Accounting exam help

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1. The Higgins Company has just purchased a piece of equipment at a cost of $300,000. This equipment will reduce operating costs by $55,000 each year for the next eleven years. This equipment replaces old equipment which was sold for $14,000 cash. The new equipment has a payback period of: (Ignore income taxes.) (Round your answer to 1 decimal place.)

A. 16.2 Years

B. 5.5 Years

C. 5.2 Years

D. 11.10

2. The management of Serpas Corporation is considering the purchase of a machine that would cost $170,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $41,000 per year. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

A.-18,464

B. 35,000

C.-33,811

D. 27,384

3. Lett Corporation is investigating buying a small used aircraft for the use of its executives. The aircraft would have a useful life of 12 years. The company uses a discount rate of 17% in its capital budgeting. The net present value of the investment, excluding the salvage value of the aircraft, is -$578,526. (Ignore income taxes.)

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.

Management is having difficulty estimating the salvage value of the aircraft. How large would the salvage value of the aircraft have to be to make the investment in the aircraft financially attractive? (Round discount factor(s) to 3 decimal places and final answers to the nearest dollar amount.)

A. $3,806,092

B. $3,403,094

C. $98,349

D. $578,526

The management of Londo Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 4 years. The company uses a discount rate of 10% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is −$316,080. (Ignore income taxes.)

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

How large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)

	$31,608
	$316,080
	$79,020
	$99,710

The management of Melchiori Corporation is considering the purchase of a machine that would cost $360,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $116,000 per year. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-2 , to determine the appropriate discount factor(s) using tables.

The present value of the annual cost savings of $116,000 is closest to: (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)

	$451,124
	$175,448
	$1,091,462
	$696,000

Gull Inc. is considering the acquisition of equipment that costs $550,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are: (Ignore income taxes.)

	Incremental net cash flows
Year 1	$145,000
Year 2	$195,000
Year 3	$156,000
Year 4	$165,000
Year 5	$155,000
Year 6	$135,000

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.

If the discount rate is 13%, the net present value of the investment is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

	$435,000
	$148,776
	$89,228
	$591,264

Charley has a typing service. He estimates that a new computer will result in increased cash inflow $1,100 in Year 1, $1,500 in Year 2 and $2,500 in Year 3. (Ignore income taxes.)

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.

If Charley's required rate of return is 12%, the most that Charley would be willing to pay for the new computer would be: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

	$3,459
	$2,296
	$3,278
	$3,958

Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

Investment required in equipment	$460,000
Annual cash inflows	$77,000
Salvage value	$0
Life of the investment	16 years
Discount rate	12%

The simple rate of return on the investment is closest to: (Round your answer to the closest interest rate.)

	5%
	10%
	15%
	11%

Sibble Corporation is considering the purchase of a machine that would cost $330,000 and would last for 7 years. At the end of 7 years, the machine would have a salvage value of $25,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $63,000. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

	−$45,194
	−$33,144
	−$8,144
	−$21,094

10.

Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

Investment required in equipment	$470,000
Annual cash inflows	$77,000
Salvage value	$0
Life of the investment	20 years
Discount rate	14%

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The internal rate of return on the investment is closest to: (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate.)

	12%
	14%
	16%
	18%

11.

Cezar Corporation's comparative balance sheet appears below:

Cezar Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Current assets:
Cash and cash equivalents	$ 84,000	$ 51,000
Accounts receivable	33,900	41,000
Inventory	76,200	71,000
Total current assets	194,100	163,000
Property, plant, and equipment	535,500	510,000
Less accumulated depreciation	195,500	171,000
Net property, plant, equipment	340,000	339,000
Total assets	$534,100	$502,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 27,800	$ 31,000
Accrued liabilities	61,800	71,000
Income taxes payable	63,600	61,000
Total current liabilities	153,200	163,000
Bonds payable	96,200	91,000
Total liabilities	249,400	254,000
Stockholders' equity:
Common stock	42,000	51,000
Retained earnings	242,700	197,000
Total stockholders' equity	284,700	248,000
Total liabilities and stockholders' equity	$534,100	$502,000

The company did not dispose of any property, plant, and equipment during the year. Its net income for the year was $48,400 and its cash dividends were $2,700. The company did not retire any bonds payable or issue any common stock during the year. Its net cash provided by operating activities and net cash used in financing activities are:

	net cash provided by operating activities, $31,600; net cash used in financing activities,$7,900
	net cash provided by operating activities, $31,600; net cash used in financing activities,$6,500
	net cash provided by operating activities, $65,000; net cash used in financing activities,$6,500
	net cash provided by operating activities, $65,000; net cash used in financing activities,$7,900

12.

Nordquist Company's net income last year was $31,000. The company did not sell or retire any property, plant, and equipment last year. Changes in selected balance sheet accounts for the year appear below:

	Increases (Decreases)
Asset and Contra-Asset Accounts:
Accounts receivable	$15,500
Inventory	$(4,000)
Prepaid expenses	$11,000
Accumulated depreciation	$28,000
Liability Accounts:
Accounts payable	$15,000
Accrued liabilities	$(8,500)
Income taxes payable	$3,100

Based solely on this information, the net cash provided by operating activities under the indirect method on the statement of cash flows would be:

	$68,600
	$15,900
	$46,100
	$91,100

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13. Last year Burford Company's cash account decreased by $33,000. Net cash used in investing activities was $8,800. Net cash provided by financing activities was $29,500. On the statement of cash flows, the net cash flow provided by (used in) operating activities was:

	$20,700
	$(53,700)
	$(33,000)
	$(12,300)

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14.

