $1,498.86

The firm would be saving $1,498.86 annually.

5 0
3 years ago
In the weekly computer run to prepare payroll checks, a check was printed for an employee who had been terminated the previous w
Gre4nikov [31]
<h2>A control total for hours worked, prepared from time cards collected by the timekeeping department.</h2>

Explanation:

An employee should get salary only based on the number days / number hours worked for the organization. So the time card will help the organization to solve the problem.

So the time card should be collected and then only the salary needs to be calculated. The salary calculation should take number of leaves (paid / unpaid), permissions and On-duty in to account so that the expected outcome can be achieved.

8 0
3 years ago
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