McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $400,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $70,000. Project B will cost $310,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $55,000. A discount rate of 9% is appropriate for both projects. Compute the net present value and profitability index of each project. Which project should be accepted?
> Writing Presented below is the partial bond discount amortization schedule for Gomez Corp. Gomez uses the effective-interest method of amortization. a. Prepare the journal entry to record the payment of interest and the discount amortization at the end
> Golden Inc. issues $4 million, 5-year, 10% bonds at 102, with interest payable annually on January 1. The straight-line method is used to amortize bond premium. a. Prepare the journal entry to record the sale of these bonds on January 1, 2020. b. Prepare
> Sweetwood Company issues $5 million, 10-year, 9% bonds at 96, with interest payable annually on January 1. The straight-line method is used to amortize bond discount. a. Prepare the journal entry to record the sale of these bonds on January 1, 2020. b. P
> Imhoff Company leases a new building from Noble Construction, Inc. The present value of the lease payments is $700,000. The lease is a finance lease. Prepare the journal entry that the lessee should make to record this transaction.
> Detroit Company has a stock portfolio valued at $6,000. Its cost was $4,000. If the Fair Value Adjustment account has a debit balance of $300, prepare the journal entry at year-end.
> Ownbey Corporation purchased debt investments for $52,000 on January 1, 2020. On July 1, 2020, Ownbey received cash interest of $2,340. Journalize the purchase and the receipt of interest. Assume that no interest has been accrued.
> State whether each of the following statements is true or false. If false, indicate how to correct the statement. _____ 1. Mortgage bonds and sinking fund bonds are both examples of debenture bonds. _____ 2. Convertible bonds are also known as callable b
> Tropic Zone Corporation experienced the following variances: materials price $350 U, materials quantity $1,700 F, labor price $800 F, labor quantity $500 F, and total overhead $1,200 U. Sales revenue was $92,100, and cost of goods sold (at standard) was
> The Rockies Division operates as a profit center. It reports the following for the year ending December 31, 2020. Prepare a responsibility report for the Rockies Division at December 31, 2020. Budget Actual Sales $2,000,000 $1,890,000 760,000 550,0
> In Pargo Company’s flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $90,000. The total budgeted cost line is $350,000 at an activity level of 50,000 direct labor hours. Compute total budgeted cost
> Larkin Company accumulated the following standard cost data concerning product I-Tal. Direct materials per unit: 2 pounds at $5 per pound Direct labor per unit: 0.2 hours at $16 per hour Manufacturing overhead: Allocated based on direct labor hours at a
> The service division of Raney Industries reported the following results for 2020. Sales ………………………………. $500,000 Variable costs …………………… 300,000 Controllable fixed costs ……… 75,000 Average operating assets …. 625,000 Management is considering the followi
> Wade Company estimates that it will produce 6,000 units of product IOA during the current month. Budgeted variable manufacturing costs per unit are direct materials $7, direct labor $13, and overhead $18. Monthly budgeted fixed manufacturing overhead cos
> Snow Cap Company has a unit selling price of $250, variable costs per unit of $170, and fixed costs of $160,000. Compute the break-even point in units using (a) the mathematical equation and (b) unit contribution margin.
> Cedar Grove Industries produces and sells a cell phone-operated home security control. Information regarding the costs and sales of security controls during May 2020 are provided below. Unit selling price of security control ………………………………………….. $45 Unit v
> Summary financial information for Gandaulf Company is as follows. Compute the amount and percentage changes in 2020 using horizontal analysis, assuming 2019 is the base year. Dec. 31, 2020 Dec. 31, 2019 Current assets $ 200,000 $ 220,000 Plant asse
> Amanda Company reports the following total costs at two levels of production. Classify each cost as variable, fixed, or mixed. 5,000 Units 10,000 Units Indirect labor $ 3,000 $ 6,000 Property taxes 7,000 7,000 56,000 Direct labor 28,000 Direct mate
> Huebner Corporation leases new equipment for 10 years on December 31, 2020. The present value of the lease payments is $192,000. After recording this lease, Huebner has assets of $1,800,000, liabilities of $1,100,000, and stockholders’ equity of $700,000
> The condensed financial statements of Murawski Company for the years 2019 and 2020 are presented as follows. (Amounts in thousands.) Compute the following ratios for 2020 and 2019. a. Current ratio. b. Inventory turnover. (Inventory on 12/31/18 was $3
> During the current month, Wacholz Company incurs the following manufacturing costs. a. Purchased raw materials of $18,000 on account. b. Incurred factory labor of $40,000. Of that amount, $31,000 relates to wages payable and $9,000 relates to payroll tax
> In its proposed 2020 income statement, Hrabik Corporation reports income before income taxes $500,000, income taxes $100,000 (not including unusual items), loss on operation of discontinued music division $60,000, gain on disposal of discontinued music d
> Detwiler Orchard issues a $700,000, 6%, 15-year mortgage note to obtain needed financing for a new lab. The terms call for annual payments of $72,074 each. Prepare the entries to record the mortgage loan and the first installment payment.
