1. Morgan Company received from Lee Company an invoice dated September 27. Terms were 2/10 EOM. List price on the invoice was $5,000 (freight not included). Morgan receives a 9/7 chain discount. Freight charges are Morgan’s responsibility but Lee agreed to prepay the $150 freight charge. Morgan pays the invoice November 9. What does Morgan pay Lee? 2. Jeff Jones earns $1,200 per week. He is married and claims four withholding allowances. The FICA rate is as follows: Social Security rate is 6.2% on $97,500; Medicare rate is 1.45%. To date his cumulative wages are $6,000. Each paycheck, his employer also deducts $42.50 for health insurance. What is his net pay? (Calculate FIT by the percentage method.) 3.Lisa Kane borrowed $8,000 on an 8%, 60-day note. After 15 days, Lisa paid $2,000 on the note. On day 45, Lisa paid $1,000 on the note. What is the total interest and ending balance due by the U.S. rule? Use ordinary interest. 4. On May 12, Bob Campbell accepted a $5,000 note in granting a time extension of a bill of goods bought by Rick Ween. Terms of the note were 8% for 120 days. On July 8, Bob needed to raise cash and discounted the note at Rick’s bank at a discount rate of 9%. Calculate Bob’s proceeds. 5. Jacob Fonda deposited $25,000 in a savings account at 10% interest compounded semiannually. At the beginning of Year 4, Jacob deposits an additional $40,000 at 10% interest compounded semi-annually. At the end of six years, what is the balance in Jacob’s account? 6. A condo is advertised in The Wall Street Journal for $350,000. It states in the ad that a 20% down payment is required. The rate of interest is 11% on a 25-year mortgage. What would be (A) the monthly payment along with (B) the total cost of interest? 7. A truck costing $25,000 with a residual value of $5,000 was purchased by Rim Corporation. The truck’s estimated life is 10 years. At the end of Year 2, what is the book value using declining-balance method? Assume a depreciation rate of twice the straight-line method. 8. A toy store has a beginning inventory of eight sets of paints at a cost of $1.25 each. During the year, the toy store purchased three at $1.50, five at $2, six at $2.50, and ten at $3. By the end of the year, 21 sets were sold. Calculate the following: A. The number of paint sets in stock B. The cost of ending inventory under LIFO C. The cost of ending inventory under FIFO D. The cost of ending inventory under Weighted Average 9. Jim Smith, who lives in Territory 5, carries 10/20/5 compulsory liability insurance along with optional collision that has a $200 deductible. Jim was at fault in an accident that caused $1,800 damage to the other auto and $600 damage to his own. Also, the courts awarded $13,000 and $8,000 respectively, to the two passengers in the other car for personal injuries. How much does the insurance company pay and what is Jim’s share of responsibility? 10. Jeff Sellers bought 200 shares of Radio Shack stock at $22.35. Eight months later, he sold the stock at $31.76. Assuming a 2% commission charge, what is the bottom line for Jeff? 11. Earl Miller plans to buy a boat for $19,500 with an interest charge of $2,500. Earl figures he can afford a monthly payment of $650. If Earl has to pay 36 equal monthly payments, by how much can he afford the boat per month? 12. Peter Mabel sold atotal of 400 Oatmeal ($1.50) and Wheat ($2) breads during the Labor Day weekend. How many of each did Pete sell if total sales were $700? 13. Ray Long wants to retire in Arizona when he is 70 years of age. Ray is now 50. He believes he will need $130,000 to retire comfortably. To date, Ray has set aside no retirement money. Assume Ray gets 14% interest compounded semi-annually. How much must Ray invest today to meet his $130,000 goal?
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