Your company has spent $250,000 on research to develop a new computer game. The firm is planning to spend $1,400,000 on a machine to produce the new game. Shipping and installation costs for the new machine total $200,000 and these costs will be capitalized and depreciated together with the cost of the machine. The machine will be used for 3 years, has a $200,000 estimated resale value at the end of three years, and will be depreciated straight line over 4 years. Revenue from the new game is expected to be $1,200,000 per year, with costs of $500,000 per year. The firm has a tax rate of 35 percent, a cost of capital (discount rate) of 6 percent, and it expects net working capital (NWC) to increase by $150,000 at the beginning of the project. This investment in NWC will be wholly recouped at the end of the project. . a) Complete the table below. b) In the second table below calculate the Net Present Value (NPV) of the project. c) Calculate the Profitability Index (PI) of the project. d) Is the Internal Rate of Return (IRR) of the project greater than, equal to, or less than the cost of capital (discount rate)? e) Should your company proceed with this project? Explain based on the decision criteria for NPV, PI, and IRR. Year 0 1 2 3 Revenue Costs Depreciation EBIT Taxes Net Income Operating Cash Flow Change in Net Operating Working Capital Change in Gross Fixed Assets Total Free Cash Flow Net Present Value Profitability Index Internal Rate of Return >, =, or < the cost of capital (discount rate)? Proceed with the project? Explain.

McAdams Company had the following inventory cost values for one item of inventory for April:

Available for sale: Units purchased = 4,000; Total cost = $67,600

Sales Activity:

Apr. 19.....1,200 units

Apr. 26.....1,400 units

Units sold = 2,600

Units remaining in EI

Available for sale..........4,000 units

Units sold.....................2,600

Ending inventory in units.....1,400

Instructions

Determine both Ending Inventory (EI) and Cost of Goods Sold (COGS) under each of the following methods and then calculate gross profit under each, assuming that the selling price per unit was $25 for all units sold.

Weighted-average cost per unit = 67,600/4,000 = $16.90

Sales Revenue = 2,600 units sold * 25 = 65,000

Sales revenue - COGS = Gross Profit

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 62 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,700 per month plus $41 per course plus $4 per student. The company’s sales should average $850 per student.

The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Shamsud Ltd. operates on a calendar-year basis. At the beginning of December 2016, the company had the following current liabilities on its books:

In December, the following events occurred:

1.Shamsud purchased a new computer system on account at a cost of $28,000, payable on January 15, 2017. In addition to this, $4,000 was paid in cash to have the new system installed and customized to the company's requirements.

2.The company purchased inventory for $93,000 on account and made payments of $86,000 to its suppliers.

3.The rent that was payable at the beginning of December represented the payment that should have been made in November. In December, Shamsud paid the past rent owed, as well as the rent for December and January.

4.By December 31, the company had earned $5,000 of the service revenue that was received in advance from customers.

5.Shamsud's employees are paid a total of $2,000 per day. Three work days elapsed between the last payday and the end of the fiscal year. (Ignore deductions for income tax, CPP, and EI.)

6.The company's products are sold with a two-year warranty. Shamsud estimates its warranty expense for the year (not previously recorded) as $16,000. During December, it paid $1,200 in warranty claims.

Required:

a.  

Prepare the journal entries to record the December transactions and adjustments. (Ignore the amounts that the company pays for its share of CPP and EI.)

b.  

Prepare the current liability section of Shamsud's statement of financial position on December 31, 2016.

Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $60 million of 6% bonds, dated January 1, on January 1, 2018. Management intends to include the investment in a short-term, active trading portfolio. For bonds of similar risk and maturity the market yield was 8%. The price paid for the bonds was $46 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2016, was $50 million.

Required: 1.Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places, (i.e., 5,500,000 should be entered as 5.50).)

a. Record Fuzzy Monkey’s investment on bonds on January 1, 2018.

b. Record the interest revenue on June 30, 2018.

c. Record the interest revenue on December 31, 2018

2. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet?

3. Prepare any entry necessary to achieve this reporting objective.

a. Record any necessary entry to report the investment at the correct value on the balance sheet. For December 31, 2018

4. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?

a. Operating cash flow

b. Investing Cash flow

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 60 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,800 per month plus $42 per course plus $5 per student. The company’s sales should average $880 per student.

The company planned to run four courses with a total of 60 students; however, it actually ran four courses with a total of only 56 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Chris P. Bacon is the chief accountant for CV Industries, a large manufacturing company. In addition to its normal business activities, the company has excess warehouse space that it rents out to local businesses. Because the typical renter is a small business, CV Industries requires renters to make lease payments for the entire rental period on the day the lease is signed. As a result, CV Industries typically reports a large unearned rent balance on its balance sheet.

After making adjusting entries for the current year, Chris prepares the adjusted trial balance and notices that the company's earnings will decline significantly. He presents the adjusted trial balance to the company's CFO, Antonio Beldin, who is concerned about the earnings decline. Mr. Beldin notices the large unearned rent balance and proposes making an additional end-of-period adjusting entry to recognize the entire unearned rent balance as revenue in the current period. Chris protests, reminding Mr. Beldin that the adjusting entry for unearned rent has already been made. Mr. Beldin assures Chris that his proposal is acceptable, reminding Chris that “because we have already received the cash, we have the right to recognize the revenue in the current period.” He instructs Chris to make the additional adjusting journal entry. Chris is hesitant to follow these instructions, but he is sensitive to the company's emphasis on earnings growth and makes the adjusting entry as instructed.

Is Chris behaving ethically? Please let us know why or why not? Who is affected by Chris's decision?

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 64 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,900 per month plus $41 per course plus $5 per student. The company’s sales should average $900 per student.

The company planned to run four courses with a total of 64 students; however, it actually ran four courses with a total of only 60 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2018. Insight Machines manufactured the equipment at a cost of $360,000 and lists a cash selling price of $492,102. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018.

a. Record the beginning of the lease for Eye Deal. (Jan 1)

b. Record the quarterly rental paid by Eye Deal. (Jan 1)

c. Record the quarterly rental and interest paid by Eye Deal. (March 31)

d. Record the Amortization of Right-of-use equipment for Eye Deal. (March 31)

2. Prepare appropriate entries for Insight Machines to record the arrangement at its beginning, January 1, 2018, and on March 31, 2018.
a. Record the beginning of the lease for Insight Machines. (Jan 1)

b. Record the lease revenue received by Insight Machines. (Jan 1)

c. Record the lease revenue and interest received by Insight Machines. (March 31)