> Presented below are two independent situations: 1. Edelman Inc. acquired 10% of the 500,000 shares of common stock of Schuberger Corporation at a total cost of $11 per share on June 17, 2020. On September 3, Schuberger declared and paid a $160,000 divide
> Ragsdell Corporation had the following transactions. 1. Issued $200,000 of bonds payable. 2. Paid utilities expense. 3. Issued 500 shares of preferred stock for $45,000. 4. Sold land and a building for $250,000. 5. Lent $30,000 to Tegtmeier Corporation,
> Kurtyka Corporation had the following transactions relating to debt investments: Jan. 1, 2020 Purchased 50, $1,000, 10% Spiller Company bonds for $50,000. Interest is payable annually on January 1. Dec. 31, 2020 Accrued interest on Spiller Company bonds.
> Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $80,000, and annual expenses (excluding depr
> Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows would
> Ranger Corporation has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. After considering cost savings as well as incremental revenues from selling excess elec
> Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows would
> Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $140,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows would
> Suppose the 2020 adidas financial statements contain the following selected data (in millions). Compute the following values and provide a brief interpretation of each. a. Debt to assets ratio. b. Times interest earned. Current assets $4,485 8,875
> Presented below are long-term liability items for Lind Company at December 31, 2020. Prepare the long-term liabilities section of the balance sheet for Lind Company. Bonds payable, due ………………………………………………….. 2022 $600,000 Lease liability …………………………………………
> Hanschu Inc. issues an $800,000, 10%, 10-year mortgage note on December 31, 2020, to obtain financing for a new building. The terms provide for annual installment payments of $130,196. Prepare the entry to record the mortgage loan on December 31, 2020, a
> The balance sheet for Miley Consulting reports the following information on July 1, 2020. Miley decides to redeem these bonds at 101 after paying annual interest. Prepare the journal entry to record the redemption on July 1, 2020. Long-term liabili
> Frankum Company has issued three different bonds during 2020. Interest is payable annually on each of these bonds. 1. On January 1, 2020, 1,000, 8%, 5-year, $1,000 bonds dated January 1, 2020, were issued at face value. 2. On July 1, $900,000, 9%, 5-year
> Nasreen Company issues $2 million, 10-year, 8% bonds at 97, with interest payable each January 1. a. Prepare the journal entry to record the sale of these bonds on January 1, 2020. b. Assuming instead that the above bonds sold for 104, prepare the journa
> Meera Corporation issued 4,000, 8%, 5-year, $1,000 bonds dated January 1, 2020, at 100. Interest is paid each January 1. a. Prepare the journal entry to record the sale of these bonds on January 1, 2020. b. Prepare the adjusting journal entry on December
> Price Company issues $400,000, 20-year, 7% bonds at 101. Prepare the journal entry to record the sale of these bonds on June 1, 2020.
> Moby Inc. is considering two alternatives to finance its construction of a new $2 million plant. a. Issuance of 200,000 shares of common stock at the market price of $10 per share. b. Issuance of $2 million, 8% bonds at face value. Complete the following
> Selected data taken from a recent year’s financial statements of trading card company Topps Company, Inc. are as follows (in millions). Net sales …………………………………………………………….. $326.7 Current liabilities, beginning of year ………………………….. 41.1 Current liabiliti
> Sisson Corporation reports operating expenses of $80,000 excluding depreciation expense of $15,000 for 2020. During the year, prepaid expenses decreased $6,600 and accrued expenses payable increased $4,400. Compute the cash payments for operating expense
> Data for Stiever Corporation’s maintenance costs is shown below. Compute the variable- and fixed-cost elements using regression analysis. Present your solution in the form of a cost equation. Units Produced Total Cost $32,000 July
> Deines Corporation has fixed costs of $480,000. It has a unit selling price of $6, unit variable costs of $4.40, and a target net income of $1,500,000. Compute the required sales in units to achieve its target net income.
