1)Vilas Company is considering a capital investment of $191,200 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $14,670 and $49,520, respectively. Vilas has a 12% cost of capital rate, which is the required rate of return on the investment. Part A please.
Required :
- Cash payback period
- Annual rate of Return
2)Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Geraths enters into the following contract on July 1, 2014, with a local homeowner. The customer purchases windows for a price of $3,500 and chooses Geraths to do the installation. Geraths charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Geraths $1,600 (which equals the fair value of the windows, which have a cost of $1,900) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2014, Geraths completes installation on October 15, 2014, and the customer pays the balance due.
Prepare the journal entries for Geraths in 2014, assuming Geraths estimates the standalone value of the installation based on an estimated cost of $470 plus a margin of 20% on cost. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)
3)Jessica is a one-third owner in Bikes-R-Us, an S corporation that experienced a $45,000 loss this year (year 1). Assume her stock basis is $10,000 at the beginning of the year and that at the beginning of year 1 Jessica loaned Bikes-R-Us $3,000. In year 2, Bikes-R-Us, reported ordinary income of $12,000.
What amount is Jessica allowed to deduct in year 1?
What are her stock and debt bases in the corporation at the end of year 1? (Leave no answer blank. Enter zero if applicable.)
What are her stock and debt bases in the corporation at the end of year 2? (Leave no answer blank. Enter zero if applicable.)