Question (1) Stanley's Farm purchases a new electric generator from Power Supply Inc. The price paid...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Question (1) Stanley's Farm purchases a new electric generator from Power Supply Inc. The price paid by Stanley's Farm was $80,000 after benefitting from a preferential customer discount of $5,000. At date of purchase, Generator RUs Inc. offered the same generator for a list price of $79,000 while Discount Farm Supplies had an older model on sale for $70,000. How should Stanley's Farm record the generator at the date of acquisition? O Dr Property and equipment assets 80,000, Cr Accounts payable 80,000 O Dr Property and equipment assets 85,000, Cr Gain on purchase 5,000, Cr Accounts payable 80,000 O Dr Property and equipment assets 79,000, Dr Loss on purchase 1,000, Cr Accounts payable 80,000 O Dr Property and equipment assets 70,000, Dr Loss on purchase 10,000, Cr Accounts payable 80,000 Question (2) A car rental business is seeking to expand its business. Which asset would be helpful to that expansion? O Purchase of new cars. O Purchase of investment property. O Investment in a new human resources software. O Purchase of new headquarters building. Question (3) Best Bakers Inc. bake and supply breads for retailers. In looking to expand their capacity to support a growing market, which form of financing would be most appropriate and why? O Extending its existing overdraft facility because this type of funding provides maximum flexibility required due to the uncertain operating conditions that the expansion will create. O Raising a new term-loan that can be secured against the new assets because this type of funding will provide secure financing over the operational life of the capital asset. O Reducing its operating cycle to generate greater operating cash flows because this type of funding is free financing and will maximize the returns that the new assets will generate for stockholders: O Raising new equity from shareholders because this type of funding is both long-term and relatively inexpensive compared to other forms of financing. Question (4) Which statement regarding depreciation is accurate? O Accumulated depreciation represents the total depreciation charged in an accounting period and is deducted from income in the period. O Depreciation expense is the difference between the original cost of an asset and its carrying amount at the end of each accounting period. O Accumulated depreciation is the additional depreciation that is charged on assets that are held at revalued amounts compared to the depreciation which would have been charged had they been held at cost. O The depreciation charge is the amount deducted from the carrying amount of an asset in the period and charged to the income statement. Question (5) Tea-Shop Inc. finance their new store leases using 2/3rd debt and 1/3rd equity. Which of these events would reduce the risk for the lending institution? O Reduction in costs of tea. C O Decrease in credit provided by suppliers. Decrease in store sales with a constant operating margin. O Increase in store maintenance costs. Question (6) Which scenario would be met through capital investment? O A business is trying to reduce disruption from stoppages to its machines by introducing a new maintenance schedule. O A business is trying to reduce its receivable days by offering customers prompt payment discounts. O A business is trying to compete by acquiring new technology that will allow it to reduce its cost of production and decrease selling price. O A business is trying to reduce its financing requirement by reducing the number of suppliers it uses. Question (7) Delivanow is a parcel delivery company. Which of these assets would you expect to see included in Fixtures & Fittings? O Warehouse shelving and partition walls O Delivery vehicles O Hand held computerized parcel-tracking units O Plastic sacks to protect parcels in transit Question (8) Identify the statement that accurately describes why a transaction should be treated as a capital rather than an expense. O If the item is expected to be used and to generate income for more than 12 months then it should be treated as capital investment. O If the item costs over a certain amount of money (generally over $10,000) it will be treated as capital investment. O If the item will have a significant resale value after 12 months it will be treated as a capital investment. O If the item is not used immediately then it should be treated as a capital investment. Question (9) Which of these transactions would be defined as a capital investment? O Annual service costs relating to delivery vehicles. O Purchase of fuel to operate machinery. O Purchase of warehouse fixtures and fittings. PI O Purchase of finished goods to re-sell to customers. Question (10) Which statement accurately describes the capital investment cycle? O It refers to the length of time between start up of a business and the expected useful life of the main operating property used by the business. O It refers to the expected holding period for investments in property that are held primarily for rental purposes or capital gains. O It refers to the process of continuous investment of surplus operating funds into long-term financial assets such as bonds and equities. O It refers to the cycles of acquisition, use and disposal of fixed assets, which can vary in length depending upon the nature and use of the fixed assets. Question (11) Which statements is correct in relation to Loan to Value ratios (LTV)? O The LTV should be above 1 at the beginning of the loan and below 1 at the end of the loan. O The LTV should be less than 1 throughout the term of the loan. O The LTV should be below 1 at the beginning of the loan and above 1 at the end of the loan. O The LTV should be greater than 1 throughout the term of the loan. Question (12) Tea-Shop Inc. are purchasing 10-year leases on 5 new stores to be run as specialist tea outlets and cafes, costing $30m. The shops are expected to generate annual net operating cash flow (before financing) of $1M each. Tea-Shop have approached you for a loan of $20m to help finance the purchases. Which combination of loan term and interest rate would be most suited to this transaction? O 12-year term loan at 8% pa with annual repayments (including interest) of $2.7M. O 14-year term loan at 8% with annual repayments (including interest) of $2.4M. O 4-year term loan at 8% with annual repayments (including interest) of $6.0M. O 