ABC Inc. is evaluating a project that will increase annual sales by $230,000 and annual cash costs by $88,000. The project will initially require $145,000 in fixed assets that will be depreciated straight-line to a zero book value over the 4-year life of the project. The applicable tax rate is 35 percent.
A. What is the depreciation tax shield? (Hint: Use straight-line depreciation to find annual depreciation)
B. Using the straight-line depreciation method, what is the book value of the asset at the end of year 2?
C. The asset for the project is classified as a 5-year property for MACRS. What is the book value of the asset at the end of year 4?
D. What is the operating cash flow for this project?
E. ABC Inc. has determined that it requires $35,000 in NWC, has a required rate of return of 14%, and plans on using the operating cash flow from problem D to evaluate its project. What is the NPV? Using the decision rule, should we accept the project? (Hint: Include NWC at the beginning and end of project)
In: Accounting
On June 30, 2017, Wisconsin, Inc., issued $158,250 in debt and 19,400 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company. Wisconsin shares had a fair value of $40 per share. Prior to the combination, the financial statements for Wisconsin and Badger for the six-month period ending June 30, 2017, were as follows:
| Wisconsin | Badger | |||||||||||
| Revenues | $ | (1,001,000) | $ | (362,000) | ||||||||
| Expenses | 690,000 | 247,000 | ||||||||||
| Net income | $ | (311,000) | $ | (115,000) | ||||||||
| Retained earnings, 1/1 | $ | (869,000) | $ | (204,000) | ||||||||
| Net income | (311,000) | (115,000) | ||||||||||
| Dividends declared | 111,750 | 0 | ||||||||||
| Retained earnings, 6/30 | $ | (1,068,250) | $ | (319,000) | ||||||||
| Cash | $ | 92,250 | $ | 114,000 | ||||||||
| Receivables and inventory | 482,000 | 183,000 | ||||||||||
| Patented technology (net) | 935,000 | 293,000 | ||||||||||
| Equipment (net) | 713,000 | 695,000 | ||||||||||
| Total assets | $ | 2,222,250 | $ | 1,285,000 | ||||||||
| Liabilities | $ | (524,000) | $ | (496,000) | ||||||||
| Common stock | (360,000) | (200,000) | ||||||||||
| Additional paid-in capital | (270,000) | (270,000) | ||||||||||
| Retained earnings | (1,068,250) | (319,000) | ||||||||||
| Total liabilities and equities | $ | (2,222,250) | $ | (1,285,000) | ||||||||
Wisconsin also paid $37,000 to a broker for arranging the
transaction. In addition, Wisconsin paid $46,600 in stock issuance
costs. Badger’s equipment was actually worth $811,250, but its
patented technology was valued at only $269,600.
What are the consolidated balances for the following accounts?
In: Accounting
Problem 12-22 Accept or Reject a Special Order [LO12-4]
| Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 38,000 Rets per year. Costs associated with this level of production and sales are given below: |
| Unit | Total | ||||
| Direct materials | $ | 15 | $ | 570,000 | |
| Direct labor | 6 | 228,000 | |||
| Variable manufacturing overhead | 3 | 114,000 | |||
| Fixed manufacturing overhead | 7 | 266,000 | |||
| Variable selling expense | 2 | 76,000 | |||
| Fixed selling expense | 6 | 228,000 | |||
| Total cost | $ | 39 | $ | 1,482,000 | |
| The Rets normally sell for $44 each. Fixed manufacturing overhead is constant at $266,000 per year within the range of 33,000 through 38,000 Rets per year. |
| Required: | |
| 1. |
Assume that due to a recession, Polaski Company expects to sell only 33,000 Rets through regular channels next year. A large retail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain’s name on the 5,000 units. This machine would cost $10,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted. |
| 2. |
Refer to the original data. Assume again that Polaski Company expects to sell only 33,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. If Polaski Company accepts the order, by how much will profits increase or decrease for the year? |
| 3. |
Assume the same situation as that described in (2) above, except that the company expects to sell 38,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 5,000 Rets. If the Army’s order is accepted, by how much will profits increase or decrease from what they would be if the 5,000 Rets were sold through regular channels? |
In: Accounting
|
Revenue External $m |
Revenue Internal $m |
Segment results (profit/loss) $m |
Segment assets $m |
Segment liabilities $m |
|
|
Machinery: |
|||||
|
Leasing |
180 |
20 |
32 |
194 |
50 |
|
Sales |
110 |
15 |
(4) |
24 |
22 |
|
FS Disclosure Amount |
290 |
35 |
28 |
218 |
72 |
|
Investment and Insurance: |
|||||
|
Investment |
120 |
130 |
80 |
192 |
65 |
|
Insurance |
60 |
8 |
(53) |
116 |
95 |
|
FS Disclosure Amount |
180 |
138 |
27 |
308 |
160 |
|
Total |
470 |
173 |
55 |
526 |
232 |
