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an introduction to accounting 1st

Questions and Answers of An Introduction To Accounting 1st

Compute the net present value (use a cost of money of 0.15) and the internal rate of return for each of the following investments: Investment A B C 0 $(1,000) (1,000) (1,000) Period 1 $
The Arrow Company is considering the purchase of equipment that will return cash proceeds as follows:Assume a cost of money of 10 percent.What is the maximum amount the company could pay for the
Assume a cost of money of 15 percent. Compute the net present values of the cash flows in Problem 1. Compare with the results obtained from Problems 1 and 4.Data from Problem 1Compute the net present
Compute the internal rate of return for each of the cash flows in Problem 1.Data from Problem 1Compute the net present value for each of the following cash flows. Assume a cost of money of 10
Compute the net present value for each of the following cash flows. Assume a cost of money of 10 percent. Investment A B C 0 $(1,000) (1,000) (1,000) 1 $100 264 Period 2 $100 264 3 4 5 $100 $100
a. Set up T-accounts and record the following transactions; key all entries.(1) Stockholders invest $100,000.(2) The company buys $12,000 of merchandise on account.(3) The company buys a building,
a. Set up T-accounts and record the following transactions of the Barker Corporation for the month of March.(1) Stockholders invest $100,000.(2) The company buys $19,000 of merchandise on account.(3)
For each of the following transactions, indicate what accounts are likely to be affected and whether the accounts are likely to be debited or credited.a. Money is received from stockholders.b.
For each of the following transactions, indicate the two (or more) accounts that are affected and how they are affected (increase or decrease). Indicate whether the accounts are debited or
From the following information, obtained as of December 31, 20XX, prepare a balance sheet for the Adams Corporation in good form. Accounts Payable Dividends Payable Cash Marketable
From the following information, obtained as of December 31, 20XX, prepare a balance sheet for the Adler Corporation in good form. Accounts Payable Dividends Payable Cash Marketable
Certain accounts are increased by entries to the left side of the account, others by entries to the right side of the account. For each of the following items, indicate whether the amount should be
From the following information, presented as of December 31, 20XX, prepare a balance sheet for the Arley Corporation in good form. Liabilities Cash Materials Buildings Owners'
The Aesop Company has total assets of $1,000,000 and total liabilities of $600,000. The common stockholders have explicitly invested $100,000 in the firm. Since organization, the firm has paid cash
The assets of a corporation total $10,000; the liabilities, $4,000. The claims of the owners are ____________.
Determine the accounting income of a company for which the following information is available for the month of June: Dividends Paid to Stockholders Employee Salaries for June Interest Paid on Bank
The balance sheet of the Aeronautical Corporation at December 31, 20x1, showed the following stockholders’ equity:Make general journal entries for the following transactions occurring during
The balance sheet of the Dupy Corporation shows a Retained Earnings balance of $3,500,000. An analysis of the account revealed the following:Comment on the amount shown as Retained Earnings. Analysis
If you found a “Reserve for Retirement Allowances” (for employees) on the equity side of a balance sheet, what would you think was the nature of the account?
Explain why it is possible for a corporation to have retained earnings of several million dollars while not being able to expand plant facilities by one million dollars without raising additional
Distinguish between “stock dividends” and “dividends on stock”. Distinguish between a “stock dividend” and a “stock split”.
What is the significance of the “par value” of common stock? Is it a bargain to purchase “$100 par value” stock for only $80?
Determine the amount you would be willing to pay for a $1,000, 8-percent, 20-year bond. You desire a yield of 10.25 percent per year (5 percent compounded every 6 months). Interest is to be paid
The Fenwick Company authorized a bond issue of ten $1,000, 6-percent, 20-year bonds. These low-interest bonds will sell at a discount.a. Record the issuance of the bonds on January 1, 2xx3, so as to
Determine the present value of a five-year, $1,000, 5-percent bond that sold for a yield of 6 percent (the effective interest rate). Interest is paid annually. Prepare a bond amortization schedule.
