ACC301-sol-ch10

ACC301-sol-ch10 - PRACTICE EXERCISES PRACTICE 10-1 WORKING...

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PRACTICE EXERCISES PRACTICE 10 - 1 WORKING CAPITAL AND CURRENT RATIO Current assets: Cash $ 400 Accounts receivable 1,750 Total $2,150 Current liabilities: Accounts payable $1,100 Accrued wages payable 250 Deferred sales revenue 900 Bonds payable (to be repaid in 6 months) 1,000 Total $3,250 Working capital = Current assets – Current liabilities = $2,150 – $3,250 = ($1,100) Current ratio = Current assets/Current liabilities = $2,150/$3,250 = 0.66 PRACTICE 10 - 2 SHORT-TERM OBLIGATIONS EXPECTED TO BE REFINANCED Current Liabilities Noncurrent Liabilities Loan A $10,000 $ 0 Loan B 15,000 0 Loan C 2,500 17,500 Total $27,500 $17,500 PRACTICE 10 - 3 TOTAL COST OF LINE OF CREDIT Credit line commitment fee: $100,000 × 0.0008 × (12/12) = $80 Interest: $70,000 × 0.064 × (8/12) = $2,987 $2,987 + $80 = $3,067 PRACTICE 10 - 4 COMPUTATION OF MONTHLY PAYMENTS Business Calculator Keystrokes: PV = $300,000 × (1 – 0.10) = $270,000 N = 30 years × 12 = 360 I = 7.5/12 = 0.625 FV = 0 (there is no balloon payment associated with the mortgage) PMT = $1,887.88
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PRACTICE 10 - 5 PRESENT VALUE OF FUTURE PAYMENTS PMT = $1,887.88 (see the solution to Practice 10 - 4) Business Calculator Keystrokes: N = 30 years × 12 = 360 – 12 payments made = 348 payments remaining I = 7.5/12 = 0.625 PMT = $1,887.88 FV = 0 (no balloon payment is associated with the mortgage) PV = $267,511 PRACTICE 10 - 6 MARKET PRICE OF A BOND N = 20 years × 2 = 40 I = 14/2 = 7 PMT = $1,000 × 0.10 × (1/2) = $50 FV = $1,000 (the face value is paid at the end of 20 years)
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This note was uploaded on 06/11/2009 for the course ACC 301 taught by Professor Pendarvis during the Spring '09 term at St. Leo.

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ACC301-sol-ch10 - PRACTICE EXERCISES PRACTICE 10-1 WORKING...

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