A dynamometer test lab currently has 45 computers with 20 printers. The computers cost $3,500 each and the printers were $350 each when purchased 2 years ago. The market value of the computers is estimated at $750 each today and the printers $75 each today. It is expected that the current equipment will last another 4 years and have no salvage value at that time. Operating expenses are $350 for each computer and $150 for each printer per year.

A new networked system is being considered that would have 45 terminal with a cost of $2.500 each; 7 printers would be purchased at $1000 each. The life of the new system is 6 years with a salvage value of $500 for the terminals and $400 for the printers at the end of that time. Operating expenses for the networked system are $6,000 per year.

A) What are the sunk costs at this point? (5 points)

B) If the firm desires a 15% IRR, determine the best alternative. (20 points)

Show ALL work.

Estimating Share Value Using the ROPI Model The following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the table to answer the following requirements. Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period Sales $ 3,469 $ 3,989 $ 4,587 $ 5,275 $ 6,066 $ 6,187 NOPAT 152 319 367 422 485 495 NOA 1,032 1,173 1,349 1,551 1,784 1,820 Answer the following requirements assuming a discount rate (WACC) of 10%, a terminal period growth rate of 2%, common shares outstanding of 87.2 million, and net nonoperating obligations (NNO) of $(858) million. (Negative NNO reflects net nonoperating assests such as investments rather than net obligations) (a) Estimate the value of a share of Abercrombie & Fitch common stock using the residual operating income (ROPI) model as of January 29, 2011. Rounding instructions: Round answers to the nearest whole number unless noted otherwise. Use your rounded answers for subsequent calculations. Do not use negative signs with any of your answers. Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period ROPI (NOPAT - [NOABeg × rw]) Answer 216 Answer 250 Answer 287 Answer 330 Answer 317 Discount factor [1 / (1 + rw)t ] (round 5 decimal places) Answer 0.90909 Answer 0.82645 Answer 0.75131 Answer 0.68301 Present value of horizon ROPI Answer 196 Answer 206 Answer 216 Answer 225 Cum present value of horizon ROPI Answer 842 Present value of terminal ROPI Answer 2,703 NOA Answer 1,032 Total firm value Answer 4,577 NNO Answer 858 Firm equity value Answer 3,719 Shares outstanding (millions) Answer 872 (round one decimal place) Stock price per share Answer 42.65 (round two d

Krandolph Metals, Inc., is a manufacturer of aluminum cans for the beverage industry. Krandolph

purchases aluminum and other raw materials from several vendors. The purchasing process at

Krandolph occurs as follows:

When inventory of any raw material seems low, a purchasing agent examines the records to

determine the vendor who supplied the last purchase of that raw material. The purchasing agent

prepares a three

‐

copy PO and mails the top copy to the vendor. One copy is filed in the purchasing

department, and one copy is forwarded to the inventory control department (inventory record

keeping). Inventory control personnel update the inventory subsidiary ledger and file the PO by

number in the inventory control files.

When the goods arrive at the receiving dock, a receiving report is prepared from information on

the packing slip. One copy of the receiving report is filed in the receiving department, and one

copy is forwarded to purchasing so that the purchasing department is informed of the receipt of

goods.

The vendor mails an invoice for the raw materials directly to the accounts payable department.

When the invoice is received, accounts payable personnel prepare a cash disbursement voucher to

approve payment. The voucher is forwarded to the cash disbursements department. The accounts

payable department also updates the accounts payable subsidiary ledger and files the invoice by

invoice number.

Upon receiving the cash disbursement voucher, an employee in the cash disbursements department

prepares a two

‐

copy check. The top copy of the check is mailed to the vendor, and the second copy

is forwarded to the general ledger department. The cash disbursement voucher is stamped “paid”

and returned to the accounts payable department. The voucher is filed with the invoice in the

accounts payable department.

The general ledger department records the check in the general ledger and returns the check copy

to the cash disbursements department, where it is filed.

2. Draw two BPDs to reflect the business processes at Krandolph. One BPD should depict the

purchasing processes, and the second BPD should depict the cash disbursements processes.

