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ACC305_week 3 discussions

# ACC305_week 3 discussions - Week 3 discussions DISSCUSSION...

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Week 3 discussions DISSCUSSION 1 P6-4 Years 1-6: PVA = \$80,000×4.35526 = \$348,420.80 (table 4, n=6, i=10%) Year 7: PV = \$70,000×.51316 = \$35,921.20 (table 2, n=7, i=10%) Year 8: PV = \$60,000×.46652 = \$27,991.20 (table 2, n=8, i=10%) Year 9: PV = \$50,000×.42410 = \$21,205 (table 2, n=9, i=10%) Year 10: PV = \$40,000×.38554 = \$15,421.60 (table 2, n=10, i=10%) Sale of business: PV = \$700,000×.38554 = \$269,878 (table 2, n=10, i=10%) \$348,420.80 + 35,921.20 + 27,991.20 + 21,205 + 15,421.60 + 269,878 = \$718,837.80 He should not purchase the restaurant because the present value of all future returns is \$718,837.80, which is less than the original purchase price of \$800,000. P6-9 Option 1: PV= \$180,000 Option 2: PVAD= \$16,000×11.33560 = \$181,369.60 (table 6, n=20, i=7%) Option 3: PVA= \$50,000×7.02358 = \$351,179 (table 4, n=10, i=7%) PV= \$351,179×.54393 = \$191,016.79 (table 2, n=9, i=7%) He should choose option 3, a 10-year annuity of \$50,000 beginning at age 65. This option has the highest present value.

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DISSCUSSION 2 E7-7 1. Allowance for uncollectible accounts 21,000 Accounts receivable 21,000 (to record the write-off of receivables) Accounts receivable 1,200 Allowance for uncollectible accounts 1,200 (to record collection of previously written off receivable) Cash 1,200 Accounts receivable 1,200 (to record collection of previously written off receivable) Bad debt expense 50,300
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