179 Unrealistic Interest Homework Problem 1 The following Balances are from Fred's Fine Lingerie and Harley Shoppe, Inc 2017 23,000 55,000 23,000 192,000 60,000 5,000 47,000 8,000 2016 10,000 40,000 36,000 180,000 50,000 10,000 40,000 10,000 Cash Accounts Receivable Inventory Equipment Accumulated Depreciation Security Deposits Accounts Payable Salaries Payable Taxes Payable Note Payable Common Stock Retained Earnings Sales Revenue Cost of Goods Sold Salary Expense Rent Expense Interest Expense Depreciation Expense 75,000 25,000 74,600 200,000 80,000 20,000 24,000 10,000 100,000 10,000 66,000 The common stock outstanding was 10,000 shares on January 1, 2017 and then 10,000 shares were issued on June 30, 2017 for $10,000. 5,000 shares were issued on September 30, 2017 in exchange for a piece of equipment worth $5,000. No equipment was sold during the year The Note Payable is payable at $25,000 principal plus 10% interest on the unpaid balance each December 31, The tax rate is 30% and 1/2 of 2017 taxes were paid in 2017 and the rest will be paid in 2018. Prepare an Income Statement, Statement of Owners' Equity, Balance Sheet and a Statement of Cash Flows using the indirect method, in good form. Problem 2 Go to page 137, Molly's Munchies, calculate the Receivable Turn, Average Days Sales Outstanding, Inventory Turn and the Average Days Sales in Inventory. (Remember Inventory turn was way in the beginning). Problem 3 Buddy will sell you some carpet. $20,000. No money down and only 1% interest per year for two years. (You send him the 1% at the end of each year) At the end of the 2nd year, you send him the $20,000 along with the interest. If you borrowed from the bank you would have to pay 12%-a heck of a deal or is it? (How much are you really paying for the carpet?)