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".

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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%

Phyllis invested $8,500, a portion earning a simple interest rate of 3 1/4% per year and the rest earning a rate of 3% per year. After one year the total interest earned on these investments was $271.25. How much money did she invest at each rate?

at 3 1/4% per year $_______

at 3% per year $________

A contractor was doing the 10-year planning for a construction business, which uses a MARR of 15% per year. The contractor anticipates income of $150,000 per year for years 1-5, and income of $200,000 per year for years 6-10.

1. Draw the cash flow diagram.
2. What is the future value (in year 10) of the income? (show steps and calculations)

You make deposits at the end of each month into an account earning interest at a rate of 6%/year compounded monthly. Your deposits will be $2000/month in the first year, $2200/month in the second year, $2420/month in the third year, $2662 in the fourth year, and so on. How much will be in your account at the end of 40 years? No Excel answers please.

A company’s weighted average cost of capital is 13.2% per year. A project requires an investment of $120,000 today and it is expected to generate after-tax cash flows of $30,000 at the end of year 1, $40,000 at the end of year 2, $50,000 at the end of year 3, and $60,000 at the end of year 4. What is the project’s annual modified internal rate of return?