Doris Hunt is considering whether to install a drink machine at the gas station she owns. Doris is convinced that providing a drink machine at the station would increase customer convenience. However, she is not convinced that buying the machine would be a profitable investment. Friends who have installed drink machines at their stations have estimated that she could expect to receive net cash inflows of approximately $10,000 per year from the machine. Doris believes that she should earn 8 percent on her investments. The drink machine is expected to have a two-year life and zero salvage value. Required Round your computations to two decimal points. 1. Use Present Value to determine the maximum amount of cash Doris should be willing to pay for a drink machine. 2. Use Present Value to determine the maximum amount of cash Doris should be willing to pay for a drink machine. 3. Explain the consistency or lack of consistency in the answers to Requirement a versus Requirement b.
> Selected financial information for Purdy Company for Year 4 follows. Sales $3,200,000 Cost of goods sold 2,100,000 Merchandise inventory Beginning of year 350,000 End of year 490,000 Required Assuming that the merchandise inventory buildup was relativel
> Alpena Company reported the following operating results for Year 4 and Year 3. Required Round percentages to one decimal point. 1. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 4 and Year 3.
> Obtain the income statements for Microsoft Corporation for its fiscal years ending on June 30, 2017, 2018, 2019, and 2020. The 2018–2020 statements are included in Microsoft’s 2020 annual report and Form 10-K, and the
> Sperry Company reported the following operating results for two consecutive years. Required Express each income statement component for each of the two years as a percentage of sales. Round percentages to one decimal point.
> The following is a list of transactions. 1. Paid cash for short-term marketable securities. 2. Purchased a computer, issuing a short-term note for the purchase price. 3. Purchased factory equipment, issuing a long-term note for the purchase price. 4. Sol
> Match each of the following ratios with its formula. 1. Price-earnings ratio 2. Dividend yield 3. Book value per share 4. Plant assets to long-term liabilities 5. Times interest earned 6. Earnings per share 7. Net margin 8. Debt-to-equity ratio 9. Curren
> Compute the specified ratios using the following December 31, Year 3, statement of financial position for Palmer Company. The average number of common shares outstanding during Year 3 was 1,500. Net income for the year was $60,000. Required Compute each
> During Year 4, Roper Corporation reported net income after taxes of $1,200,000. During the year, the number of shares of stock outstanding remained constant at 20,000 shares of $100 par, 8 percent preferred stock and 200,000 shares of common stock. The c
> Selected data from Goode Company follow. Table Summary: A table shows the Balance Sheet data as of December 31. Column 1 has entries. Column 2 has year 4. Column 2 has year 3. The Income Statements for the years ended December 31 shows 3 columns. Column
> The following data come from the financial records of Welch Corporation for Year 3. Sales $320,000 Interest expense 9,000 Income tax 36,000 Net income 99,000 Required How many times was interest earned in Year 3?
> Haskell Corporation reported the following operating results for two consecutive years. Required 1. Compute the percentage changes in Haskell Corporation’s income statement components for the two years. Round percentages to one decimal
> Hebron Manufacturing Company started operations on January 1, Year 1. During Year 1, the company engaged in the following transactions. Issued common stock for $100,000. Paid $39,600 cash to purchase raw materials used to make products. Transferred $36,0
> The following information pertains to Job 712 that Nantou Manufacturing Company completed during the month of January. Materials and labor costs for the job were $24,500 and $19,000, respectively. Applied overhead costs were $16,000. Nantou completed and
> Kemp Tables Inc. (KTI) makes picnic tables of 2 × 4 planks of treated pine. It sells the tables to large retail discount stores such as Walmart. After reviewing the following data generated by KTI’s chief accountant, the co
> Tripoli Consulting provides financial and estate planning services on a retainer basis for the executive officers of its corporate clients. It incurred the following labor costs on services for three corporate clients during March Year 2. Direct Labor Co
> Newton Advertisements Corporation designs and produces television commercials for clients. On March 1, Year 1, the company issued common stock for $100,000 cash. During March, Newton worked on three jobs. Pertinent data follow. Actual production overhead
