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

Required:

Classifying Cash Flows
The company provided the following information.
(a)   Cash sales for the year were $50,000; sales on account totaled $60,000. (b) Cost of goods sold was $55,000. (c)   All inventory is purchased on account. (d) Depreciation on building was $31,000 for the year.
(e)   Depreciation on equipment was $2,000.
(f)   Cash collections of accounts receivable were $38,000.
(g) Cash payments on accounts payable for inventory equaled $39,000.
(h)   Rent expense paid in cash was $11,000.
(i)   20,000 shares of common stock were issued for $240,000 in cash.
(j)   Land valued at $106,000 was acquired in exchange for signing a mortgage note payable.
(k)   Equipment was purchased for cash at a cost of $84,000.
(l)   Dividends of $46,000 were declared but not yet paid.
(m) $15,000 of dividends that had been declared the previous year were paid in cash.
(n)   Interest totaling $16,000 was paid in cash during the year.
(o)   A machine used on the assembly line was sold for $12,000 in cash. The machine had a book value of $7,000.
(p) On January 1, the company entered into an operating lease to secure the use of a building having a cash price of $200,000. The first lease payment of $19,000 in cash was made on January 1.
1.   Compute cash from operating activities. 2.   Compute cash from investing activities. 3.   Compute cash from financing activities

Required information

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

Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.)

1. 1) Acquired $1,800 cash from the issue of common stock.
2. 2) Borrowed $1,270 from a bank.
3. 3) Earned $1,450 of revenues.
4. 4) Paid expenses of $420.
5. 5) Paid a $220 dividend.

During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.)

1. 1) Issued an additional $1,175 of common stock.
2. 2) Repaid $815 of its debt to the bank.
3. 3) Earned revenues of $1,600.
4. 4) Incurred expenses of $700.
5. 5) Paid dividends of $270.

What was the balance of Packard's Retained Earnings account before closing in Year 1?

Multiple Choice

• $810

• $0

• $1,030

• $1,050

with the information above....

What is the after-closing amount of retained earnings that will be reported on Packard’s balance sheet at the end of Year 2? (Assume that closing entries have been made).

Multiple Choice

• $2,080

• $1,710

• $1,440

• $2,275

_______________________________________________________________

The following entry is taken from the journal of a merchandising company:

What is the effect of this entry on the company’s financial statements?

Multiple Choice

• Assets and stockholders’ equity increase.

• Assets and liabilities increase.

• Assets and stockholders’ equity decrease.

• Assets decrease and stockholders’ equity increases.

The Evergreen Chemical Corporation, established in 1990, has managed to earn a consistently high rate of return on its investments. The secret of its success has been the strategic and timely development, manufacturing, and marketing of innovative chemical products that have been used in various industries. Currently, the management of the company is considering the manufacture of a thermosetting resin as packaging material for mobile devices. The Company's Research and Development Department has come up with two alternatives: an epoxy resin, which would have a lower startup cost, and a synthetic resin, which would cost more to produce initially but would have greater economies of scale. At the initial presentation, the project leaders of both teams presented their cash flow projections and provided sufficient documentation in support of their proposals. However, since the products are mutually exclusive, the firm can only fund one proposal.

In order to resolve this dilemma, Tim Lui, the Assistant Treasurer, and a recent MBA from a prestigious university has been assigned the task of analyzing the costs and benefits of the two proposals and presenting his findings to the board of directors. Tim knows that this will be a difficult task, since the board members are not all familiar with financial concepts. The Board has historically had a strong preference for using rates of return as its decision criteria. On occasions it has also used the payback period approach to decide between competing projects when they are close competitors. However, Tim is convinced that the net present value (NPV) method is the best and when used correctly will always create the most value to the company.

After obtaining the cash flow projections for each project (see Tables 1 & 2), and crunching out the numbers, Tim realizes that the presentation is more difficult than he thought. The various capital budgeting techniques, when applied to the two series of cash flows, provide inconsistent results. The project with the higher NPV has a longer payback period, as well as a lower Internal Rate of Return (lRR). Tim scratches his head, wondering how he can convince the Board that the IRR and Payback Period can often lead to incorrect decisions.

In looking over the documentation prepared by the two project teams, it appears to you that the synthetic resin technology would require extensive development before it could be implemented whereas the epoxy resin technology is available “off-the-shelf." What impact might this have on your analysis?  

On December 16th, 2015, FED decided to raise first time the record low target rate of federal reserve fund from 1/4% to 1/2%.

On December 14th, 2016, Fed decided to raise the second time the federal fund rate from 1/2% to 3/4%.

On March 15th, 2017, Fed decided to raise the federal fund rate from 3/4% to 1%.

