E6-5
(a) $30,000 X 4.96764 = $149,029.20.
(b) $30,000 X 8.31256 = $249,376.80.
(c) ($30,000 X 3.03735 X .50663 = $46,164.38. E6-12
Building (A)—PV = $600,000.
Building (B)— Rent X (PV of annuity due of 25 periods at 12%) = PV $69,000 X 8.78432 = PV $606,118.08 = PV
Building (C)— Rent X (PV of ordinary annuity of 25 periods at 12%) = PV $7,000 X 7.84314 = PV $54,901.98 = PV
Cash purchase price $650,000.00 PV of rental income – 54,901.98 Net present value $595,098.02
Answer: I would lease Building C since the present value of its net cost is the smallest.
E7-2
1. Cash balance of $925,000. Only the checking account balance should be reported as cash. The certificates of deposit of $1,400,000 should be reported as a temporary investment, the cash advance to subsidiary of $980,000 should be reported as a receivable, and the utility deposit of $180 should be identified as a receivable from the gas company.
2. Cash balance is $584,650 computed as follows:
Checking account balance $600,000
Overdraft (17,000)
Petty cash 300
Coin and currency 1,350
Total: $584,650
Cash held in a bond sinking fund is restricted. This is assuming that the bonds are noncurrent, the restricted cash is also reported as noncurrent.
3. Cash balance is $599,800 computed as follows:
Checking account balance $590,000
Certified check from customer 9,800
Total $599,800
The postdated check of $11,000 should be reported as a receivable. Cash restricted due to compensating balance should be described in a note indicating the type of arrangement and amount. Postage stamps