> Tang Drapery Inc. specializes in making custom draperies for both commercial and residential customers. It began business on August 1, Year 1, by acquiring $60,000 cash through issuing common stock. In August Year 1, Tang accepted drapery orders, Jobs 80
> Glenvar Automotive Specialties Inc. has a successful market niche. It customizes automobile interiors to fit the various needs of disabled customers. Some customers need special equipment to accommodate drivers with disabilities. Others need modified ent
> Julie Snyder, an artist, plans to make her living drawing customer portraits at a stand in Underground Atlanta. She will carry her drawing equipment and supplies to work each day in bags. By displaying two of her best hand-drawn portraits on either side
> Tully Corporation’s Kearney Plant in Jacksonville, Florida, produces the company’s weed-control chemical solution, Weed Terminator. Production begins with pure water from a controlled stream to which the plant adds different chemicals in the production p
> Wautoma Corporation, which makes suitcases, completed 42,000 suitcases in August Year 2. At the end of August, work in process inventory consisted of 5,000 suitcases estimated to be 40 percent complete. Total product costs for August amounted to $880,000
> Osprey Corporation, a manufacturer of diabetic testing kits, started November production with $150,000 in beginning inventory. During the month, the company incurred $740,000 of materials cost and $480,000 of labor cost. It applied $330,000 of overhead c
> Galilee Publications Inc. produces Bibles in volume. It printed and sold 60,000 Bibles last year. Demand is sufficient to support producing a particular edition continuously throughout the year. For this operation, Galilee uses two departments: printing
> Indicate which costing system (job-order, process, or hybrid) would be most appropriate for the type of product listed in the left-hand column. The first item is shown as an example. Type of Product a. House b. Oil c. Luxury yacht d. Special-order pers
> Jasmin Sylvera is the manufacturing production supervisor for Feynman Motor Works (FMW), a company that manufactures electrical motors for industrial applications. Trying to explain why she did not get the year-end bonus that she had expected, she told a
> Emma Emerson is a proud woman with a problem. Her daughter has been accepted into a prestigious law school. While Ms. Emerson beams with pride, she is worried sick about how to pay for the school; she is a single parent who has worked hard to support her
> The following incomplete T-accounts were drawn from the records of Richland Manufacturing Company. Required Determine the dollar amounts for (a), (b), (c), (d), and (e). Assume that underapplied and overapplied overhead is closed to Cost of Goods Sold.
> Lincoln Manufacturing Company incurred the following actual manufacturing overhead costs: (1) cash paid for plant supervisor’s salary, $43,000; (2) depreciation on manufacturing equipment, $15,000; and (3) manufacturing supplies used, $1,150 (Lincoln use
> Creek Company and Fort Company base their predetermined overhead rates on machine hours. The following information pertains to the companies’ most recent accounting periods. Required 1. Compute the predetermined overhead rate for each c
> Pleasant Hill Manufacturing Company incurred actual overhead costs of $312,000 during Year 2. It uses direct labor dollars as the allocation base for overhead costs. In Year 2, actual direct labor costs were $400,000, and overhead costs were underapplied
> On January 1, Year 2, Tinicum Company estimated that its total overhead costs for the coming year would be $646,000 and that it would make 34,000 units of product. Tinicum actually produced 34,600 units of product and incurred actual overhead costs of $6
> Creswell Enterprises’ budget included the following estimated costs for the Year 3 accounting period. Depreciation on manufacturing equipment $ 30,400 Cost of manufacturing supplies 6,000 Direct labor cost 172,800 Rent on manufacturing facility 15,200 Di
> Use a horizontal statements model to show how each of the following independent accounting events affects the elements of the balance sheet and the income statement. Indicate whether the event increases (I), decreases (D), or does not affect (NA) each el
> Fremont Company started Year 1 with $248,000 in its cash and common stock accounts. During Year 1, Fremont paid $160,000 cash for employee compensation and $68,000 cash for materials. Required 1. Determine the total amount of assets and the amount of exp
> The following information was drawn from the records of Shelby Company. During the most recent month, Shelby produced 4,000 units of product and sold 3,800 units of product at a sales price of $54 per unit. Required 1. Prepare an income statement for the
> Susank Manufacturing Company was started on January 1, Year 1, when it acquired $1,250 cash by issuing common stock. During its first year of operation, it purchased $250 of direct raw materials with cash and used $180 of the materials to make products.