On June 14th, 2017, Fed decided to raise the federal fund rate from 1% to 1.25%.

On December 13th, 2017, Fed decided to raise the federal fund rate from 1.25% to 1.5%.

On March 21st, 2018, Fed decided to raise the federal fund rate from 1.5% to 1.75%.

On June 13th, 2018, Fed decided to raise the federal fund rate from 1.75% to 2%.

On September 26th, 2018, Fed decided to raise the federal fund rate from 2% to 2.25%.

On December 19th, 2018, Fed decided to raise the federal fund rate from 2.25% to 2.5%.

On July 31st, 2019, Fed decided to cut the federal fund rate from 2.5% to 2.25%.

On September 18th, 2019, Fed decided to cut the federal fund rate from 2.25% to 2%.

On October 30th, 2019, Fed decided to cut the federal fund rate from 2% to 1.75%.

Fed agrees that economic recovery is sound, Also Fed feels that the job market is strengthening, but the long term inflation signs still stabilized. Now Fed feel it is not necessary to maintain such accommodating easy monetary policy including very low interest rate until unemployment improves further and inflation rate goes up to 2.0%.

Fed decided that the size of the mortgage bond purchase as QE policy was winding down on October 2014 as the economy continues to improve.

The future rate hike will be gradual, depending upon the upcoming economic indicators.

1) What's your opinion about the Fed policy decision by next FOMC meeting?

2) Do you feel that this near-zero interest was a necessary one, or may not work to save declining economy, due to liquidity trap? or can we be back in double-dip recession due to too early exit strategy by the FED's tight monetary policy?

3) Are you concerned about the inflation come back due to such easy monetary policy with zero interest rate for long time? if so, how fast is the Fed supposed to tighten its monetary policy as an normalizing strategy?

4) Will the new president's proposal of spending increase on infrastructure and defense as well as tax cut on corporate income tax and individual income tax may overheat US economy to be inflationary? if so, will it cause Fed to speed up the rate hike? If Tariff over trade and possible retaliation could be inflationary, does it give another incentive for Fed to speed the rate hike?

5) Is there any risk that tight Fed policy may put the US economy back into another recession, if tight Fed policy is ahead of curve , although it is gradual tightening? Do you think the US will be in recession the next year(Year 2020)? Yes or No. Can You predict how many times Fed will raise FFR(federal fund rate) this year? or how many times FED will cut FFR due to trade issues and global slowdown?

Novak Cole Inc. acquired the following assets in January of 2018.

The equipment has been depreciated using the sum-of-the-years’-digits method for the first 3 years for financial reporting purposes. In 2021, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method.

Pepper Company acquired all of Salt Corporation’s outstanding shares on December

    31, 2017 for $750,000 cash.  Pepper will operate Salt as a wholly owned

    subsidiary with a separate legal and accounting identity.  Although many of Salt’s

    book values approximate fair values, several of its accounts have a fair values that

    differ from book values.  In addition, Salt has internally developed assets that remain

    unrecorded on its books.  In deriving the acquisition price, Pepper assessed Salt’s

    fair and book value differences as follows:

Required:  Complete the consolidation worksheet for Pepper and Salt at December 31, 2017.

Brief Exercise 15-17 Lessor; effect on earnings; Type B lease

Rosenberg Land Development (RLD) is a developer of condominium properties in the Southwest United States. RLD has recently acquired a 40.625 acre site outside Phoenix, Arizona. Zoning restrictions allow at most 8 units per acre. Three types of condominiums are planned: one-, two-, and three-bedroom units. The average construction costs for each type of unit are $450,000, $600,000 and $750,000, respectively. These units will generate a net profit of 10%. The company has equity and loans totaling $180 million dollars for this project. From prior development projects, senior managers have determined that there must be a minimum of 15% one-bedroom units, 25% two-bedroom units, and 25% three-bedroom units.

a. Develop a linear optimization model to determine how many of each type of unit the developer should build.

b. Find an optimal solution by Solver in Excel.

Lily Company began business on January 1, 2017. The company’s year-end is December 31. The following events occurred during the first year of operations: Apr. 1 Paid cash in the amount of $24,000 for a one-year rental contract on a building. July 1 Received $60,000 in cash from customers for services to be provided evenly during the next twelve months. Oct. 1 Acquired a building by borrowing $300,000 at 6% interest, principal and interest payable at maturity in ten years. Annual depreciation expense is $12,000.

1. Prepare the necessary adjusting journal entries at December 31 (10 points total). (Hint: Four adjusting entries are necessary.)

2. Bonus: For each of the adjusting entries, indicate which of the following type of entry was recorded: accrued expense, accrued revenue, deferred expense, or deferred revenue (2 points total).