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# ACC 305 Final Exam Complete A+ Answer

ACC 305 Final Exam Complete A+ Answer

ACC 305 Final Exam Complete A+ Answer

ACC 305 Final Exam Complete A+ Answer

ACC 305 Final Exam Complete A+ Answer

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
4.
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

5.
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
6.
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
7.
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
8.
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%

9.
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

Explanation:

Cezar Corporation
Comparative Balance Sheet
Ending Beginning
Balance Balance
Assets: Net Income
Current assets: 48400
Cash and cash equivalents 84000.00 51000.00 33000
Accounts receivable 33900 41000 -7100 7100
Inventory 76200 71000 5200 -5200
Total current assets 194100 163000 31100
Property, plant, and equipment 535500 510000 25500
Less accumulated depreciation 195500 171000 24500 24500
Net property, plant, equipment 340000 339000 1000
Total assets 534100 502000 32100
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable 27800 31000 -3200 -3200
Accrued liabilities 61800 71000 -9200 -9200
Income taxes payable 63600 61000 2600 2600
Total current liabilities 153200 163000 -9800
Bonds payable 96200 91000 5200 5200
Total liabilities 249400 254000 -4600
Stockholders’ equity:
Common stock 42000 51000 -9000 -9000
Retained earnings 242700 197000 45700
Total stockholders’ equity 284700 248000 36700
Total liabilities and stockholders’ equity 534100 502000 32100 -2700

65000 -6500

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

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)

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
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.
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

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

Ans:

Net Income
31000

5700
-5700
2700

32000

4700
9700
3700

83800

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

FCF to equal EBIT(1-Tax Rate) + Depreciation & Amortization – Change in Net Working Capital – Capital Expenditure.
FCF is also = net cash provided by operating activities – capital expenditures – cash dividends

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
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