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oee [108]
3 years ago
11

On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): (FV of $1,

PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
a. Bought a delivery truck and agreed to pay $60,000 at the end of three years.
b. Rented an office building and was given the option of paying $10,000 at the end of each of the next three years or paying $28,000 immediately.
c. Established a savings account by depositing a single amount that will increase to $90,000 at the end of seven years.
d. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $40,000 to a retired employee (payments starting December 31 of this year).

1. What is the cost of the truck that should be recorded at the time of purchase? (Round your answer to nearest whole dollar.)
2. Which option for the office building results in the lowest present value?
Pay in single installment or Pay in three installments?
3. What single amount must be deposited in this account on January 1 of this year? (Round your answer to nearest whole dollar.)
4. What single sum must be deposited in the bank on January 1 of this year? (Round your answer to nearest whole dollar.)
Business
1 answer:
fredd [130]3 years ago
7 0

Answer:

1. Amount to be paid at the end of three years (A) = $60,000

Rate of interest (r) = 10% = 0.10

Number of years (n) = 3 years.

Cost of truck that should be recorded at the time of purchase = A÷(1+r)n = 60,000÷(1+0.10)3 = 60,000÷1.13 = 60,000÷1.331 = $45,078

2. Annual payment (P) = 10,000

Number of years (n) = 3 years

Rate of interest (r) = 10% = 0.10

Present value of annual payment = P×[1-(1+r)-n]÷r = 10,000×[1-(1+0.10)-3]÷0.10 = 10,000×[1-1.1-3]÷0.10 = 10,000×[1-0.7513]÷0.10 = 10,000×0.2487÷0.10 = $24,870.

Single installment payment is $28,000 and the present value of $10,000 paid annually for 3 years is $24,870, which means annual payment for three years will be the better option because the present value is less than the single installment.

Pay in three installment will be the better option.

3. Amount at the end of 7 years (A) = $90,000

Number of years (n) = 7 years

Rates of interest (r) = 10% = 0.10

Single amount to be deposited in this account on January 1 of this year = A÷(1+r)n = 90,000÷(1+0.10)7 = 90,000÷1.17 = 90,000÷1.9487 = $46,184

4. Annual payment (P) = $40,000

Number of years (n) = 10 years

Rate of interest (r) = 10% = 0.10

Single sum to be deposited in the bank on January 1 of this year = P×[1-(1+r)-n]÷r = 40,000×[1-(1+0.10)-10]÷0.10 = 40,000×[1-1.1-10]÷0.10 = 40,000×[1-0.3855]÷0.10 = 40,000×0.6145÷0.10 = $245782.6842

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One car rental agency rents a mid dash size car at a daily rate of ​$36.95 plus 36 cents per mile. Another company rents a mid d
maw [93]

Answer:

80 miles

Explanation:

Data provided in the question:

Rental of the first agency = $36.95 + 36 cents per mile

or

= $36.95 + $0.36 per mile                   [as $1 = 100 cents ]

Rental of the second agency = $44.95 + 26 cents per mile

or

= $44.95 + $0.26 per mile  

now,

let the mileage be 'x' miles

therefore,

the cost for the first agency will be = $36.95 + ( 0.36 × x )    ............(a)

and,

the cost for the second agency will be = $44.95 + ( $0.26 × x )    ........(b)

for the equal mileage, equating (a) and (b)

$36.95 + ( 0.36 × x ) = $44.95 + ( $0.26 × x )

or

( $0.36 - $0.26 ) × x = $44.95 - $36.95

or

0.1x = 8

or

x = 80 miles

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Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days.
Solnce55 [7]

The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a credit to Unearned Warranty Revenue, $900

Explanation:

  • Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,300 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a credit to Unearned Warranty Revenue, $900.
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7 0
3 years ago
The following information applies to the questions displayed below.]
MrRissso [65]

Answer:

KORBIN COMPANY

Common Size Comparative Income Statements

For Years Ended December 31, 2017, 2016, and 2015

                                          2017       %          2016          %      2015          %

Sales                            $ 555,000  100    $340,000   100   $278,000  100

Cost of goods sold         283,500    51.1     212,500    62.5   153,900    55.4

Gross profit                      271,500   48.9    127,500     37.5    124,100    44.6

Selling expenses            102,900    18.5      46,920     13.8     50,800     18.3

Administrative expenses 50,668     9.1      29,920       8.8     22,800      6.0

Total expenses               153,568   27.7      76,840     22.6     73,600    26.5

Income before taxes       117,932   21.2      50,660      14.9    50,500      18.2

Income taxes                   40,800     7.4       10,370        3.1      15,670       5.6

Net income                    $ 77,132    13.9   $40,290       11.9  $34,830      12.5

Explanation:

a) Data and Calculations:

KORBIN COMPANY

Common Size Comparative Income Statements

For Years Ended December 31, 2017, 2016, and 2015

                                          2017       %          2016          %      2015          %

Sales                            $ 555,000  100    $340,000   100   $278,000  100

Cost of goods sold         283,500    51.1     212,500    62.5   153,900    55.4

Gross profit                      271,500   48.9    127,500     37.5    124,100    44.6

Selling expenses            102,900    18.5      46,920     13.8     50,800     18.3

Administrative expenses 50,668     9.1      29,920       8.8     22,800      6.0

Total expenses               153,568   27.7      76,840     22.6     73,600    26.5

Income before taxes       117,932   21.2      50,660      14.9    50,500      18.2

Income taxes                   40,800     7.4       10,370        3.1      15,670       5.6

Net income                    $ 77,132    13.9   $40,290       11.9  $34,830      12.5

KORBIN COMPANY

Comparative Balance Sheets

December 31, 2017, 2016, and 2015

                                                  2017            2016         2015

Assets

Current assets                       $ 52,390     $37,924      $51,748

Long-term investments                      0            500         3,950

Plant assets, net                      100,000      96,000       60,000

Total assets                           $152,390   $134,424    $115,698

Liabilities and Equity

Current liabilities                    $22,800     $19,960    $20,300

Common stock                         72,000       72,000      60,000

Other paid-in capital                  9,000         9,000         6,000

Retained earnings                   48,590       33,464       29,398

Total liabilities and equity   $152,390    $134,424    $115,698

b) Korbin's common size income statement shows each line item expressed as a percentage of the revenue or sales value.  This analysis of individual financial statement items is also known as a vertical analysis of the financial statement, making line items comparison to a common base easy.

3 0
3 years ago
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