HW#9 - then it will operate at loss and therefore the...

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Anthony Marsala ACC201 Sec. 24 Homework #9 A. 1 Compensation Expense (+E, -SE) 25,000 Liability for Inc. Taxes Withheld (+L) 6,000 FICA Payable (+L) 1,200 Cash (-A) 17,800 Compensation Expense (+E, -SE) 1,200 FICA Payable (+L) 1,200 A + L = SE R - E = NI D I D NE I D 2 Supplies (+A) 5,000 Account Payable (+L) 5,000 A + L = SE R - E = NI I I NE NE NE NE 3 Deferred Revenue (-L) 8,000 Earned Revenue (+R, +SE) 8,000 A + L = SE R - E = NI NE D I I NE I 4 Account Payable (-L) 15,450 Cash (-A) 15,450 15,000 * (0.09) * (4/12) = 450 (Interest) A + L = SE R - E = NI D D NE NE NE NE 5 Account Payable (-L) 7,000 Cash (-A) 7,000 A + L = SE R - E = NI D D NE NE NE NE 6 Cash (+A) 10,000 Note Payable (+L) 10,000 A + L = SE R - E = NI I I NE NE NE NE 7 Interest Expense (+E, -SE) 250 Interest Payable (+L) 250 10,000 * (0.06) * (5/12) = 250 Interest A + L = SE R - E = NI NE I D NE I D B. Entry Working Capital Current Ratio 2 D D 5 NE I 7 D D Part II: PV and FV Analysis 1 P = (150,000/14.8775) = 10,082 2 P = (1,500,000/3.9927) = 381,971 3 P = (200,000/4.5638) = 43,823 No, this is not a smart business decision because if yearly revenues from the machine are only $42,000 and yearly payments for the machine are $43,823
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Unformatted text preview: then it will operate at loss and therefore the investment will be unprofitable. 4 A B Year Beginning Interest Uncle End 1 5,000 5,000 2 5,000 300 5,000 10,300 3 10,300 618 5,000 15,918 4 15,918 955.08 5,000 21,873 5 21,873 1312.38 5,000 28,185 C Year Beginning Interest Uncle End 1 4,000 4,000 2 4,000 240 4,000 8,240 3 8,240 494.4 4,000 12,734 4 12,724 763.44 4,000 17,487 5 17,487 1049.22 4,000 22,536 D Year Beginning Interest Uncle End 1 3,000 3,000 2 3,000 180 3,000 6,180 3 6,180 370.8 3,000 9,551 4 9,551 573.06 3,000 13,124 Given all the alternatives, B is the most profitable. 150,000 = P * PV A (3, 20) [14.877 1,500,000 = P * PV A (8, 5) [3.9927 200,000 = P * PV A (12, 7) [4.5638 20,000(1.06) 5 = 26,764 4,000(1.06) 5 = 5,352.90 5,352.90 + 22,536 = 27,888.90 13,124 + 15,000 = 28,124...
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