ACCT 550 Week 4 Homework Assignment
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ACCT 550 Week 4 Homework Assignment
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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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