Rusty Williams, the owner and CEO of The Rusty Bicycle Company, a small manufacturer and distributer of recreational bikes, has dejectedly watched sales of his company’s flagship bike, the WindRunner, decline precipitously over the past 7 years. Believing that the trend is irreversible, Rusty has taken the drastic step of shutting down the operation of his firm in an effort to reduce costs while he tries to figure out how to rescue the firm he has spent the bulk of his life building.

Rusty asks his brother John, the head design engineer at his firm to design and build a prototype of a new bicycle that might be able to save the company. Rusty tells John to forget about conventional bicycle design and to “think big” and come up with something truly revolutionary.

After about 6 weeks of intense work, John comes back to Rusty with a proposal for the “WindRunner 2.0”, a bicycle unlike anything else on the market today. John believes that the specialty nature of the new bicycle suggests that, while unit sales volume may be relatively low, the bicycle should command a premium sales price. Specifically, he thinks that customers would be willing to pay upwards of $845 per bike.

Rusty, intrigued by the new design, hires a market research consultant, Sandy Frazier, to study the potential demand for the WindRunner 2.0. As projecting demand for a completely new product is notoriously difficult, she limits her prediction to a 5 year horizon. Sandy gives the following forecast to Rusty in exchange for her customary fee of $45,000.

Rusty is optimistic that the expected sales revenue will be enough to save his company. Deciding to move forward on the evaluation of this project, he asks John what new manufacturing capacity will be needed to begin production. John thinks that he could reconfigure the firm’s current manufacturing facility to produce the new model bicycle, although the current production machinery, purchased over 20 years ago, is woefully inadequate. He estimates that the necessary new equipment could be purchased for $2.5 million and that the whole manufacturing process will incur fixed operating costs of $3 million per year. Additionally, he estimates the variable costs of production to run $260 per bike produced.

John further thinks that the existing production equipment, which will no longer be needed, could be sold for $400,000. The existing equipment was classified for tax purposes under the 15 year MACRS category. As a result of a recent exemption given to small businesses, Rusty will not have to use the MACRS depreciation schedules for new capital assets acquired. Instead, the new equipment will be depreciated straight-line to zero over the 5 year planning horizon. John thinks that the new production equipment will be worthless and scrapped at the end of 5 years.

Finally, John tells Rusty that he will need about $300,000 in raw materials (i.e. parts and supplies) for the bicycles to begin production. This expenditure will not be recovered at the end of the project. Rusty, worried about spending so much cash on parts, calls a supplier, Rodney Murdock, to see about short-term credit options. Unfortunately, due to the precarious position Rusty finds his company in, the supplier is unable to offer any credit terms and will insist upon cash on delivery payment for raw materials.

Recently, a federal government economic stimulus measure was enacted. As a result of this effort, small businesses, like Rusty, will have their business income tax rate cut to zero percent for the next 10 years. The intent is to stimulate the formation of new small businesses throughout the country. Since this project is a last ditch effort to save the company, Rusty plans to let the project run for the 5 year forecast horizon. After that, he plans to dissolve the business and retire. Due to the desperation involved in this project, Rusty estimates that a 20% required rate of return is appropriate.

Rusty has asked for your help in addressing the following questions.

Prepare a 5 year forecast of cash flow from assets (CFA) for the WindRunner 2.0 project.

Calculate the Net Present Value (NPV) of the WindRunner 2.0 project.

Since the future of his company rests on the success or failure of this project, Rusty is understandably concerned about risks to his forecasts and expectations for the project. To get a better picture of the risk involved, Rusty again asks you to conduct the following scenario analyses.   

With your previous work being used as the ‘base case’ scenario, estimate the net present value of the project under a pessimistic scenario. Specifically, Rusty wants to consider the project’s NPV if both sales volume and the sales price are 10% below the base case scenario, while variable costs are 10% above the base case scenario estimates. All other variables will remain the same.

Now, to look at the optimistic case, reevaluate the project NPV where sales volume and sales price are 10% above the base case estimates, while variable costs are 10% below base case estimates. Again, all other variables are presumed to remain the same.

Finally, Rusty would like to know what minimum quantity of the WindRunner 2.0 models will have to be sold in order to produce a zero NPV (i.e. the financial breakeven point). That is, he would like to know what level of sales volume would leave him indifferent between undertaking the project versus shelving the project.  

If you were the CEO of a company, what would you do to your compensation and benefits plan to make it effective in aligning employee behavior and performance with the needs of the enterprise? Additionally, please read the article in the “Readings and Resources” section above on performance evaluation and share your views – pro and con – on eliminating such reviews.

a) The manager of Ghana Boxes company has a lot of challenges managing its stock item in inventory, the company has decided to employ a stores manager, you have been shortlisted as an applicant suitable for the job, you have been asked by a panel member in the interview, to explain the likely challenges affecting the stores of the box production company and suggest ways through which as a potential store manager, mechanisms you would adopt to ensure inventory are managed within the standard practice.

b) In your view to protect the investment of the company, what measures would you suggest that the company adopts to protect the capital invested in the stock items and why?

c) Finally, in the bid to keep accurate records explain the various stock-taking methods available to the stock manager and how these would differ between your choice of the company above and a grocery store?

Computing and Assessing Plant Asset Impairment

Zeibart Company purchases equipment for $225,000 on July 1, 2016, with an estimated useful life of 10 years and expected salvage value of $25,000. Straight-line depreciation is used. On July 1, 2020, economic factors cause the fair value of the equipment to decline to $90,000. On this date, Zeibart examines the equipment for impairment and estimates $125,000 in future cash inflows related to use of this equipment.

a. Is the equipment impaired at July 1, 2020? Explain.

b. If the equipment is impaired on July 1, 2020, compute the impairment loss and prepare a journal entry to record the loss.

c. What amount of depreciation expense would Zeibart record for the 12 months from July 1, 2020 through June 30, 2021? Prepare a journal entry to record this depreciation expense.

(Hint: Assume no change in salvage value.)

d. Using the financial statement effects template, show how the entries in parts b and c affect Zeibart Company's balance sheet and income statement.

Problem 16-5 Change in tax rate; record taxes for four years [LO16-1, 16-4, 16-5]

The DeVille Company reported pretax accounting income on its income statement as follows:
   

   
Included in the income of 2018 was an installment sale of property in the amount of $52,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $20,800 in 2019, $26,000 in 2020, and $5,200 in 2021.

Included in the 2020 income was $21,000 interest from investments in municipal bonds.

The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new tax legislation was passed reducing the tax rate to 25% for the years 2020 and beyond.

Required:
Prepare the year-end journal entries to record income taxes for the years 2018–2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

(I have posted this question three times without any answer! please answer it. I really need the answer)

Using openERP open-source (Odoo 10) systems, you will have to build HR & Finance business processes into the system.

You will have to build ( a University or any company of your choosing) HR business processes using one of the tool you found interesting.

You will have to find out improvements of the process

Add the business rules to the processes

You will have to build (the same University or the company that you have chosen above) Finance business processes using one of the tool you found interesting.

You will have to find out improvements of the process

Add the business rules to the processes