1. A business invests $5000 and initially plans to achieve annual revenue of $1100/YEAR with $200/YEAR expenses (starting at the end of year 1) for ten years. No market value if used for 10 years.

Part A:

Draw a before tax cash flow diagram of the ten-year plan

Part B:

If at the end of year 6, the investment is sold for $1000, calculate the PW, FW, and AW for the before tax cash flow MARR of 12%. Is the investment worth it? And why ?

Part C:

If the investment was used for ten years with no market value, what are the simple payback and the discounted payback periods.

Part D:

What is the IRR if it used for the ten years with no market value? Is it a good investment in this way? If so why?

(b) During the year ended 30 June Year 6, Nungua Ltd acquired freehold land at a cost of
GHC 500,000 and built a distribution centre on it, using a mixture of subcontract and own
labour. The distribution centre cost a total of GHC 200,000 to construct. The construction was
completed by the end of April.

Required:

Set out the audit objectives in respect of the above and the substantive procedures you would
carry out to achieve those objectives.

During Year 1 and Year 2, Agatha Corp. completed the following transactions relating to its bond issue. The corporation’s fiscal year is the calendar year.

Year 1

Year 2

Timpanogos Inc. is an accrual-method calendar-year corporation. For the current year 2017, it reported financial statement income after taxes of $1,552,000. Timpanogos provided the following information relating to its current year activities:

Life insurance proceeds as a result of CEO’s death $ 200,000

Revenue from sales (for both book and tax purposes) 2,000,000

Premiums paid on the key-person life insurance policies (the policies have no cash surrender value) 21,000

Charitable contributions 180,000

Interest income on tax-exempt bonds 40,000

Interest paid on loan obtained to purchase tax-exempt bonds 45,000

Rental income payments received and earned in current year 15,000

Rental income payments received in last year but earned in current year 10,000

Rental income payments received in current year but not earned by year-end 30,000

MACRS depreciation 55,000

Book depreciation 25,000

Net capital loss 42,000

Federal income tax expense for books in current year 400,000

Required:

1. Parts A and B are done in a Word table – one page single sided.

2. Parts C and D are done on Form M-1.Fill in information form www.irs.gov

3.

A. Reconcile book income to taxable income for Timpanogos Inc. Be sure to start with book income and identify all of the adjustments necessary to arrive at taxable income.

B. Identify each book–tax difference as either permanent or temporary.

C. Complete Schedule M-1 for Timpanogos.

D. Compute Timpanogos Inc.’s tax liability.

The following income statement and additional year-end information is provided.

Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Comparative financial statement data for Carmono Company follow:

For this year, the company reported net income as follows:

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Required:

1. Using the indirect method, prepare a statement of cash flows for this year.

2. Compute Carmono’s free cash flow for this year.

On the first day of its fiscal year, Chin Company issued $16,800,000 of five-year, 4% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 6%, resulting in Chin Company receiving cash of $15,366,859.

a. Journalize the entries to record the following:

Issuance of the bonds.

First semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)

Second semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)

For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.

b. Determine the amount of the bond interest expense for the first year.
$

c. Why was the company able to issue the bonds for only $15,366,859 rather than for the face amount of $16,800,000?
The market rate of interest is the contract rate of interest.

Sage Inc. experienced the following transactions for Year 1, its first year of operations: Issued common stock for $90,000 cash. Purchased $195,000 of merchandise on account. Sold merchandise that cost $162,000 for $322,000 on account. Collected $292,000 cash from accounts receivable. Paid $175,000 on accounts payable. Paid $66,000 of salaries expense for the year. Paid other operating expenses of $82,000. Sage adjusted the accounts using the following information from an accounts receivable aging schedule: Number of Days Past Due Amount Percent Likely to Be Uncollectible Allowance Balance Current $ 18,000 0.01 0–30 7,500 0.05 31–60 1,500 0.10 61–90 1,500 0.20 Over 90 days 1,500 0.50 Required Organize the transaction data in accounts under an accounting equation. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Sage Inc. for Year 1. What is the net realizable value of the accounts receivable at December 31, Year 1?

Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses.

Additional Information on Current Year Transactions

1. The loss on the cash sale of equipment was $17,125 (details in b).
2. Sold equipment costing $82,875, with accumulated depreciation of $42,125, for $23,625 cash.
3. Purchased equipment costing $108,375 by paying $54,000 cash and signing a long-term note payable for the balance.
4. Borrowed $5,200 cash by signing a short-term note payable.
5. Paid $56,125 cash to reduce the long-term notes payable.
6. Issued 3,700 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $52,500.

Required:
1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.)

Use the table, which shows a farm’s production possibilities, to work Problems 2 and 3.

2. If the farm uses its resources efficiently, what is the opportunity cost of an increase in chicken production from 300 pounds to 500 pounds a year? Explain your answer.

3. If the farm adopted a new technology, which allows it to use fewer resources to fatten chickens, explain how the farm’s production possibilities will change. Explain how the opportunity cost of producing a bushel of soybean will be affected.

4. "Because the United States is the largest economy in the world and can produce anything it needs domestically, there are no gains from trade for the United States." Is the previous statement correct or incorrect?

5. The United States can use all of its resources to produce 50 computers or 4,000 shoes. Suppose

that at world market prices, one computer exchanges for 100 shoes. Explain how the United States can gain from trade

.