Which of the following bond would have the greatest price volatility?

A) 6%, 3-year bond

B) 6%, 10-year bond

C) 3%, 3-year bond

D) 9%, 10-year bond

Martin Towing Company is at the end of its accounting year ending December 31. The following data that must be considered were developed from the company's records and related documents:

1. On January 1 of the current year, the company purchased a new hauling van at a cash cost of $23,800. Depreciation estimated at $3,000 for the year has not been recorded for the current year.
2. During the current year, office supplies amounting to $890 were purchased for cash and debited in full to Supplies. At the end of last year, the count of supplies remaining on hand was $400. The inventory of supplies counted on hand at the end of the current year was $300.
3. On December 31 of the current year, Lanie's Garage completed repairs on one of the company's trucks at a cost of $1,080; the amount is not yet recorded by Martin and by agreement will be paid during January of next year.
4. On December 31 of the current year, property taxes on land owned during the current year were estimated at $1,340. The taxes have not been recorded and will be paid in the next year when billed.
5. On December 31 of the current year, the company completed towing service for an out-of-state company for $6,900 payable by the customer within 30 days. No cash has been collected, and no journal entry has been made for this transaction.
6. On July 1 of the current year, a three-year insurance premium on equipment in the amount of $660 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1 of the current year.
7. On October 1 of the current year, the company borrowed $10,800 from the local bank on a one-year, 12 percent note payable. The principal plus interest is payable at the end of 12 months.
8. The income before any of the adjustments or income taxes was $40,000. The company's federal income tax rate is 30 percent. (Hint: Compute adjusted pre-tax income based on (a) through (g) to determine income tax expense.)

Required:

1. Indicate whether each transaction relates to a deferred revenue, deferred expense, accrued revenue, or accrued expense.

2. Prepare the adjusting entry required for each transaction at December 31 of the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar value)

XYZ 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.

1A. Calculate depreciation for year 2.

1B. Calculate book value and gain (loss) for sale of truck on Dec. 31, year 3.

1C. Prepare journal entries to record these transactions and events.

Record the total cost of the new delivery truck, year-end adjusting entry for the depreciation expense of the delivery truck, year-end adjusting entry for the depreciation expense of the delivery truck, year-end adjusting entry for the depreciation expense of the delivery truck, and record the sale of the delivery truck for $5,500 cash.

Malco Enterprises issued $28,000 of common stock when the company was started. In addition, Malco borrowed $54,000 from a local bank on July 1, Year 1. The note had a 6 percent annual interest rate and a one-year term to maturity. Malco Enterprises recognized $92,300 of revenue on account in Year 1 and $103,200 of revenue on account in Year 2. Cash collections of accounts receivable were $79,300 in Year 1 and $89,500 in Year 2. Malco paid $55,200 of other operating expenses in Year 1 and $63,000 of other operating expenses in Year 2. Malco repaid the loan and interest at the maturity date. Required Based on this information given above, record the events in the accounting equation and answer the following questions. (Enter any decreases to account balances with a minus sign.)

a. What amount of interest expense would Malco report on the Year 1 income statement?

b. What amount of net cash flow from operating activities would Malco report on the Year 1 statement of cash flows?

c. What amount of total liabilities would Malco report on the December 31, Year 1, balance sheet?

d. What amount of retained earnings would Malco report on the December 31, Year 1, balance sheet?

e. What amount of net cash flow from financing activities would Malco report on the Year 1 statement of cash flows?

f. What amount of interest expense would Malco report on the Year 2 income statement?

g. What amount of net cash flow from operating activities would Malco report on the Year 2 statement of cash flows?

h. What amount of total assets would Malco report on the December 31, Year 2, balance sheet?

i. What amount of net cash flow from investing activities would Malco report on the Year 2 statement of cash flows?

j. If Malco Enterprises paid a $3,800 dividend during Year 2, what retained earnings balance would it report on the December 31, Year 2, balance sheet?

Malco Enterprises issued $16,000 of common stock when the company was started. In addition, Malco borrowed $42,000 from a local bank on July 1, Year 1. The note had a 8 percent annual interest rate and a one-year term to maturity. Malco Enterprises recognized $79,100 of revenue on account in Year 1 and $91,200 of revenue on account in Year 2. Cash collections of accounts receivable were $67,300 in Year 1 and $77,500 in Year 2. Malco paid $44,400 of other operating expenses in Year 1 and $51,000 of other operating expenses in Year 2. Malco repaid the loan and interest at the maturity date.

Required
Based on this information given above, record the events in the accounting equation and answer the following questions. (Enter any decreases to account balances with a minus sign.)


a. What amount of interest expense would Malco report on the Year 1 income statement?
b. What amount of net cash flow from operating activities would Malco report on the Year 1 statement of cash flows?
c. What amount of total liabilities would Malco report on the December 31, Year 1, balance sheet?
d. What amount of retained earnings would Malco report on the December 31, Year 1, balance sheet?
e. What amount of net cash flow from financing activities would Malco report on the Year 1 statement of cash flows?
f. What amount of interest expense would Malco report on the Year 2 income statement?
g. What amount of net cash flow from operating activities would Malco report on the Year 2 statement of cash flows?
h. What amount of total assets would Malco report on the December 31, Year 2, balance sheet?
i. What amount of net cash flow from investing activities would Malco report on the Year 2 statement of cash flows?
j. If Malco Enterprises paid a $2,600 dividend during Year 2, what retained earnings balance would it report on the December 31, Year 2, balance sheet?
  

Mary, a single taxpayer, purchased 10,000 shares of § 1244 stock several years ago at a cost of $20 per share. In November of the current year, Mary received an offer to sell the stock for $12 per share. She has the option of either selling all of the stock now or selling half of the stock now and half of the stock in January of next year. Mary will receive a salary of $80,000 for the current year and $90,000 next year. Mary will have long-term capital gains of $8,000 for the current year and $10,000 next year.

If Mary's goal is to minimize her AGI for the two years, determine whether she should sell all of her stock this year or half of her stock this year and half next year.

a. The loss on the sale of Mary's § 1244 stock is treated as an ordinary loss. This treatment for taxpayers filing as single is limited to $ per year.

b. Determine Mary's total AGI under both options for the current year and next year.

If an amount is zero, enter "0".

Feedback

The corporation must meet certain requirements for § 1244 stock. The major requirement is that the total amount of money and other property received by the corporation for stock as a contribution to capital (or paid-in surplus) does not exceed $1 million. The $1 million test is made at the time the stock is issued. Section 1244 stock can be common or preferred stock. Section 1244 applies only to losses.

Which option will result in the best overall tax consequence for Mary?

Glendora Ridge Company has a project opportunity that requires $576.32 initial investment (cash outflows) today and this project is expected to generate cash inflows of $150 in year 1, $175 in year 2, $200 in year 3, and $X in year 4. If the project rate of return is 8%, calculate the project cash inflow in year 4 (calculate what is $X)?

What is the modified internal rate of return for a 3-year project with the following characteristics?

Cash flow at time year 0 = -$100,000

Cash flow at time year 1 = $50,000

Cash flow at time year 2 = $50,000

Cash flow at time year 3 = $50,000

Corporate cost of capital = 10%