> Spitzer Company has collected sales forecasts for next year from three people. They have estimated that the cost of goods sold is 70 percent of sales. The company tries to maintain 10 percent of next quarter’s expected cost of goods sol
> Moriarty Manufacturing began business on January 1, Year 1. The following events pertain to its first year of operation. 1. Acquired $4,000 cash by issuing common stock. 2. Paid $1,600 cash for direct raw materials. 3. Transferred $1,000 of direct raw ma
> The following information was drawn from the accounting records of Boulder Manufacturing Company. During the accounting period, Boulder paid $32,000 to purchase raw materials, $30,000 for direct labor, and $22,000 for overhead costs. Assume that actual o
> Supply the missing information on the following schedule of cost of goods manufactured and sold. HAMLET CORPORATION Schedule of Cost of Goods Manufactured and Sold
> Hayward Manufacturing Company started Year 2 with the following balances in its inventory accounts: Raw Materials, $3,000; Work in Process, $3,600; Finished Goods, $3,960. During Year 2, Hayward purchased $20,400 of raw materials and issued $19,800 of ma
> Unit-level (variable) manufacturing costs for Jacinto Manufacturing Company amount to $8. Fixed manufacturing costs are $9,000 per month. Production workers provided 800 hours of direct labor in January and 1,400 hours in February. Jacinto expects to use
> Chadron Inc. started Year 3 with $52,500 in its cash and common stock accounts. During Year 3, Chadron paid $42,500 cash for employee compensation. Required Based on this information alone: 1. Determine the total amount of assets at the end of Year 3, as
> Ronnie Gentry, CFO of Odessa Enterprises, is evaluating an opportunity to invest in additional manufacturing equipment that will enable the company to increase its net cash inflows by $250,000 per year. The equipment costs $858,270.25. It is expected to
> Glen Todd is considering whether to invest in a computer game machine that he would place in a hotel his brother owns. The machine would cost $34,000 and has an expected useful life of three years and a salvage value of $4,000. Mr. Todd estimates the mac
> Two alternative investment opportunities are available to Irene Rice, president of Rice Enterprises. For the first alternative, the present value of cash inflows is $296,000, and the present value of cash outflows is $254,000. For the second alternative,
> Edgar Sloan has decided to start a small delivery business to help support himself while attending school. Mr. Sloan expects demand for delivery services to grow steadily as customers discover their availability. Annual cash outflows are expected to incr
> The accountant for Nelly’s Dress Shop prepared the fourth quarter 2017 cash budget that appears on the following spreadsheet. Nelly’s has a policy to maintain a minimum cash balance of $14,000 before the interest payme
> Jessica Larkin, manager of the Nash Music Hall, is considering the opportunity to expand the company’s concession revenues. Specifically, she is considering whether to install a popcorn machine. Based on market research, she believes that the machine cou
> Neil Wooten has a terminal illness. His doctors have estimated his remaining life expectancy as three years. Neil has a $450,000 life insurance policy but no close relative to list as the beneficiary. He is considering canceling the policy because he nee
> One year from today, Pamela Oliver is scheduled to receive a $32,000 payment from a trust fund her father established. She wants to buy a car today but does not have the money. A friend has agreed to give Pamela the present value of the $32,000 today if
> Kenneth McDaniel rents pontoon boats to customers. He has the opportunity to purchase an additional pontoon boat for $40,000; it has an expected useful life of four years and no salvage value. Kenneth McDaniel uses straight-line depreciation. Expected re
> Kokomo Shuttle Service Inc. is considering whether to purchase an additional shuttle van. The van would cost $45,000 and have a zero salvage value. It would enable the company to increase net income by $6,750 per year. The manufacturer estimates the van’
> Vienna Snowmobile Company is considering whether to invest in a particular new snowmobile model. The model is top-of-the-line equipment for which Vienna expects high demand during the first year it is available for rent. However, as the snowmobile ages,
> The management team at Payne Manufacturing Company has decided to modernize the manufacturing facility. The company can replace an existing, outdated machine with one of two technologically advanced machines. One replacement machine would cost $72,000. M
> Four years ago Charlotte Whitaker decided to invest in a project. At that time, she had projected annual net cash inflows would be $108,000. Over its expected four-year useful life, the project had produced significantly higher cash inflows than anticipa
> Dawn Holman has two alternative investment opportunities to evaluate. The first opportunity would cost $299,024.46 and generate expected cash inflows of $42,000 per year for 17 years. The second opportunity would cost $273,818.88 and generate expected ca
> Clarence Cleaver is the budget director for the Harris County School District. Mr. Cleaver recently sent an urgent e-mail message to Sally Simmons, principal of West Harris County High. The message severely reprimanded Ms. Simmons for failing to spend th
> Cody Wyatt is considering whether to invest in a dump truck. Mr. Wyatt would hire a driver and use the truck to haul trash for customers. He wants to use present value techniques to evaluate the investment opportunity. List sources of potential cash infl
> Elkins Corporation’s desired rate of return is 10 percent. Bristol Division, one of Elkins' five investment centers, earned an operating income of $1,600,000 last year. The division controlled $12,500,000 of operational assets. Required Compute Bristol D
> With annual sales of $1,200,000 and operating assets of $800,000, Culpeper Company achieved a 10 percent ROI. Required 1. If Culpeper reduces expenses by $20,000 and sales remain unchanged, what ROI will result? 2. If Culpeper cannot change either sales
> A Salisbury Corporation investment center shows an operating income of $81,000 and an investment in operating assets of $900,000. Required Compute the return on investment.
