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ACC 421 WEEK 5



Grading: This assignment is worth a total of 75 points and will be graded based 1/3 on effort and 2/3 on accuracy. The effort portion of your score will be impacted by items such as arithmetic errors, failure to follow proper form for statements and schedules as shown in the text, a clear lack of effort, the omission of computations to support your conclusions, or the omission of sections of the assignment, etc. Careless arithmetic errors, unbalanced journal entries, unbalanced schedules, or other careless mistakes will result in the loss of all credit for effort for that problem. I5-1: Presented below are various cash flows: 1. $45,000 to be received at the end of 12 years at 9%. 2. $100,000 to be paid at the end of 25 years at 5%. 3. $5,000 to be paid at the end of each year for 6 years at 8%. 4. $8,000 to be received at the beginning of each year for 10 years at 6%. 5. $2,500 to be paid at the beginning of each year for 20 years at 15% 6. $6,000 to be received at the end of each year for 14 years at 12%. 7. $4,000 to be received at the end of the third, sixth, and ninth year at 10%. 8. $7,500 to be paid at the beginning of the first, fourth, and seventh year at 11%. Instructions: Using the appropriate interest table(s), compute the present value of each item above. Assume that compounding occurs annually. I5-2: Presented below are various situations. 1. Melissa has just invested $10,000 into a 10 year certificate of deposit earning 8% per year. How much will Melissa have at the end of the 10 years? 2. Jonathan has just begun a bank savings account that guarantees an annual interest rate of 4%. Jonathan opened the account with a $1,000 deposit and will deposit $1,000 at the beginning of each year for the next 8 years. (9 deposits in total.) What will be the balance in Jonathan’s account at the end of 9 years? 3. William has been saving to purchase a new ski lodge just outside of Aspen, Colorado. The ski lodge will cost $2,400,000. He currently has $217,662 in an investment that guarantees an annual interest rate of 11%. Assuming that William does not add to his savings, how long will it take for William’s investment to grow so that he can purchase the ski lodge? 4. Barbara is 35 years old. She is looking for the right investment in order to achieve her goal of retiring at the age of 55 with $5,000,000 in the bank. She currently has $305,501.35 in savings. Assuming that Barbara does not add to her savings, what interest rate will the investment need to pay for Barbara to achieve her goal? Instructions: Assuming annual compounding, answer each of the above questions. I5-3: The Green Light Company’s accountant has prepared the following year end financial statements. Green Light Company Income Statement For the Year Ended December 31, 2009 Revenue $300,000 Cost of goods sold 205,000 Gross margin 95,000 Selling and administrative expenses 40,500 Income from operations 54,500 Loss from sale of investments 3,500 Income before tax 51,000 Income tax expense 15,300 Net income $35,700 Green Light Company Comparative Balance Sheet As of December 31, 2010 and 2009 2010 2009 Cash $78,300 $50,000 Accounts receivable 76,000 56,500 Inventory 70,000 82,600 Plant, property & equipment 82,500 74,000 Accumulated depreciation (52,000) (50,000) Long-term investments (held-to-maturity) 56,500 61,800 $311,300 $274,900 Accounts payable $52,200 $39,100 Accrued liabilities 8,700 11,000 Bonds payable 60,900 68,000 Common stock 82,500 74,500 Retained earnings 107,000 82,300 $311,300 $274,900 Additional information for 2010: The Company paid out cash dividends in the amount of $11,000. The Company acquired a machine valued at $3,000 in exchange for common stock. The Company did not sell any plant, property or equipment during the year. Instructions: Using the indirect method, prepare a statemen


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