> Using the data in BE26.6 and BE26.10, compute the overhead volume variance. Normal capacity was 25,000 direct labor hours. Data from BE26.6 & BE26.10: In October, Pine Company reports 21,000 actual direct labor hours, and it incurs $118,000 of manufactu
> Some overhead data for Pine Company are given in BE26.6. In addition, the flexible manufacturing overhead budget shows that budgeted costs are $4 variable per direct labor hour and $50,000 fixed. Compute the overhead controllable variance. Data from BE2
> Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $130,000 and will increase annual expenses by $70,000 including depreciation. The oil well will cost $490,000 and will have a
> For the year ending December 31, 2020, Cobb Company accumulates the following data for the Plastics Division which it operates as an investment center: contribution margin—$700,000 budget, $710,000 actual; controllable fixed costs—$300,000 budget, $302,0
> Kanye Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $176,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash
> In October, Pine Company reports 21,000 actual direct labor hours, and it incurs $118,000 of manufacturing overhead costs. Standard hours allowed for the work done is 20,600 hours. The predetermined overhead rate is $6 per direct labor hour. Compute the
> Gundy Company expects to produce 1,200,000 units of Product XX in 2020. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct materials $5, direct labor $6, and overhead $8. Budget
> Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $65,000 per year, maintenance expenses of $5,000 per year, and operating expenses of $26,000 per year. Option 2 provides revenues of $60,000 per y
> Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $136,000 and have an estimated useful life of 5 years. It can be sold for $60,000 at the end of that time. (Amusement parks need to rotat
> Data for Croix Company are given in BE25.1. In the second quarter, budgeted sales were $380,000, and actual sales were $384,000. Prepare a static budget report for the second quarter and for the year to date. Data from BE25.1: For the quarter ended Marc
> Rihanna Company is considering purchasing new equipment for $450,000. It is expected that the equipment will produce net annual cash flows of $60,000 over its 10-year useful life. Annual depreciation will be $45,000. Compute the cash payback period.
> Vern Thoms is puzzled. His company had a profit margin of 10% in 2020. He feels that this is an indication that the company is doing well. Tina Amos, his accountant, says that more information is needed to determine the company’s financial well-being. Wh
> When the total cash inflows exceed the total cash outflows in the statement of cash flows, how and where is this excess identified?
> (a) When should a long-term investment in common stock be accounted for by the equity method? (b) When is revenue recognized under this method?
> Distinguish among the three types of activities reported in the statement of cash flows.
> The return on assets for Ayala Corporation is 7.6%. During the same year, Ayala’s return on common stockholders’ equity is 12.8%. What is the explanation for the difference in the two rates?
> Windsor Corporation issues $500,000 of 9%, 5-year bonds on January 1, 2020, at 104. If Windsor uses the effective-interest method in amortizing the premium, will the annual interest expense increase or decrease over the life of the bonds? Explain.
> You have been given the following information about the production of Usher Co., and are asked to provide the plant manager with information for a meeting with the vice president of operations. Standard Cost Card Direct materials (5 pounds
> Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $2.50 per pound) …………………………………….. $20 Direct labor (3 hours at $12.00 per hour) ………………………………………………. $
> The standard cost of Product B manufactured by Pharrell Company includes three units of direct materials at $5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70 per unit, and 29,000 units of direct materials are
> Stefani Company has gathered the following information about its product. Direct materials. Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials cost $5
> Manufacturing overhead data for the production of Product H by Shakira Company, assuming the company uses a standard cost system, are as follows. Overhead incurred for 52,000 actual direct labor hours worked ……………………….. $263,000 Overhead rate (variable
> Parsons Company is planning to produce 2,000 units of product in 2020. Each unit requires 3 pounds of materials at $5 per pound and a half-hour of labor at $16 per hour. The overhead rate is 70% of direct labor. Instructions a. Compute the budgeted amou
> As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October. As a result of this budget report, Joe was called into the president’
> Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available fo
> Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, travel 3%, and delive
> Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows. Indirect labor ……………………………….. $1.00 Indirect materials …………………………… 0.70 Utilities ……
> Presented below is selected financial information for two divisions of Samberg Brewing. Instructions Supply the missing information for the lettered items. Lager Lite Lager Contribution margin Controllable margin Average operating assets $ 300,000
> The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Preventive Services and Orthodontic Services. Each of th
> The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2020 at $900,000. The only variable costs budgeted for the division were cost of goods sold ($440,000) and selling and administra
> Horatio Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows. Instructions a. Compute the missing amounts. Show computations. b. Prepare a responsibility report for
