Questions and Answers of Fundamental Accounting Principles 25th

A company is considering a $150,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (a) Compute the net present value of this
HH Electric reports the following information.a. Compute the time charge per hour of direct labor.b. Compute the materials markup percentage.c. What price should the company quote for a job requiring
Raju is in a competitive product market. The expected selling price is $80 per unit, and Raju’s target profit is 20% of selling price. Using the target cost method, what is the highest Raju’s
Cheng Co. reports the following information. Determine its (a) Time charge per hour of direct labor and(b) Materials markup percentage. Direct labor rate.. $50 per DLH Non-materials-related
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $135,000. Project 2 requires an initial investment of $98,000.
Apple invested $10,495 in the current year to expand its manufacturing capacity. Assume that these assets have a 10-year life and generate net cash flows of $3,000 per year, and that Apple requires a
Management requires purchases above $5,000 to be submitted with cash flow projections for capital budget approval. As systems manager, you want to upgrade your computers at a $25,000 cost. You
Quary Co. is considering an investment in machinery with the following information. Compute the investment’s(a) Annual income and annual net cash flow and (b) Payback period. Initial
A manufacturer is considering eliminating a segment because it shows the following $6,000 loss. All $20,000 of its variable costs are avoidable, and $36,000 of its fixed costs are avoidable. (a)
Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each
Project A requires a $240,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each
Information on assumed capital investments in the current year for Google and Apple follow.Required1. Compute break-even time for both companies.2. Based on break-even time, which company can expect
Garcìa Co. can invest in one of two alternative projects. Project Y requires a $360,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires
Lopez Co. can invest in one of two alternative projects. Project Y requires a $240,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a
Samsung invested $21,766 in the current year to expand its manufacturing capacity. Assume that these assets have an 8-year life and generate net cash flows of $4,000 per year, and that Samsung
Compute the payback period for an investment with the following net cash flows. Year Net Cash Flows per Year Cumulative Net Cash Flows Initial investment $(100,000) $(100,000) .... 1.... 10,000
Rowan Co. is considering two alternative investment projects. Each requires a $250,000 initial investment.Project A is expected to generate net cash flows of $60,000 per year over the next six
Milan Co. is considering two alternative investment projects. Each requires a $300,000 initial investment.Project A is expected to generate net cash flows of $90,000 per year over the next five
Read the chapter opener about Jake Loosararian and his company, Gecko Robotics. Suppose Jake’s business continues to grow, and he builds a massive new manufacturing facility and warehousing center
A company is considering three alternative investment projects. Accounting rate of return computations are calculated using Excel and are shown below. If the company can choose only one project,
Information for two alternative projects involving machinery investments follows.a. Compute accounting rate of return for each project.b. Based on accounting rate of return, which project is
Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield the following net cash flows. Management requires a 10% return on
Project A requires a $280,000 initial investment for new machinery with a five-year life and a salvage value of $30,000. Project A is expected to yield annual income of $20,000 per year and net cash
Archer Foods is considering whether to overhaul an old freezer or replace it with a new freezer. Information about the two alternatives follows. Management requires a 10% rate of return on its
Gomez is considering a $180,000 investment with the following net cash flows. Gomez requires a 10% return on its investments. (a) Compute the net present value of this investment. (b)
Net present values for three alternative investment projects follow. (a) If the company accepts all positive net present value investments, which of these projects will it accept? (b) If the company
A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow.a. Compute the net
Gonzalez Co. is considering two new projects with the following net cash flows. The company’s required rate of return on investments is 10%.a. Compute payback period for each project. Based on
Ibez Co. is considering a project that requires an initial investment of $60,000 and will generate net cash flows of $16,000 per year for 6 years. Ibez requires a return of 9% on its investments. The
Dax Co. is considering an investment with the following information.a. Compute the net present value of the investment.b. Determine whether the investment should be accepted on the basis of net
Refer to the information in Exercise 26-10. The company instead requires a 12% return on its investments. Compute each project’s (a) Net present value and (b) Profitability index. Round
Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 10% return from its investments. For each investment
The profitability indexes for three alternative investment projects follow. Each project has a five-year life.(a) Which project(s) will the company accept on the basis of profitability
Refer to the information in Exercise 26-6. B2B Co. requires at least an 8% return on this investment.(a) Compute the net present value of this investment. (b) Should the investment be accepted
Pena Co. is considering an investment of $27,000 that provides net cash flows of $9,000 annually for four years. (a) If Pena Co. requires a 10% return on its investments, what is the net present
Refer to the information in Exercise 26-1. Project 1 has a seven-year useful life, and Project 2 has a fiveyear useful life. Assume the company requires a 10% rate of return on its investments.
