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You have seen an ad for a used Mercedes in the Athens Messenger. The car is for sale for $40,000. You believe you could make a buck by renting the car out. You figure you could rent the car to the semi-rich on a daily basis for three years. You think you could rent the car for $100 per day for the first year and $80 per day the second year and $60 per day for the third year. You expect that the car will be rented out about 70% of the time for each year. At the end of the third year, you figure you can sell the car for $20,000. You estimate that the repairs and maintenance on the car will be about $1,000 for the first year, $2,000 the second year and $3,000 the third year. Licenses and fees will run $2,000 per year for all three years. You will pay a rental company 10% of the gross rents you receive each year to take care of all the paper work and the renting of the car to the students. How much can you pay for the car today and make 20% on your investment? Mercedes??????Year 1?Year 2?Year 3?Rents 25,550 ???????????????????Cash Expenditures:?????? Repairs & Maintenance?????? Licenses & Fees?????? Rental Company Fees??????Total Cash Expenditures?????????????Net Cash Flow?????Once upon a time the following add appeared in a December, 2019 edition of the Athens newspaper-For Sale: Apartment Building 30 UnitsAverage Rent for 2020 is expected to be $600 per month per unit2 years oldPrice __________Upon investigation you found that it would require little or no work on your part. There was a rental agency which would keep the books, rent apartments, do evictions and other administrative tasks for 10% of the rent. Your investigation showed that the apartments stayed about 95% occupied and that occupancy rate is likely to continue. Additionally, the rental agency told you that you can expect rents to increase about 5% per year after 2020 year for the following three years (2021, 2022, and 2023) because the building is new. The repairs and maintenance costs are about $800 per month for 2020, 2021, 2022 and 2023. After that, you expect these to rise at 5% per year. You want to earn at least 20% on your investment. You figure you will hold on to the apartment for four years and then sell it for $800,000 (on Dec 31, 2023). All other cash expenses run $1,000 per month and will rise at 5% per year after 2020. Assume it is Jan 1, 2020- what is the price you would pay for the apartment? Ignore taxes. Owners’ Equity HomeworkProblem 19 The following balances are from the Savannah’s Accounting Company 2019 2018Cash 20,000 10,000Accounts Receivable 52,000 43,000Allowance for Doubtful Accounts 2,000 1,000Prepaid Rent 3,000 4,000Equipment 190,000 180,000Accumulated Depreciation 60,000 50,000Accounts Payable 70,000 40,000Salaries Payable 5,000 10,000Taxes Payable ______Note Payable 70,000 100,000Common Stock ($1 Par) 2,000 500Paid In Capital 18,000 4,500Retained Earnings 35,000 31,000Accounting Fees 100,000Salary Expense 38,800Rent Expense 24,000Bad Debt Expense 1,200Interest Expense 6,000Depreciation Expense 10,000The common stock outstanding was 500 shares on January 1 and then 1,500 shares were sold on June 30. During 2019, the company paid a dividend of _____________. No equipment was sold during the year. The tax rate is 30% and 1/2 of 2019 were paid in 2019 and the rest will be paid in 2020. The Note Payable requires an annual payment of $30,000 principal plus interest at 6% on December 31 of each year. (Note- this is a service company- no COGS!)For the year ended 2019 prepare a Balance Sheet, Income Statement, Statement of Owners’ Equity and Statement of Cash Flows.Problem 2 Prepare Journal Entries for all of the following transactions:On January 1, 2019, Stacy Corporation began operations by selling 200,000 shares of $1 par value stock to the public for $5 per share. On June 30, they sold 50,000 more shares at $6 per share. On July 1, they declared a dividend of $.25 per share, payable on July 30 to shareholders of record on July 15. On July 30 they paid the dividend. Problem 3 On January 1 Collen Company began operations by issuing 10,000 shares of $1 par value stock for $10 per share. On June 30th they declared a $0.10 per share dividend to shareholders of record on July 15th, payable July 30th. Prepare all journal entries for the above transactions ................
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