Steve has asked you for a technical analysis on how Phrygian should report its segment information, under IAS 14, as of its year-end of December 31, 2017
In: Accounting
On January 1, 2021, the general ledger of Dynamite Fireworks includes the following account balances:
| Accounts | Debit | Credit | |||||
| Cash | $ | 25,500 | |||||
| Accounts Receivable | 6,900 | ||||||
| Supplies | 4,800 | ||||||
| Land | 67,000 | ||||||
| Accounts Payable | $ | 4,900 | |||||
| Common Stock | 82,000 | ||||||
| Retained Earnings | 17,300 | ||||||
| Totals | $ | 104,200 | $ | 104,200 | |||
During January 2021, the following transactions occur:
| January | 2 | Purchase rental space for one year in advance, $11,100 ($925/month). | ||
| January | 9 | Purchase additional supplies on account, $5,200. | ||
| January | 13 | Provide services to customers on account, $27,200. | ||
| January | 17 | Receive cash in advance from customers for services to be provided in the future, $5,400. | ||
| January | 20 | Pay cash for salaries, $13,200. | ||
| January | 22 | Receive cash on accounts receivable, $25,800. | ||
| January | 29 | Pay cash on accounts payable, $5,700. |
What is the amount of profit reported for the month of January?
Calculate the ratio of current assets to current liabilities at the end of January.
Based on Dynamite Fireworks’ profit and ratio of current assets to current liabilities, indicate whether Dynamite Fireworks appears to be in good or bad financial condition.
(GOOD or BAD)
In: Accounting
Oscar Fox, the accounting manager of Onaka Antique Company, is preparing his company’s cash budget for the next quarter. Onaka desires to maintain a cash cushion of $2,000 at the end of each month. As cash flows fluctuate, the company either borrows or repays funds at the end of a month. It pays interest on borrowed funds at the rate of 1 percent per month.
|
Cash Budget |
July |
August |
September |
|
Section 1: Cash Receipts |
|||
|
Beginning cash balance |
$ 10,000 |
$ ? |
$ ? |
|
Add cash receipts |
90,000 |
96,000 |
104,000 |
|
Total cash available (a) |
100,000 |
? |
? |
|
Section 2: Cash Payments |
|||
|
For inventory purchases |
81,000 |
76,500 |
85,500 |
|
For S&A expenses |
18,500 |
18,000 |
19,500 |
|
For interest expense |
0 |
? |
? |
|
Total budgeted disbursements (b) |
99,500 |
? |
? |
|
Section 3: Financing Activities |
|||
|
Surplus (shortage) |
500 |
? |
? |
|
Borrowing (repayments) (c) |
1,500 |
? |
? |
|
Ending Cash Balance (a − b + c) |
$ 2,000 |
$ 2,000 |
$ 2,000 |
Required
In: Accounting
Prepare the journal entry to apply factory overhead for April 30 according to the predetermined overhead rate. Refer to the Chart of Accounts for exact wording of account titles. Cavy Company estimates that total factory overhead costs will be $559,619 for the year. Direct labor hours are estimated to be 90,700. Required: Determine (a) the predetermined factory overhead rate; (b) the amount of factory overhead applied to Job 567 if the amount of direct labor hours is 1,200 and Job 999 if the amount of direct labor hours is 3,100; and (c) prepare the journal entry to apply factory overhead for April according to the predetermined overhead rate. Refer to the Chart of Accounts for exact wording of account titles. DATE DESCRIPTION POST. REF. DEBIT CREDIT
In: Accounting
Bierce Corporation has two manufacturing departments--Machining and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:
| Machining | Finishing | Total | ||||
| Estimated total machine-hours (MHs) | 4,000 | 6,000 | 10,000 | |||
| Estimated total fixed manufacturing overhead cost | $ | 10,000 | $ | 33,000 | $ | 43,000 |
| Estimated variable manufacturing overhead cost per MH | $ | 2.80 | $ | 6.00 | ||
During the most recent month, the company started and completed two jobs--Job B and Job K. There were no beginning inventories. Data concerning those two jobs follow:
| Job B | Job K | |||||
| Direct materials | $ | 16,000 | $ | 8,200 | ||
| Direct labor cost | $ | 22,600 | $ | 2,700 | ||
| Machining machine-hours |
2,700 | 1,300 | ||||
| Finishing machine-hours | 600 | 5,400 | ||||
Required:
a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)
b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job B. (Do not round intermediate calculations.)
c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job K. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
d. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Machining department? (Round your answer to 2 decimal places.)
e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Finishing department? (Round your answer to 2 decimal places.)
f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job B? (Do not round intermediate calculations.)
g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job K?. (Do not round intermediate calculations.)