If $1 is deposited on January 1, how much money will have accumulated at the end of one year if:a. The bank computes interest annually, using an interest rate of 6 percent?b. The bank computes
The Marshall Company authorized a bond issue of ten $1,000, 7-percent, 20-year bonds.a. Record the issuance of the bonds on January 1, 2xx3, so as to yield 6.09 percent annually (3 percent compounded
The Collier Coal Company purchased mining property for $6,400,000 in cash. It was estimated that the property contained 300,000 tons of recoverable coal and that the land would have a value of
The Carlson Coal Company purchased mining property for $10,600,000 in cash. It was estimated that the property contained 400,000 tons of recoverable coal and that the land would have a value of
The Barnes Company purchased equipment costing $200,000 on January 1, 19x1. The equipment has an expected useful life of five years and a forecast net salvage value at retirement of $20,000. Prepare
The ABC Coal Company has two accounting problems:a. The company is about to develop a strip mining field. It is estimated that at the completion of the mining operation in ten years, it will cost the
Accountants usually insist on using objective verifiable evidence to support figures reported in the financial statements.What elements of subjectivity enter into the determination of depreciation
The president of the Federal Company was somewhat confused by accounting terminology. He recently read in a financial journal that companies were financing their capital expenditures by using
Financial analysts frequently add depreciation charges to reported income to obtain a figure that they refer to as cash flow. This figure is sometimes used as a substitute for reported income in
What is the “book value” of a depreciable asset? Is this a reasonable estimate of market value?
Depreciation accounting involves the use of estimates. At the time an asset is retired or sold, however, many of the factors affecting the annual cost of using the asset become known. For each of the
Assume that in the hiring process a firm spends $4,000 per university graduate that it hires. Should the firm consider the entire $4,000 to be an expense in the period in which the person is hired or
Assume there is an unknown “true” value. Consider two measurement procedures. One procedure (A) will provide a measure that is less than the true value, and all measurers will present the same
It has been suggested by reputable economists that firms should be allowed for tax purposes to consider the cost of equipment as a reduction of income at the time of acquisition, since the equipment
A major stockholder of a corporation is concerned about the management of her firm, since the company has land with a value of $8,000,000 being used for parking lots. The controller is aware of the
Indicate which of the following items might be expected to be found on a balance sheet prepared in accordance with Generally Accepted Accounting Principles (the basic framework of accounting):a. The
It is sometimes stated that the asset side of a balance sheet should include the rights in property, both tangible and intangible, of a business enterprise. Accepting this statement, discuss whether
Compare the need for financial information of a bank loan officer, an investor in common stock, and the financial analyst of an insurance company investing in long-term corporate debt.
Accounting is one type of information system. Name several other systems supplying information to business managers. Name several other sources of financial information available to investors.
The XYZ Company has listed on one of its financial reports (balance sheet), “Buildings, $451,000.” Describe the usefulness of this measure for decision making.
What are two principal financial statements? What is the function of each?
What form of business organization would you expect the following industries to take? Why?a. Steel industry.b. Law.c. Retailing.d. Farming.
Should financial accounting principles be based upon income tax regulations?
Define the term accounting. What are some of the tasks that accountants perform?
a. What would be the annual payments on an 8% per annum installment loan of $1,000 from a credit union with repayment over three years?b. Write out the amortization schedule for the loan.c. Now
Assume a 0.10 interest rate (you can borrow and lend at that rate). Specify which you would prefer:a. $10,000 in cash or $1,000 per year for perpetuity (first payment received at the end of the first
The XYZ Company has borrowed $40,000. Equal payments will be made over a three-year period (first payment at the end of the first year). The bank charges interest of 0.15 per year.a. The annual
The XYZ Company has borrowed $100,000. Payments will be made over a four-year period (first payment at the end of the first year). The bank charges interest of 0.20 per year.a. The annual payment
a. We can make an immediate payment now of $10,000 or pay equal amounts of R for the next four years (first payment due one year from now).With a time value of money of 0.10, what is the maximum
a. How much do you have to save per year (at the end of each year) for 40 years in order to have $10,000 per year for perpetuity, first receipt starting in year 41? Use 0.10 as the time value
Assume that a firm has a cost of money of 0.15. It is considering an investment with the following cash flows:Should the investment be accepted? Time 0 1 2 3 Cash
Assume that the interest rate is 0.10. Compute the present value of $1 per year for four years (first payment one year from now) using three different methods (Appendix Table A, Appendix Table B, and
Assume a 0.10 interest rate. How much is a perpetuity of $1,000 per year worth?
