Jerrod Company owns a machine with a cost of $305,000 and an accumulated depreciation of$45,000 that can be sold for $231,000, less a 5% sales commission. Alternatively, the machine can be leased by Jerrod Company for three years for a total of$243,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Jerrod Company on the machine would total $16,900 over the three years. Prepare a differential analysis on January 12, 2014, as to whether Jerrod Company should lease (Alternative 1) or sell (Alternative 2) the machine.

The Herndons bought a lot several years ago for $\$ 22,000$. On the lot they own, they are now building a home that will cost $\$ 140,000$. The Herndons will pay for the home by taking $\$ 25,000$ from savings and borrowing the rest. First-year expenses are estimated to be: mortgage interest, $\$ 9,100$; depreciation, $2.25 \%$ of the home's cost; property taxes, $\$ 2,890$; insurance, $\$ 645$; lost interest income, $\$ 720$; maintenance, $\$ 1,350$; and utilities, $\$ 1,900$. Income tax savings are estimated to be $\$ 3,025$. a. What will be the Herndon's cost of owning the home in the first year? b. What will be the net cost of home ownership in the first year?

The following revenue and expense account balances were taken from the ledger of Veggie Health Services Co. after the accounts had been adjusted on February 28, 2014, the end of the current fiscal year:

$$\begin{array}{lrlr} \text { Depreciation Expense } & \$ 9,000 & \text { Service Revenue } & \$ 270,900 \\ \text { Insurance Expense } & 4,000 & \text { Supplies Expense } & 3,000 \\ \text { Miscellaneous Expense } & 6,000 & \text { Utilities Expense } & 17,600 \\ \text { Rent Expense } & 42,000 & \text { Wages Expense } & 213,100 \end{array}$$

Prepare an income statement.

A physician performs medical services for a patient on October 20; the total bill for the medical services was $200. The patient makes a co-pay of$20 on October 20, and the insurance company pays the remaining balance of $180 on November 19. On what date(s) will the physician record the revenue for those medical services provided on October 20?

a.$200 of revenue on October 20 b. $20 of revenue on October 20 and$180 of revenue on November 19 c. $200 of revenue on November 19 d.$180 of revenue on October 20 and the remaining $20 on November 19

Two people decide to open a business reconditioning toner cartridges for copy machines. They rent a building for $7000/year and estimate that building maintenance, taxes, and insurance will cost$6500/year. Each person wants to make $12/h in the first year and will work 10 h per day for 260 days of the year. Assume that it costs$28 to restore a cartridge and that the restored cartridge can be sold for $45. Write a linear function for the total cost C to operate the business and restore n cartridges during the first year, not including the hourly wage the owners wish to earn.

$$\begin{matrix} \text{Estimated uncollectible accounts based} & \text{}\\ \text{on aging accounts receivable} & \text{\$ 3,697.32}\\ \text{Accrued interest income} & \text{137.50}\\ \text{Merchandise inventory} & \text{45,058.15}\\ \text{Supplies inventory} & \text{126.00}\\ \text{Jalue of prepaid insurance} & \text{1,535.80}\\ \text{Annual depreciation expense- equipment} & \text{2,250.00}\\ \text{Accrued interest expense} & \text{277.58}\\ \text{Prepaid rent income earned} & \text{1,000.00}\\ \end{matrix}$$

Journalize the income tax adjustment and post it to the T accounts.

Based on the following information, prepare a monthly and yearly budget for Cathy Kudyrko.

Average Income

Net monthly pay is $1,400

Average Monthly Expenses

$$\begin{array}{lr} \text { Rent } & \$ 410 \\ \text { Insurance } & 60 \\ \text { Utilities } & 50 \\ \text { Gasoline } & 60 \\ \text { Clothing } & 60 \\ \text { Entertainment } & 100 \\ \text { Savings } & 120 \\ \text { Telephone (landline) } & 15 \\ \text { Car payment } & 150 \\ \text { Car repairs } & 20 \\ \text { Groceries } & 150 \\ \text { Personal care } & 50 \\ \text { Miscellaneous } & 155 \end{array}$$

You are curious as to how much Rhonda and Steve made in their business last year. You do not have all the data, but you know that most of their expenses relate to buying the sweaters and having them monogrammed. You know they paid themselves $\$50,000$ each and you know the rent, utilities, insurance, and a benefit package for the business was about $\$20,000$. About how much do you think they made “before taxes” last year? If they must make their payment to the venture capital firm, and then pay 50 percent in taxes, what was their increase in cash last year?

Imagine you are a provider of portfolio insurance. You are establishing a four-year program. The portfolio you manage is currently worth $100 million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-bills pay 5% per year. Assume for simplicity that the portfolio pays no dividends (or that all dividends are reinvested). a. What fraction of the portfolio should be placed in bills? What fraction in equity? b. What should the manager do if the stock portfolio falls by 3% on the first day of trading?

Handy Hardware Corporation's unadjusted trial balance and accounting forms are given in the Working Papers.

Instructions:

1. Using the following information, journalize the adjusting entries for the current year ended December 31.

Adjustment Information, December 31

Estimated uncollectible accounts based on aging accounts receivable         $ 13,832.96 
Accrued interest income                                                          630.00 
Merchandise inventory                                                        162,569.00
Supplies inventory                                                             3,695.00
Value of prepaid insurance                                                     8,360.00
Annual depreciation expense equipment                                         13,034.00 
Accrued interest expense                                                         600.00 
Prepaid rent income earned                                                     4,000.00

Velcor Industries has over 70 expense accounts in its chart of accounts. Each month, the computerized accounting system generates a list of the accounts which includes the year-to-date account balance and the annual amount budgeted for the year.

The managers of the business want to receive a monthly report showing how effectively the business is controlling its expenses. For example, if the company expected to spend $12,000 on insurance for the entire year, it should only have spent$5,000 through May.

OPEN THE SPREADSHEET TLA CH04

1. Follow the directions on the Instructions tab.

Sam and Kolleen Hastings have two children. Sam was 30 years old when he first purchased a $125,000, 5-year term life insurance policy. He will be 35 years old this year. What is the percent increase in the premium? a. What will his annual premium be if he increases the policy to$200,000 ? b. What is his monthly premium? c. What total amount did he pay during the previous 5-year term? d. What total amount will he pay for the next 5-year term?

Janice Wong receives an annual salary of $42,536, which is paid weekly. Her normal work week is 40 hours, and she is paid time and a half for all overtime. She is single and claims two withholding allowances. Her deductions include FICA, Medicare, federal withholding, state disability insurance, state withholding at 4.4%, credit union payments of$125, retirement deductions of $75, association dues of$12, and a Diabetes Association contribution of $25. Find the federal withholding using the percentage method for a week in which she works 52 hours.

Rene and Jefferson Franklin want to purchase a $560,000 home. They plan to make a 25% down payment and finance the remaining amount through Peabody Savings Association. Peabody has these closing costs: application fee,$325; credit report, $90; appraisal report,$555; title insurance, $490; survey and photographs,$325; recording fee, $65; legal fees,$780; and first 6 months of property taxes, $1,789. If the seller agreed to pay 50% of the closing costs, how much money will the Franklins need to secure the loan, including the down payment?