Purpose of this Assessment The Final Assessment for this competency is to complete a series of financial calculations that address long-term assets, specifically depreciation methods, long-term debt, specifically capital leases and bonds, and Paid-In Capital and Retained Earnings, specifically Earnings Per Share. Items Required for Submission In order to demonstrate mastery of this competency, you will submit answers to the four questions as included below in Step Two: Calculations. Step ONE: Preparation In order to prepare for this assignment, it is important to carefully read this document in its entirety before starting the Final Assessment. Ensure to review each required item and submit the essay and calculations that align with the rubric. When reviewing each problem, the following questions should be considered: 1. What possible tasks are required? 2. What will you need to complete the essay and problems? 3. What formulas will you need? 4. What resources from this competency might you reference to complete this Final Assessment successfully? 5. Think about possible plans of action for the steps you will take – what strategies will you use to address each problem? Final Assessment: Outline and Rubric 1 Accounting for Long-Term Investing and Financing Decisions Final Assessment: Outline and Rubric Step TWO: Calculations The following financial calculations were covered in the competency content. Calculate the following four problems showing formulas for the ratio as well as the answer. Include the calculations, computation details (show your work), and answers. Word, Excel, or .pdf format preferred. Problem #1 On January 1, 2021, a company purchased machinery costing $70,000. The estimated useful life is 5 years, and the salvage value of the asset is expected to be $10,000. The machinery was used for 2,000 hours in Year 1, 2,010 hours in Year 2, 2,050 hours in Year 3, 2,045 hours in Year 4, and 1,010 from January 1 – June 30 of the fifth year. The depreciation rate is $7.50 per hour. a) Using the above information and the Straight-Line Depreciation Method: 1) Provide the journal entry to record the depreciation expense for Year 1 (show work for calculation of amount) 2) Provide the journal entry to record the depreciation expense for Year 2 (show work for calculation of amount) 3) Provide the journal entry to record the depreciation expense for Year 3 (show work for calculation of amount) 4) Assume the company sold the equipment at the end of Year 3 for $30,000. Provide the appropriate journal entries to record the sale. b) Using the above information and the Double Declining Deprecation Method: 1) Provide the journal entry to record the depreciation expense for Year 1 (show work for calculation of amount) 2) Provide the journal entry to record the depreciation expense for Year 2 (show work for calculation of amount) 3) Provide the journal entry to record the depreciation expense for Year 3 (show work for calculation of amount) 4) Assume the company sold the equipment at the end of Year 3 for $30,000. Provide the appropriate journal entries to record the sale. c) Using the above information and the Units of Production Method: 1) Provide the journal entry to record the depreciation expense for Year 1 (show work for calculation of amount) 2) Provide the journal entry to record the depreciation expense for Year 2 (show work for calculation of amount) 3) Provide the journal entry to record the depreciation expense for Year 3 (show work for calculation of amount) 4) Assume the company sold the equipment at the end of Year 3 for $30,000. Provide the appropriate journal entries to record the sale. 2 Final Assessment: Outline and RubricAccounting for Long-Term Investing and Financing Decisions Final Assessment: Outline and Rubric Problem #2 A company signs a lease on January 1, Year One, to lease a machine for eight years. Payments are $10,000 per year with the first payment made at the beginning of the year. The company has an incremental borrowing rate of 10 percent and the lease is considered as a capital lease. Assume the present value of an annuity due of $1 for eight periods at an annual interest rate of 10 percent is 5.335. Ensure to show work for all calculations. Prepare the following journal entries for the company. ● Record the signing of the lease on January 1, Year One. ● Record the first payment on January 1, Year One. ● Record depreciation on the equipment on December 31, Year One. ● Record interest on the liability on December 31, Year One. ● Record the second payment on January 1, Year Two. Problem #3 Company A issues twenty-year bond with a face value of $300,000 on January 1, Year One. According to the bond contract, cash interest at a stated rate of 2 percent will be paid each year beginning December 31, Year One. Company B wants to buy this bond immediately at an annual interest rate of 8 percent. The present value of $1 in twenty years at a rate of 8 percent is 0.215. The present value of an ordinary annuity of $1 per year for twenty years at a rate of 8 percent per year is 9.818. How much does Idea Investment Company pay the Vertise Company for this bond (rounded)? Ensure to include the following calculations: cash interest, present value of cash interest, present value of the bond, and value of bond. Show work for all calculations and clearly mark answer. Problem #4 A company reports Net Income for the current year as $1,505,000. Preferred stock dividends for the year total $55,150. At January 1, 100,000 shares of common stock were outstanding. On September 1, 9,000 shares of this common stock were re-purchased as treasury stock. a) What is the company’s Earnings Per Share? b) What does Earnings Per Share measure? c) If the P/E ratio is 3.2, what will the anticipated stock price be in the next period? Step THREE: Complete Checklist for Submission 3 Final Assessment: Outline and RubricAccounting for Long-Term Investing and Financing Decisions Final Assessment: Outline and Rubric Before you submit your work, check to see if you have met the criteria noted below. Did you: ✓ Ensure all 4 calculations are included ✓ Ensure all rubric areas have been addressed ✓ Correctly show the formula for each calculation ✓ Clearly show your work for each calculation Step FIVE: Submit Your Work ● Your completed files should be submitted through the Final Assessment page of your competency. ● Please note, for files smaller than 10MB (e.g., most Word documents), use the corresponding “+UPLOAD STUDENT FILE” button to upload your Final Assessment documents. For larger files of any type (e.g., voice over PowerPoint files, video presentations), please use the optional TEXT EDITOR to provide a URL where your tutorial faculty can download your file. ● How you create a download URL is up to you, but various free online providers, including Google Drive and Dropbox, offer this service. Please make sure that the URL you provide can be accessed by anyone with the link. For further instructions on how to create public links for uploaded files, consult the support pages for your chosen provider. List of Templates/Resources Needed The following are some resources that could provide support in your completion of this assignment: ● Word ● Excel 4 Final Assessment: Outline and Rubric