GTO Inc. is considering an investment costing $214,170 that results in net cash flows of $30,000 annually for 11 years. (a) What is the internal rate of return of this investment? (b) The
Quail Co. is considering buying a food truck that will yield net cash inflows of $10,000 per year for seven years. The truck costs $50,000 and has an estimated $6,000 salvage value at the end of the
Lopez Co. is considering three alternative investment projects below. Which project is preferred if management makes its decision based on (a) Payback period, (b) Net present value,
Pablo Company is considering buying a machine that will yield income of $1,950 and net cash flow of $14,950 per year for three years. The machine costs $45,000 and has an estimated $6,000 salvage
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $228,000 and would yield the following annual net cash flows.a. The company requires a 12%
Refer to the information in Exercise 26-2. The company’s required rate of return is 12%.Data From Exercise 26-2:Quary Co. is considering an investment in machinery with the following information.
Refer to the information in QS 26-19 and instead assume the machine has a salvage value of $20,000 at the end of its three-year life. Compute the machine’s net present value.Data From QS
Refer to the information in Exercise 26-17. Create an Excel spreadsheet to compute the internal rate of return for the proposed investment.Data From Exercise 26-17OptiLux is considering investing in
Internal rates of return for three alternative investment projects follow. Each project has a five-year life. The company requires a 12% rate of return on its investments. (a) Which project(s)
Refer to the information in Exercise 26-10. (a) Create an Excel spreadsheet to compute the internal rate of return for each of the projects. (b) Based on internal rate of return, determine
Refer to the information in Exercise 26-12. Create an Excel spreadsheet to compute the internal rate of return for each of the projects.Data From Exercise 26-12Following is information on two
Perez Co. is considering an investment of $27,336 that provides net cash flows of $9,000 annually for four years. (a) What is the internal rate of return of this investment? (b) The hurdle
A shoe manufacturer is evaluating new equipment that would custom fit athletic shoes. The new equipment costs $90,000 and will generate $35,000 in net cash flows for five years. Determine the
A $100,000 initial investment will generate the following present values of net cash flows. What is the breakeven time for this investment? Present Value of Net Cumulative Present Value Year Cash
Assume you are preparing for a class presentation on the accounting for factory overhead. Prepare a set of notes to guide a presentation that addresses the questions below.Required1. Describe the
Marco Company shows the following costs for three jobs worked on in April.Additional Informationa. Raw Materials Inventory has a March 31 balance of $80,000.b. Raw materials purchases in April are
Perez Company shows the following costs for three jobs worked on in September.Additional Informationa. Raw Materials Inventory has an August 31 balance of $150,000.b. Raw materials purchases in
Assume Samsung and Apple are bidding on a large device support service job for a U.S.-based business. Samsung estimates direct labor for this service job to include 800 phone support hours and 1,200
Bergo Bay’s accounting system generated the following account balances on December 31. The company’s manager knows something is wrong with this list of balances because it does not show any
Following are simplified job cost sheets for three custom jobs at the end of June for Custom Patios.All jobs were started in June. Overhead is applied with a predetermined rate based on direct labor
Refer to the chapter opener regarding Mark Wallace and his company, Wallace Detroit Guitars. All successful businesses track their costs, and it is especially important for start-up businesses to
Watercraft’s predetermined overhead rate is 200% of direct labor. Information on the company’s production activities during May follows.a. Purchased raw materials on credit, $200,000.b. Materials
Bell Co. produces stainless steel drink tumblers, its only product. These tumblers are stamped with company logos and used as promotional items. Following are simplified job cost sheets for two
The following partial job cost sheet is for a job lot of 2,500 units completed.1. What is the total cost of this job lot?2. What is the total cost per unit completed? JOB COST SHEET Customer's Name
At the beginning of the year, Learer Company’s manager estimated total direct labor cost to be $2,500,000. The manager also estimated the following overhead costs for the year.For the year, the
A manufacturer’s Raw Materials Inventory account appears as follows.All raw materials purchases are made on credit. Prepare journal entries to record the:1. Purchase of raw materials.2. Direct
At the beginning of the year, Pavelka Company’s manager estimated total direct labor cost to be $1,500,000. The manager also estimated the following overhead costs for the year.For the year, the
Sager Company builds custom retaining walls for large commercial customers. On May 1, the company had no inventories of work in process or finished goods but held the following raw materials.On May
A company that uses job order costing incurred a monthly factory payroll of $180,000. Of this amount, $30,000 is indirect labor and $150,000 is direct labor.Prepare journal entries to record
The following information is available for a custom manufacturer.1. Compute the ending balances of Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory.2. Compute
Ace Patios applies overhead using direct labor hours as its activity base. At the beginning of the year, the company estimates total direct labor hours of 20,000 and total overhead costs of $600,000
The following information is available for ADT Company, which produces special-order security products and uses a job order costing system. Overhead is applied using a predetermined overhead rate of
A manufacturer incurred the following actual factory overhead costs: indirect materials, $6,200; indirect labor (factory wages payable), $9,000; depreciation on factory equipment, $12,000; factory
Harley-Davidson manufactures 30 custom-made, luxurymodel motorcycles. Each is unique. Does it account for these motorcycles as 30 individual jobs or as a job lot? Explain.
