1. Assume you purchased herd of 20 pigs for breeding and you pay $500 per pig for them – total of $10,000. You bought them on March 1, 2017. Assume there is no loss of pigs and the salvage value is $150 per pig ($3,000 total). The useful life is 5 years. Use the MACRS 3-year schedule as shown in the PowerPoint (this is different from the useful life).

Using the information above and any documents provided to you calculate the “Previous Year Depreciation” and the Beginning of Year Book Value” for the years and the depreciation method in the table below. Place your answers in the table.

MACRS

Recovery Percentages

Recovery Year

Recovery Year              3 year class               5 year class               7 year class                           

1.                        33.33%            20.00%              14.29%

        2.                                                 44.45%                                    32.00%                                    24.49%

        3.                                                  14.81%                                   19.20%                                    17.49%

       4.                                                   7.41%                                      11.52%                                    8.92%

       5.                                                                                                    11.53%                                    8.93%

       6.                                                                                                      5.76%                                     4.46%

Yoshi Company completed the following transactions and events involving its delivery trucks.

Year 1

Year 2

Year 3

Required:
1-a. Calculate depreciation for Year 2.
1-b. Calculate book value and gain (loss) for sale of Truck on December 31, Year 3.
1-c. Prepare journal entries to record these transactions and events.

• Required 1A
• Required 1B
• Required 1C

Calculate depreciation for Year 2.

Calculate book value and gain (loss) for sale of Truck on December 31, Year 3.

Journal entry worksheet

• Record the total cost of the new delivery truck.

Note: Enter debits before credits.

1A) What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.

Year 0 cash flow = -158,000
Year 1 cash flow = 30,000
Year 2 cash flow = 36,000
Year 3 cash flow = 38,000
Year 4 cash flow = 39,000
Year 5 cash flow = 43,000
Year 6 cash flow = 42,000

1B) Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 17.1%. (Round to nearest penny)

1C) Spacely Sprockets Inc is a new start-up evaluating a new project. They worry that they don't have all the requisite operating information they will need to estimate Cash Flows From Assets and that they wouldn't be able to evaluate this project based on NPV and IRR (which both use the CFFA's to evaluate). Instead they have decided to use the Average Accounting Return (AAR) rule to evaluate the project. What is the AAR for this project? (Enter your answer as a percentage and Round to 2 decimals)

ANSWER EACH PART (A,B,C)

Comparing Three Depreciation Methods Waylander Coatings Company purchased waterproofing equipment on January 6 for $555,000. The equipment was expected to have a useful life of four years, or 7,600 operating hours, and a residual value of $45,800. The equipment was used for 2,900 hours during Year 1, 2,400 hours in Year 2, 1,400 hours in Year 3, and 900 hours in Year 4. Required: 1. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) the units-of-output method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method. Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar. Depreciation Expense Year Straight-Line Method Units-of-Output Method Double-Declining-Balance Method Year 1 $ $ $ Year 2 $ $ $ Year 3 $ $ $ Year 4 $ $ $ Total $ $ $ 2. What method yields the highest depreciation expense for Year 1? Double-declining-balance method 3. What method yields the most depreciation over the four-year life of the equipment? All three depreciation methods Feedback Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation. Annual units-of-production depreciation allocates the cost of the asset equally over the units produced (hours). The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero. Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method. Learning Objective 2. Check My Work

If your formulas are correct, you should get the correct answers to the following questions.

(a) What is the net operating income (loss) in Year 1 under absorption costing?

(b) What is the net operating income (loss) in Year 2 under absorption costing?

(c) What is the net operating income (loss) in Year 1 under variable costing?

(d) What is the net operating income (loss) in Year 2 under variable costing?

Make a note of the absorption costing net operating income (loss) in Year 2.

At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $20,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 4,400 units.

(a) Would this change result in a bonus being paid to the CEO?

(b) What is the net operating income (loss) in Year 2 under absorption costing?

(c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,400 units per year?

Please do this in PSEUDOCODE.Give a baby $5,000! Did you know that, over the last century, the stock market has returned an average of 10%? You may not care, but you’d better pay attention to this one. If you were to give a newborn baby $5000, put that money in the stock market and NOT add any additional money per year, that money would grow to over $2.9 million by the time that baby is ready for retirement (67 years)! Don’t believe us? Check out the compound interest calculator from MoneyChimp and plug in the numbers! To keep things simple, we’ll calculate interest in a simple way. You take the original amount (called the principle) and add back in a percentage rate of growth (called the interest rate) at the end of the year. For example, if we had $1,000 as our principle and had a 10% rate of growth, the next year we would have $1,100. The year after that, we would have $1,210 (or $1,100 plus 10% of $1,100). However, we usually add in additional money each year which, for simplicity, is included before calculating the interest. Your task is to design (pseudocode) and implement (source) for a program that 1) reads in the principle, additional annual money, years to grow, and interest rate from the user, and 2) print out how much money they have each year. Task 3: think about when you earn the most money! Lesson learned: whether it’s your code or your money, save early and save often… Sample run 1: Enter the principle: 2000 Enter the annual addition: 300 Enter the number of years to grow: 10 Enter the interest rate as a percentage: 10 Year 0: $2000 Year 1: $2530 Year 2: $3113 Year 3: $3754.3 Year 4: $4459.73 Year 5: $5235.7 Year 6: $6089.27 Year 7: $7028.2 Year 8: $8061.02 Year 9: $9197.12 Year 10: $10446.8

The CHS Company has provided the following information:

• Accounts receivable written-off as uncollectible during the year amounted to $13,400.
• The accounts receivable balance at the beginning of the year was $340,000.
• The accounts receivable balance at the end of the year was $400,000.
• The allowance for doubtful accounts balance at the beginning of the year was $15,900.
• The allowance for doubtful accounts balance at the end of the year after the recording of bad debt expense was $14,800.
• Credit sales during the year totaled $995,000.

How much was CHS Company's bad debt expense?

An interest rate swap has three years of remaining life. Payments are exchanged annually. Interest at 2.25% fixed is paid and 12-month LIBOR is received. An exchange of payments has just taken place. The one-year, two-year and three-year LIBOR Forward rates are 2.25%, 2.40% and 2.6%. The one-year, two-year and three-year OIS rates are 3.25%, 3.00%, and 3.25%. All rates are compounded continuously. What is the value of the swap if the principal is $250 million?

Doak Corp. is evaluating a project with the following cash flows:

Year 0 Cash flow -$36.200,

Year 1 Cash Flow 11.520,

Year 2 Cash Flow 14.670,

Year 3 Cash Flow 11.270,

Year 4 Cash Flow 10.940,

Year 5 Cash Flow -4.830.

The company uses an interest rate of 11 percent on all of its projects.

Calculate the MIRR of the project using the:

Discounting approach

Reinvestment approach

Combination approach

A loan officer states, "Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage." Calculate the difference in payments on a 30-year mortgage at an interest of 0.75% a month versus a 15-year mortgage with an interest rate of 0.7% a month. Both mortgage are for $100,000 and have monthly payments.

1) What is the monthly payment committed by the 30-year mortgage? And the total payment?

2) What is the monthly payment committed by the 15-year mortgage? And the total payment?