8-year term loan at 8% with annual repayments (including interest) of $3.5M. Question (1) Stanley's Farm purchases a new electric generator from Power Supply Inc. The price paid by Stanley's Farm was $80,000 after benefitting from a preferential customer discount of $5,000. At date of purchase, Generator RUs Inc. offered the same generator for a list price of $79,000 while Discount Farm Supplies had an older model on sale for $70,000. How should Stanley's Farm record the generator at the date of acquisition? O Dr Property and equipment assets 80,000, Cr Accounts payable 80,000 O Dr Property and equipment assets 85,000, Cr Gain on purchase 5,000, Cr Accounts payable 80,000 O Dr Property and equipment assets 79,000, Dr Loss on purchase 1,000, Cr Accounts payable 80,000 O Dr Property and equipment assets 70,000, Dr Loss on purchase 10,000, Cr Accounts payable 80,000 Question (2) A car rental business is seeking to expand its business. Which asset would be helpful to that expansion? O Purchase of new cars. O Purchase of investment property. O Investment in a new human resources software. O Purchase of new headquarters building. Question (3) Best Bakers Inc. bake and supply breads for retailers. In looking to expand their capacity to support a growing market, which form of financing would be most appropriate and why? O Extending its existing overdraft facility because this type of funding provides maximum flexibility required due to the uncertain operating conditions that the expansion will create. O Raising a new term-loan that can be secured against the new assets because this type of funding will provide secure financing over the operational life of the capital asset. O Reducing its operating cycle to generate greater operating cash flows because this type of funding is free financing and will maximize the returns that the new assets will generate for stockholders: O Raising new equity from shareholders because this type of funding is both long-term and relatively inexpensive compared to other forms of financing. Question (4) Which statement regarding depreciation is accurate? O Accumulated depreciation represents the total depreciation charged in an accounting period and is deducted from income in the period. O Depreciation expense is the difference between the original cost of an asset and its carrying amount at the end of each accounting period. O Accumulated depreciation is the additional depreciation that is charged on assets that are held at revalued amounts compared to the depreciation which would have been charged had they been held at cost. O The depreciation charge is the amount deducted from the carrying amount of an asset in the period and charged to the income statement. Question (5) Tea-Shop Inc. finance their new store leases using 2/3rd debt and 1/3rd equity. Which of these events would reduce the risk for the lending institution? O Reduction in costs of tea. C O Decrease in credit provided by suppliers. Decrease in store sales with a constant operating margin. O Increase in store maintenance costs. Question (6) Which scenario would be met through capital investment? O A business is trying to reduce disruption from stoppages to its machines by introducing a new maintenance schedule. O A business is trying to reduce its receivable days by offering customers prompt payment discounts. O A business is trying to compete by acquiring new technology that will allow it to reduce its cost of production and decrease selling price. O A business is trying to reduce its financing requirement by reducing the number of suppliers it uses. Question (7) Delivanow is a parcel delivery company. Which of these assets would you expect to see included in Fixtures & Fittings? O Warehouse shelving and partition walls O Delivery vehicles O Hand held computerized parcel-tracking units O Plastic sacks to protect parcels in transit Question (8) Identify the statement that accurately describes why a transaction should be treated as a capital rather than an expense. O If the item is expected to be used and to generate income for more than 12 months then it should be treated as capital investment. O If the item costs over a certain amount of money (generally over $10,000) it will be treated as capital investment. O If the item will have a significant resale value after 12 months it will be treated as a capital investment. O If the item is not used immediately then it should be treated as a capital investment. Question (9) Which of these transactions would be defined as a capital investment? O Annual service costs relating to delivery vehicles. O Purchase of fuel to operate machinery. O Purchase of warehouse fixtures and fittings. PI O Purchase of finished goods to re-sell to customers. Question (10) Which statement accurately describes the capital investment cycle? O It refers to the length of time between start up of a business and the expected useful life of the main operating property used by the business. O It refers to the expected holding period for investments in property that are held primarily for rental purposes or capital gains. O It refers to the process of continuous investment of surplus operating funds into long-term financial assets such as bonds and equities. O It refers to the cycles of acquisition, use and disposal of fixed assets, which can vary in length depending upon the nature and use of the fixed assets. Question (11) Which statements is correct in relation to Loan to Value ratios (LTV)? O The LTV should be above 1 at the beginning of the loan and below 1 at the end of the loan. O The LTV should be less than 1 throughout the term of the loan. O The LTV should be below 1 at the beginning of the loan and above 1 at the end of the loan. O The LTV should be greater than 1 throughout the term of the loan. Question (12) Tea-Shop Inc. are purchasing 10-year leases on 5 new stores to be run as specialist tea outlets and cafes, costing $30m. The shops are expected to generate annual net operating cash flow (before financing) of $1M each. Tea-Shop have approached you for a loan of $20m to help finance the purchases. Which combination of loan term and interest rate would be most suited to this transaction? O 12-year term loan at 8% pa with annual repayments (including interest) of $2.7M. O 14-year term loan at 8% with annual repayments (including interest) of $2.4M. O 4-year term loan at 8% with annual repayments (including interest) of $6.0M. O 8-year term loan at 8% with annual repayments (including interest) of $3.5M.
