# In 1996, the monthly cost of a certain cell phone plan was \$45. In 2002,

Please complete the below 5 questions

1. Questions #1a and #1b .

1a:
In 1996, the monthly cost of a certain cell phone plan was \$45. In 2002, that
same plan had a monthly cost of \$36. If 1996 is the reference date, what is the
price index for that cell phone plan in 2002?
1b:
Using the price index for the cell phone plan from the previous question,
assume that the cell phone company has a family plan that cost \$68 in 1996.
What should we expect that family plan to cost in 2003?

2. Mario just invested
\$12,000 into an interest-bearing account that yeilds 11.0%. Inflation is averaging
6.6% per year.
a.
What
is the actual dollar value of Mario’s investment be after 9 years?
b. What is the
inflation-fee interest rate (rounded to the nearest 0.1 percent)?
c.
What
will the constant dollar value of Mario’s investment be after 9 years (using today’s dollars as the reference dollar)?
d. Show that the actiual
dollar value and the constant dollar value of Mario’s investment 9 years from
now represent the same amount of money.

Question 3a, 3b & 3c use the following situation: Two years later,
XY Computers bought another even higher-powered array processor. This processor
has an acquisition cost of \$40,000, a 10-year useful life, and an expected
salvage value of \$2000. Use the format shown in table 14.2 to show depreciation
year, depreciation amount, and book value. Note: Table
14.2 is at the bottom of this document

3a.Show straigh-line
depreciation
3b.
Show 150% declining-balance depreciation
3c.
Show MACRS depreciation.

Question
4a, & 4b, are related to the below situation: Below is a
simplified balance sheet (amounts in thousands) for Xenon Game Software, Inc.
immediately before they buy new development hardware for an up-coming project.

Assests

Cash and cash equivalents
\$90

Accounts receivable
\$175

Plant and equipment
\$216

Total assests \$481

Liabilities

Accounts
payable \$198
Debt
\$122

Declared dividends
\$87

Total liabilities
\$407

Owner’s
Equity

Stock \$58
Retained earnings
\$16

Total owner’s equity
\$74

Total
liabilities and owner’s eqity
\$481
Xenon
is buying \$24,000 of new computer hardware and playing for it with acsh. Show
the profit and loss statemet, cash-flow statement, and ending balance sheet
immediately after the purchase. Assume that all other unspecified accounting
categories are zero.

4a. Using the same starting balance sheet from the
above, show the profit and loss statement, cash-flow statement, and ending
balance sheet assuming that Xenon buys
the computer equipment using a loan for the full amount of the purchase.

4b.Using the ending balance
sheet from above situation as the starting balance sheet for this question.
Assume that Xenon Software had the following financial results from using the
equipment over the reporting period:

Sales
and operating income = \$240,000
Cost of goods sold = \$63,000
Selling
expenses = \$47,000
General
Research
and development = \$81,000
Depreciation
=\$7000
Federal,
state, and local income taxes = \$29,000

Assume
that all other unspecified accounting categories are zero and show the profit
and loss statement, cash-flow statement, and ending balance sheet for this
situation.

Qustion
5 relate to the following situation: TropicalFish Tanks.com sells
aquariums on the World Wide Web. Their
two main products are foldfish bowls and delux aquariums. Both products come
complete with sand (yopur choice from a set of variable colors), air pump,
filter, owner’s manual, and a modest supp[ly of fish food. Last year, 18,000
goldfish bowls and 14,000 deluxe acquariums were produced. The following table
lists other relevant data.

Direct-Material
Dollars
per Unit

Direct-Labor
Hours per Unit

Direct-Labor
Cost per Hour

Goldfish
bow

\$5.67

\$0.45

\$9.75

Deluxe
aquarium

\$10.47

\$0.75

\$12.25

5: What are the unit
costs for goldfish bowls and deluxe aquariums under the direct-labor-hour
method?

Table 14.2 An
Example of Straight-Line Depreciation
End
of Year Depreciation
Book
Value at End
Amount
in Year of Year
0 – \$7000
1 \$1000 \$6000
2 \$1000 \$5000
3 \$1000 \$4000
4 \$1000 \$3000
5 \$1000 \$2000
6 \$1000 \$1000

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