HARDING PLASTIC MOLDING COMPANY CAPITAL BUDGETING: RANKING PROBLEMS On January 11, 1993, the finance committee of Harding Plastic Molding Company (HPMC) met to consider 4 capital-budgeting projects. Present at the meeting were Robert L. Harding, president and founder, Susan Jorgensen, comptroller, and Chris Woelk, head of research and development. Over the past 5 years, this committee met every month to consider and make final judgment on all proposed capital outlays brought up for review during the period. Harding Plastic Molding Company was founded in 1965 by Robert L. Harding to produce plastic parts and molding for the Detroit automakers. For the first 10 years of operations, HPMC worked solely as a subcontractor for the automakers, but since then has made strong efforts to diversify in an attempt to avoid the cyclical problems faced by the auto industry. By 1993, this diversification attempt led HPMC into the production of over 1,000 different items, including kitchen utensils, camera housings, and phonographic and recording equipment. It also led to an increase in sales of 800% during the 1975–1993 period. As this dramatic increase in sales was paralleled by a corresponding increase in production volume, HPMC was forced, in late 1991, to expand production facilities. This plant and equipment expansion involved capital expenditures of approximately $10.5 million and resulted in an increase of production capacity of about 40%. Because of this increased production capacity, HPMC made a concerted effort to attract new business and consequently has recently entered into contracts with a large toy firm and a major discount department store chain. While non-auto-related business has grown significantly, it still represents only 32% of HPMC’s overall business. Thus, HPMC has continued to solicit non-automotive business, and, as a result of this effort and its internal research and development, the firm has four sets of mutually exclusive projects to consider at this month’s finance committee meeting. Over the past 10 years, HPMC’s capital-budgeting approach has evolved into a somewhat elaborate procedure in which new proposals are categorized into three areas: profit, research and development, and safety. Projects falling into the profit or research and development areas are evaluated using present value techniques, assuming a 10 percent opportunity rate; those falling into the safety classification are evaluated in a more subjective framework. Although research and development projects have to receive favorable results from the present value criteria, there is also a total dollar limit assigned to projects of this category, typically running about $750,000 per year. This limitation was imposed by Harding primarily because of the limited availability of quality researchers in the plastics industry. Harding felt that if more funds than this were allocated, “we simply couldn’t find the manpower to administer them properly.” The benefits derived from safety projects, on the other hand, are not in terms of cash flows; hence, present value methods are not used at all in their evaluation. The subjective approach used to evaluate safety projects is a result of the pragmatically difficult task of quantifying the benefits from these projects in dollar amounts. Thus, these projects are subjectively evaluated by a management-worker committee with a limited budget. All 8 projects to be evaluated in January are classified as profit projects. The first set of projects listed on the meeting’s agenda for examination involves the utilization of HPMC’s precision equipment. Project A calls for the production of vacuum containers for thermos bottles to be produced for a large discount hardware chain. The containers would be manufactured in 5 different size and color combinations. This project would be carried out over a 3-year period, for which HPMC would be guaranteed a minimum return plus a percentage of the sales. Project B involves the manufacture of inexpensive photographic equipment for a national photography outlet. Although HPMC currently has excess plant capacity, each of these projects would utilize precision equipment of which the excess capacity is limited. Thus, adopting either project would tie up all precision facilities. In addition, the purchase of new equipment would be both prohibitively expensive and involve a time delay of approximately 2 years, thus making these projects mutually exclusive. (The cash flows associated with these 2 projects are given in Exhibit 1.) The second set of projects involves the renting of computer facilities over a 1-year period to aid in customer billing and, perhaps, inventory control. Project C entails the evaluation of a customer billing system proposed by Advanced Computer Corporation. Under this system, all the bookkeeping and billing presently done by HPMC’s accounting department would be done by Advanced. In addition to saving costs involved in bookkeeping, Advanced would provide a more efficient billing system and do a credit analysis of delinquent customers, which could be used in the future for in-depth credit analysis. Project D is proposed by International Computer Corporation and includes a billing system similar to that offered by Advanced, and in addition, an inventory control system that will keep track of all raw materials and parts in stock and reorder when necessary. This inventory control system would reduce the likelihood of material stockouts, which have become more and more frequent over the past 3 years. (The cash flows for these projects are given in Exhibit 2.)