Mccloe Corporation's balance sheet and income statement appear below:

Mccloe Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$ 58	$ 43
Accounts receivable	48	62
Inventory	78	62
Property, plant and equipment	535	520
Less: accumulated depreciation	275	262
Total assets	$444	$425
Liabilities and stockholders' equity:
Accounts payable	$ 71	$ 57
Accrued liabilities	44	28
Income taxes payable	57	57
Bonds payable	77	144
Common stock	47	42
Retained earnings	148	97
Total liabilities and stockholders' equity	$444	$425

Income Statement
Sales	$568
Cost of goods sold	360
Gross margin	208
Selling and administrative expenses	141
Net operating income	67
Gain on sale of plant and equipment	22
Income before taxes	89
Income taxes	32
Net income	$ 57

Cash dividends were $6. The company did not issue any bonds or repurchase any of its own common stock during the year. The net cash provided by (used in) financing activities for the year was:

rev: 05_24_2013_QC_31013

	$(67)
	$(68)
	$(6)
	$5

15.

Lueckenhoff Corporation's most recent balance sheet appears below:

Lueckenhoff Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$ 44	$ 40
Accounts receivable	59	52
Inventory	86	80
Property, plant and equipment	790	732
Less: accumulated depreciation	289	206
Total assets	$690	$698
Liabilities and stockholders' equity:
Accounts payable	$ 37	$ 34
Bonds payable	460	668
Common stock	72	64
Retained earnings	121	(68)
Total liabilities and stockholders' equity	$690	$698

The company's net income for the year was $242 and it did not sell or retire any property, plant, and equipment during the year. Cash dividends were $53. The net cash provided by (used in) operating activities for the year was:

	$315
	$73
	$169
	$368

16.

16. Top of Form

Hocking Corporation's comparative balance sheet appears below:

Hocking Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Current assets:
Cash and cash equivalents	$ 47,000	$ 27,000
Accounts receivable	22,300	27,000
Inventory	61,700	57,000
Prepaid expenses	15,300	17,000
Total current assets	146,300	128,000
Property, plant, and equipment	356,000	337,000
Less accumulated depreciation	176,000	144,000
Net property, plant, and equipment	180,000	193,000
Total assets	$326,300	$321,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 21,700	$ 18,000
Accrued liabilities	65,700	57,000
Income taxes payable	49,700	47,000
Total current liabilities	137,100	122,000
Bonds payable	64,500	77,000
Total liabilities	201,600	199,000
Stockholders' equity:
Common stock	34,300	38,000
Retained earnings	90,400	84,000
Total stockholders' equity	124,700	122,000
Total liabilities and stockholders' equity	$326,300	$321,000

The company's net income (loss) for the year was $8,800 and its cash dividends were $2,400. It did not sell or retire any property, plant, and equipment during the year.

The company's net cash used in investing activities is:

	$19,000
	$36,700
	$13,000
	$51,000

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17. Top of Form

17. Hocking Corporation's comparative balance sheet appears below:

Hocking Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Current assets:
Cash and cash equivalents	$ 57,000	$ 37,000
Accounts receivable	31,300	37,000
Inventory	72,700	67,000
Prepaid expenses	24,300	27,000
Total current assets	185,300	168,000
Property, plant, and equipment	374,000	347,000
Less accumulated depreciation	196,000	164,000
Net property, plant, and equipment	178,000	183,000
Total assets	$363,300	$351,000
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$ 32,700	$ 28,000
Accrued liabilities	76,700	67,000
Income taxes payable	60,700	57,000
Total current liabilities	170,100	152,000
Bonds payable	59,000	87,000
Total liabilities	229,100	239,000
Stockholders' equity:
Common stock	45,400	48,000
Retained earnings	88,800	64,000
Total stockholders' equity	134,200	112,000
Total liabilities and stockholders' equity	$363,300	$351,000

The company's net income (loss) for the year was $31,000 and its cash dividends were $6,200. It did not sell or retire any property, plant, and equipment during the year. The company uses the indirect method to determine the net cash provided by operating activities.

The company's net cash provided by operating activities is:

	$89,500
	$78,100
	$83,800
	$51,800

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18. Top of Form

18. Boole Corporation's net cash provided by operating activities was $125; its capital expenditures were $68; and its cash dividends were $27. The company's free cash flow was:

	$30
	$98
	$57
	$220

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19. Top of Form

19.

Financial statements of Ansbro Corporation follow:

Ansbro Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$ 38	$ 35
Accounts receivable	94	86
Inventory	53	45
Property, plant and equipment	738	620
Less: accumulated depreciation	358	313
Total assets	$565	$473
Liabilities and stockholders' equity:
Accounts payable	$ 71	$ 80
Bonds payable	165	250
Common stock	104	86
Retained earnings	225	57
Total liabilities and stockholders' equity	$565	$473

Income Statement
Sales	$775
Cost of goods sold	438
Gross margin	337
Selling and administrative expenses	104
Net operating income	233
Income taxes	40
Net income	$ 193

Cash dividends were $25. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows.

The net cash provided by (used in) investing activities for the year was:

$118

$(73)

$73

$(118)

20.

Schleich Corporation's most recent balance sheet appears below:

Schleich Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$ 42	$ 31
Accounts receivable	40	27
Inventory	52	67
Property, plant and equipment	744	552
Less: accumulated depreciation	286	264
Total assets	$592	$413
Liabilities and stockholders' equity:
Accounts payable	$ 57	$ 74
Accrued liabilities	22	20
Income taxes payable	45	30
Bonds payable	107	168
Common stock	87	82
Retained earnings	274	39
Total liabilities and stockholders' equity	$592	$413

Net income for the year was $330. Cash dividends were $62. The company did not sell or retire any property, plant, and equipment during the year. The net cash provided by (used in) operating activities for the year was:

	$306
	$24
	$465
	$354

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