> Beth Shields, president of Dover Travel Company, a travel agency, is seeking a method of evaluating her seven branches. Each branch vice president is authorized to hire employees and devise competitive strategies for the branch territory. Ms. Shields won
> Paul Hammond, president of Hammond Door Products Company, is evaluating the performance of Jason Burke, the plant manager, for the last fiscal year. Mr. Hammond is concerned that production costs exceeded budget by $50,000. He has available the Year 2 st
> Yazoo Company has provided the following data for Year 2. Budget Sales $500,000 Variable product costs 164,000 Variable selling expense 46,000 Other variable expenses 8,000 Fixed product costs 70,000 Fixed selling expense 26,000 Other fixed expenses 2,00
> Kent Plano, corporation vice president of research and development, has overall responsibility for employees with the following positions: - Directors of the Houston, Seattle, and Charlotte laboratories - Senior researchers reporting to laboratory direct
> Dexter Corporation divides its operations into three regions: North American, European, and Asian. The following items appear in the company’s responsibility report: - European director’s salary - Revenues of the French branch - Office expenses of the Ja
> The Nashua Division of Leland Company currently produces electric fans that desktop computer manufacturers use as cooling components. The Gilmer Division, which makes notebook computers, has asked the Nashua Division to design and supply 20,000 fans per
> The Curious Accountant in this chapter discussed some of the budgeting issues facing the United States Olympic and Paralympic Committee (USOPC). First, to get a basic understanding of the sources of revenues and expenses of the USOPC, review its “Audited
> Dayton Company makes household water filtration equipment. The Murray Division manufactures filters. The Franklin Water Division sells to consumers. The Murray Division has the capacity to produce 8,000 filters per month at the following cost per unit. V
> Welch Insurance Company (WIC) earned operating income of $24,000,000 on operating assets of $200,000,000 during Year 2. The Automobile Insurance Division earned $4,770,000 on operating assets of $36,000,000. WIC has offered the Automobile Insurance Divis
> The Florence Division of Hampton Garage Doors Inc. is currently achieving a 12 percent ROI. The company’s target ROI is 8 percent. The division has an opportunity to invest in operating assets an additional $375,000 at 10 percent but is reluctant to do s
> Supply the missing information in the following table for Greenwood Company.
> Logan Oil Change operates two divisions. The following pertains to each division for Year 2. Required 1. Compute each division’s residual income. 2. Which division increased the company’s profitability more?
> Yesterday, Dexter Corporation’s board of directors appointed Lucy Varden as the new president and chief executive officer. This morning, Ms. Varden presented to the board a list of her management team members. The vice presidents are Zachary East, region
> Everton Manufacturing Company had an excellent year. The company hired a new marketing director in January. The new director’s great motivational appeal inspired the sales staff, and, as a result, sales were 20 percent higher than expected. In a recent m
> Loretto Technologies Company’s Year 2 master budget called for using 60,000 hours of labor to produce 180,000 units of software. The standard labor rate for the company’s employees is $50 per direct labor hour. Demand exceeded expectations, resulting in
> At the beginning of its most recent accounting period, Zelma Company had planned to clean 400 house roofs at an average price of $450 per roof. By reducing the service charge to $400 per roof, the company was able to increase the actual number of roofs c
> Salem Cable Installation Services Inc. is planning to open a new regional office. Based on a market survey Salem commissioned, the company expects services demand for the new office to be between 30,000 and 40,000 hours annually. The firm normally charge
> The annual budget of the United States is very complex, but this case requires that you analyze only a small portion of the historical tables that are presented as a part of each year’s budget. The fiscal year of the federal government ends on September
> Use the standard price and cost data provided in Exercise 8-1B. Assume the actual sales price was $14.75 per unit and the actual variable cost was $6.80 per unit. The actual fixed manufacturing cost was $33,500, and the actual selling and administrative
> Use the information provided in Exercise 8-1B. 1. Determine the sales and variable cost volume variances. 2. Classify the variances as favorable or unfavorable. 3. Comment on the usefulness of the variances with respect to performance evaluation and iden
> Compute variances for the following items and indicate whether each variance is favorable (F) or unfavorable (U).
