ACCT 550 Intermediate Accounting Week 4 Homework
ACCT
550 Intermediate Accounting Week 4 Homework
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E6-5 (Computation of Present
Value) Using the appropriate interest table, compute the present values
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of the following periodic
amounts due at the end of the designated periods.
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(a) $30,000 receivable at the
end of each period for 8 periods compounded at 12%.
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This is a case of annuity
because the person is receiving the amount at the end of each period.
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E6-12
(Analysis of Alternatives) The Black Knights Inc., a manufacturer of low-sugar,
low-sodium, low-cholesterol TV dinners, would like to increase its market share
in the Sunbelt. In order to do so, Black Knights has decided to locate a new
factory in the Panama City area. Black Knights will either buy or lease a site
depending upon which is more advantageous. The site location committee has
narrowed down the available sites to the following three buildings. Building A:
Purchase for a cash price of $600,000, useful life 25 years. Building B: Lease
for 25 years with annual lease payments of $69,000 being made at the beginning
of the year. Building C: Purchase for $650,000 cash. This building is larger
than needed; however, the excess space can be sublet for 25 years at a net
annual rental of $7,000. Rental payments will be received at the end of each
year. The Black Knights Inc. has no aversion to being a landlord. Instructions
In which building would you recommend that The Black Knights Inc. locate,
assuming a 12% cost of funds?
E7-5
(Recording Sales Gross and Net) On June 3, Arnold Company sold to Chester
Company merchandise having a sale price of $3,000 with terms of 2/10, n/60,
f.o.b. shipping point. An invoice totaling $90, terms n/30, was received by
Chester on June 8 from John Booth Transport Service for the freight cost. On
June 12, the company received a check for the balance due from Chester Company.
Instructions
(a) Prepare journal entries on the Arnold Company books to record all the
events noted above under each of the following bases. (1) Sales and receivables
are entered at gross selling price.
(2)
Sales and receivables are entered at net of cash discounts. (b) Prepare the
journal entry under basis 2, assuming that Chester Company did not remit
payment until July 29
E7-7
(Recording Bad Debts) Duncan Company reports the following financial
information before adjustments. Dr. Cr. Accounts Receivable$100,000 Allowance
for Doubtful Accounts$2,000 Sales (all on credit) 900,000 Sales Returns and
Allowances 50,000
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