A custom manufacturer completed Jobs 103 and 104. Job 103 cost $12,000 and was sold (on credit) for $20,000. Job 104 cost $15,000. Prepare journal entries to record (a) The completion of both
Assume Verizon will install and service a server to link all of a customer’s employees’ smartphones to a centralized cloud server for an up-front flat price. How can Verizon use a job order
Built-Tite uses job order costing. The T-account below summarizes Factory Overhead activity for the current year.1. Compute total applied overhead cost.2. Compute total actual overhead cost.3.
Use information in Exercise 19-12 to prepare journal entries for the following events for the period.1. Incurred other actual overhead costs (all paid in Cash).2. Applied overhead to work in
A company that uses job order costing reports the costs incurred below. Overhead is applied at the rate of 60% of direct materials cost. The company has no beginning Work in Process or Finished Goods
Telstar uses job order costing. The T-accounts below summarize its production activity for the year.1. Compute the amount for each of the following.a. Direct materials usedb. Indirect materials
Shen Co. reports the costs incurred below for the month ended May 31. The company has no beginning Work in Process Inventory. Overhead is applied using a predetermined overhead rate of 120% of direct
Shire Company’s predetermined overhead rate is based on direct labor cost. Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the period.
Prepare journal entries to record transactions a through h.a. Raw materials purchased on credit, $90,000.b. Direct materials used, $36,500. Indirect materials used, $19,200.c. Direct labor used,
Lorenzo Company applies overhead to jobs on the basis of direct materials cost. At year-end, the Work in Process Inventory account shows the following.1. Determine the predetermined overhead rate
Rize Co. reports the following (partial) T-account activity at the end of its first year of operations.1. Compute the under- or overapplied overhead for the year.2. Prepare the journal entry to close
Custom Co. reports the following (partial) T-account activity at the end of its first year of operations.1. Compute the under- or overapplied overhead for the year.2. Prepare the journal entry to
Tyler Corp. reports the following results for its first month of operations ended December 31. Overhead is applied using a predetermined overhead rate of 80% of direct materials cost.1. Prepare an
A manufacturer began operations on April 1 and reports the information below. All jobs are sold for 20% above cost.1. Compute the May 31 balance in (a) Work in Process Inventory and (b)
A manufacturer reports the following information at June 30.1. Compute Work in Process Inventory at June 30.2. Compute Finished Goods Inventory at June 30.3. Compute cost of goods sold for June. Job
A manufacturer reports sales of $80,000 and cost of goods sold of $60,000.1. Compute its gross profit ratio.2. If competitors average a 10% gross profit ratio, does this manufacturer compare
A manufacturing company reports the following for the period.1. Prepare a schedule of cost of goods manufactured.2. Compute gross profit. Inventories Beginning Ending Activities for the period Raw
Prepare the journal entry to close over- or underapplied overhead to Cost of Goods Sold for each of the two companies below. Star Promotions Valle Builders Indirect materials... Indirect labor. Other
At the beginning of the year, Custom Mfg. set its predetermined overhead rate using the following estimates: overhead costs, $750,000, and direct materials costs, $625,000. At year-end, the company
At the beginning of the year, Mirmax set its predetermined overhead rate for movies produced during the year by using the following estimates: overhead costs, $1,680,000, and direct labor costs,
Sofía Gomez runs a mobile pet grooming service. She charges $35 direct labor per grooming hour. She applies overhead to jobs on the basis of grooming hours. She predicts 800 grooming hours for the
Rolex Company reports the following information.1. Compute the gross profit ratio for each of the two years reported.2. Did the company outperform or underperform the industry average gross profit
Victory Company uses weighted average process costing. The company has two production processes. Conversion cost is added evenly throughout each process. Direct materials are added at the beginning
Selected accounts from GermX Co.’s adjusted trial balance for the year ended December 31 follow. Prepare the assets section of a classified balance sheet. Fair Value Adjustment—Stock decreases
Fivio Co. reports the following information. (1) Compute return on total assets for the current year and for 1 year ago. (2) Is Fivio more efficient or less efficient in using total assets
Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business. (Although the serial problem allowed for various ownership changes in earlier chapters, we
Use Apple’s financial statements in Appendix A to answer the following.1. Is Apple’s statement of cash flows prepared under the direct method or the indirect method?2. For each fiscal year 2019,
Pritchett Co. reported the following year-end data: cash of $15,000; short-term investments of $5,000; accounts receivable (current) of $8,000; inventory of $20,000; prepaid (current) assets of
On January 1, 5G Co. reported current assets of $72,000 and current liabilities of $60,000. Compute total current assets, total current liabilities, and the current ratio at January 1 and after each
Niantic reported the following financial information (amounts in millions). Compute the current ratio and profit margin. Net sales.... Net income. Current assets......... $ 9,000 $4,400 Total

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