The cost of production of completed and transferred goods during the period amounted to $540,000, and the finished products shipped to customers had production costs of $375,000. The entry to record the transfer of costs from finished goods to cost of goods sold is

a.

Cost of Goods Sold540,000

Finished Goods540,000

b.

Finished Goods375,000

Cost of Goods Sold375,000

c.

Cost of Goods Sold375,000

Finished Goods375,000

d.

Finished Goods540,000

Cost of Goods Sold540,000

1. A new operating system for an existing machine is expected to cost $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $205,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $26,200.
2. A machine costs $490,000, has a $21,800 salvage value, is expected to last eight years, and will generate an after-tax income of $68,000 per year after straight-line depreciation.

Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Alpha Industries is considering a project with an initial cost of $8.2 million. The project will produce cash inflows of $1.93 million per year for 6 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.67% and a cost of equity of 11.31%. The debt-equity ratio is 0.62 and the tax rate is 40%. What is the net present value of the project?

Hint: You'll need to calculate the appropriate discount rate and use it to calculate the NPV. Be careful not to confuse debt-equity ratios with debt-value ratios.

A financial administrator believes the average cost of tuition and room and board at a small liberal arts college exceeds $8,500 per term. A study conducted using 350 small liberal arts colleges showed that the average cost per term is $8,745. The population standard deviation is $1,200. Let α = 0.05. What is the p-value for this test?

0.0500

0.0000

0.4938

0.0124

Select all of the following statements about intangibles that are TRUE

The cost of a purchased intangible includes the purchase price, legal fees and other incidental expenses Bond investments are considered intangibles

A company can capitalize legal costs associated with an internally created intangible asset

When amortizing an intangible asset, an accumulated amortization contra account is always used

Only limited life intangibles are regularly evaluated for impairment

Trademarks are considered the property of the company originating the trademark for 70 years

The useful life of an intangible is the period over which these assets will contribute to a company's cash flows

Carl's Construction Inc. will buy a machine that has an initial cost of $1,200,000 and is expected to be useful for 8 years. Several estimations have been created but the company is going to focus on 3 main scenarios. One scenario estimates yearly benefits of $310,000 and O&M costs of $60,000 per year with a 30% chance of occurrence. The second scenario involves benefits of $280,000 per year and O&M costs of $70,000 annually with a 50% chance of occurring. The last scenario involves annual benefits of $240,000 and annual O&M costs of $80,000 with a probability of 20%. The company uses an interest rate of 7%. What is the standard deviation of this project?

Consider a machine that has an initial cost of $126,000 and an estimated salvage value of $27,000. After some analysis we conclude that this machine will have O&M costs of $1,850 per year but based on the faulty nature of this machine we will have to incur in major maintenance costs at the end of year 3 and 6. During year 3 we expect to pay $14,000 and for year we estimate a $16,500. The machine will have a useful life of 8 years and we will use an interest rate of 6%. Use annual cash flow analysis.

Carl's Construction Inc. will buy a machine that has an initial cost of $1,200,000 and is expected to be useful for 8 years. Several estimations have been created but the company is going to focus on 3 main scenarios. One scenario estimates yearly benefits of $310,000 and O&M costs of $60,000 per year with a 30% chance of occurrence. The second scenario involves benefits of $280,000 per year and O&M costs of $70,000 annually with a 50% chance of occurring. The last scenario involves annual benefits of $240,000 and annual O&M costs of $80,000 with a probability of 20%. The company uses an interest rate of 7%. What is the expected net present value (NPV) of this project?

Duke Energy reported that the cost of electricity for an efficient home in a particular neighborhood of Cincinnati, Ohio, was $104 per month.† A researcher believes that the cost of electricity for a comparable neighborhood in Chicago, Illinois, is higher. A sample of homes in this Chicago neighborhood will be taken and the sample mean monthly cost of electricity will be used to test the following null and alternative hypotheses.

H₀: μ ≤ 104

H_a: μ > 104

(A)

Assume the sample data led to rejection of the null hypothesis. What would be your conclusion about the cost of electricity in the Chicago neighborhood?

a) Conclude that the population mean monthly cost of electricity in the Chicago neighborhood is not greater than $104 and hence is not higher than in the comparable neighborhood in b)   Cincinnati. Conclude that the population mean monthly cost of electricity in the Chicago neighborhood is greater than $104 and hence higher than in the comparable neighborhood in Cincinnati.

(b)

What is the type I error in this situation?

The type I error is rejecting H₀ when it is true.

The type I error is accepting H₀ when it is true.     

The type I error is rejecting H₀ when it is false.

The type I error is accepting H₀ when it is false.

What are the consequences of making this error?

This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is actually less than or equal to $104.

This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is less than or equal to $104.     

This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is greater than $104.

This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is actually greater than $104.

(c)

What is the type II error in this situation?

The type II error is rejecting H₀ when it is true.

The type II error is accepting H₀ when it is true.     

The type II error is rejecting H₀ when it is false.

The type II error is accepting H₀ when it is false.

What are the consequences of making this error?

This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is actually less than or equal to $104.

This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is less than or equal to $104.     

This error occurs if the researcher concludes that the population mean monthly cost of electricity is greater than $104 in the Chicago neighborhood when the population mean cost is greater than $104.

This error occurs if the researcher concludes that the population mean monthly cost of electricity is less than or equal to $104 in the Chicago neighborhood when the population mean cost is actually greater than $104.