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Vintage Motors, Inc., was formed on January 1, 2018. The following transactions occurred during 2018: On January 1, 2018, Vintage issued its common stock for $430,000. Early in January, Vintage made the following cash payments:
a.$160,000 for equipment
b. $234,000 for inventory (six cars at$39,000 each)
c. $18,000 for 2018 rent on a store building
In February, Vintage purchased four cars for inventory on account. The cost of this inventory was$192,000 ($48,000 per car). Before year-end, the company paid off$153,600 of this debt. The company uses the first-in, first-out (FIFO) method to account for its inventory.
During 2018, Vintage sold seven autos for a total of $504,000. Before year-end, it had collected 90% of this amount. The business employs two people. The combined annual payroll is$60,000, of which Vintage owes $11,000 at year-end. At the end of the year, the company paid income taxes of$22,000.
Late in 2018, Vintage declared and paid cash dividends of $13,000. For equipment, Vintage uses the straight-line depreciation method, over five years, with zero residual value.
- Prepare Vintage’s income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses together.
On January 2, 2015, Banno Corporation issued $1,500,000 of 10% bonds at 97 due December 31, 2024. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable "interest method.")
The bonds are callable at 101 (ie, at 101% of face amount), and on January 2, 2020, Banno called$900,000 face amount of the bonds and redeemed them.
Ignoring income taxes, compute the amount of loss, if any, to be recognized by Banno as a result of retiring the $900,000 of bonds in 2020 and prepare the journal entry to record the redemption.
Your rich aunt has promised to give you $2,000 per year at the end of each of the next four years to help you pay for college. Using a discount rate of 12%, the present value of the gift can be stated as
a. PV=$2,000 (PV factor, i=4 %, n=12 ). b. PV= $2,000 (Annuity PV factor, i=12 %, n=4 ). c. PV=$2,000 (Annuity FV factor, i=12 %, n=4 ). d. PV= 2,000\times12\times$ 4.