1) Presented below s information for Monaco Company.

a) Beginning-of-the-year Accounts Receivable balance was $56,000

b) Net sales (all on account) for the year was $65,000. Monaco does not offer cash discounts.

c) Collections on accounts receivable during the year were $65,000.

Instructions:

(a) Prepare (summary) journal entries to record the items noted above.

(b) Compute Monaco accounts receivable turnover ratio for the year. The company does not believe it will have any bad debt.

(c) Use the turnover ratio computed in (b) to analyze Monaco's liquidity. The turnover ratio last year was 8.0

2) (Journalize Various Accounts Receivable Transactions) The balance sheet of Clemons Company at December 31, 2013, includes the following:

Notes Receivable $85,000

Accounts Receivable $216,650

Less: Allowance for doubtful accounts $14,690 $246,960

Transactions in 2014 include the following:

1. Accounts receivable of $200,000 were collected including accounts of $90,000 on which 1% sales discounts were allowed.

2. $7,600 was received in payment of an account which was written off the books as worthless in 2014.

3. Customer accounts od $21,680 were written off during the year.

4. At year-end. Allowance for Doubtful Accounts was estimated to need a balance of $18,680. This estimate is based on an analysis of aged accounts receivable.

Instructions:

Prepare all journal entries necessary to reflect the transactions above.

3) (Time Value Concepts Applies to Solve Business Problems) Answer the following questions related to Purple Cloud Inc.

(a) Purple Cloud Inc. has $500,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $65,000 at the end of each year for 10 years, and the other is to receive a single lump-sum payment of $900,000 at the end of the 10 years. Which alternative should Purple Cloud select? Assume the interest rate is constant over the entire investment.

(b) Purple Cloud, Inc. has completed the purchase of 25 new tractors. The fair value of equipment is $1,450,000. The purchase agreement specifies an immediate down payment of $290,000 and semiannual payments of $157,606 beginning at the end of 6 months for 5 years. What is the interest rate, to the nearest percent, used in discounting this purchase transaction?

(c) Purple Cloud, Inc. loans money to one of its major suppliers in the amount of $600,000. Purple Cloud accepts 10% note due in 5 years with interest payable semiannually. After 1 year (and the receipt of interest for 1 year), Purple Cloud needs money and therefore sells the note to Fourth National Bank, which demands interest on the note of 12% compounded semiannually. What is the amount Purple Cloud will receive on the sale of the note?

(d) Purple Cloud Inc. wishes to accumulate $1,800,000 by December 31, 2024, to retire bonds outstanding. The company deposits $100,000 on December 31, 2014, which will earn interest at 8% compounded quarterly, to help in the retirement of this debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 10 years to ensure that $1,800,000 is available at the end of 224. (The quarterly deposits will also earn at a rate of 8%, compounded quarterly.) (Round to even dollars)

4. (Analysis of Alternatives) Assume that Future-Mart has decided to surface and maintain foe 15 years a vacant lot next to one of its stores to service asa parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 8,000 square yards.

Bid A: A surface that cost $8.20 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 19 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface.

Bid B: A surface that cost $17.10 per square yard to install. This surface has a probable useful life of 15 years and will require annual maintenance in each year except the last year, at an estimate cost of 13 cent per square yard.

Instructions:

Prepare computations showing which bid should be accepted by Future-Mart. You may assume that the cost of capital is 8%, that the annual maintenance expenditures are incurred at the end of each year, and that prices are not expected to change during the next 15 years.