Handy Ltd is a glove manufacturer in Melbourne. The managers decide to obtain an automated machine worth $1,000,000. As a result of obtaining such a machine, there will be a $100,000 reduction in total expense. The managers are considering the following options:
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- Cryptocurrency Finder is buying the first computer for their new server farm. Suppose the company paid $5,000for this computer, which it expects to last for three years. Describe how the company would account for the $5,000 expenditure under (a) the cash basis and (b) the accrual basis. State in your own words why the accrual basis is more realistic for this situation.Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help finance itsgrowth. The bank requires financial statements before approving the loan.Required:Classify each cost listed below as either a product cost or a period cost for the purpose of preparing financial statements for the bank.1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory…Suppose that you have been given a summer job as an intern at Issac Aircams, a company that man- ufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs: Depreciation on salespersons’ cars. Rent on equipment used in the factory. Lubricants used for machine maintenance. Salaries of personnel who work in the finished goods warehouse. Soap and paper towels used by factory workers at the end of a shift. Factory supervisors’ salaries. Heat, water, and power consumed in the factory. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) Advertising costs. Workers’ compensation insurance for factory employees. Depreciation on…
- For each of the following problems, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. Company E is considering installing Valutemp temperature loggers in all of its refrigerated trucks for monitoring temperatures during transit. If the systems will reduce insurance claims by $500,000 in each of the next 5 years, how much should the company be willing to spend now if it uses an interest rate of 10% per year?Arcmat plc owns a factory which at present is empty. Mrs X, a business strategist, has been working on a proposal for using the factory for doll manufacture. This will require complete modernisation. Mrs X is a little confused about project appraisal and has asked your advice about which of the following are relevant and incremental cash flows. 1) The future cost of modernising the factory.2) The $100,000 spent two months ago on a market survey investigating the demand for these plastic dolls.3) Machines to produce the dolls – cost $10m payable on delivery.4) Depreciation on the machines.5) Arcmat’s other product lines are expected to be more popular due to the complementary nature of the new doll range with these existing products – the net cash flow effect is anticipated at $1m. 6) Three senior managers will be drafted in from other divisions for a period of a year. 7) A proportion of the US head office costs. 8) The tax saving due to the plant investment being offset against…The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best cash payback. Machine A Machine B Machine C Annual cash flow $40,000 $50,000 $75,000 Average investment 300,000 250,000 500,000 a.Machine A b.Machine C c.Machine B d.Machines B and C have the same preferred payback period.
- Dwight Donovan, the president of Donovan Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a măchine that will enáble factory automation: the machine iş expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment Intial cash expenditures for Projec A are $400 000 and for Project B are S160.000. The annual expected cash inflows are S126,000 for Projęct A and $52,800 for Project B. Both investments are expected to provide Pape 472 Required Compute the net present value of cach project. Which project should be adopted based on the net present value approach? Round your computations to two decimal points. .Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return Compare the net present value…Phoenix Products Inc. requires a new machine to produce a part for a solar air conditioner. Two companies have submitted bids, and you have been assigned the task of choosing one of the machines. Cash flow analysis indicates the following: Year Machine A Machine B 0 −$1,000 −$1,000 1 0 417 2 0 417 3 0 417 4 1,938 417 If the required rate of return for Phoenix Products is 5 percent, which of the following is the most valid statement? Group of answer choices The IRRA < IRRB, therefore accept Machine B. The NPVA < NPVB, therefore accept Machine B. The IRRA > IRRB, therefore accept Machine A. The NPVA > NPVB, therefore accept Machine A. None of these.For following problem, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. A new air conditioning system is to be installed in an office building. Purchasing and installing the system costs $100,000 and the company expects to save $50,000 every year on electricity bills. The company’s MARR is 10% per year, maintenance costs are worked out to be $10,000 per year and the system’s market value will be $20,000 at the end of 10 years. Use the FW method to determine whether the system should be installed.
- Vice Corporation is considering replacing a machine that it uses in its operations. Companies that were interested in working with Vice made the following offers: a. Tito Co. offered a similar machine in exchange for P350,000 in cash. b. Vic Corp. offered to exchange a machine that was identical. c. Joey Inc. offered to trade a similar machine in exchange for Vice's machine, but they demanded P120,000 in addition to Vice's. Presented below are the machine's cost, accumulated depreciation, and fair value: Vice Tito Vic Joey Willie Cost Accumulated Depreciation 2,500,000.00 1,900,000.00 2,305,000.00 2,300,000.00 1,850,000.00 750,000.00 675,000.00 1,065,000.00 1,125,000.00 1,380,000.00 1,035,000.00 1,380,000.00 1,500,000.00 2 775,000.00 Fair value In addition, Vice contacted Willie Co., a machine dealer. Vice will pay P1,395,000 in cash plus the value of its old computer in exchange for a new one. As a result of the transaction with Willie, what is the effect (net of any contra asset) on…Dwight Donovan, the president of Fanning Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $116,000 and for Project B are $36,000. The annual expected cash inflows are $44,810 for Project A and $12,355 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Fanning Enterprises’ desired rate of return is 8 percent.The production department of a Company is planning to purchase a new machine to improve product quality. The company’s management accountant is currently evaluating two options- Buy the machine OR Rent it. The following information is available: The company has to pay £3,200 to set up the machine. Insurance cost £450 per annum. If it is bought, the new machine is depreciated on reducing balance basis at the rate of 25%. After various calculations, the company has to pay £4,200 maintenance cost every year and the estimated repair cost would be £300 per year. The firm will have to sell old machines, which had cost £65,000 six years ago. Apart from the above information, the £500 delivery cost is incurred for this purchase option. If it is rented, £4,650 per year to pay as rent. There is no cost for repair and maintenance. However, the firm is required to pay the administration charge of £650 with this rent option. For rent option, the delivery cost remains at 20% of the £500 (the…