> Indicate whether each of the following variances is favorable (F) or unfavorable (U). The first one has been done as an example.
> Higbee Manufacturing Company established a predetermined fixed overhead cost rate of $80 per unit of product. The company planned to make 19,000 units of product but actually produced 20,000 units. Actual fixed overhead costs were $1,600,000. Required 1.
> Brisco Manufacturing Company established a predetermined variable overhead cost rate of $12.00 per direct labor hour. The actual variable overhead cost rate was $11.40 per direct labor hour. Brisco planned to use 150,000 hours of direct labor. It actuall
> Fashion Hair is a hair salon. It planned to provide 240 hair color treatments during December. Each treatment was planned to require 0.6 hour of labor at the standard labor price of $25.00 per hour. The salon actually provided 250 treatments. The actual
> Sparta Landscaping Company established the following standard labor cost data to provide complete lawn care service (cutting, edging, trimming, and blowing) for a small lawn. Sparta planned each lawn to require 2 hours of labor at a cost of $18.00 per ho
> Monroe Manufacturing Company incurred an unfavorable labor price variance. Required 1. Describe a scenario in which the personnel manager is responsible for the unfavorable price variance. 2. Describe a scenario in which the production manager is respons
> Wayne Pittman Inc. makes ice cream that it sells in 5-gallon containers to retail ice cream parlors. During Year 2, the company planned to make 100,000 containers of ice cream. It actually produced 97,000 containers. The actual and standard quantity and
> The following trial balance was drawn from the records of Havel Company as of October 1, Year 2. Required 1. Divide the class into groups, each with four or five students. Organize the groups into three sections. Assign Task 1 to the first section, Task
> Amity Company makes paint that it sells in 1-gallon containers to retail home improvement stores. During Year 3, the company planned to make 190,000 gallons of paint. It actually produced 198,000 gallons. The standard and actual quantity and cost of the
> Thelma Merritt manages the Spring Candy Shop, which was expected to sell 4,000 servings of its trademark candy during July. Each serving was expected to contain 6 ounces of candy. The standard cost of the candy was $1.20 per ounce. The shop actually sold
> Imboden Manufacturing Company established the following standard price and cost data. Sales price $ 15 per unit Variable manufacturing cost $ 7 per unit Fixed manufacturing cost $32,500 total Fixed selling and administrative cost $24,000 total Imboden p
> Clement Oil Corporation, which distributes gasoline products to independent gasoline stations, had $240,000 of cost of goods sold in January. The company expects a 2.5 percent increase in cost of goods sold during February. The ending inventory balance f
> Glendo Grocery buys and sells groceries in a community far from any major city. Travis Glendo, the owner, budgeted the store’s purchases as follows. Glendo’s suppliers require that 70 percent of accounts payable be pai
> Elgin Drugstores Inc. sells prescription drugs, over-the-counter drugs, and some groceries. The purchasing manager prepared the following inventory purchases budget. For this year, Elgin expects an ending inventory balance equal to 10 percent of the foll
> Temple Greetings Corporation sells greeting cards for various occasions. Required Write a brief memo describing the sales pattern that you would expect Temple Greetings to experience during the year. In which months will sales likely be high? Explain why
> Lingo Corporation is about to start a business as an agricultural products distributor. Because its customers will all be retailers, Lingo will sell its products solely on account. The company expects to collect 50 percent of accounts receivable in the m
> Plano International Company has three subsidiaries, Seymour Trading Company, Archer Medical Supplies Company, and Milsap Shipping Company. Because the subsidiaries operate in different industries, Plano’s corporate budget for the coming
