Chapter 7, Exercise 2 2. Accrued liability: current portion of long-term debt. On July 1, 20X1, Hall Com¬pany borrowed $225,000 via a long-term loan. Terms of the loan require that Hall pay interest and $75,000 of principal on July 1, 20X2, 20X3, and 20X4. The unpaid balance of the loan accrues interest at the rate of 10% per year. Hall has a December 31 year-end. a. Compute Hall’s accrued interest as of December 31, 20X1. b. Present the appropriate balance sheet disclosure for the accrued interest and the current and long-term portion of the outstanding debt as of December 31, 20X1. c. Repeat parts (a) and (b) using a date of December 31, 20X2, rather than December 31, 20X1. Assume that Hall is in compliance with the terms of the loan agree¬ment. Chapter 7, Exercise 4 4. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing: Social Security taxes: 6% on the first $55,000 earned Medicare taxes: 1.5% on the first $130,000 earned Federal income taxes withheld from wages: $7,500 State income taxes: 5% of gross earnings Insurance withholdings: 1% of gross earnings State unemployment taxes: 5.4% on the first $7,000 earned Federal unemployment taxes: 0.8% on the first $7,000 earned The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end. a. Prepare the necessary entry to record Brookhaven’s February payroll that will be paid on March 1. b. Prepare the journal entry to record Brookhaven’s payroll tax expense. Chapter 7, Problem 2 2. Current liabilities: entries and disclosure. A review of selected financial activities of Visconti’s during 20XX disclosed the following: 12/1: Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable. Interest and principal are due at maturity. 2/10: Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Past experience with similar products indicates that 2% of the units will require repair, with warranty costs averaging $27 per unit. 12/22: Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30. 12/26: Borrowed $5,000 from First City Bank; signed a $5,120 note payable due in 60 days. 12/31: Repaired six XY-80s during the month at a total cost of $162. 12/31: Accrued 3 days of salaries at a total cost of $1,400. 12/31: Accrued vacation pay amounting to 6% of December’s $36,000 total wage and salary expense. Instructions a. Prepare journal entries to record the preceding transactions and events. b. Determine accrued interest as of December 31, 20XX, and prepare the necessary adjusting entry or entries. c. Prepare the current liability section of Visconti’s December 31, 20XX balance sheet. Chapter 8, Problem 1 Issuance of stock: organization costs. Snowbound Corporation was incorporatedin July. The firm’s charter authorized the sale of 200,000 shares of $10 par-valuecommon stock. Thefollowing transactions occurred during the year: 7/1: Sold 45,000 shares of common stock to investors for $18 per share. Cashwas collected and the shares were issued. 7/7: Issued 600 shares to Sharon Dale, attorney-at-law, for services renderedduring thecorporation’s organizational phase. Dale charged $12,600 forher work. 8/11: Sold 20,000 shares to investors for $22 per share. Cash was collectedand the shares were issued. 12/14: Issued 30,000 shares to the MJB Company for land valued at $900,000. Instructions Prepare journal entries to record each transaction.

1. Basic present value calculations

Calculate the present value of the following cash flows, rounding to the nearest dollar:

1. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return.
2. An annual receipt of $16,000 over the next 12 years, discounted at a 14% rate of return.
3. A single receipt of $15,000 at the end of Year 1 followed by a single receipt of $10,000 at the end of Year 3. The company has a 10% rate of return.
4. An annual receipt of $8,000 for three years followed by a single receipt of $10,000 at the end of Year 4. The company has a 16% rate of return.2. Cash flow calculations and net present value On January 2, 20X1, Bruce Greene invested $10,000 in the stock market and purchased 500 shares of Heartland Development, Inc. Heartland paid cash dividends of $2.60 per share in 20X1 and 20X2; the dividend was raised to $3.10 per share in 20X3. On December 31, 20X3, Greene sold his holdings and generated proceeds of $13,000. Greene uses the net-present- value method and desires a 16% return on investments.
5. Prepare a chronological list of the investment’s cash flows. Note: Greene is entitled to the 20X3 dividend.
6. Compute the investment’s net present value, rounding calculations to the nearest dollar.
7. Given the results of part (b), should Greene have acquired the Heartland stock? Briefly explain.

3. Straightforward net present value and internal rate of return

The City of Bedford is studying a 600-acre site on Route 356 for a new landfill. The startup cost has been calculated as follows:

Purchase cost: $450 per acre

Site preparation: $175,000

The site can be used for 20 years before it reaches capacity. Bedford, which shares a facility in Bath Township with other municipalities, estimates that the new location will save $40,000 in annual operating costs.

1. Should the landfill be acquired if Bedford desires an 8% return on its investment? Use the net-present-value method to determine your answer. 4. Straightforward net-present-value and payback computations STL Entertainment is considering the acquisition of a sight-seeing boat for summer tours along the Mississippi River. The following information is available:

All operating costs, except depreciation, require cash outlays. On the basis of similar operations in other parts of the country, management anticipates that each trip will be sold out and that 120,000 passengers will be carried each season. Ignore income taxes.

Instructions:

By using the net-present-value method, determine whether STL Entertainment should acquire the boat. Assume a 14% desired return on all investments- round calculations to the nearest dollar.

5. Equipment replacement decision

Columbia Enterprises is studying the replacement of some equipment that originally cost $74,000. The equipment is expected to provide six more years of service if $8,700 of major repairs are performed in two years. Annual cash operating costs total $27,200. Columbia can sell the equipment now for $36,000; the estimated residual value in six years is $5,000.

New equipment is available that will reduce annual cash operating costs to $21,000. The equipment costs $103,000, has a service life of six years, and has an estimated residual value of $13,000. Company sales will total $430,000 per year with either the existing or the new equipment. Columbia has a minimum desired return of 12% and depreciates all equipment by the straight-line method.

Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"