> Fey Company’s organization chart includes the president; the vice president of production; three assembly plants—Dallas, Atlanta, and Tucson; and two departments within each plant— Machining and Finishing. Budget and actual manufacturing cost data for Ju
> UrLink Company is a newly formed company specializing in high-speed Internet service for home and business. The owner, Lenny Kirkland, had divided the company into two segments: Home Internet Service and Business Internet Service. Each segment is run by
> Chubbs Inc.’s manufacturing overhead budget for the first quarter of 2020 contained the following data. Actual variable costs were indirect materials $13,500, indirect labor $9,500, utilities $8,700, and maintenance $5,000. Actual fix
> Connie Rice has prepared the following list of statements about budgetary control. 1. Budget reports compare actual results with planned objectives. 2. All budget reports are prepared on a weekly basis. 3. Management uses budget reports to analyze differ
> Rodriguez, Inc., is preparing its direct labor budget for 2020 from the following production budget based on a calendar year. Each unit requires 1.5 hours of direct labor. Instructions Prepare a direct labor budget for 2020. Wage rates are expected to
> Rensing Ltd. estimates sales for the second quarter of 2020 will be as follows. Month ………………………. Units April ………………………… 2,550 May …………………………. 2,675 June ……………………….. 2,390 The target ending inventory of finished products is as follows. March 31 …………………
> On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020. Sales units: First quarter 5,000; second quarter 6,000; third quarter 7,000. Ending raw materials inventory: 40% of
> DeWitt Industries has adopted the following production budget for the first 4 months of 2020. Each unit requires 2 pounds of raw materials costing $3 per pound. On December 31, 2019, the ending raw materials inventory was 4,000 pounds. Management wants
> Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as follows. Quarter ……………………………. HD-240 1 ………………………………………………….. 5,000 2 ………………………………………………….. 7,000 3 ………………………………………………….. 8,000 4 ………………………………………
> Thome and Crede, CPAs, are preparing their service revenue (sales) budget for the coming year (2020). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below. Ave
> Emeric and Ellie’s Painting Service estimates that it will paint 10 small homes, 5 medium homes, and 2 large homes during the month of June 2020. The company estimates its direct labor needs as 40 hours per small home, 70 hours for a medium home, and 120
> Edington Electronics Inc. produces and sells two models of calculators, XQ-103 and XQ-104. The calculators sell for $15 and $25, respectively. Because of the intense competition Edington faces, management budgets sales semiannually. Its projections for t
> Pletcher Dental Clinic is a medium-sized dental service specializing in family dental care. The clinic is currently preparing the master budget for the first 2 quarters of 2020. All that remains in this process is the cash budget. The following informati
> Green Landscaping Inc. is preparing its budget for the first quarter of 2020. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected. Clients us
> Nieto Company’s budgeted sales and direct materials purchases are as follows. Nieto’s sales are 30% cash and 70% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% i
> The controller of Trenshaw Company wants to improve the company’s control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2020. June 30, 2020, cash balance …………………………………………………………. $45,000 Divi
> Deitz Corporation is projecting a cash balance of $30,000 in its December 31, 2019, balance sheet. Deitz’s schedule of expected collections from customers for the first quarter of 2020 shows total collections of $185,000. The schedule of expected payment
> Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $85,000, February $150,000. Payments for direct materials: Januar
> Fultz Company has accumulated the following budget data for the year 2020. 1. Sales: 30,000 units, unit selling price $85. 2. Cost of one unit of finished goods: direct materials 1 pound at $5 per pound, direct labor 3 hours at $15 per hour, and manufact
> Atlanta Company is preparing its manufacturing overhead budget for 2020. Relevant data consist of the following. Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000. Direct labor: time is 1.5 hours per unit. Variable overhead costs per dir
> Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2020. Lowell has a labor contract that calls for a wage increase to $9.00 per h
> Trusler Company has always done some planning for the future, but the company has never prepared a formal budget. Now that the company is growing larger, it is considering preparing a budget. Instructions Write a memo to Jim Dixon, the president of Trus
> Anna Garden recently opened her own basketweaving studio. She sells finished baskets in addition to selling the raw materials needed by customers to weave baskets of their own. Unfortunately, owing to space limitations, Anna is unable to carry all variet
> Gwynn Incorporated had the following transactions involving current assets and current liabilities during February 2020. Feb. 3 Collected accounts receivable of $15,000. 7 Purchased equipment for $23,000 cash. 11 Paid $3,000 for a 1-year insurance policy
> Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $250 each, but the company is considering using the excess c
> Here are the comparative income statements of Delaney Corporation. Instructions a. Prepare a horizontal analysis of the income statement data for Delaney Corporation, using 2019 as a base. (Show the amounts of increase or decrease.) b. Prepare a vertic
