Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

1. $700 per year for 16 years at 8%.

   $  

2. $350 per year for 8 years at 4%.

   $  

3. $200 per year for 8 years at 0%.

   $  

4. Rework previous parts assuming they are annuities due.

   Present value of $700 per year for 16 years at 8%: $  

   Present value of $350 per year for 8 years at 4%: $  

   Present value of $200 per year for 8 years at 0%: $  

5.15

PRESENT VALUE OF AN ANNUITY

Find the present values of these ordinary annuities. Discounting occurs once a year. Round your answers to the nearest cent.

1. $600 per year for 16 years at 12%.

   $  

2. $300 per year for 8 years at 6%.

   $  

3. $900 per year for 16 years at 0%.

   $  

   Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent.

4. $600 per year for 16 years at 12%.

   $  

5. $300 per year for 8 years at 6%.

   $  

6. $900 per year for 16 years at 0%.

   $  

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

1. $500 per year for 16 years at 14%.

2. $250 per year for 8 years at 7%.

3. $1,000 per year for 16 years at 0%.

4. Rework previous parts assuming they are annuities due.

   Present value of $500 per year for 16 years at 14%:   

   Present value of $250 per year for 8 years at 7%:

   Present value of $1,000 per year for 16 years at 0%:

Machine X has a first cost of $70,000 and an operating cost of $21,000 in year 1, increasing by $500 per year through year 5 with a salvage value of $13,000. Machine Y has a first cost of $62,000 and an operating cost of $21,000 in year 1, increasing by 3% per year through year 10 with a salvage value of $2000. If the interest rate is i =19% per year, evaluate which machine must you choose on the basis of:

(a) the present worth analysis,

(b) the conventional B/C analysis

(Show me all the steps)

At the beginning of the year, Swifty Company had total assets of $862,000 and total liabilities of $600,000. Answer the following questions.

(a) If total assets increased $137,000 during the year and total liabilities decreased $70,000, what is the amount of stockholders’ equity at the end of the year?

(b) During the year, total liabilities increased $120,000 and stockholders’ equity decreased $84,000. What is the amount of total assets at the end of the year?
(c) If total assets decreased $77,000 and stockholders’ equity increased $101,000 during the year, what is the amount of total liabilities at the end of the year?

This research assignment is an actual simulation directly taken from the audit section of a CPA exam. Please research the questions and provide the correct answer along with a short explanation as to why you chose that answer. Each question is worth ten points.

Gloria CPA, an auditor for Smart Move Inc., observed changes in certain Year 2 financial ratios or amounts from the Year 1 ratios or amount. For each observed change, answer the following questions regarding possible explanations. (Assume that the turnover ratios were calculated using year-end balances.)

Inventory turnover decreased substantially from the prior year. Which of the following is a possible explanation for this finding?

A. Items shipped FOB shipping point during December, Year 2, were included in Year 3 sales.

B. Items shipped on consignment during the last month of the year were recorded as sales.

C. A significant number of credit memos for returned merchandise that were issued during the last month of the year were not recorded.

D. Year-end purchases of inventory were understated by incorrectly excluding items received before year-end.

Accounts receivable turnover decreased substantially from the prior year. Which of the following is not a possible explanation for this finding?

A. Items shipped on consignment during the last month of the year were recorded as sales.

B. A significant number of credit memos for returned merchandise that were issued during the last month of the year were not recorded.

C. A larger percentage of sales occurred during the last month of the year, as compared to the prior year.

D. Sales increased at a lower percentage than cost of goods sold increased, as compared to the prior year.

Allowance for doubtful accounts increased from the prior year, but allowance for doubtful accounts as a percentage of accounts receivable decreased from the prior year. Which of the following is not a possible explanation for this finding?

A. Items shipped on consignment during the last month of the year were recorded as sales.

B. A significant number of credit memos for returned merchandise that were issued during the last month of the year were not recorded.

