A lift fork truck is available at a cost of $28,000. The engineer estimates a 5-year life with a $2,000 salvage value at the end. The operating cost has been estimated to be $2,000 per month and the cost due to energy consumption is $90 per day. Estimate the fixed and variable costs for this lift fork truck in a period of one month. Company policy sets an 8% internal rate of return per year for such calculation and assumes that there are 26 working days in a month.

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $98 per unit, and variable expenses are $68 per unit. Fixed expenses are $831,600 per year. The present annual sales volume (at the $98 selling price) is 25,000 units. Required: 1. What is the present yearly net operating income or loss? 2. What is the present break-even point in unit sales and in dollar sales? 3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit? 4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

What is the present yearly net operating income or loss?

What is the present break-even point in unit sales and in dollar sales? (Do not round intermediate calculations.)

Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

What would be the break-even point in unit sales and in dollar sales using the selling price you determined in Required (3) (e.g., the selling price at the level of maximum profits)? (Do not round intermediate calculations.)

Fuzzy Button Clothing Company reported sales of $720,000 at the end of last year; but this year, sales are expected to grow by 9%. Fuzzy Button expects to maintain its current profit margin of 21% and dividend payout ratio of 15%. The firm’s total assets equaled $500,000 and were operated at full capacity. Fuzzy Button’s balance sheet shows the following current liabilities: accounts payable of $75,000, notes payable of $25,000, and accrued liabilities of $70,000. Based on the AFN (Additional Funds Needed) equation, what is the firm’s AFN for the coming year?

-$129,764

-$118,951

-$124,358

-$108,137

A negatively-signed AFN value represents:

A. A shortage of internally generated funds that must be raised outside the company to finance the company’s forecasted future growth

B. A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends

C. A point at which the funds generated within the firm equal the demands for funds to finance the firm’s future expected sales requirements

Because of its excess funds, Fuzzy Button is thinking about raising its dividend payout ratio to satisfy shareholders. What percentage of its earnings can Fuzzy Button pay to shareholders without needing to raise any external capital? (Hint: What can Fuzzy Button increase its dividend payout ratio to before the AFN becomes positive?)

60.5

72.5

56.4

80.6

Company X is in its first year of operations and has decided to use the percentage of sales method for estimating uncollectible accounts. Sales for the year totaled $112,000. Company X has assessed uncollectible accounts at 10% of sales. The company recorded $11,200 of bad debt expense. Write-offs for the period were $3,000. What is the effect of this transaction?

Select one:

a. Net income is overstated by 3,000

b. Cost of Goods sold is understated by 3,000

c. Bad debt expense is overstated by 3,000

d. None of the these

Max is an auditor on the low end limited engagement for the year
ended 30 June 2012. Jordan has performed a number of tests in relation to accounts
payable.
Selected a number of suppliers' invoices and checked that the pricing and discount
terms have been reviewed and authorized by the purchase manager. Three out of 20
invoices tested had not been authorized and incorrect discounts were recorded for
these invoices. A follow-up of the three samples with deviations did not highlight a
pattern of specific reason for the errors. Jordan accepted the result as the errors in
discounts claimed were immaterial. Identify whether this is a test of control or substantive test of detail and discuss why
the conclusion reached is appropriate or inappropriate.

At the end of the year, Randy’s Parts Co. had the following items in inventory:

Required
a. Determine the amount of ending inventory using the lower-of-cost-or-market rule applied to each individual inventory item.
b. Provide the adjustment necessary to write down the inventory based on Requirement a. Assume that Randy’s Parts Co. uses the perpetual inventory system.
c. Determine the amount of ending inventory, assuming that the lower-of-cost-or-market rule is applied to the total inventory in aggregate.
d. Provide the adjustment necessary to write down the inventory based on Requirement c. Assume that Randy’s Parts Co. uses the perpetual inventory system.

The Economist collects data each year on the price of a Big Mac in various countries around the world. A sample of McDonald's restaurants in Europe in July 2016 resulted in the following Big Mac prices (after conversion to U.S. dollars).

The mean price of a Big Mac in the U.S. in July 2016 was $5.04. For purposes of this exercise, you can assume it is reasonable to regard the sample as representative of European McDonald's restaurants. Does the sample provide convincing evidence that the mean July 2016 price of a Big Mac in Europe is less than the reported U.S. price? Test the relevant hypotheses using

α = 0.05.

(Hint: See Example 12.12.)

Find the test statistic and P-value. (Use a table or technology. Round your test statistic to one decimal place and your P-value to three decimal places.)

t=  

P-value = 0.000

State the conclusion in the problem context.

We reject H₀. We have convincing evidence that the mean July 2016 price of a Big Mac in Europe is less than the reported U.S. price.

Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

There are 11 units of the item in the physical inventory at December 31. The periodic inventory system is used. Round average unit cost to the nearest cent and final answers to the nearest whole dollar, if required.

a. Determine the inventory cost by the first-in, first-out method.
$

b. Determine the inventory cost by the last-in, first-out method.
$

c. Determine the inventory cost by the weighted average cost method.
$

1. Indicate how the following items are recorded in the accounting records in the current year of Coronet Co. (a) Impairment of goodwill. (b) A change in depreciating plant assets from acceler- ated to the straight-line method. (c) Large write-off of inventories because of obsolescence. (d) Change from the cash basis to accrual basis of accounting. (e) Change from LIFO to FIFO method for inventory valuation purposes. (f) Change in the estimate of service lives for plant assets.

Jupiter Corporation had $8,500 balance in accounts receivable at the beginning of the current year. The beginning balance of allowance for doubtful accounts was $2,000. Early in January, $500 worth of receivable were written off as uncollectible. What is the net realizable value of accounts receivable, after the write off?

Select one:

a. $7,000

b. $1,500

c. $8,000

d. $6,500

e. $6,000