Exercise 21-27 Statement of cash flows; direct method [LO21-3, 21-5, 21-6, 21-8]

Comparative balance sheets for 2018 and 2017, a statement of income for 2018, and additional information from the accounting records of Red, Inc., are provided below.

Additional information from the accounting records:

1. During 2018, $241 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value.
2. In order to maintain the usual policy of paying cash dividends of $61 million, it was necessary for Red to borrow $61 million from its bank.

Required:
Prepare the statement of cash flows of Red, Inc., using the direct method to report operating activities. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

A) Required information

[The following information applies to the questions displayed below.]

The following information pertains to the inventory of Parvin Company during Year 2:

During Year 2, Parvin sold 2,700 units of inventory at $90 per unit and incurred $41,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $75,000, inventory of $12,000, common stock of $50,000, and retained earnings of $37,000.

Required
a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

FIFO

LIFO

Please fill in the blanks for #6.

D) d. Determine the cash flow from operating activities under FIFO and LIFO. (Amounts to be deducted should be indicated with minus sign.)

Please fill in the blanks on the chart. Thank you.

A magazine provided overall customer satisfaction scores for AT&T, Sprint, T-Mobile, and Verizon cell-phone services in major metropolitan areas throughout the United States. The rating for each service reflects the overall customer satisfaction considering a variety of factors such as cost, connectivity problems, dropped calls, static interference, and customer support. A satisfaction scale from 0 to 100 was used with 0 indicating completely dissatisfied and 100 indicating completely satisfied. The ratings for the four cell-phone services in 20 metropolitan areas are contained in the Excel Online file below. Construct a spreadsheet to answer the following questions.

a. Consider T-Mobile first. What is the median rating (to 1 decimal)?

b. Develop a five-number summary for the T-Mobile service.

c. Are there outliers for T-Mobile?

_________Yes, the data contain outliersNo, the data do not contain outliers

d. Repeat parts (b) and (c) for the other three cell-phone services.

Are there outliers for AT&T?

_________Yes, the data contain outliersNo, the data do not contain outliers

Are there outliers for Sprint?

_________Yes, the data contain outliersNo, the data do not contain outliers

Are there outliers for Verizon?

_________Yes, the data contain outliersNo, the data do not contain outliers

e. Which of the following box plots accurately displays the data set?

_________Box plot #1Box plot #2Box plot #3Box plot #4

Which service did the magazine recommend as being best in terms of overall customer satisfaction?

_________AT&TSprintT-MobileVerizon

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

Required:

1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. (Do not round intermediate calculations.)

Orgler Label Company is thinking about replacing an existing press. The     existing press was purchased 6 years ago for $155,000 with a salvage value of $8,000. It will last for four more years and it is expected to be worthless at that time.   It can be sold today for $50,000.

                  A new high-speed press can be purchased for $195,000 with an expected salvage value of $30,000 at the end of its four-year life.

            Orgler current revenue is $2,000,000 and is expected grow 6% per annum. The new machine would have increased current revenue to $2,200,000. Firm revenue will continue to grow by 6% per annum if they acquire the new machine. Orgler average collection period is 55 days and pays it bills after 25 days.   Orgler has a gross profit margin of 28%. The new press will increase labor costs by $9,000 per year.   Orgler uses 9% for its cost of capital and has an ordinary income tax rate of 30%. The project will be 50% financed with a 7% 3-year loan. The firm uses straight line depreciation.   Calculate the project’s NPV.   

Question Set 3. A small manufacturing plant produces specialized stainless steel valves for high-pressure steam systems. Each valve costs $2000 to produce. The plant incurs $1,200,000 in fixed annual costs. The plant sells the valves directly to power plants for $6400 each. For this question set, use the following formulas:

[Total Profit] = [Total Revenue] – [Total Cost]

[Total Revenue] = [Production] x [Unit Revenue]

[Total Cost] = [Production] x [Variable Unit Cost] + [Fixed Costs]

1. Create a data table (as demonstrated during lab exercise 2), that shows what total profit would be if the company produced 100 to 400 valves, in increments of 20. You must use a data table structure to receive credit for this problem. (6pts)

2. Create a scatter chart that displays the variable total profit (and no other variables) as a function of the number of valves produced and sold. At low production quantities, total profit may be negative but should still be displayed. Label your chart axes appropriately. (6pts)