The following facts apply to the ABC Company in the year 20XX.1. Stockholders invest $1,000,000.2. The company buys land for $20,000 and a building for $380,000 in cash.3. The company borrows
The Hubbard Company owns a machine that was purchased on January 1, 2xx1, at a cost of $10,000. The machine has been depreciated on a straight-line basis with a useful life of six years and expected
a. What is the present value of $1,000 due in ten years, discounted at 14 percent?b. What is the present value of $140 per year for a period of ten years if the rate of interest used to discount the
Assume a 0.05 time value of money. The sum of $100 received immediately is equivalent to what quantity received in 10 equal annual payments, the first to be received one year from now? What would be
Assume a 0.05 time value of money. We have a debt to pay and are given a choice of paying $1,000 now or some amount X five years from now. What is the maximum amount that X can be for us to be
The ABC Company is to receive $1 a period for three periods, the first payment to be received one period from now. The time value factor is 0.10. Compute the present value of the annuity.There are
What is the present value of $1.00 to be received three time periods from now if the time value of money is 0.10 per period?In Table A at the end of the book, the 0.10 column and the line opposite n
Exactly 15 years from now, Jones will start receiving a pension of $20,000 a year. The payments will continue forever. How much is the pension worth now, assuming that the appropriate discount rate
The ABC Company wishes to borrow $10,000 from the City Bank, repayable in three annual installments (the first one due one year from now). If the bank charges 0.10 interest, what will be the annual
We can make an immediate payment now of $10,000 or pay equal amounts of R for the next five years (first payment due one year from now). With a time value of money of 0.05, what is the maximum value
If the interest rate per month is 0.05, compounded quarterly, what is the annual equivalent rate?
If a firm borrowed $100,000 for one year and paid back $9,455.96 per month, what is the cost of the debt?
A firm can save $10,000 per year for 15 years. If the time value of money is 0.10, how much better off will the firm be after the 15 years if it accomplishes the saving?
If the time value of money is 0.10, how much do you have to save per year for 20 years to have $50,000 per year for perpetuity? Assume that the first deposit is immediate and that the first payment
If $100 earns 0.08 per year, how much will the investor have at the end of 10 years? What is the present value of $100 due in 10 years if money is worth 0.08?
You are the loan officer of a bank. The ABC Company wants to borrow $100,000 and repay it with four equal annual payments (first payment due one year from now).You decide that the ABC Company should
What is the present value of $20 per year for perpetuity if money is worth 0.10?
Refer to Problem 12. If the first payment is to be received in 11 years, what is the series of payments worth today?Data from Problem 12What is the present value of $20 per year for perpetuity if
a. If the interest rate per month is 0.02, compounded monthly, what is the annual effective equivalent rate?b. How much do you have to save per year for 20 years in order to have $50,000 per year for
What is the present value of two cash flows, $100.00 and $200.00, to be received at the end of one and two periods from now, respectively, if the time value of money is 0.10? Period t 1 2 Cash
A president of an automobile manufacturing firm has the opportunity to double the firm’s profits in the next year. To accomplish this profit increase, the quality of the product (currently the
Can a firm have income without having a positive cash flow? Explain.
If a firm currently earning $1 million can increase its accounting income to $1.1 million (an action consistent with profit maximization), is this always a desirable move? Explain.
A sales force is proud of having doubled sales in the past four years. What questions should be asked before praising them?
Name an “economic cost” that is omitted from the accounting income statements that should be of interest to management.
The ABC Company can undertake an investment that is economically desirable. It will adversely affect current earnings, but in management’s judgment will benefit future earnings. Management fears
The ABC Company has to make a choice between two strategies:Strategy 1: Is expected to result in a market price now of $100 per share of common stock and a price of $120 five years from now.Strategy
It has been said that few stockholders would think favorably of a project that promised its first cash flow in 100 years, no matter how large this return. Comment on this position.
Each of the following is sometimes listed as a reasonable objective for a firm:(a) maximize profit (accounting income), (b) maximize sales (or share of the market), (c) maximize the value of a share

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