20-3 20-08

Costs per Equivalent Unit

The following information concerns production in the Baking Department for March. All direct materials are placed in process at the beginning of production.

a. Based on the above data, determine each cost listed below. Round "cost per equivalent unit" answers to the nearest cent.

b. Assuming that the direct materials cost is the same for February and March, did the conversion cost per equivalent unit increase, decrease, or remain the same in March?

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:

* $3 per unit variable; $254,000 fixed each year.

The company’s $39 unit product cost is computed as follows:

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.

Production and cost data for the first two years of operations are:

Required:

1. Using variable costing, what is the unit product cost for both years?

2. What is the variable costing net operating income in Year 1 and in Year 2?

3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

On November 1, 2017, Larkspur, Inc. had the following account balances. The company uses the perpetual inventory method. Debit Credit Cash $10,980 Accumulated Depreciation—Equipment $1,220 Accounts Receivable 2,733 Accounts Payable 4,148 Supplies 1,049 Unearned Service Revenue 4,880 Equipment 30,500 Salaries and Wages Payable 2,074 $45,262 Common Stock 24,400 Retained Earnings 8,540 $45,262 During November, the following summary transactions were completed. Nov. 8 Paid $4,331 for salaries due employees, of which $2,257 is for November and $2,074 is for October. 10 Received $2,318 cash from customers in payment of account. 11 Purchased merchandise on account from Dimas Discount Supply for $9,760, terms 2/10, n/30. 12 Sold merchandise on account for $6,710, terms 2/10, n/30. The cost of the merchandise sold was $4,880. 15 Received credit from Dimas Discount Supply for merchandise returned $366. 19 Received collections in full, less discounts, from customers billed on sales of $6,710 on November 12. 20 Paid Dimas Discount Supply in full, less discount. 22 Received $2,806 cash for services performed in November. 25 Purchased equipment on account $6,100. 27 Purchased supplies on account $2,074. 28 Paid creditors $3,660 of accounts payable due. 29 Paid November rent $458. 29 Paid salaries $1,586. 29 Performed services on account and billed customers $854 for those services. 29 Received $824 from customers for services to be performed in the future.

Prepare a multiple-step income statement for November.

A new van costs $25,000, has an estimated useful life of five years and an estimated salvage value of $5,000 at the end of that time. It is expected that the van will be driven 100,000 miles during its useful or service life.

The Nation Express Company purchases this van on April 1, 2019. During 2019 the van is driven 13,000 miles and during 2020 it was driven 21,000 miles. On January 1, 2021, the van is sold for $7,000.

Calculate the depreciation expense for 2019 and 2020 using:

1. Straight-line

2. Double-declining-balance

3. Units-of-production

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 50,000 Rets per year. Costs associated with this level of production and sales are given below:

The Rets normally sell for $51 each. Fixed manufacturing overhead is $350,000 per year within the range of 45,000 through 50,000 Rets per year.

Required:

1. Assume that due to a recession, Polaski Company expects to sell only 45,000 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. What is the financial advantage (disadvantage) of accepting the special order? (Round your intermediate calculations to 2 decimal places.)

2. Refer to the original data. Assume again that Polaski Company expects to sell only 45,000 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 $1.20 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. What is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

3. Assume the same situation as described in (2) above, except that the company expects to sell 50,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 5,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data:

The following additional information is available:  

1. The company’s plant has a capacity of 110,050 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.

2. The direct labor rate of $10 per hour is expected to remain unchanged during the coming year.

3. Fixed manufacturing costs total $570,000 per year. Variable overhead costs are $4 per direct labor-hour.

4. All of the company’s nonmanufacturing costs are fixed.

5. The company’s finished goods inventory is negligible and can be ignored.

1. 20-03 20=07

2. Equivalent Units of Production

   The following information concerns production in the Baking Department for March. All direct materials are placed in process at the beginning of production.

   ACCOUNT Work in Process—Baking Department							ACCOUNT NO.
   Date		Item	Debit		Credit		Balance
   							Debit		Credit
   March	1	Bal., 6,900 units, 2/5 completed					26,220
   	31	Direct materials, 124,200 units	235,980				262,200
   	31	Direct labor	64,140				326,340
   	31	Factory overhead	36,084				362,424
   	31	Goods finished, 126,000 units			351,102		11,322
   	31	Bal. ? units, 2/5 completed					11,322

   a. Determine the number of units in work in process inventory at March 31.
   units

   b. Determine the equivalent units of production for direct materials and conversion costs in March. If an amount is zero, enter in "0".

