mpt in Progress Swifty Corporation has old inventory on hand that cost $26250. Its scrap value is $35000. The inventory could be sold for $47500 manufactured further at an additional cost of $26250. What should Swifty do? O Sell the inventory for $35000 scrap value Manufacture further and sell it for $87500 O Dispose of the inventory to avoid any further decline in value O Hold the inventory at its $26250 cost
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- LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item: In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for 19, and each unit purchased had cost 10. The income tax rate is 21%. Required: 1. Next Level If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report? 2. Prepare the appropriate annual report disclosures for 2020. 3. Next Level if Hammond purchases an additional 7,000 units in December 2020, how much income tax will the company save? 4. Next Level If Hammond purchases the additional 7,000 units, how much income tax has the company saved over the 4-year period by using LIFO instead of the FIFO cost flow assumption?Subasta Corporation was able to acquire second hand goods worth P100,000 in an auction. The goods can be sold as is for P120,000 or reconditioned at a cost of P30,000 and sold for P170,000. 1. Identify the irrelevant cost in this problem. Why? 2. Which alternative should be chosen: sell as is or recondition. Why? 3. What is the opportunity cost of reconditioning the goods. Why?Refer to the situation described in BE 11–16. Assume that SCC’s fair value of $40 million approximates fairvalue less costs to sell and that the present value of SCC’s estimated future cash flows is $41 million. If WebHelper prepares its financial statements according to IFRS and SCC is considered a cash-generating unit, whatamount of impairment loss, if any, should WebHelper recognize?
- Differential analysis for a lease or sell decision Burlington Construction Company is considering selling excess machinery with a book value of 115,000 (original cost of 275,000 less accumulated depreciation of 160,000) for 90,000, less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of 100,000, for four years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Companys costs of repairs, insurance, and property tax expenses are expected to be 9,000. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A:PurchaseCost of Equipment 700,581Salvage Value 105,896Daily operating cost 534Economic life, years 10 Alternative B: Rental at 1,539 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. Instructions a. Prepare the journal entry (if any) to record the impairment at December 31, 2020. b. Where should the gain or loss (if any) on the write-down be reported in the income statement? c. At December 31, 2021, the equipment’s fair value increased to $260,000. Prepare the journal entry (if any) to record this increase in fair value. d. What accounting issues did management face in accounting for this impairment?
- Problem # 1 (30): Given: On Sep 1, 2017 General Assembly (GA) purchased for $980,000 an ANSONIA 7300 wide-corridor stacking modulator with the expectation that its economic life would be exhausted at 2024 12 31 and that the unit’s salvage value would be $320,000. On 2020 11 01 GA exchanged the equipment for a 4-year, zero-coupon note with a face value of $900,000. GA recognized a loss of $16,100 on the transaction. GA uses SLN for depreciation and prorating for partial periods. Required: Book the 12/31/2020 interest accrual for the note.CDO Corporation determined to sell a group of assets within its shoe manufacturing division, as it believed it was cheaper to buy the parts from China. The assets that it wanted to sell had the following carrying amounts: Factory P 22,000,000 Accumulated depreciation (12,000,000) Raw materials 3,800,000 Spare parts The management of CDO calculated the fair value less costs to sell of the disposal group to be P14.400,000. The assets were sold on February 15, 2020 for P15,400,000, with selling costs amounting to P700,000. Before income taxes, how much should be recognized as gain (loss) on sale of the disposal group?On January 1, 2020, CDO Corporation determined to sell a group of assets within its shoe manufacturing division, as it believed it was cheaper to buy the parts from China. The assets that it wanted to sell had the following carrying amounts: Factory P22,000,000 Accumulated depreciation. Raw materials (12.000.000) 3.800,000 2.200,000 The management of CDO calculated the fair value less costs to sell of the disposal group to be P14.400,000 Spare parts The assets were sold on February 15, 2020 for P15.400,000, with selling costs amountinit to P700.000 The following balances have been excerpted from Tito Piccolo's statement of financial position: December 31 January 1 Prepaid Insurance 6,000 P 7,500. Interest Receivable Salaries Payable 3,700 61.500 53,000 14.500 Accounts Receivable 550.000 415,000 25,000 Allowance for bad debts i 40,000 Tito Piccolo Company reported the following during 2020 the following items: Insurance premiums paid 41,500 Interest collected 123.500 Salaries paid Sales…
- The management has decided not to seell the old equipment. All the present value is YEAR 1 2 3 4 Discount rate (10%) 0.909 0.826 0.751 0.683 Determine the releevant after tax cash flows at each of the following three point i) project initiation (Year 0) ii) Project operation (Year 1-4) iii) Project disposal (termination, year 4) B) Based on the workings in (a) and using the NPV decision model, should the company buy the new oil field equipment? show calculation.The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. d. What accounting issues did management face in accounting for this impairment?Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie’s estimated the new machine would increase the company’s cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine’s internal rate of return? (Round your answer to whole decimal place i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 14%, what is the machine’s net present value? Interpret your results. 3. Suppose the new machine would increase the company’s annual cash inflows, net of expenses, by only $31,720 per year. Under these conditions, what is the internal rate of return? (Round your answer to whole decimal place i.e. 0.123 should be considered as 12%.)