Question: You owe $6000 payable three years from

> The BMO Bank of Montreal advertised rates of 1.8%, 2.25%, 2.6%, 3%, and 3.25% for the five successive years of its five-year compound interest RateOptimizer GIC. At the same time, the bank was offering fixed-rate five-year compound interest GICs yielding

> Western Life’s “Move-Up” compound interest GIC earns 4.125%, 4.25%, 4.5%, 4.875%, and 5% in successive years. What will be the maturity value of $7500 invested in this GIC?

> $8000 is invested in a five-year compound interest GIC earning interest rates of 2%, 2.5%, 3%, 3.5%, and 5% in successive years. What amount will the investor receive at maturity?

> A compound interest GIC will earn 5% compounded annually for the first two years and 6% compounded annually for the last three years of its five-year term. What will be the maturity value of $3000 invested in this GIC?

> Calculate the maturity value of $2000 invested in a five-year compound interest GIC earning 2.1% compounded annually.

> Using the information given in Problem 8, calculate the interest earned in the third year from a $10,000 investment in each GIC. Data from Problem 8: Sun Life Financial offers a five-year compound interest GIC earning rates of 2.5%, 3%, 3.5%, 4.25%, and

> Krista invested $18,000 in a three-year regular-interest GIC earning 4.2% payable semiannually. What is each semiannual interest payment?

> If your client’s objective is to have $10,000 in four years, how much should he invest today in a product earning 5.5% compounded annually?

> What amount today is economically equivalent to $8000 paid 18 months from now, if money is worth 5% compounded monthly?

> The maturity value of an investment after 42 months is $9704.61. What was the original investment, if it earned 3.5% compounded semiannually?

> Hasad is paid an annual salary of $54,600 based on a 40-hour workweek. What is his gross pay for a biweekly pay period if he works 43 hours in the first week and 46.5 hours in the second week? Overtime is paid at time and a half.

> What principal amount will have a maturity value of $5437.52 after 27 months if it earns 8.5% compounded quarterly?

> What is the present value of $10,000 discounted at 4.5% compounded annually over 10 years?

> Peggy has never made any payments on a five-year-old loan from her mother at 6% compounded annually. The total interest owed is now $845.56. How much did she borrow from her mother?

> If the total interest earned on an investment at 8.2% compounded semiannually for 8 1 2 years was $1175.98, what was the original investment?

> Repeat Problem 32 with the change that each obligation accrues interest at the rate of 9% compounded monthly from a date nine months ago when the obligations were incurred. Data from Problem 32: Teresita has three financial obligations to the same perso

> If money is worth 6% compounded annually, what amount today is equivalent to $10,000 paid: 1. 12 years from now? 2. 24 years from now? 3. 36 years from now?

> Repeat Problem 31 with the change that each contract accrues interest from today at the rate of 12% compounded monthly. Data from Problem 31: Commercial Finance Co. buys conditional sale contracts from furniture retailers at discounts that provide a 16.

> Three equal payments were made two, four, and six years after the date on which a $9000 loan was granted at 10% compounded quarterly. If the balance immediately after the third payment was $5169.81, what was the amount of each payment?

> A $7500 loan at 4% compounded monthly requires three payments at five-month intervals after the date of the loan. The second payment is to be twice the size of the first payment, and the third payment is to be double the amount of the second payment. Cal

> A $6000 loan at 9% compounded quarterly is to be settled by two payments. The first payment is due after nine months and the second payment, half the amount of the first payment, is due after 1 1 2 years. Determine the size of each payment.

> Lucille receives an annual salary of $37,500 based on a 37.5-hour workweek. What are her gross earnings for a 2-week pay period in which she works 9 hours of overtime at 1.5 times her regular rate of pay?

> A $10,000 loan at 4% compounded semiannually is to be repaid by three equal payments due 2 1 2 , 4, and 7 years after the date of the loan. What is the size of each payment?

> A $4000 loan at 10% compounded monthly is to be repaid by three equal payments due 5, 10, and 15 months from the date of the loan. What is the size of the payments?

> A $15,000 loan at 5.5% compounded semiannually is advanced today. Two payments of $4000 are to be made one year and three years from now. The balance is to be paid in five years. What will the third payment be?

> Teresita has three financial obligations to the same person: $2700 due in 1 year, $1900 due in 1 1 2 years, and $1100 due in 3 years. She wishes to settle the obligations with a single payment in 2 1 4 years, when her inheritance will be released from he

> Commercial Finance Co. buys conditional sale contracts from furniture retailers at discounts that provide a 16.5% compounded monthly rate of return on the purchase price. What total price should Commercial Finance pay for the following three contracts: $

> Daniel makes annual payments of $2000 to the former owner of a residential lot that he purchased a few years ago. At the time of the fourth-from-last payment, Daniel asks for a payout figure that would immediately settle the debt. What amount should the

> What amount invested today would grow to $10,000 after 25 years, if the investment earns: 1. 4% compounded annually? 2. 4% compounded semiannually? 3. 4% compounded quarterly? 4. 4% compounded monthly?

> Michelle has just received an inheritance from her grandfather’s estate. She will be entering college in 3 1 2 years, and wants to immediately purchase three compound interest investment certificates having the following maturity values and dates: $4000

> To motivate individuals to start saving at an early age, financial planners will sometimes present the results of the following type of calculation. How much must a 25-year-old individual invest five years from now to have the same maturity value at age

> Pete Pylon has just signed a “four-year, $68-million deal” with the Ottawa Senators. The terms of the contract include a signing bonus of $4.8 million and salaries of $10 million, $17.2 million, $17.5 million, and $18.5 million in successive years of the

> Trevor earns a base monthly salary of $2000 plus a commission of 3% on sales exceeding his monthly quota of $25,000. He receives a further 3% bonus on sales in excess of $50,000. What must his sales be in order to gross $4000 per month?

> A bond pays $1000 interest at the end of every year for the next 30 years. What is the current economic value of each of the 15th and 30th payments if we discount the payments at: 1. 5% compounded semiannually? 2. 8% compounded semiannually?

> Alicia is considering two offers-to-purchase that she has received on a residential building lot she wishes to sell. One is a cash offer of $145,000. The other offer consists of three payments of $49,000—one now, one in six months, and one in twelve mont

> A debtor owing payments of $750 due today, $1000 due in 2 years, and $1250 due in 4 years requests a payout figure to settle all three obligations by means of a single economically equivalent payment 18 months from now. What is that amount if the payee c

> A scheduled payment stream consisted of three payments: $2100 due (but not paid) 1 1 2 years ago, $1300 due today, and $800 due in two years. What single payment six months from now would be economically equivalent to the payment stream? Money can earn 4

> What single payment one year from now would be equivalent to $2500 due in three months, and another $2500 due in two years? Money is worth 7% compounded quarterly.

> What single payment six months from now would be economically equivalent to payments of $500 due (but not paid) four months ago and $800 due in 12 months? Assume money can earn 2.5% compounded monthly.

> What payment 2 1 4 years from now would be a fair substitute for the combination of $1500 due (but not paid) nine months ago and $2500 due in 4 1 2 years if money can earn 9% compounded quarterly?

> What amount would have to be invested today for the future value to be $10,000 after 20 years if the rate of return is: 1. 5% compounded quarterly? 2. 7% compounded quarterly? 3. 9% compounded quarterly?

> Mohinder has financial obligations of $1000 due in 3 1 2 years and $2000 due in 5 1 2 years. He wishes to settle the obligations sooner with a single payment one year from now. If money is worth 2.75% compounded semiannually, what amount should the payee

> Ramon wishes to replace payments of $900 due today and $500 due in 22 months by a single equivalent payment 18 months from now. If money is worth 5% compounded monthly, what should that payment be?

> Daniella’s gross monthly earnings are based on commission rates of 4% on the first $40,000 of sales, 5% on the next $50,000, and 6% on all additional sales for the month. What is her sales total for a month in which she earns $5350?

> What single amount, paid three years from now, would be economically equivalent to the combination of $1400 due today and $1800 due in five years if funds can be invested to earn 3% compounded quarterly?

> Mustafa can receive a $77 discount if he pays his property taxes early. Alternatively, he can pay the full amount of $2250 when payment is due in nine months. Which alternative is to his advantage if he can earn 6% compounded monthly on short-term invest

> What amount 15 months ago is equivalent to $2600 one and a half years from now? Assume money can earn 5.4% compounded monthly.

> A payment of $1300 is scheduled for a date 3 1 2 years from now. What would be an equivalent payment nine months from now if money is worth 5.5% compounded quarterly?

> What amount 1 1 2 years from now is equivalent to $7000 due in 8 years if money can earn 6.2% compounded semiannually?

> Your client has a choice of either receiving $5000 two years from now or receiving a lump payment today. If your client can earn 5.4% compounded semiannually, what amount received today is equivalent to $5000 in two years?

> Ross has just been notified that the combined principal and interest on an amount that he borrowed 27 months ago at 11% compounded quarterly is now $2297.78. How much of this amount is principal and how much is interest?

> If money can be invested to earn 2.5% compounded annually, how much would have to be invested today to grow to $10,000 after: 1. 10 years? 2. 20 years? 3. 30 years?

> By calculating the maturity value of $100 invested for one year at each rate, determine which rate of return an investor would prefer. 1. 3.0% compounded monthly 2. 3.1% compounded quarterly 3. 3.2% compounded semiannually 4. 3.3% compounded annually

> Jason’s gross pay for August is $3296.97 on sales totalling $151,342. If his base salary is $1500 per month, what is his rate of commission on sales exceeding his monthly quota of $100,000?

> Rocky Mountain Bus Tours needs an additional bus for three years. It can lease a bus for $2100 payable at the beginning of each month, or it can buy a similar bus for $120,000, using financing at the rate of 7.5% compounded monthly. The bus’s resale valu

> One year ago, Jasmin and Derek opened investment accounts with a discount broker. In their C$ account, they purchased 300 Bank of Montreal (BMO) shares at C$54.20 per share and six Government of Canada bonds (GoCs) at C$1063 per bond. In their US$ accoun

> Wyland Consulting, a firm started three years ago by Reyna Wyland, offers consulting services for material handling and plant layout. Its balance sheet at the close of 2018 is as follows. Earlier in the year Wyland obtained a bank loan of $30,000 cash fo

> Explain how a reduction in operating expenses as a percentage of sales can produce a short-term gain at the cost of long-term performance.

> Seaside Surf Shop began operations on July I, 2019, with an initial investment of $50,000. During the initial 3 months of operations, the following cash transactions were recorded in the firm's checking account. Additional information 1. Most sales were

> Gross profit margin [(Sales revenue - Cost of goods sold)/Sales revenue] is an important determinant of profit margin. Identify two factors that can cause gross profit margin to decline. ls a reduction in the gross profit margin always bad news? Explain.

> From the first quarter 2018 I 0-Q of Groupon, Inc.: Groupon operates online local commerce marketplaces throughout the world that connect merchants to consumers by offering goods and services, generally at a discount. Consumers access those marketplaces

> (a) Explain how an increase in financial leverage can increase a company's ROE. (b) Given the potentially positive relation between financial leverage and ROE, why don't we see companies with 100% financial leverage (entirely nonowner financed)?

> Companies are aware that analysts focus on profitability in evaluating financial performance. Managers have historically utilized a number of methods to improve reported profitability that are cosmetic in nature and do not affect "real" operating perform

> Explain the concept of liquidity and why it is crucial to company survival.

> Increasing net operating asset turnover requires some combination of increasing sales and/or decreasing net operating assets. For the latter, many companies consider ways to reduce their investment in working capital (current assets less current liabilit

> What insights do we gain from the graphical relation between profit margin and asset turnover?

> On May 1, 2019, Ott, Inc. sold merchandise to Fox Inc. Fox signed a non-interest bearing note requiring payment of $60,000 annually for 7 years. The first payment is due May 1, 2020. The prevailing rate for similar notes on that date is 9%. What amount s

> One way to increase overall profitability is to increase gross profit. This can be accomplished by raising prices and/or by reducing manufacturing costs. REQUIRED a. Will raising prices and/or reducing manufacturing costs unambiguously increase gross pro

> Why is it important to disaggregate ROA into profit margin (PM) and asset turnover (AD?

> Jackie Hardy, CPA, has a brother, Ted. in the retail clothing business. Ted ran the business as its sole owner for IO years. During this I 0-year period. Jackie helped Ted with various accounting matters. For example, Jackie designed the accounting syste

> Explain in general terms the concept of return on investment. Why is this concept important in the analysis of financial performance?

> Paula Seale is negotiating the purchase of an extermination firm called Total Pest Control. Seale has been employed by a national pest control service and knows the technical side of the business. However, she knows little about accounting data and finan

> In determining net cash flow from operating activities using the indirect method, why must we add depreciation back to net income? Give an example of another item that is added back to net income under the indirect method.

> Data from the financial statements of JetBlue Airways and Southwest Airlines are presented below. REQUIRED a. Compute the return on equity ratio for JetBlue and Southwest for 2017. Which company earned the higher return for its shareholders? b. Compute t

> What is the difference between the direct method and the indirect method of presenting net cash flow from operating activities?

> Data from the financial statements of The Gap, Inc., and Nordstrom, Inc., are presented below. REQUIRED a. Compute the return on equity ratio for The Gap and Nordstrom for 2017. Which company earned the higher return for its shareholders? b. Compute the

> Why is a statement of cash flows a useful financial statement?

> In 2019, Cart Inc. adopted a plan to accumulate funds for environmental remediation beginning July 2, 2024 at an estimated cost of $20 million. Cart plans to make five equal annual payments into a fund earning 6% interest compounded annually. The first d

> Starbucks Corporation reported the following data in its 2018 and 2017 10-K reports. REQUIRED a. Prepare income statements for Starbucks for the years ended September 30, 2018, and October 1, 2017. Use the format illustrated in Exhibit 1.8. b. Compute St

> Why are noncash investing and financing transactions disclosed as supplemental information to a statement of cash flows?

> DowDuPont Inc. provides the following footnote disclosures in its 10-K report relating to its pension plans. REQUIRED a. How much pension expense (revenue) does Dow DuPont report in its 2018 income statement? b. Dow DuPont reports a $2,846 million expect

> Traverse Company acquired a $3,000,000 building by issuing $3,000,000 worth of bonds payable. In terms of cash flow reporting, what type of transaction is this? What special disclosure requirements apply to a transaction of this type?

> Record the effect of each of the following independent transactions using the financial statements effects template provided. Confirm that Assets = Liabilities + Equity for each transaction.

> In which of the three activity categories of a statement of cash flows would each of the following items appear? Indicate for each item whether it represents a cash inflow or a cash outflow: a. Cash purchase of equipment. b. Cash collection on loans. c.

> In the last quarter of 2014, DreamWorks Animation SKG Inc. recorded a loss. Part of this loss was due to impairment charges. In its annual report the company stated: We are required to amortize capitalized production costs over the expected revenue strea

> What are the three major types of activities classified on a statement of cash flows? Give an example of a cash inflow and a cash outflow in each classification.

> The following information is taken from the March 31, 2018 annual report of Take-Two Interactive Software, Inc., a maker and distributor of video games. All amounts are in thousands of U.S. dollars. Information from the Management Discussion, Balance She

> Why are cash equivalents included with cash in a statement of cash flows?

> Sandy Nguyen just graduated from college and has $40,000 in student loans. The loans bear interest at a rate of 8% and require quarterly payments. a. What amount should Sandy pay each quarter if she wishes to pay off her student loans in six years? b. Sa

> Return on a company's net operating assets is commonly used to evaluate financial performance. One way to increase performance is to focus on operating assets. REQUIRED Indicate how this might be done in relation to the following asset categories. Indica

> What separate disclosures are required for a company that reports a statement of cash flows using the indirect method?

> General Mills, Inc. is a global consumer foods company. The firm manufactures and sells a wide range of branded products and is a major supplier to the foodservice and baking industries. The company's core product areas are ready-to-eat cereal, super-pre

> Describe the accounting for a convertible bond. Would this accounting ever result in the recognition of a gain in the income statement'!

> What is a stock option vesting period? How does the vesting period affect the recognition of compensation expense for stock options?

> What items are typically reported under the stockholders' equity category of other comprehensive income (OCI)?

> What information is reported in a statement of stockholders equity'?

> Employee stock options have a potentially dilutive effect on earnings per share (EPS) that is recognized in the diluted EPS computation. What can companies do to offset these dilutive effects and how might this action affect the balance sheet?

> What is the difference between the accounting for a small stock dividend and the accounting for a large stock dividend?

> Brownlee Company borrowed money by issuing a 20-year mortgage note payable. The note will be repaid in equal monthly installments. The interest expense component of each payment decreases with each payment. Why?

> On April 30, 2019. one year before maturity. Weber Company retired $200.000 of 9% bonds payable at 101 . The book value of the bonds on April 30 was $197,600. Bon d interest was last paid on April 30 , 2019. What is the gain or loss on the retirement of