   Baking Department
   Equivalent Units of Production for Direct Materials and Conversion Costs
   For March
   	Whole Units	Direct Materials Equivalent Units	Conversion Equivalent Units
   Inventory in process, March 1
   Started and completed in March
   Transferred to finished goods in March
   Inventory in process, March 31
   Total

1. On January 1, 2017, Park Rapids Lumber Company issued $80 million in 20-year, 10.5% bonds payable. Interest is payable semiannually on June 30 and December 31.

1. Record the journal entry when the bonds were issued on January 1, 2017 when the market rate was 10%, and record the payment of bond interest on June 30^th and December 31^st for 2017 and 2018.

      b.    Compute the net bond liability at December 31, 2018.

            c. On January 1, 2019 the bonds were repurchased for 101. Record the journal entry for the repurchase of the bonds.   This transaction is very similar to the sale of a fixed asset. 101 is the same as 101% of the face value of the bond.

Required:
1. Complete the below table to calculate each year's current ratio.

How do I journalize paid Fuentes Company in full in the amount of $1500 within the discount period in the general journal?

The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is shown as follows: 1 Dec. 31, 20Y3 Dec. 31, 20Y2 2 Assets 3 Cash $626,170.00 $585,760.00 4 Accounts receivable (net) 227,840.00 208,880.00 5 Inventories 641,390.00 616,790.00 6 Investments 0.00 240,820.00 7 Land 327,380.00 0.00 8 Equipment 704,290.00 554,020.00 9 Accumulated depreciation-equipment (167,160.00) (148,930.00) 10 Total assets $2,359,910.00 $2,057,340.00 11 Liabilities and Stockholders’ Equity 12 Accounts payable $424,670.00 $404,080.00 13 Accrued expenses payable 43,080.00 52,050.00 14 Dividends payable 24,920.00 19,300.00 15 Common stock, $4 par 140,000.00 102,000.00 16 Paid-in capital: Excess of issue price over par—common stock 417,400.00 280,600.00 17 Retained earnings 1,309,840.00 1,199,310.00 18 Total liabilities and stockholders’ equity $2,359,910.00 $2,057,340.00 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: A. The investments were sold for $279,890 cash. B. Equipment and land were acquired for cash. C. There were no disposals of equipment during the year. D. The common stock was issued for cash. E. There was a $206,210 credit to Retained Earnings for net income. F. There was a $95,680 debit to Retained Earnings for cash dividends declared. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow for each section, if required. Labels and Amount Descriptions Cash used for dividends Cash used for merchandise Cash used for purchase of equipment Cash used for purchase of land Cash received from customers Cash from sale of common stock Cash from sale of investments December 31, 20Y3 Decrease in accounts payable Decrease in accounts receivable Decrease in accrued expenses payable Decrease in inventories Decrease in cash Depreciation For the Year Ended December 31, 20Y3 Gain on sale of investments Increase in accounts payable Increase in accounts receivable Increase in accrued expenses payable Increase in cash Increase in inventories Loss on sale of investments Net cash flow from operating activities Net cash flow used for operating activities Net cash flow from investing activities Net cash flow used for investing activities Net cash flow from financing activities Net cash flow used for financing activities Net income Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow for each section, if required. Navaria Inc. Statement of Cash Flows (Label) 1 Cash flows from operating activities: 2 3 Adjustments to reconcile net income to net cash flow from operating activities: 4 5 6 Changes in current operating assets and liabilities: 7 8 9 10 11 12 13 Cash flows from (used for) investing activities: 14 15 16 17 18 19 Cash flows from (used for) financing activities: 20 21 22 23 24 Cash at the beginning of the year 25 Cash at the end of the year

You work for a manufacturing company and have just completed the budget process for the upcoming business year. At the end of the first quarter you take the actuals and compare them to the budget. You notice there are differences which need explanation and create the static and flexible budget variances. You present this to management and they request you to explain the variances in more detail.

Use your own calculations to create the Flexible Budget Performance Report and present this. You also need to explain the reasons for the variances and who is responsible. Explain the calculations used to create this report.

Explain why the variances using standard costs better reflect the actual variance and how to determine who is responsible for each variance