A construction company Y is considering to participate in the tendering process for building a toll bridge. The duration of the construction project is 5 years. The successful tenderer is allowed to collect toll from the bridge users after the completion of the project and subsequently will be responsible for maintaining the bridge. The expected cash flow transactions from this project are as follows:

• Receive bank loan of RM 2,000,000 now
• Annual material expenses of RM 200,000 in year 1 and expected to increase by RM 20,000 per year until year 5
• Annual bridge maintenance cost of RM 70,000 from year 6 until end of bridge life
• Annual bank loan payment of RM 500,000 starting from the first year until at the end of year 10
• Progress payment received from the government: RM 4,000,000 (end of year 3) and RM 8,000,000 (end of year 5)
• Toll revenue of RM 500,000 per year from year 6 until year 10

a) Construct cash flow diagram to summarize the above transactions.

b) Another company is interested in this project and is willing to buy over this project worth RM 1,500,000 now. Should this offer being accepted? Show all your calculations to justify your decision and assume the growth rate is 12% per year.                                                                                             

Depreciation by Two Methods; Sale of Fixed Asset

New lithographic equipment, acquired at a cost of $718,750 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $61,800. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year.

On March 4 of Year 5, the equipment was sold for $105,300.

Required:

1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by the following methods:

a. Straight-line method

b. Double-declining-balance method

2. Journalize the entry to record the sale assuming that the manager chose the double declining-balance method. If an amount box does not require an entry, leave it blank.

3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $90,400 instead of $105,300. If an amount box does not require an entry, leave it blank.

Missing Statement Items, Available-for-Sale Securities

Highland Industries Inc. makes investments in available-for-sale securities. Selected income statement items for the years ended December 31, Year 2 and Year 3, plus selected items from comparative balance sheets, are as follows:

There were no dividends.

Determine the missing items. If required, use the minus sign to indicate a net or operating loss, unrealized losses, or a credit balance in the valuation allowance account.

1. Assume that in year 1 an economy produces 1000 units of output and they sell for $90 a unit, on average. In year 2, the economy produces the same 1000 units of output, and sells it for $110 a unit, on average. Use year 1 prices as base year to calculate real GDP in Year 1 and Year 2. What happened to real GDP between years 1 and 2?

2. Which of the following are included and which are excluded in calculating this year’s GDP? Explain in each instance.

(a) A homeowner who mows her own lawn

(b) A decline in the average hours worked per week

(c) Business expenditures on pollution control equipment

(d) Income from illegal drug activities

(e) The person who purchases a health care product

3. The next four questions refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.

Year Units of output Price per unit

1 16 $2

2 20 3

3 30 4

4 36 5

5 40 6

a. Give the nominal GDP for year 3.

b. What is the real GDP for year 3?

Kim-Brooks, Inc. makes costumes for movies and television shows. Brooks Kimberly, the company's owner, prepared the following estimates for the upcoming year:

Required

(a)  

Assume that Kim-Brooks applies manufacturing overhead on the basis of direct labor hours. During the year, 49,800 direct labor hours were worked. How much overhead was applied to work in process? If actual manufacturing overhead for the year was $792,000, was overhead under- or over-applied during the year? By how much?

(b)  

Assume that Kim-Brooks applies manufacturing overhead on the basis of direct labor cost. During the year, $245,000 in direct labor cost was incurred. How much overhead was applied to work in process during the year? If actual manufacturing overhead for the year was $792,000, was overhead under- or over-applied during the year? By how much?

(c)  

Assume that Kim-Brooks applies manufacturing overhead on the basis of machine hours. During the year, 40,200 machine hours were worked. How much overhead was applied to work in process during the year? If actual manufacturing overhead for the year was $792,000, was overhead under- or over-applied during the year? By how much?

D4-20.  

Depreciation by Two Methods; Sale of Fixed Asset

New lithographic equipment, acquired at a cost of $625,000 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $53,700. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year.

