i need this quick for double or longer for not so double

Project Description:

debate and questions


present value of annuities staci martinez email this author 5/15/2014 12:10:34 pm




dear mr. marks,



i have completed the analysis you have requested for the two contracts presented to your client harvey alexander. the method i used to reach my conclusion is a common method known as the present value of annuity method. with this method i have found the present value of each offer now and what it will be per year of the contract. the calculations are as follows for each deal presented:



49ers offer: $1 million sign on bonus and $1.5 million per year for a 5 year contract




year

payment

pv of $1 @8% interest

pv


1

1,500,000

0.92593

1,388,895


2

1,500,000

0.85734

1,286,010


3

1,500,000

0.79383

1,190,745


4

1,500,000

0.73503

1,102,870


5

1,500,000

0.68058

1,020,870


sign on bonus

1,000,000


present value of contract

6,989,065




dallas cowboys offer: $2.5 million sign on bonus and $1 million per year for a 5 year contract




year

payment

pv of $1 @8% interest

pv


1

1,000,000

0.92593

925,930


2

1,000,000

0.85734

857,340


3

1,000,000

0.79383

793,830


4

1,000,000

0.73503

735,030


5

1,000,000

0.68058

680,580


sign on bonus

2,500,000


present value of contract

6,492,710


in conclusion, i have found that there is a difference of $496,355 over five years in favor of the 49ers deal. since he does not have a preference of teams, then i recommend the offer made by the 49ers. if you have questions regarding anything, feel free to contact my office.



sincerely,

staci martinez, cpa






do you agree why or why not







mr. marks,

in comparing both contracts offered to your client, i used the present value of money calculation to point out the present value of each offering. the present value of money shows one how much a set amount of money paid in the future is worth to a person at the present time. all of the calculations are based off an assumption your clients moneys are invested in vehicles that produce an average annual rate of return of 8%.


san francisco 49er’s


payments

pv of $1 (i=8%)

present value

n


1,000,000

1

1,000,000

0


1,500,000

.92593

1,388,895

1


1,500,000

.85734

1,286,010

2


1,500,000

.79383

1,190,745

3


1,500,000

.73503

1,102,545

4


1,500,000

.68058

1,020,870

5


total



6,989,065







dallas cowboys


payments

pv of $1 (i=8%)

present value

n


2,500,000

1

2,500,000

0


1,000,000

.92593

925,930

1


1,000,000

.85734

857,340

2


1,000,000

.79383

793,830

3


1,000,000

.73503

735,030

4


1,000,000

.68058

680,580

5


total



6,492,710





as you see in the comparisons above, the san francisco 49er’s offer tops the offer submitted to your client from the dallas cowboys by $496,355 in present value of money terms. the cowboys did offer your client the bigger signing bonus, however, the higher yearly payments by the 49er’s makes the difference and beats out the cowboys’ offer. i would recommend to you and your client to accept the san francisco 49er’s offer.



regards,



robert j. rebeor, cpa




do you agree why or why not


1. the internal control weakness in the first scenario is the lack of supporting documentation for the petty cash transactions that john handles. even though it is a small amount there should still be back up information regarding how the company is spending the petty cash fund. this information can be included with john's list and be reviewed by another employee to support the transactions.


2. the internal control weakness in the second scenario is there is not a separation of duties and there is a risk of possible theft. dean is responsible for duties such as approving vouchers, check signing, and reconciles accounts. "individuals that have physical responsibility for assets should not have access to accounting records" (spiceland, sepe, and nelson, 2011, page 339). the company should consider hiring at least another employee to review the transactions that dean is handling for accuracy and preventing theft.


3. the internal control weakness in the last scenario is similar to both scenarios above as there is not a great separation of duties. i think it is great that jerry is at least responsible for for the general ledger accounts, but fran operates everything else to include deposits and handling the subsidiary ledger for accounts receivable. the company will benefit from hiring another employee to either handles the deposits or managed the accounts receivable ledger. all three scenarios can ensure accuracy and safeguard cash against theft.


reference

spiceland, j. d., sepe, j. f. & nelson, m.w. (2011). intermediate accounting (6th ed.). new york, n.y.: mcgraw-hill irwin.





do you agree why or why not


1. john smith should not be the only person to tally the amount for the account. he should also not be able to just receive one check for the full amount needing to be made. it would be my suggestion that there would be multi step process to help verify that all amounts being paid are accurate. a check should also be written for each singular expense and not just one lump sum for all expenses.









2. there is a good, multi-step process to ensure everything is correctly paid. the only suggestions i would have for internal control weakness is to have someone else in charge of balancing the account at the end of the month, or handling the check registry. by adding this additional person in the middle of the process, it would confirm all is correct and less would be looked over accidently.













3. fran should not receive the mail and makes a listing of all of the checks and cash received by customers as well as handle accounts receivable. she should do one or the other and someone else should help balance the work. this would also help make sure all numbers are correct and the customers are all getting credit for what they have paid.






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