Problem 14-60 (Algo) Economic Value Added (LO 14-4)Normandy Instruments invests heavily in research and development (R&D), although it must currently treat its R&D expenditures asexpenses for financial accounting purposes. To encourage investment in R&D, Normandy evaluates its division managers using EVAThe company adjusts accounting income for R&D expenditures by assuming these expenditures create assets with a two-year life.That is, the R&D expenditures are capitalized and then amortized over two years.Aerospace Division of Normandy shows after-tax income of $18.004 million for year 2, R&D expenditures in year 1 amounted to $7.204million and in year 2, R&D expenditures were $12.004 million. For purposes of computing EVA, Normandy assumes all R&Dexpenditures are made uniformly over the year. Before adjusting for R&D, Aerospace Division shows assets of $72.004 million at thebeginning of year 2 and current liabilities of $1,504,000. Normandy computes EVA using divisional investment at the beginning of theyear and a 12 percent cost of capital.Required:Compute EVA for Aerospace Division for year 2.Note: Enter your answers in dollars, not in millions.Adjusted divisional incomeCost of adjusted divisional investmentEconomic value added (EVA)

Economic value added is helpful in computing the amount of economic profit the company generates…

Answered: Normandy Instruments invests heavily in…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...

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CASE 1 (TOPIC 2 - TOPIC 3] HMD Corporation operates a high ends manufacturing facility. The capital intensive nature of the corporation's operations make internal control over the acquisition and the use of non current asset important management objectives. At the beginning of every financial year, HMD prepares a non current asset budget that would indicate the planning on their capital expenditure. To prepare this, managers from each department would request capital expenditure from the senior management. This requires them to complete a non current asset requisition form, which must be approved by the senior management team. HMD has established PPE (property, plant and equipment) guidance and policies that will determine whether the non current asset requisition is to be considered as capital expenditure or revenue expenditure. The management committee will meet each month to review the budget reports. Among other things, the committee will also compare actual outcome incurred by the…
CASE 4 HMD Corporation operates a high end manufacturing facility. The capital intensive nature of the corporation's operations makes internal control over the acquisition and the use of fixed assets important management objectives. At the beginning of every financial year, HMD prepares a fixed asset budget that would indicate the planning on their capital expenditure. To prepare this, managers from each department would request capital expenditure from the senior management. This requires them to complete a fixed asset requisition form, which must be approved by the senior management team. HMD has established PPE (property, plant and equipment) guidance and policies that will determine whether the fixed asset requisition is to be considered as capital expenditure or revenue expenditure. The management committee will meet each month to review the budget reports. Among other things, the committee will also compare actual outcome incurred by the managers to their forecasted figures; and…
Which of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.
amount. An entity reported the following data for the current year. What net amount in OCI that may not be recycled to profit or loss? * Net sales Cost of goods sold Selling expenses Administrative expenses P9.500,000 4,000,000 1,000,000 1,200,000 Interest expense 700,000 Gain from expropriation of land 500,000 Income tax 800,000 Income from discontinued operations Unrealized gain on equity investment at FVOCI Unrealized loss on futures contract designated as a cash flow hedge Increase in projected benefit obligation due to actuarial assumptions Foreign translation adjustment- debit Revaluation surplus 600,000 900,000 400,000 300,000 100,000 2,500,000
Refer to the situation described in BE 11–13. Assume that the present value of the estimated future cash flowsgenerated from the division’s assets is $22 million and that their fair value approximates fair value less costs tosell. What amount of impairment loss should C&R recognize if the company prepares its financial statementsaccording to IFRS?
! Required information [The following information applies to the questions displayed below.] Turtle Creek Partnership had the following revenues, expenses, gains, losses, and distributions: Sales revenue Long-term capital gains Cost of goods sold Depreciation-MACRS Amortization of organization costs. Guaranteed payments to partners for general management Cash distributions to partners $ 65,500 $ 4,800 Ordinary income (loss) $ (22,100) $ (7,900) $ (1,240) $ (15,600) $ (3,600) a. Given these items, what is Turtle Creek's ordinary business income (loss) for the year?
For each of the following issues determine whether the item should be Capitalised as an intangible Expensed to the Statement of Profit or Loss (Income Statement) £200,000 spent on developing a new process that will not bring in new revenue, but will deliver cost savings £800,000 spent on developing a new product. A competitor has already brought a similar product to the market. The directors are uncertain if they will commit any further funds. £500,000 spent on marketing a new product. This has led to increased sales of £1 million £750,000 has been spent on developing a new product. The future benefits have been estimated at £500,000.
Assume an income statement with the following classifications: RevenuesCost of goods soldDistribution expensesGeneral & administrative expensesOther revenues and expensesIncome tax on income from continuing operationsGain from disposal of discontinued operationsIncome tax on gain from discontinued operationsNone of the above Indicate by letter how each of the following should be classified: Advertising expense Amortization of a patent held as an investment Cash dividend received on short-term investment Depreciation on plant that manufactures good for sale (prior to sale of the goods) Freight on sales Income tax effect of loss on sale of plant Income tax on gain on sale of short-term investment in securities Interest expense Interest revenue Loss on sale of patent Dividend revenue from investment Salary of company president Sales Sales returns Services sold
Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of returns on investment and residual incomes: Invested Assets Income from Operations Return on Investment Minimum Return Minimum Acceptable Income from Operations Residual Income $890,000 $231,400 (a) 15% (b) (c) $460,000 (d) (e) (f) $50,600 $23,000 $310,000 (g) 14% (h) $31,000 (i) $230,000 $48,300 (j) 12% (k) (l) Determine the missing values, identified by the letters above. For all amounts, round to the nearest whole number. a. % b. c. d. e. % f. % g. h. % i. j. % k. l.
You are provided with the following information on Kayray Corporation. Your ultimate objective is to calculate the EVA for the firm. LIFO reserve 60 Net plant, property, and equipment 1,325 Other assets 30 Goodwill 325 Accumulated Goodwill amortized 65 PV of Operating leases 140 Tax benefit from interest on expenses 10 Tax benefit from interest on leases 5 Taxes on non-operating income 2 Implied interest on op. lease 9.5 Increase in LIFO reserve 12 Goodwill amortization 15 Operating profit 550 Income tax expense 215 Net working capital 440 WACC 0.12 Refer to Exhibit 9.15. Calculate the adjusted operating profits before taxes. a. $586.5 b. $225.64 c. $825.23 d. $692.5 e. $831.56
Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of rates of return on investment and residual incomes: Invested Assets Income from Operations Return on Investment Minimum Return Minimum Acceptable Income from Operations Residual Income $980,000 $225,400 (a) 13% (b) (c) $600,000 (d) (e) (f) $72,000 $24,000 $320,000 (g) 14% (h) $35,200 (i) $240,000 $45,600 (j) 11% (k) (l) Determine the missing values, identified by the letters above. For all amounts, round to the nearest whole number.
Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a long term basis. Without knowing the comparative costs involved, answer these question: a. What disclosures should be made by lessees and lessors related to futurepayments?

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