Molly Costner deposits 2,500 in her checking account today. Her checking account pays interest of 2.5 compounded annually.
Assuming Molly does not withdraw any funds and does not deposit any additional funds, how much will be in her account in 25 years?
A) 4,096.54
B) 3,750.00
C) 4,102.52
D) 4,634.86
E) 4,062.50
Question 2
The balance sheet for the Long Drive Golf Company on September 30, 2010 is presented below:
Long Drive Golf Company Balance Sheet
September 30, 2010
Cash 528,000 Accounts payable 1,568,000
Accounts receivable 1,216,000 Notes payable 752,000
Inventory 2,400,000 Total current liabilities 2,320,000
Fixed assets 5,632,000 Long-term debt 2,336,000
Common stock 3,200,000
Total assets 9,776,000 Retained earnings 1,920,000
Total liabilities and
stockholders' equity 9,776,000
The treasurer of the firm wants to issue 1,200,000 in long-term bonds to be used as follows:
1. 240,000 to reduce accounts payable
2. 192,000 to retire notes payable
3. 128,000 to increase cash on hand
4. 640,000 to increase inventories
a. Assuming that the loan is obtained, construct a pro forma balance sheet for December 31, 2010, for Long
Drive Golf Company that reflects the use of the funds provided.
b. Was the liquidity of Long Drive Golf Company improved by the loan?
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