Problem 1. You sell a machine for $600,000. You allow the client to pay 1/3 at the time of the sale and 1/3 at the end of year one and 1/3 at the end of year two. The company earns 10% on assets. What value will you record the sale at?
|
Sales Price:
|
$ 600,000.00
|
|
Down Payment:
|
$ 200,000.00
|
|
Outstanding Balance at Start of Year 1:
|
$ 400,000.00
|
|
Outstanding Balance at Start of Year 2:
|
$ 200,000.00
|
|
0 interest earned Down Payment
|
|
|
10% Interest Earned on the remaining $400,000 for 1 Year
|
$40,000
|
|
10% Interest Earned on the remaining $200,000 for 1 Year
|
$20,000
|
Problem 2. You want to have $2,000,000 in your retirement account (IRA) at the end of 30 years. You hope to earn 6% per year. How much must you save each year?
Problem 3. You want to save $40,000 for a down payment on a new home. You expect to save $7,000 per year, be in the 25% tax bracket and hope to earn 4% on your investments. How long (in months) will it take you to save the $40,000? You invest the $7,000 at the start of each year.
Problem 4. Smith Corporation purchased an intangible asset for $110,000. Compute the second year's tax amortization. The second year would be a full year's amortization. The company estimates the life at 12 years which is different from the IRS life of 15 years.
a. What is the second year's tax amortization?
b. Present the journal entry to record purchase of the intangible asset noted above. The company financed $50,000 and paid cash for the balance.
c. The intangible has a 15 year life. Present the journal entry to record the second year amortization. The journal entry must be in the proper format.
Problem 5. Are non-profit and governments required to depreciate assets? Why or why not? Would it make sense for them to use double declining balance? Is there a difference between a non-profit cash flows statement and a for profit company's cash flows statement?
Problem 6. What type of activity could a company engage in to improve their cash flows in their Cash Flows Statement? Is this ethical? Could borrowing money make the cash from operations better or worse? Will the tax depreciation affect the cash flows statement?
Problem 7. If a company trades in a building towards a new building and does not recognize a gain or loss (because of code section 1031), will this transaction affect the cash flows statement? Would your answer be different if the company borrowed $10 million to buy the new building and paid off $3 million due on the building trade in?
Problem 8. Are non-profit and governments required to depreciate assets? Why or why not? Would it make sense for them to use double declining balance? Is there a difference between a non-profit cash flows statement and a for profit company's cash flows statement?
Problem 9. What type of activity could a company engage in to improve their cash flows in their Cash Flows Statement? Is this ethical? Could borrowing money make the cash from operations better or worse? Will the tax depreciation affect the cash flows statement?
Problem 10. If a company trades in a building towards a new building and does not recognize a gain or loss (because of code section 1031), will this transaction affect the cash flows statement? Would your answer be different if the company borrowed $10 million to buy the new building and paid off $3 million due on the building trade in?