EXHIBIT 1. Harding Plastic Molding Company Cash Flows:

Year Project A Project B

$-75,000   $-75,000

1 10,000 43,000

2 30,000 43,000

3 100,000 43,000

EXHIBIT 2. Harding Plastic Molding Company Cash Flows:

Year Project C Project D

0 $-8,000 $-20,000

1 11,000 25,000

QUESTIONS What are the NPV, PI, Payback, and IRR for projects A and B? Should project A or B be chosen? Might your answer change if project B is a typical project in the plastic molding industry?

What are the NPV, PI, Payback, and IRR for projects C and D? Should project C or D be chosen?

I need help with projects C and D please.

Write Recommendation Write and present a formal recommendation for management on which projects should be undertaken (A or B, C or D). Include your supporting calculations for each grouping of projects and your reasoning for your decision. Paper should be 2-3 pages double spaced, free of grammatical errors, and have a professional appearance.

- All the following are reported as current liabilities except:

1. Notes payable due in 3 years

2. Deferred revenues

3. Notes payable due in 8 months

4. Accounts payable

- In each succeeding payment on installment note:

1. The amount of interest expense is unchanged

2. The amount of interest expense increases

3. The amount of interest expense decreases

4. The amounts paid for both interest and principal increase proportionately

- Which of the following is considered to be a Land Improvement asset?

1. A sprinkler system

2. A warehouse

3. A printing press

4. A dump truck

- The sale of gift cards by a company is direct example of:

1. Deferred revenues

2. Installment notes

3. Current portion of long-term debt

4. Sales tax payable

- Flamingo Company borrows $30,000 using a five-year, long-term installment note payable. The rate on the note is percent and Flamingo agrees to make monthly payments of $566.14. Which of the following statements is correct about Flamingo’s first payment?

1. Note payable reduction is $125.00 and interest is $441.14

2. Note payable reduction is $441.14 and interest is $125.00

3. Note payable reduction is $123.16 and interest is $442.98

4. Note payable reduction is $442.98 and interest is $123.16

- Young Company is involved in a lawsuit. The liability that could arise as a result of this lawsuit should be recorded on the books of Young if:

1. The likelihood of losing the lawsuit is reasonably possible and the amount is reasonably estimable.

2. The likelihood of losing the lawsuit is probable and the amount is not reasonably estimable.

3. The likelihood of losing the lawsuit is remote and the amount is reasonably estimable.

4. The likelihood of losing the lawsuit is probable and the amount is reasonably estimable.

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,712,000 Cost of goods sold 1,234,045 Gross margin 477,955 Selling and administrative expenses 590,000 Net operating loss $ (112,045 ) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below: B300 T500 Total Direct materials $ 400,600 $ 162,700 $ 563,300 Direct labor $ 120,200 $ 42,400 162,600 Manufacturing overhead 508,145 Cost of goods sold $ 1,234,045 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $52,000 and $102,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below: Manufacturing Overhead Activity Activity Cost Pool (and Activity Measure) B300 T500 Total Machining (machine-hours) $ 207,225 90,900 62,600 153,500 Setups (setup hours) 139,020 71 260 331 Product-sustaining (number of products) 101,600 1 1 2 Other (organization-sustaining costs) 60,300 NA NA NA Total manufacturing overhead cost $ 508,145 Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

EX23-03

Budget Performance Report

Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

At the beginning of July, GBC management planned to produce 430,000 bottles. The actual number of bottles produced for July was 464,400 bottles. The actual costs for July of the current year were as follows:

Enter all amounts as positive numbers.

a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.

b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your answers to two decimal places.

c. The Company's actual costs were $740.44   than budgeted.   direct labor and direct material cost variances more than offset a small   factory overhead cost variance.

Empire Building Co. makes toxic material used in chemical weapons. On December 31, 2008 they buy a factory for $5 million(cash) for the production of Policus, a dangerous chemical. The plant is expected to be used for 10 years, at which time it will be dismantled and the site will be cleaned up. Empire estimates that it will cost them $10 million at the end of 2018 to remove the factory and clean the area. The risk free rate on December 31, 2018 is 4% and the adjusted risk rate for the company is 8%.

a) Record the journal entry(ies) for the purchase of the factory.

b) Record the required adjusting entry(ies) at the end of 2009.

c) On December 31, 2018 the factory is removed at a cost of 7$ million and site is cleaned up at for an additional $4 million . Record the required journal entry(ies) for the factory clean up.

Advanced Products Corporation has supplied the following data from its activity-based costing system:

During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any other products during the year. Data concerning that order follow:

Required:

1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. Calculate the total overhead costs for the order from Shenzhen Enterprises including customer support costs.