C. A larger percentage of sales occurred during the last month of the year, as compared to the prior year.

D. Sales increased at a lower percentage than cost of goods sold increased, as compared to the prior year.

Long-term debt increased from the prior year, but interest expense increased a larger-than-proportionate amount than long-term debt. Which of the following is a possible explanation for this finding?

A. A significant amount of long-term debt was paid off during the current year.

B. Long-term borrowing was refinanced on a short-term basis at lower interest rates.

C. Short-term borrowing was refinanced on a long-term basis at lower interest rates.

D. Short-term borrowing was refinanced on a long-term basis at higher interest rates.

Articulation Exercise

Listed below are selected account balances for Moby Corporation at December 31, Year 2 and Year 1. Also available for you is selected information from the income statement for Moby for the year ended December 31, Year 2.

Selected balance sheet accounts:       Year 2                                       Year 1

Assets:

Accounts Receivable                           $18                                           $22

Prepaid Salaries                                     8                                              7

Prepaid Rent                                         3                                              5

Property, Plant & Equipment                310                                           283

(Accumulated Depreciation)                (75)                                          (68)

Investments                                         26                                             24

Liabilities & Stockholders’

Equity:

Salaries Payable                                   12                                              9

Unearned Sales Rev.                              4                                              1

Notes Payable                                     39                                             34

Dividends Payable                                 6                                              4

Contributed Capital                              32                                             24

Retained Earnings                                42                                             39

Selected income statement information for the year ended December 31, Year 2:

Sales revenue                                     $74

Depreciation                                       18

Salaries Expense                                  27

Gain on sale of equipment                       7

Loss on sale of investments                     3

Net Income                                         21

Additional information:

1. During Year 2, Property, Plant & Equipment costing $26 was sold causing a gain.
2. During Year 2, $22 of Notes Payable were issued in exchange for Property, Plant and Equipment. This involves an exchange of Notes Payable for Property, Plant and Equipment.
3. During Year 2, the firm sold Investments for $8 cash.

Required: Determine the correct dollar amounts for each of the following items. Place your answers in the spaces provided.

1. Cash paid for salaries in Year 2.                                                                  $_________                                              
2. Payments for the purchase of Investments in Year                                        $_________           

3. Notes Payable paid off in Year 2.                                                                 $_________                                                           

4. Cash dividends paid in Year 2                                                                     $_________                      
5. Cash received from the sale of Property, Plant and Equipment in Year 2              $_________                                                           
6. Cash paid for Property, Plant & Equipment in Year 2                                      $_________           

7. Cash collected from customers in Year 2                                                         $_________

Newlands Brewery is evaluating a new product line for the production of two new cider brands for the young affluent target market. The brewery is currently operating at its optimal capacity and it will have to invest in an expansion for new machinery and production space. The expected cash flows for the two cider brands are:
Project Cider A, Cashflows are as follows , Year 0=(25 000), Year 1=12 900, Year 2=10 900, Year 3 =8 300 and year 4=7 240.

Project Cider B, Cashflows are as follows , Year 0=(13 500), Year 1=7 230, Year 2=8 200, Year 3 =8 600 and year 4=5 400

Also the expected net income figures for the new product line are as follows

Project Cider A net incomes Year 1=6 728, Year 2=4 800, Year 3 =2 009 and Year 4= 7 420

Project Cider B net incomes Year 1=3 855, Year 2=4 725, Year 3=5 255 and Year 4 =1 864

Consider the following information:
• The average book value for Cider A project is R12,500,000
• The average book value for Cider B project is R6,800,000
• Management requires 15 percent for the project to go ahead based on accounting rate of return perspective
• The discount rate for a project of similar risk level is 10 percent
• Management requires a minimum payback of 1.75 years for the type of risk associated with this project

Required:
Taking into consideration that the two projects are independent and no scaling issues, what should Newlands Brewery do? Your answer should be supported by the analysis of the following calculations:
• Payback method
• Discounted payback method
• Accounting rate of return (using averages)
• Net present value
• Internal rate of return
• Profitability index
Now consider the presence of scaling issue, which project should Newland Brewery consider?