|
Yokam
Company is considering two alternative projects. Project 1 requires an
initial investment of $400,000 and has a present value of cash flows of
$1,100,000. Project 2 requires an initial investment of $4 million and
has a present value of cash flows of $6 million.
|
| 1. | Compute the profitability index for each project. |
|
Beyer
Company is considering the purchase of an asset for $180,000. It is
expected to produce the following net cash flows. The cash flows occur
evenly throughout each year.
|
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total | |||||||||||||||||||
| Net cash flows | $ | 60,000 | $ | 40,000 | $ | 70,000 | $ | 125,000 | $ | 35,000 | $ | 330,000 | ||||||||||||
| | ||||||||||||||||||||||||
|
Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.)
 |
B2B
Co. is considering the purchase of equipment that would allow the
company to add a new product to its line. The equipment is expected to
cost $360,000 with a 12-year life and no salvage value. It will be
depreciated on a straight-line basis. The company expects to sell
144,000 units of the equipment’s product each year. The expected annual
income related to this equipment follows.
|
| Sales | $ | 225,000 | |
| Costs | |||
| Materials, labor, and overhead (except depreciation on new equipment) | 120,000 | ||
| Depreciation on new equipment | 30,000 | ||
| Selling and administrative expenses | 22,500 | ||
| | | ||
| Total costs and expenses | 172,500 | ||
| | | ||
| Pretax income | 52,500 | ||
| Income taxes (30%) | 15,750 | ||
| | | ||
| Net income | $ | 36,750 | |
| | | ||
| | |||
| 1. |
Compute the payback period.
 |
Pineapple Republic is a specialty retailer that operates stores selling clothes
under the trade names Pineapple Republic, Banana Republic, and Old Navy.
Assume that you are employed as a stock analyst and your boss has just
completed a review of the annual report of The Pineapple Republic, Inc.
for the third quarter of 2013. She provided you with her notes, but they
are missing some information that you need. Her notes show that the
ending inventory for Pineapple Republic in the current quarter was $3.3
billion and in the previous quarter it was $2.3 billion. Net Sales for
the current quarter were $6.6 billion. Gross Profit was $2.6 billion and
Net Income was $ 350 million.
|
| Required: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Determine the Cost of Goods Sold and Purchases for the third quarter. (Enter your answers in billions rounded to 1 decimal place.)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Determine the missing amounts in each of these four separate situations a through d.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| a. |
On April 1, the company retained an attorney for a flat monthly fee of $3,500. Payment for April legal services was made by the company on May 12.
|
| b. |
A $1,080,000 note payable requires 10% annual interest, or $9,000 to be paid at the 20th day of each month. The interest was last paid on April 20 and the next payment is due on May 20. As of April 30, $3,000 of interest expense has accrued.
|
| c. |
Total weekly salaries expense for all employees is $10,000. This amount is paid at the end of the day on Friday of each five-day workweek. April 30 falls on Tuesday of this year, which means that the employees had worked two days since the last payday. The next payday is May 3.
|
The above three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses. (Use 360 days a year. Do not round intermediate calculations and round your final answers to the nearest dollar amount.)
|
Pablo Management has five part-time employees, each of whom earns $250 per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on Friday, December 28, 2013. The next week, the five employees worked only four days because New Year’s Day was an unpaid holiday.
a.
b.
| |||||||