Expert Answer:
Answer rating: 100% (QA)
The detailed answer for the above question is provided below 1 The correct answer is Dr Property and equipment assets 80000 Cr Accounts payable 80000 This is because Stanleys Farm should record the ge... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
How old is my bass? Ever wondered about the age of the bass you just caught? Measure your bass from the snout to the tip of the tail. The following ages are average ages by length of largemouth and...
-
It is required to face mill a medium cast iron block (BHN 200) to size it down from 1.1 to 1.0 thick (in a single pass of the tool) using a 5 diameter 32-toothed carbide cutting tool. The block is...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
In the real number system the equation a2 = 1 has exactly two solutions. Find at least eight different 3 3 matrices that satisfy the equation A2 = I3.
-
How would the force in Example 7.4 vary if the workpiece were made of a perfectly plastic material? Explain.
-
You are a penetration tester, and you are looking to cross-compile code for your penetration activity. Then you plan to deploy it. Why would you cross-compile code? A. To add additional libraries B....
-
Sarah Saxon and Jane Rolf are partners in a business called J & S Service. The partnership's work sheet for the year ended December 31 of the current year is provided in the Working Papers....
-
Carpetland salespersons average $8,000 per week in sales. Steve Contois, the firms vice president, proposes a compensation plan with new selling incentives. Steve hopes that the results of a trial...
-
The Tribiani Co. just issued a dividend of $2.90 per share on its common stock. The company is expected to maintain a constant 4.5 percent growth rate in its dividends indefinitely. If the stock...
-
The tie rods from anchored sheet piles will be connected using a row of anchors, as shown in Figure 18.46a. Here H = 2.0 m, h = 1.25 m, B = 1.5 m, S' = 2.5 m, ' = 32, and = 17.5 kN/m 3 . The anchor...
-
8. A tire manufacturer has been concerned about the number of defective tires found recently. To evaluate the true magnitude of the problem, a production manager selected 10 random samples of 20...
-
Judy Hanlon, CPA, performed an audit and prepared the federal income tax return for the Guild Corporation for the year ended December 31, 19X2. This was Ms. Hanlon's first engagement for this client....
-
For each of the ethical situations listed below, indicate (1) whether or not a rule of profes- sional conduct has been violated and (2) which rule has been violated (if your answer to (1), above, is...
-
Mr. Clyde Neglent, CPA, was engaged to perform an audit of Hidden Records, Inc., a retail department store. Mr. Neglent had investigated the business and its owners before accepting the engagement...
-
A study showed an association between intentional weight loss and a decreased risk of high blood pressure. Is it appropriate to infer from this study that weight loss causes a decreased risk of high...
-
XYZ Oil Co. had been a problem for its auditor, Joe Jones, CPA, for several years. The company's stock was traded in the over-the-counter market, and management was concerned with keeping net income...
-
Kiara, a recent graduate is interviewing for the role of customer service agent for a telecommunication provider. She has been asked to respond to emails and handle some grievances within a set...
-
Carlton Stokes owns and operates a car-detailing business named SuperShine & Detailing. For $150, Carltons business will hand wash and wax customers cars, vacuum the interior, and thoroughly clean...
-
Professor Bong has just written the first textbook in Punk Economics. It is called Up Your Isoquant. Market research suggests that the demand curve for this book will be Q = 2, 000 100P, where P is...
-
Kens utility function is uK(x1, x2) = x1 + x2 and Barbies utility function is uB(x1, x2) = (x1 + 1) (x2 + 1). A person can buy 1 unit of good 1 or 0 units of good 1. It is impossible for anybody to...
-
Lets have another look at the soccer example that was discussed in the text. But this time, we will generalize the payoff matrix just a little bit. Suppose the payoff matrix is as follows. Now the...
-
The following information is taken from the annual report of The Coca- Cola Company: Calculate the receivable turnover ratio and the receivable collection period for 2014 and 2015. How much...
-
The following information is taken from the annual report of The Mann Corporation: Calculate the receivable turnover ratio and the receivable collection period for 2014 and 2015. How much additional...
-
CA Technologies is a software company that designs, develops, installs, and services business software for manufacturing companies. Typically, CA Technologies provides its services over a multiyear...
Study smarter with the SolutionInn App