1.Carter Company earned net income of $350,000 last year. This year it wants to earn net income of $450,000. The company's fixed costs are expected to be $300,000, and variable costs are expected to be 70% of sales.

Instructions

(a) Determine the required sales to meet the target net income of $450,000 using the mathematical equation.

(b) Using a CVP income statement format, prove your answer.

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2. Logan Company's budgeted sales and direct materials purchases are as follows.

Budgeted Sales Budgeted D.M. Purchases

January $300,000 $60,000

February 330,000 70,000

March 350,000 80,000

Logan's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Hagen's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.

Instructions

(a) Prepare a schedule of expected collections from customers for March.

(b) Prepare a schedule of expected payments for direct materials for March.

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1. Jack Birch invested his inheritance at 4% annual interest and left the money invested without withdrawing any of the interest for 10 years. At the end of the 10 years, Jack withdrew the accumulated amount of money plus the accumulated interest of $35,000. What amount had Jack invested, assuming the investment earned simple interest?

3. The amount you must deposit now in your savings account, paying 6% compound interest, in order to accumulate $15,000 for your first tuition payment when you start college in 4 years is____?

4. Davis Company is about to issue $900,000 of 8-year bonds paying a 12% interest rate with interest payable semiannually. The discount rate for such securities is 10%. Below are available time value of money factors that Davis uses to calculate compound interest.

	8 periods, 10%	16 periods, 5%	8 periods, 12%	16 periods, 6%
Present Value of 1	0.46651	0.45811	0.40388	0.39365
Future Value of 1	2.14359	2.18287	2.47596	2.54035
Present Value of an Annuity of 1	5.33493	10.83777	4.96764	10.10590
Future Value of an Annuity of 1	11.43589	23.65749	12.29969	15.67253

To the closest dollar, how much can Davis expect to receive for the sale of these bonds?

5. Striegel Company has purchased equipment that requires annual payments of $60,000 to be paid at the end of each of the next 6 years. The appropriate discount rate is 12%. What amount will be used to record the equipment?

6. When determining the proceeds received when issuing a bond, the factor applied to the amount of the interest payments is determined from the table for the 1. present value of 1. 2. present value of an annuity of 1.

1.

2.

Both 1 and 2.

Neither 1 nor 2.

7. If a single future amount of $6,000 is to be received in 5 years and discounted at 6%, its present value is ____?

9. The amount you must deposit now in your savings account, paying 4% interest compounded annually, in order to accumulate $20,000 for a down payment 3 years from now on a new car is ____?

10. The amount you must deposit now in your savings account, paying 4% compound interest, in order to accumulate $5,000 for a down payment 4 years from now on a new car is ____?

11. Sturm Corporation earns 8% on an investment that will return $600,000, 5 years from now. Below is some of the time value of money information that Sturm has compiled that might help in planning compound interest decisions.

Present Value of 1 for 5 periods at 8%	0.68058
Future Value of 1 for 5 periods at 8%	1.46933
Present Value of an Annuity of 1 for 5 periods at 8%	3.99271
Future Value of an Annuity of 1 for 5 periods at 8%	5.86700

To the closest dollar, what is the amount Sturm should invest now to earn this rate of return?

13. Which of the following discount rates will produce the largest present value?

8%.

9%.

10%.

4%.

14. When determining the proceeds received when issuing a bond, the factor applied to the amount of the bond principal is determined from the table for the

present value of 1.

present value of annuity of 1.

future value of 1.

15. Forrest Company issued $200,000 of 5-year bonds, with a stated rate of interest of 8%, payable semiannually. The market rate for such securities is 10%. How much did Forrest receive from the sale of these bonds? (Round to the nearest dollar.)

18. Justine Company is considering purchasing machinery. The machinery will produce the following cash flows: Year 1 $100,000 Year 2 $140,000 Justine requires a minimum rate of return of 12%. What is the maximum price Justine should pay for this machinery?

20.

Presented below are long-term liability items for Lind Company at December 31, 2014.

Bonds payable, due 2016		$460,000
Lease liability		62,520
Notes payable, due 2019		72,720
Discount on bonds payable		36,800

Prepare the long-term liabilities section of the balance sheet for Lind Company.

21. What is the present value of $13,950 due 7 periods from now, discounted at 12%?

22. Presented below is the partial bond discount amortization schedule for Ferree Corp. Ferree uses the effective-interest method of amortization.

Semiannual Interest Periods		Interest to Be Paid			Interest Expense to Be Recorded			Discount Amortization			Unamortized Discount			Bond Carrying Value
Issue date											$84,240			$1,319,760
1		$63,180			$65,988			$2,808			81,432			1,322,568
2		63,180			66,128			2,948			78,484			1,325,516

(a) Prepare the journal entry to record the payment of interest and the discount amortization at the end of period

23. Sweetwood Company issues $4,200,000, 10-year, 12% bonds at 95, with interest payable on July 1 and January 1. The straight-line method is used to amortize bond discount.

Prepare the journal entry to record the sale of these bonds on January 1, 2014.

24 Golden Inc. issues $2,600,000, 5-year, 12% bonds at 104, with interest payable on July 1 and January 1. The straight-line method is used to amortize bond premium.

Prepare the journal entry to record the sale of these bonds on January 1, 2014.