SBS Company purchased a new machine on January 1, at a cost of $420,000. The machine has an expected useful life of four years and an expected salvage value of $40,000. The company expects to use the machine for 1,300 hours in the first year, 1,900 hours in the second year, and 900 hours in the third and fourth year, respectively.

(a) Calculate Depreciation Expenses for each year using Straight-Line Method

(b) Calculate Depreciation Expenses for each year using Double-Declining-Balance Method

A working table is provided on the next page.

(c) Calculate Depreciation Expenses for each year using Units of Production Method

Working Table for Double-Declining-Balance Method

Upper Division of Lower Company acquired an asset with a cost of $550,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows:

The cost of the asset is expected to increase at a rate of 10 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes.

Year Cash Flow

1 $200,000

2 $245,000

3 $280,000

4 $305,000

Required:

a. What is the ROI for each year of the asset's life, using a historical cost approach? (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)

ROI

Year

1    _____ %

2   _____ %

3   _____ %

4   _____ %

b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year? (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)

ROI

Year   

1    _____ %

2   _____ %

3   _____ %

4   _____ %

Listed below are several transactions that took place during the second and third years of operations for the RPG Company.

In addition, you learn that the company incurred advertising costs of $17,000 in year 2, owed the advertising agency $4,200 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two-year period, year 2 and year 3.

Required:
1. Calculate accrual net income for both years.
2. Determine the amount due the advertising agency that would be shown as a liability on RPG’s balance sheet at the end of year 2.

BBB Manufacturing Company has considered investing in two independent projects, which both will result in a cost of $1,200,000. Each project is expected to last 5 years. Project A ‘s annual cash flows are listed as follows: Year 1: $325,000; Year 2: $440,000; Year 3: $270,000 Year 4: $550,000; and Year 5: $265,000. Project B annual cash flows are listed as follows: Year 1: $880,000; Year 2: $500,000; Year 3: $300,000; Year 4: $200,000; and Year 5: $1,000. BBB’s cost of capital is 9%. In excel:

1. Calculate each project’s NPV.
2. Compute each project’s IRR.
3. Calculate Payback Period for both projects
4. As the financial analyst evaluating this project, would you accept/reject one or accept or reject both? Would your answer change if the projects were mutually exclusive?

**Please please show formulas/explain how you got the answers in the cells. I'm very confused on this and appreciate the help. Thank you!

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.91 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,150,000 in annual sales, with costs of $845,000. The project requires an initial investment in net working capital of $370,000, and the fixed asset will have a market value of $245,000 at the end of the project.

a. If the tax rate is 22 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.)

year 0 cash low

year 1 cash flow

year 2 cash flow

year 3 cash flow

b. If the required return is 11 percent, what is the project's NPV?

npv = ?

Dividends

Keener Company has had 700 shares of 9%, $100 par preferred stock and 46,000 shares of $5 stated-value common stock outstanding for the last 3 years. During that period, dividends paid totaled $5,200, $33,800, and $38,100 for each year, respectively.

Required:

Compute the amount of dividends that Keener must have paid to preferred shareholders and common shareholders in each of the 3 years, given the following 3 independent assumptions:
If an amount is zero, enter "0".

1. Preferred stock is nonparticipating and noncumulative.

2. Preferred stock is nonparticipating and cumulative.

3. Preferred stock is fully participating and cumulative.

Huntley Corp. provides the following information about its pension plan for the year 2021:

                                                                                                                           2021

Fair value of plan assets, first of year $134,100

Defined benefit obligation (DBO) (assumed

To equal the ABO for funding purposes under ASPE), first of year 212,700

Current service cost for year                                                                               13,000

Interest or discount rate on the DBO/plan assets                                                  10%

Actual earnings on plan assets for year                                                                12,000

Employer contributions for year (funding), September 31, 2021                        24,000

Benefits paid to retirees by trustee for year                                                         10,500

Actuarial loss due to change in actuarial assumptions                                         28,530

Plan assets, end of year                                                                                      159,600

DBO, end of year                                                                                             265,000

Funded status, end of year – over- or (under)- funded                                   (105,400)

Instructions

1. Prepare a pension worksheet and general journal entries under IFRS for 2021. (7 points)
2. Prepare a pension worksheet and general journal entries under ASPE (the Immediate Recognition approach) for 2021. (7 points)

Cotter Manufacturing is considering investing in new technology which will reduce manufacturing costs in future years. There are three possible types of technology called BX124R or BX125R. Regardless of which technology is chosen (if chosen at all), the initial cost will be $3,500,000. The life of either technology is expected to be 5 years. The projected cost savings (cash flows) from BX124R are listed as follows: Year 1: $1,500,000; Year 2: $1,800,000; Year 3: $950,000; Year 4: $1,975,000; Year 5: $1,300,000. The projected cost savings (cash flows) from BX125R are listed as follows: Year 1: $900,000; Year 2: $600,000; Year 3: $570,000; Year 4: $1,075,000; Year 5: $3,000,000. Cotter’s cost of capital is 8%.

A) Calculate the NPV BX124R and BX125R.

B) Compute each the IRR for BX124R and BX125R.

C) Calculate the project’s payback period for BX124R and BX125R.

D) As the management accountant, would you recommend an investment in this technology (if the projects were independent)? What if the projects were mutually exclusive?