Question Details

Grading:  This assignment is worth a total of 75 points and will be graded based 1/3 on effort and 2/3 on accuracy.  The effort portion of your score will be impacted by items such as arithmetic errors, failure to follow proper form for statements and schedules as shown in the text, a clear lack of effort, the omission of computations to support your conclusions, or the omission of sections of the assignment, etc.  Careless arithmetic errors, unbalanced journal entries, unbalanced schedules, or other careless mistakes will result in the loss of all credit for effort for that problem.  
I5-1: 
Presented below are various cash flows:

1.	 $45,000 to be received at the end of 12 years at 9%.

2.	$100,000 to be paid at the end of 25 years at 5%.

3.	$5,000 to be paid at the end of each year for 6 years at 8%.

4.	$8,000 to be received at the beginning of each year for 10 years at 6%.

5.	$2,500 to be paid at the beginning of each year for 20 years at 15%

6.	$6,000 to be received at the end of each year for 14 years at 12%.

7.	$4,000 to be received at the end of the third, sixth, and ninth year at 10%.

8.	$7,500 to be paid at the beginning of the first, fourth, and seventh year at 11%.

Instructions:
Using the appropriate interest table(s), compute the present value of each item above.  Assume that compounding occurs annually.
 

I5-2: 
Presented below are various situations.

1.	 Melissa has just invested $10,000 into a 10 year certificate of deposit earning 8% per year.  How much will Melissa have at the end of the 10 years?

2.	Jonathan has just begun a bank savings account that guarantees an annual interest rate of 4%.  Jonathan opened the account with a $1,000 deposit and will deposit $1,000 at the beginning of each year for the next 8 years.  (9 deposits in total.)  What will be the balance in Jonathan- account at the end of 9 years?

3.	William has been saving to purchase a new ski lodge just outside of Aspen, Colorado.  The ski lodge will cost $2,400,000.  He currently has $217,662 in an investment that guarantees an annual interest rate of 11%.  Assuming that William does not add to his savings, how long will it take for William- investment to grow so that he can purchase the ski lodge?

4.	Barbara is 35 years old.  She is looking for the right investment in order to achieve her goal of retiring at the age of 55 with $5,000,000 in the bank.  She currently has $305,501.35 in savings.  Assuming that Barbara does not add to her savings, what interest rate will the investment need to pay for Barbara to achieve her goal?

Instructions:

Assuming annual compounding, answer each of the above questions.

 

I5-3: 
The Green Light Company- accountant has prepared the following year end financial statements.
Green Light Company
Income Statement
For the Year Ended December 31, 2009
	
Revenue	$300,000
Cost of goods sold	205,000
Gross margin	95,000
Selling and administrative expenses	40,500
Income from operations	54,500
Loss from sale of investments	3,500
Income before tax	51,000
Income tax expense	15,300
Net income	$35,700
	

	Green Light Company
Comparative Balance Sheet
As of December 31, 2010 and 2009
			
	2010		2009
			
Cash	$78,300		$50,000
Accounts receivable	76,000		56,500
Inventory	70,000		82,600
Plant, property & equipment	82,500		74,000
Accumulated depreciation	(52,000)		(50,000)
Long-term investments (held-to-maturity)	56,500		61,800
	$311,300		$274,900
			
Accounts payable	$52,200		$39,100
Accrued liabilities	8,700		11,000
Bonds payable	60,900		68,000
Common stock	82,500		74,500
Retained earnings	107,000		82,300
	$311,300		$274,900

Additional information for 2010:
The Company paid out cash dividends in the amount of $11,000.  
The Company acquired a machine valued at $3,000 in exchange for common stock.  
The Company did not sell any plant, property or equipment during the year.
Instructions:
Using the indirect method, prepare a statement of cash flows in good form.

I5-4: 
Using the information in I5-3, prepare a statement of cash flows in good form using the direct method.