ACC-211-IS Test #2

Pr. 1

Part (a) Future value of $40,000 compounded @ 10% for 6 years $40,000 x 1.77156 = $70,862.40

Part (b) Present value of a $60,000 ordinary annuity discounted @ 8% for 20 years $60,000 x 9.81815 = $589,089

Part (c) Alternative 1: Present value of $1,750 discounted @ 8% for 2 years $1,750 x .85734 = $1,500.35 Present value of $700 now = $700 Present value of alternative 1 = $1,500.35 + $700 = $2,200.35

Alternative 2: Present value of $2,800 discounted @ 8% for 3 years $2,800 x .79383 = $2,222.72

I would choose Alternative 1 because it would cost Judy Thomas less.

Pr. 2 Leong Corporation | Balance Sheet | December 31, 2014 | Assets | Current assets | | | | Cash | | $45,000 | | Accounts receivable | | 102,000 | | Supplies | | 1,860 | | Prepaid advertising | | 5,000 | | Total current assets | | | $153,860 | Property, plant, and equipment | | | | Land | | 137,320 | | Buildings | $80,400 | | | Accumulated depreciation - bld. | (15,000) | 65,400 | | Equipment | 60,000 | | | Accumulated depreciation - equip. | (10,000) | 50,000 | | Total property, plant, and equipment | | | 252,720 | Total assets | | | $406,580 | | | | | Liabilities & Stockholders' Equity | Current liabilities | | | | Notes payable | | $29,400 | | Income taxes payable | | 3,000 | | Salaries and wages payable | | 900 | | Interest payable | | 600 | | Total current liabilities | | | 33,900 | Long-term liabilities | | | | Bonds payable | | | 78,000 | Total liabilities | | | 111,900 | Stockholders' equity | | | | Common stock | | 70,000 | | Retained earnings ($275,080* - $50,400) | |