Monday November 7th Chapter 9 ANSWERS TO QUESTIONS E9 15 Req 1 50 000 x 0 7513 37 565 10 000 x 2 4869 24 869 Req 2 It is better to pay in three installments because the economic cost is less Req 3 40 000 x 0 5132 20 528 15 000 x 6 1446 92 169 Req 4 E9 21 Present value of annuity 55 000 x 6 8017 374 094 E9 22 25 000 x 5 0330 125 825 purchase price Wednesday November 9th E9 2 Req 1 March 31 Salary and wage expense E SE Liability for income taxes withheld employees L Liability for insurance premiums withheld employees L FICA taxes payable employees L Cash A Payroll for March including employee deductions 200 000 40 000 1 000 15 000 144 000 Req 2 March 31 Payroll tax expense E SE FICA taxes payable employer L Employer payroll taxes on March payroll 15 000 Req 3 Liability for income taxes withheld employees L Liability for insurance premiums withheld employees L FICA taxes payable employees L FICA taxes payable employer L Cash A Remittance of payroll taxes and deductions for March payroll 40 000 1 000 15 000 15 000 15 000 AP9 7 Option 1 750 000 750 000 688 194 Option 2 60 000 11 4699 71 000 Option 3 50 000 7 3601 368 005 80 000 7 3601 0 5584 328 790 Total 696 795 Option one is the best because it gives you the highest return The time value of money makes a dollar received today worth more than a dollar received one year from now Monday November 14th M9 5 Quick Ratio Working Capital a Decrease Remain the same b Decrease Decrease c Increase Remain the same d Decrease Remain the same E9 8 Req 1 Date Assets Liabilities Stockholders Equity January 10 Inventory Accounts Payable Not Affected March 1 Cash Note Payable Not Affected Req 2 August 31 Cash Paid 47 250 Principal plus interest Req 3 Transaction a has no impact on cash flows because there is neither an inflow nor an outflow of cash Transaction b results in an inflow of cash from financing activities The August 31 payment is an outflow of cash Note to instructor If you have emphasized the Statement of Cash Flows you should discuss the specific nature of these cash flows The repayment of principal is a cash flow from financing activities and the payment of interest expense is a component of cash flows from operating activities E9 17 Present value of future amount 900 000 x 0 5019 451 710 Because the client already has 200 000 in the account she needs to deposit an additional 251 710 Wednesday November 16th AP9 3 Req 1 Warranty Expense 3 9 billion Warranty Liability 3 9 billion 4 billion Cash 4 billion Req 2 In year 2011 no revenue has been earned The liability is 23 million Using an estimated life of 39 months Bally may report 589 744 in revenue each month 23 million 39 or 7 076 923 for the year The balance sheet in 2012 would report Unearned revenue in the amount of 15 923 077 Req 3 While the trend for the quick ratio is downward it is doubtful that ExxonMobil is experiencing financial difficulty The company has a reputation for aggressive cash management It would be useful to study the Statement of Cash Flows to determine if ExxonMobil is generating significant cash resources from operating activities Req 4 The company estimates future costs and records them as a current expense The matching concept dictates that all costs related to earning revenue should be reported in the same accounting period as the revenue ANSWERS TO MULTIPLE CHOICE 1 c 6 a 2 e 7 c 3 d 8 b 4 c 9 b 5 c 10 d