See Intermediate Acct HW.doc

3 accounting hw questions. fairly easy and wont take too much time

I. Special Interest Calculations A. Financing Deals Fast Freight Truck Company offers a truck to your client for $100,000 in exchange for an installment note to be paid with equal quarterly payments over 4 years at a 1% annual rate. There is a required $12,000 down payment. Your research indicates that the truck could have been purchased for $92,000 cash. 1. Calculate the required payment 2. Prepare the legal (1%) amortization schedule provided by Fast Freight to your client, for the first two quarters: 3. Record the purchase of the truck by your client: 4. Prepare the effective interest amortization schedule for the first two quarters that reflects the actual present value of the loan: 1 5 Record the first quarter entry to record the first payment of principal and interest. 6. Suppose that your client pays off the loan right after making the second payment, record the entry. 7. What is the effective interest rate if your client pays off the note after making the second payment? III. Current Liabilities Premiums. Paige Candy Company offers a coffee mug as a premium for every ten 50-cent candy bar wrappers presented by customers together with $1.00. The purchase price of each mug to the company is 90 cents; in addition it costs 60 cents to mail each mug. It is assumed that 25% of the wrappers will be returned for the coffee cups. The results of the premium plan for the years 2010 and 2011 are as follows (assume all purchases and sales are for cash): 2010 Coffee mugs purchased Candy bars sold Wrappers redeemed 2011 160,000 150,000 5,600,000 6,750,000 800,000 1,600,000 Instructions Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the Paige Candy Company balance sheet and income statement at the end of 2010 and 2011. Space is included for T-accounts, 2 Account 2010 Income statement 2010 Balance Sheet Amount Account 2011 Income statement Amount 2011 Balance Sheet Note: After each account, in parenthesis, indicate debt or credit Warranties. Miley Equipment Company sells computers for $1,500 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2010, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $30 for parts and $75 for labor. (Assume sales all occur at December 31, 2010.) In 2011, Miley incurred actual warranty costs relative to 2010 computer sales of $10,000 for parts and $28,000 for labor. Instructions (a) Under the expense warranty treatment, give the entries to reflect the above transactions (accrual method) for 2010 and 2011. 2010 2011 3 (b) The transactions of part (a) create what balance under current liabilities in the 2010 balance sheet? 4