Calculate the following present value for the following annuities.

a. Dan will be collecting his retirement benefit starting one month from now and continuing for 25 years. He will receive 3000 per month for the first year and the monthly benefit increases by 3% per year. At the rate of 5% annual interest compounded monthly, calculate the present value of the retirement benefit.

b. A 10-year decreasing annuity-immediate, with annual payments of 20, 18, 16, …, 2. Given an effective rate of 6%.

c. A perpetuity-immediate with annual payments. The perpetuity pays 1 in year 1, 2 in year 2, 3 in year 3, and so on, until year 10 where it pays 10 every year from then on. Given an effective rate of 6%.

3. Loan Interest. Sharon is considering the purchase of a car. After making the down payment, she will finance $11,450.00. Sharon is offered 3 maturities. On a four-year loan she will pay $284.93 per month. On a five-year loan, Sharon’s monthly payment will be $237.68. On a six-year loan they will be $206.39. Sharon rejects the four-year loan, as it is not within her budget. How much interest will Sharon pay over the life of the five-year loan? Of the six-year loan? Which should she choose if she bases her decision solely on interest paid?

• The amount of interest on the five-year loan is ___
• The amount of interest on the six-year loan is  _______
• She should choose the __________ loan based on total interest paid.
• What would be a valid reason for choosing the other loan option? ______________.

After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $366,000. Ingrid allocated $61,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis.(Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3?

b. In lieu of the original facts, assume that Ingrid purchased only a phone list with a useful life of 5 years for $15,500. How much amortization expense on the phone list can Ingrid deduct in year 1, year 2, and year 3?

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business.

1. Prepare the current-year income statement for the company using variable costing.

Biohazard Inc created a product to dispose of personal medical waste safely for regular consumers. It will be sold for $50 each. To start this venture, $700,000 of equipment will have to be purchased. Additional working capital of 150k will be required in year 0 and 100k in year 1. Revenue is forecasted at 500k for year 1 and will grow 50k/year through year 5. Annual operating expenses are estimated at 250k in year 1 and will continue to grow by 25k per year until the end of the project’s life. Straight line depreciation will be used for the equipment over 10 years. It’s salvage value at the end of 10 years is estimated at 50k. The tax rate will be 40%.

Calculate the net investment (year 0 cash flow) and the net cash flow for years 1, 2 and 10.

A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 475, 000 units of product during its life. It actually produces the following units: 220,000 in 1^st year, 124,000 in 2^nd year, 121,800 in 3^rd year, 15,200 in 4^th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

Required:

Prepare a table with the following column headings and compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.

. On December 31, Year One, the Abertion Company decides to lease a piece of equipment rather than buy it. The lease is for 10 years. Payments are $22,000 each December 31 beginning on December 31, Year One. Abertion has an annual incremental borrowing rate of 9 percent. The present value of an annuity due of $1 at 9 percent for 10 periods is $6.99525. a. Assume this lease is an operating lease. What journal entries are made in Year One and Year Two? b. Assume this lease is an operating lease. What is shown on the company’s balance sheet at the end of Year Two? c. Assume this lease is a capital lease. What journal entries are made in Year One and Year Two? d. Assume this lease is a capital lease. What is shown on the company’s balance sheet at the end of Year Two?

In the current year Mike reports income and losses from the following​ activities:

Activity X

$27,000

Activity Y

(16,000)

Activity Z

(23,000)

Salary

175,000

Activities​ X, Y, and Z are all passive with respect to Mike. Activity Z has $35,000 in passive losses which are carried over from the prior year. In the current year Mike sells activity Z for a taxable gain of $22,000.

Requirement

a. What is the amount of loss that Mike may deduct and what is the amount that must be carried over in the current​ year? ​(Enter a​ "0" for amounts with a zero​ balance.)

Requirement b. Based solely on the amounts​ above, compute Mike​'s AGI for the current year.

In Tax Accounting