Principles of Accounting II- Final Exam

Australia

Question
Principles of Accounting II
1. (Ignore income taxes in this problem.) Gull Inc. is considering the acquisition of equipment that costs $570,000 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:
Incremental net cash flows
Year 1
$148,000
Year 2
$204,000
Year 3
$153,500
Year 4
$170,500
Year 5
$160,500
Year 6
$139,500
If the discount rate is 10%, the net present value of the investment is closest to: (Use exhibit11b-1, exhibit11b-2) rev: 12_14_2012, 12_21_2012
$406,000
$262,884
$143,116
$713,116
2.
Jerston Company has an annual plant capacity of 3,000 units. Data concerning this product are given below:
Annual sales at regular selling prices
2,800 units
Manufacturing costs:
Variable
$
26 per unit
Fixed (annual) $ 74,500
Selling and administrative expenses:
Variable (sales commissions) $ 9 per unit
Fixed (annual)
$
17,000
The company has received a special order for 200 units at a selling price of $60 each. Regular sales would not be affected, and sales commissions on the 200 units would be reduced by one-third. This special order would have no impact on total fixed costs.
Required:

Similar Ads: