Lance Armstrong Inc. manufactures

Essay by dnyleUniversity, Bachelor'sA+, July 2007

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E6-5 (Computation of Present Value)Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.

(a) $30,000 receivable atthe end of each period for 8 periods compounded at 12%.

$30,000 X 4.96764 = $149,029.20(b) $30,000 payments to be made at the end of each period for 16 periods at 9%.

$30,000 X 8.31256 = $249,406.80.

(c) $30,000 payable at the end of the seventh, eighth, ninth, and tenth periods at 12%.

($30,000 X 3.03735 X .50663 = $46,164.38.

or(5.65022 – 4.11141) X $30,000 = $46,164.30 (difference of $.08 due to rounding).

E6-13 (Computation of Bond Liability)Lance Armstrong Inc. manufactures cycling equipment. Recently the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $2,000,000 of 11% term corporate bonds on March 1, 2007, due on March 1, 2022, with interest payable each March 1 and September 1.

At the time of issuance, the market interest rate for similar financial instruments is 10%.

InstructionsAs the controller of the company, determine the selling price of the bonds.

PV–OA = R (PVF–OAn, i)PV–OA = $110,000 (PVF–OA30, 5%)PV–OA = $110,000 (15.37245)PV–OA = $1,690,970PV = FV (PVFn, i)PV = $2,000,000 (PVF30, 5%)PV = $2,000,000 (0.23138)PV = $462,760The selling price of the bonds = $1,690,970 + $462,760 = $2,153,730.

E23-11 (SCF—Indirect Method)Condensed financial data of Pat Metheny Company for 2008 and 2007 are presented below.

Additional information:During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2008.

InstructionsPrepare a statement of cash flows using the indirect method. (L0 6)Pat...