Question 8 of 9Molly purchased a franchise agreement to distribute electronic gadgets for 8 years. The agreement cost $1,900,000and she had to make investments of $825,000 for the first 2 years to set up her showroom. The franchise generated$1,025,000 in profits each year from the 1st year to 8 years afterwards. At the end of year 8, she sold the furniture inher showroom for $80,000.a. What is the Internal Rate of Return (IRR)?%Round to two decimal placesb. Should she have proceeded with this plan if her cost of capital was 17%?(click to select)YesNo

IRR is the rate at which the NPV of a project will become 0. A project can be accepted if the IRR is…

Answered: Molly purchased a franchise agreement…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 6EB: Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a...

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OLA #11.3 Manvir purchased a franchise agreement to distribute electronic gadgets for 9 years. The agreement cost $1,700,000 and she had to make investments of $875,000 for the first 2 years to set up her showroom. The franchise generated $1,075,000 in profits each year from the 1st year to 9 years afterwards. At the end of year 9, she sold the furniture in her showroom for $110,000. a. What is the Internal Rate of Return (IRR)? b. Should she have proceeded with this plan if her cost of capital was 14%? Please reply using details with algebra
1. Debbie acquired a franchise to operate a donut shop from Dollar Donuts, Inc., for $100,000. She incurred anadditional $4,000 in legal costs to negotiate the terms with the franchiser. In five years, the franchise contract will berenegotiated. The current contract also states that there will be a $3, 000 annual fee plus a two percent charge basedon the store's annual revenue, which is expected to average 90,000 per year. What is the franchise cost that should becapitalized? a. $88,000 b. $92, 000 c. $100,000 d. $104,000
Question 4 On January 1, 20X2, The GenKota Winery purchased a new bottling system. The system has an expected life of 5 years. The system cost $325,000. Shipping, installation, and set up were an additional $35,000. At the end of the useful life, Julie Hayes, chief accountant for GenKota, expects to dispose of the bottling system for $26,000. She further anticipates total output of 668,000 bottles over the useful life. The output for 20x2 was 108,000 bottles, 130,000 (20x3), 150,000 (20X4), 160,000 (20X5), and 120,000 (20X6). i) Prepare depreciation schedules assuming use of the: (a) straight-line depreciation method (b) units-of -production depreciation method (c) double-declining balance depreciation method
2. FiTch, Inc., has purchased a new server and must decide what to do with the old one. The cost of the old server was originally P60,000 and has been depreciated P45,000. The company has received two offers. One offer was to lease the equipment for P7,000 for the next five years, but the company will be required to provide maintenance and insurance totaling P3,000 per year. The other offer was made to purchase the equipment outright for P18,500 less a 5% sales commission. Which offer should FiTCh, Inc., accept? Prepare a differential analysis report to support your answer.
In the below question part 2 would the recovery period be 60 months or 180 months? Thank you After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $300,000. Ingrid allocated $50,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3? In lieu of original facts, assume that Ingrid purchased only a phone list with a useful life of five years for $10,000. How much amortization expense on the phone list can Ingrid deduct in year 1, year 2, and year 3?
(a) Michael is an Internet service provider. On December 31, 2009, he bought an existing business with servers and a building worth $400,000. During his first year of operation, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000. What was Michael’s: (i) gross investment during 2010 (ii) depreciation during 2010 (iii) net investment during 2010 (iv) capital at the end of 2010 (b) Lori is a student who teaches golf on the weekend and in a year earns $20,000 after paying her taxes. At the beginning of 2010, Lori owned $1,000 worth of books, CDs, and golf clubs and she had…
Can I please get help with this practice question? for parts d e f Stuart Manufacturing Company was started on January 1, year 1, when it acquired $89,000 cash by issuing common stock. Stuart immediately purchased office furniture and manufacturing equipment costing $32,000 and $40,000, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $4,000 salvage value and an expected useful life of six years. The company paid $12,000 for salaries of administrative personnel and $21,000 for wages to production personnel. Finally, the company paid $26,000 for raw materials that were used to make inventory. All inventory was started and completed during the year. Stuart completed production on 10,000 units of product and sold 8,000 units at a price of $9 each in year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.) Required Determine the total product cost…
Jocelyn runs her own photography business and has done for the past 10 years. Her business income has remained relatively stable over the last 5 years, at around $1m. On 20 May 2021 Jocelyn purchased a new digital camera for $4,400. Assume that the camera as having an effective life of 5 years according to the Commissioner's ruling. On 1 September 2021, Jocelyn decided to upgrade her camera in order to produce the highest quality brochures, photos and documents for her clients. She paid $12,000 for the latest high-end digital camera. She traded in her old camera for $2,400 when she purchased her new camera. Assume the effective life of the new camera is 5 years. While the cameras are for Jocelyn's use in her business, she has sometimes used them to take family photos and photos of her hiking trips due to the superior quality of the cameras. Jocelyn’s personal use of the cameras amounts to 10%. Jocelyn is registered for GST (so you must account for this). Step through the criteria,…
“Louis's firm had the following situations during the year: Louis's CEO purchased a Ferrari for personal use and charged it to the company. Louis added five additional weeks to its fiscal year so it could improve its income. The accounting period for the previous years were 52 weeks. Equipment with a cost of £100,000 is reported at its market value of £150,000. Recently, Louis purchased a beach house for his personal use. However, he plans on using it for company retreats and for hosting large clients. Hence, he decided to list the asset and the corresponding liability for this reason (he used a loan to purchase this asset). Louis included £10,000 in accounts receivable and retained earnings for a service that he will provide next year. Since he is an honest man and will provide the service, he decided to record the amount this year. The company had paid £3,000 for insurance but uses only £2,000 during the period. The accountant has recorded £3,000 as insurance…
Weren't Inc. purchase a $480,000 machine to manufacture a specialty tab for electrical equipment. The tap is in height-A-Man and burn can sell all that it could manufacture for the next 10 years.
Skip to question While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2023, and each contributed $140,000 in exchange for a 50 percent ownership interest. GTE also borrowed $560,000 from a local bank Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's 2023 activities: GTE uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis. GTE received $900,000 of sales revenue and reported $420,000 of cost of goods sold (it did not have any ending inventory). GTE paid $75,000 compensation to James, $75,000 compensation to Paul, and $85,000 of compensation to…
Can I please get help with this practice question? Stuart Manufacturing Company was started on January 1, year 1, when it acquired $89,000 cash by issuing common stock. Stuart immediately purchased office furniture and manufacturing equipment costing $32,000 and $40,000, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $4,000 salvage value and an expected useful life of six years. The company paid $12,000 for salaries of administrative personnel and $21,000 for wages to production personnel. Finally, the company paid $26,000 for raw materials that were used to make inventory. All inventory was started and completed during the year. Stuart completed production on 10,000 units of product and sold 8,000 units at a price of $9 each in year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.) Required Determine the total product cost and the average…

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