ACCT 550 Intermediate Accounting Week 4 Homework Assignment


E6-5 (Computation of Present Value) Using the appropriate interest table, compute the present values
of the following periodic amounts due at the end of the designated periods.
(a) $30,000 receivable at the end of each period for 8 periods compounded at 12%.
This is a case of annuity because the person is receiving the amount at the end of each period.

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