On March 4 of Year 5, the equipment was sold for $91,500.

Required:

1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by the following methods:

a. Straight-line method

b. Double-declining-balance method

2. Journalize the entry to record the sale assuming that the manager chose the double declining-balance method. If an amount box does not require an entry, leave it blank.

3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $78,600 instead of $91,500. If an amount box does not require an entry, leave it blank.

Dividend

policies​)

Final earnings estimates for Chilean Health Spa​ & Fitness Center have been prepared for the CFO of the company and are shown in the following​ table:

. The firm has

7,300,000

shares of common stock outstanding. As assistant to the​ CFO, you are asked to determine the yearly dividend per share to be paid depending on the following possible​ policies:a. A stable dollar dividend targeted at

50

percent of earnings over a​ 5-year period.b. A​ small, regular dividend of

​$0.50

per share plus a​ year-end extra when the profits in any year exceed

​$19,000,000

The​ year-end extra dividend will equal

60

percent of profits exceeding

​$19,000,000

c. A constant dividend payout ratio of

45

percent.a. What is the yearly dividend per share to be paid depending on a stable dollar dividend targeted at

50

percent of earnings for years 1 through​ 5?

​$nothing

per share  ​(Round to the nearest​ cent.)b. Determine the yearly dividend per share to be paid depending on a​ small, regular dividend of

​$0.50

per share plus a​ year-end extra when the profits in any year exceed

​$19,000,000

The​ year-end extra dividend will equal

60

percent of profits exceeding

​$19,000,000

c. Determine the yearly dividend per share that will be paid assuming a constant dividend payout ratio of

45

ercent.

7/ In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available:

Net cash provided by operating activities was:  

Multiple Choice

$46,000.

$71,600.

$22,000.

$126,000.

$32,000.

8/ Mercury Company reports depreciation expense of $41,000 for Year 2. Also, equipment costing $143,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

Multiple Choice

$29,000.

$70,000.

$41,000.

$36,500.

$73,000.

9/ Bagwell's net income for the year ended December 31, Year 2 was $192,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2.

Multiple Choice

$106,700.

$146,400.

$85,300.

$50,700.

$95,700.

10/ Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

The amount of cash paid for dividends was:

Multiple Choice

$52,500.

$54,100.

$61,400.

$44,600.

$63,000.

Final earnings estimates for the Smithfield Meat Packing Company have been prepared for the CFO of the company and are shown in the following​ table:

YEAR PROFITS AFTER TAXES 1 12,000,000 2 15,000,000 3 19,000,000 4 23,000,000 5 25,000,000

The firm has 4,000,000 shares of common stock outstanding. As assistant to the​ CFO, you are asked to determine the yearly dividend per share to be paid depending on the following possible​ policies:

a. A stable dollar dividend targeted at 30 percent of earnings over a​ 5-year period.

b. A​ small, regular dividend of $0.60 per share plus a​ year-end extra when the profits in any year exceed ​$18,000,000 The​ year-end extra dividend will equal 50 percent of profits exceeding ​$18,000,000

c. A constant dividend payout ratio of 40 percent.

a. What is the yearly dividend per share to be paid depending on a stable dollar dividend targeted at 30 percent of earnings for years 1 through​ 5?

​$nothing per share  ​(Round to the nearest​ cent.)

b. Determine the yearly dividend per share to be paid depending on a​ small, regular dividend of ​$0.60 per share plus a​ year-end extra when the profits in any year exceed ​$18,000,000.

The​ year-end extra dividend will equal 50 percent of profits exceeding $18,000,000.

c. Determine the yearly dividend per share that will be paid assuming a constant dividend payout ratio of

40 percent.

Using the following spot rates, what is the dollar price of a 3-year bond with a par value of $1000 that pays a fixed annual coupon of 6%?

Year 1: 4.5%

Year 2: 5.0%

Year 3: 6.0%