Sheridan Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $100,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance. The note would require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period of two years. Sheridan has a proposal from its bank for an instalment loan for two years that requires a fixed blended monthly payment (including both principal and interest) starting August 1, 2020. The loan would be for 80% of the equipment’s purchase price. The current market rate of interest is 6%. Both contracts have an interest rate of 6%. Calculate the amount of the payments required of Sheridan under each alternative.

1. Quarterly fixed principal + interest payments option with manufacturer: Total amount of payments:__________________

2. Fixed blended monthly instalment note with the bank including principal and interest: Total amount of payments:____________________

After-class Task #1

Financial Statements

Use the information for NearPerfect Co. to work the problems.

                                       2009               2010

Sales                          $1,145            $1,200

Depreciation                   128                 128

Cost of goods sold        450                 537

Other expenses             110                    98

Interest                              85                    96

Cash                                640                 735

Receivables                    912                 967

Notes payable                122                 103

Long-term debt           2,349              2,666

Net fixed assets          5,556              5,637

Accounts payable          664                 659

Dividends                        100                 110

Inventory                      1,440              1,489

1. Draw up an income statement and a balance sheet for NearPerfect for 2009 and 2010. The tax rate is 34%.

2. For 2010, calculate NearPerfect’s cash flow from assets, cash flow to bondholders, and cash flow to stockholders.

Government survey takers determine that typical family expenditures each month in the base year 2010 are as follows: 25 pizzas @ $10 each; rent of apartment at $ 800 per month; Gasoline and car maintenance, $ 50; Basic phone services, $ 50.

In 2011, the survey determines that the price of pizza has risen to $12 each, apartment rent is $850, gasoline and car maintenance, $ 80 and basic phone services have dropped to $ 30 (Tabulate the data given) (6 points)

1. Find the CPI in year 2011 and the rate of inflation between base year 2010 and 2011
2. The family’s nominal income rose by 5% between the 2010 and 2011. Are they worse off or better off in terms of what their income is able to buy?

The Affordable Care Act (aka Obamacare) was signed into law in March 2010. Did it “bend the health care cost curve downward” as its supporters promised it would?

A. Social Security recipients receive annual adjustments in their benefits (COLAs) based on year-to-year changes in the CPI-W. (Actually, the Social Security annual COLA is tied to the third quarter to third quarter change from year to year, but let’s just use March to March, 2010 to 2018). Calculate the increase over that eight year period.

B. And finally, what about the average worker? For that, calculate the percent increase in compensation—using the index of hourly compensation, business sector of the economy—over the period from first quarter 2010 to first quarter 2018.

A Comparative Statement of Financial Position for Vivaldi Corporation is given below;

Additional Information

1. Net Income for 2010 was $105000
2. Cash Dividend of $40000 were declared and paid
3. Bonds payable amounting to $50000 were retired.

Requirement:

Prepare Statement of Cash Flow for the year 2010.

Unemployment Rate                                      Civilian Labor Force Level

2008: 5.0                                                         2008: 145

2009: 7.8                                                        2009: -445

2010: 9.8                                                       2010: 373

2011: 9.1                                                        2011: -387

2012: 8.3                                                       2012: 386

2013: 8.0                                                     2013: 135        

2014: 6.6                                                     2014: 175

1) Make a graph with the dates along the horizontal axis and the unemployment rate on the vertical axis. Plot the data from the table on this graph. See if you can identify a peak, trough, recession, and/or expansion in that data.

2) Notice that the unemployment rate falls from Jan. 2010 to Jan 2011. Make an argument why the economy may not actually be recovering by referring to the labor force data from that same time period.

Company sells a machine for $6,800 under a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 500 machines in 2010 (warranty expense is incurred 25% in 2010, 60% in 2011 and 15% in 2012). As a result of product testing, the company estimates that the warranty cost is $380 per machine ($200 parts and $180 labor).

      Required:

Assuming that actual warranty costs are incurred exactly as estimated, prepare the journal entries that would be made under application of the expense warranty accrual method for the following:

             i.      Warranty costs incurred in 2010.                                                          

            ii.      Warranty costs incurred in 2011.                                                           

On December 31, 2010, Harris Co. leased a machine from Catt, Inc. for a five-year period. Equal annual payments under the lease are 630,000 (including 30,000 annual executory costs) and are due on December 31 of each year. The first payment was made on December 31, 2010, and the second payment was made on December 31, 2011. The five lease payments are discounted at 10% over the lease term. The, present value of minimum lease payments at the inception of the lease and before the first annual payment was $2,502,000. The lease is appropriately accounted for as a finance lease by Harris. In its December 31, 2010. balance sheet, Harris should report a current lease liability of:

A. 600,000.
B. 630,000.
C. 409,800.
D. 1,902,000