In: Accounting
Which of the following are not typical problems of traditional costing approaches (as compared to Activity-Based Costing)?
Under-costing of low-volume, high-complexity products
Over-costing of high-volume, low-complexity products
Over-producing unprofitable products
Under-producing profitable products
None of the above
Under variable costing, Gross Profit is equal to:
Sales - Variable Costs
Sales - Fixed Costs
Sales - Variable Costs - Fixed Costs
Contribution Margin - Fixed Costs
Variable costing does not calculate Gross Profit
Which of the following is not a factor to consider when deciding whether to accept a special order?
Whether this order will hurt the brand name of the company
Whether other potential orders would be more profitable
Whether additional fixed costs would need to be incurred
Whether the offered price is sufficient to cover prime costs and fixed overhead allocated
All of the above
If a company has sufficient excess capacity, which of the following costs are relevant to the decision to make or buy a new product?
Direct materials
Variable overhead
Fixed overhead
Costs of buying from the outside vendor
A, B, and D only
In: Accounting
QUESTION 2: What challenges do multinational companies face in a global economy? What opportunities do multinational companies face in a global economy?
In: Accounting
Module 9 Prompt: What is forensic Auditing? What is Internal auditing?
Module 10 Prompt: Compare and contrast a horizontal analysis and vertical analysis Identify and Explain factors that affect quality of earnings Identify what each type of ratio measures liquidity ratios Solvency ratios Profitability ratios
In: Accounting
| Item | Cost | Price | ||||||
| Per Unit (RM) | % of Cost to price | Total (RM) | Note | Per Unit (RM) | Total (RM) | |||
| Food | 18.72 | 40% | 11,232.00 | 1 | 46.80 | 28,080.00 | 40% of RM 28,080 | |
| Beverage | 1.30 | 26% | 780.00 | 2 | 5.00 | 3,000.00 | 26% of RM3,000 | |
| Hall Rental | 5.00 | 50% | 3,000.00 | 3 | 10.00 | 6,000.00 | 50% of RM6,000 | |
| AV & Equipment | 4.00 | 50% | 2,400.00 | 4 | 8.00 | 4,800.00 | 50% of RM4,800 | |
| Carpark | 2.10 | 70% | 1,260.00 | 5 | 3.00 | 1,800.00 | 70% of RM1,800 | |
| Decoration | 6.00 | 100% | 3,600.00 | 6 | 6.00 | 3,600.00 | 100% of RM3,600 | |
| Salaries | 19.70 | 25% | 11,820.00 | 7 | 25% of RM 47,280 | |||
| Operation System | 6.30 | 8% | 3,782.40 | 8 | 8% of RM 47,280 | |||
| Utilities | 6.30 | 8% | 3,782.40 | 9 | 8% of RM 47,280 | |||
| Total | 69.42 | 41,656.80 | 78.80 | 47,280.00 | ||||
The above data is the cost and price of the event of Annual Dinner . As a cost controller, using the data above briefly explain and analyze how the company can maximize the profit and minimize the cost using the below method?
a. Job Costing
b. Hybrid Costing
c. Process costing
d. Historical costing
e. Operating Costing
In: Accounting
As the economy goes through highs and lows, investors with stock in various companies face significant risk. How do you see the stock market affecting your own investing plans in the future? What types of risks do investors take? How can investors minimize their risk?
In: Accounting
At the end of the year, a company offered to buy 4,520 units of
a product from X Company for a special price of $12.00 each instead
of the company's regular price of $17.00 each. The following
information relates to the 66,200 units of the product that X
Company made and sold to its regular customers during the
year:
| Per-Unit | Total | ||
| Cost of goods sold | $8.63 | $571,306 | |
| Period costs | 2.28 | 150,936 | |
| Total | $10.91 | $722,242 | |
Fixed cost of goods sold for the year were $141,668, and fixed
period costs were $69,510. Variable period costs include selling
commissions equal to 2% of revenue.
6. Profit on the special order is
| Tries 0/3 |
7. Assume the following two changes for the special order: 1)
variable cost of goods sold will decrease by $0.84 per unit, and 2)
there will be no selling commissions. What would be the effect of
these two changes on the special order profit?
| Tries 0/3 |
8. There is concern that regular customers will find out about the
special order, and X Company's regular sales will fall by 600
units. As a result of these lost sales, X Company's profits would
fall by
In: Accounting
Costs:
Benefits:
Calculate the Net Present Value of this proposed investment at the end of the five-year planning cycle using a discount rate of 5%. Show your work. Assume that one-time costs are incurred in year zero, and annual costs and savings are incurred in years 1 through 5.
In: Accounting