4. Calculate the customer margin for Shenzhen Enterprises.

For a recent year, McDonald's Company-owned restaurants had the following sales and expenses (in millions):

Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

a. What is McDonald's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)
$ million

b. What is McDonald's contribution margin ratio?
%

c. How much would income from operations increase if same-store sales increased by $1,500 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
$ million

Data for the next 3 questions: Beauty Company issued $1,000,000, 4%, 10-year, bonds. Interest to be paid semiannually. The market rate on bonds issue date was 6%.

1. Provide the journal entry that must be made on issue date of the bonds

2.Complete the following partial amortization schedule. Include only the final number for each cell

Schedule Title

3. Provide the necessary journal entry that company must make for the 2nd interest payment on the bond.

Data for the next 3 questions: Holly Company issued $2,000,000, 6%, 10-year, bonds. Interest to be paid semiannually. The market rate on bonds issue date was 5%.

4.Provide the journal entry that must be made on issue date of the bonds

5.Complete the following partial amortization schedule. Include only the final number for each cell

Schedule Title:

6.Provide the necessary journal entry that company must make for the 2nd interest payment on the bonds.

Analyze why they have used this way to answer the below question (The question is already answered I need analysis for the answer like a paragraph for each case)

Example: On 1/2/08, See-Saw Systems (S3) purchased a patent valued at €8 million; it had a useful life of 8 years with zero residual value, and S3 used straight-line depreciation. On 1/2/10, the fair value of the patent had decreased to €4.5 million. On 1/2/12, the fair value had increased to €6 million, and on 1/2/14, the fair value had dropped to €1 million. Assuming S3 uses the revaluation model, determine how the gains and losses are reported.

Straight-line amortization is €8 million ÷ 8 years = €1 million per year, so the book value on 1/2/10 is:

€8 million − 2(€1 million) = €6 million

The revaluation to €4.5 million results in a €1.5 million loss, which appears on S3’s income statement.

Straight-line amortization is now €4.5 million ÷ 6 years = €750,000 per year. On 1/2/12 the book value is:

€4.5 million − 2(€750,000) = €3 million

The revaluation to €6 million results in a €3 million gain. Because S3 had a previous €1.5 million loss on its income statement, the first €1.5 million of the gain is shown on the income statement to reverse the loss; the remaining €1.5 million gain goes to the Revaluation Surplus account on S3’s balance sheet.

Straight-line amortization is now €6 million ÷ 4 years = €1.5 million per year.

On 1/2/14 the book value is:

€6 million − 2(€1.5 million) = €3 million

The revaluation to €1 million results in a €2 million loss. Because S3 had a previous €1.5 million gain in the Revaluation Surplus account in equity, the first €1.5 million of the loss reduces the Revaluation Surplus account to zero. The remaining €500,000 million loss is shown on S3’s income statement.

EX24-05

Service Department Charges

In divisional income statements prepared for LeFevre Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $58,380, and the Purchasing Department had expenses of $22,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records:

a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division.

b. Using the activity base information in (a), determine the annual amount of payroll and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. If required, round your answers to two decimal places. Do not round your interim calculations, round your answers to two decimal places, if required.

c. Residential's service department charge is   than the other two divisions because Residential is a   user of service department services. Residential has many employees on a weekly payroll, which translates into a   number of check-issuing transactions.

Question 1

1. Where can you find the significant account policies used by the company in the Notes to Consolidate Financial Statements (state the name and the number of the note)?
2. Summarize accounting policies for investments.

Question 2

Question 3

From the 2017 financial statements of UPS, provide the amount for the following items:

1. Total fair value of trading and available-for-sale securities: ____________

2. Total fair value of trading securities: _____________

3. Total cost of trading securities: _______________

4. Total unrealized gain (loss) of trading securities: ____________

5. Total fair value of available-for-sale securities: _______________

6. Total cost of available-for-sale securities: _________________

7. Total unrealized gain (loss) for available-for-sale securities: ____________

8. Accumulated other comprehensive gain or loss: ____________

9. Investment income and other: ________________

10. Change in unrealized gains or losses on marketable securities: __________

11. Diluted earnings per share? ___________

how are capital gains on form 1120s taxes?

The following income statement and information about changes in noncash current assets and current liabilities are reported.

Changes in current asset and current liability accounts for the year that relate to operations follow.

Required:

Prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)