Q1. This question relates to the following presentation in the balance sheets of Criss Co. at March 31, 2014 and 2013:
3/31/14 3/31/13
Equipment, less accumulated depreciation of $76,000 and $57,000, respectively $104,000 $98,000
If the cost of new equipment purchased during the year totaled $32,000, what was the cost of equipment sold?
Q2. For the month ended February 28, 2014, a company capitalized a $3,000 expenditure that should have been expensed. Depreciation expense for the full month, using the straight-line method, was recorded for $120 in February with respect to this item. Reported operating income for February was $11,700.
a. Calculate the amount of net income that should have been reported for February.
b. If this error is not corrected, what will be the impact on operating income for the ten-month period from March 1, 2014 through December 31, 2014? (Hint: don't forget the original $3,000)
Q3. Calculate the present value of $9,200 to be received in 7 years, assuming that interest is compounded semi-annually at an annual rate of 12%.
Q4. Congratulations! You have won a prize of $48,000. But, you must decide whether to receive $8,000 at the end of every year for 6 years, or to receive $4,000 at the end of every 6 months for 6 years. Assume an annual interest rate of 16%. Calculate the present value of each alternative, and indicate which alternative you would prefer using a full sentence.
Q5. You have just added a swimming pool and deck to your home, and have taken out a 10% mortgage loan on which you agreed to make 20 annual payments of $4,698.37.
a. What was the amount of the mortgage? (Hint: It was the present value of the payments you will make.)
b. What is the total amount of the payments you will make over the 20 years?
c. What accounts for the difference between the amounts in a and b?