I have attached my homework assignment for Chapter 10. There are four main questions (10-1, 10-2,10-3,10-4). My answers are in blue. Can you please review my answers and correct any errors I may have made. Thank you for your time.

10-1 Winslow Enterprises reports $40,000 in accounts payable on the balance sheet as of December 31, 2011. These payables, on average, will be paid in ten days. a. Assuming a 12 percent annual discount rate, approximate the present value of the cash outflows associated with the accounts payable. (note: knowledge of present value outflows [Appendix A] is required to do this exercise) Appendix A shows that in the 1st period a 12 percent value is .89286% 40,000 x .89286=$35,714.40 b. Why are accounts payable carried on then balance sheet at face value instead of present value? This is because its discounted. 10-2 Darrington and Darling borrowed $100,000 from Commercial Financing to finance the purchase of fixed assets. The loan contract provides for a 12 percent annual interest rate and states the principle must be paid in full in TEN years. The contract also requires that Darrington and Darling maintain a current ration of 1.5:1. Before Darrington and Darling borrowed the $100,000, the company's current assets and current liabilities were $130,000 and $80,000, respectively. a. Compute the company's current raitio if it invests $50,000 of the borrowed funds in fixed assets and keeps the rest as cash or short-term investments. $130,000+50,000=$180,000 $80,000+$10,000 (part of principle that is to be paid over ten years)=90,000 So $180,000/$90,000=2 To what dollar amount can current liabilities grow before the company violates the contract? The dollar amount that current liabilities can go to before the company violates the contract is $120,000 b. Compute the company's current ratio if it invests $80,000 of the borrowed funds in fixed assets and keeps the rest as cash or short-term investments. To what dollar amount can current liabilities grow before the company violates the contract. $130,000+80,000=$210,000 $80,000+$10,000=$90,000 So $210,000/$90,000=2.33 To what dollar amount can current liabilities grow before the company violates the debt contracts? The dollar amount that current liabilities can go to before the company violates the contract is $140,000 c. Compute the company's current ratio if it invests the entire $100,000 of the borrowed funds in fixed assets. To what dollar amount can current liabilities grow before the company violates the debt contract? $100,000+$100,000=$200,000 $80,000+$10,000=$90,000 So $200,000/$90,000=2.22 To what dollar amount can current liabilities grow before the company violates the debt contracts? The dollar amount that current liabilities can go to before the company violates the contract is $133,300 10-3 Lily May Electronics recognizes expenses for wages, interest, and rent when cash payments are made. The foloowing related cash payments wer made during December 2011. 1. December 1 2. December 5 & 20 3. December 15 Paid $1,100 for rent to cover the subsequent 12 months. Paid wages in the amount of $7,500. Wages in the amount of $7,500 are paid on the fifth and the twentieth of each month for the fifteen days just ended. The next payment will be on Jan 5, 2012. Paid $600 interest on an outstanding note payable. The note has face value of $10,000 and a 12 percent annual interest rate. Interest payments in the amoun of $600 are made every 6 months. As of December 31, the current assets and current liabilities reported on Lily May's Balance sheet were $24,000 and $15,000, respectively. Lily May's income statement reported net income of $7,500. Compute Lily May's current ratio and net income if the company were to account for wages, interest, and rent on an accrual basis. Notes Payable Less Interest $10,000 $600 $9,400 Add in Wages of $7,500x2 an add in interest of $600 Total current liabilities=$15,600? For net income It equals $7,500? To compute current ratio take $15,600/$7,500 ?? 10-4 On December 1, Spencer Department Store borrowed $19,250 from First Bank and Trust. Spencer signed a ninety-day note with a face amount of $20,000. The interest rate stated on the face of the note is 15% per year. a. Provide the journal entry recorded by Spencer on December 1. Cash (+A) Discount on Notes Payable (-L) Notes Paybable (+L) 19,250 750 20,000 b. Provide the adjusting entry recorded by Spencer on December 31 before financial statements are prepared. Show how the note payable would be disclosed on the Dec 31 balance sheet. Interest Expense (E, -RE) 250 Discount on Notes Payable (+L) recognized accrual of interest on short-term note ($750/3) Notes Payable $20,000 Less: Discount on Notes Payble $500 250 19,500 c. Compute the actual annual interest rate on the note. (hint: note that Spencer had the use of $19,250 only over the period of the loan). 20,000x .15=$3,000 d. Why is the actual interest rate different from the rate stated on the face of the note? It is different because the face value is different from the amount borrowed