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Business
AccountingSurvey of Accounting (Accounting I)8th Edition

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Chapter 12, Problem 12.1.3P
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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

Solutions

Chapter
Section
Problem 1SEQ
Problem 2SEQ
Problem 3SEQ
Problem 4SEQ
Problem 5SEQ
Problem 1CDQ
Problem 2CDQ
Problem 3CDQ
Problem 4CDQ
Problem 5CDQ
Problem 6CDQ
Problem 7CDQ
Problem 8CDQ
Problem 9CDQ
Problem 10CDQ
Problem 11CDQ
Problem 12CDQ
Problem 12.1E
Problem 12.2E
Problem 12.3E
Problem 12.4E
Problem 12.5E
Problem 12.6E
Problem 12.7E
Problem 12.8E
Problem 12.9E
Problem 12.10E
Problem 12.11E
Problem 12.12E
Problem 12.13E
Problem 12.14E
Problem 12.15E
Problem 12.16E
Problem 12.17E
Problem 12.18E
Problem 12.1.1P
Problem 12.1.2P
Problem 12.1.3P
Problem 12.2.1P
Problem 12.2.2P
Problem 12.3.1P
Problem 12.3.2P
Problem 12.4.1P
Problem 12.4.2P
Problem 12.5.1P
Problem 12.5.2P
Problem 12.5.3P
Problem 12.5.4P
Problem 12.5.5P
Problem 12.5.6P
Problem 12.1MBA
Problem 12.2MBA
Problem 12.3.1MBA
Problem 12.3.2MBA
Problem 12.3.3MBA
Problem 12.4.1MBA
Problem 12.4.2MBA
Problem 12.4.3MBA
Problem 12.5.1MBA
Problem 12.5.2MBA
Problem 12.5.3MBA
Problem 12.1C
Problem 12.2C
Problem 12.3C
Problem 12.4.1C
Problem 12.4.2C
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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Differential analysis report involving opportunity costs
Five Star is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $900.000 of 4% U.S. Treasury bonds that mature in 15 years. The bonds could be purchased at face value. The following data have been assembled:

Instructions

If the proposal is accepted, what is the total estimated operating income of the warehouse for the 15 years?

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

  1. Out-of-pocket costs
  2. Opportunity costs

To Calculate:

Total estimated income for the proposal

Explanation

The differential analysis report of the proposal is prepared as follows:

    Year Cash Flow PVFPV
    A B =A*B
    Cost of equipment 0 $ (900,000) 1.00000 $ (900,000.00)
    Residual Value of Equipment 15 $ 100,000 0...

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Chapter 12,
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Chapter 12 Solutions

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Ch-12 P-1SEQCh-12 P-2SEQCh-12 P-3SEQCh-12 P-4SEQCh-12 P-5SEQCh-12 P-1CDQCh-12 P-2CDQCh-12 P-3CDQCh-12 P-4CDQCh-12 P-5CDQ
Ch-12 P-6CDQCh-12 P-7CDQCh-12 P-8CDQCh-12 P-9CDQCh-12 P-10CDQCh-12 P-11CDQCh-12 P-12CDQCh-12 P-12.1ECh-12 P-12.2ECh-12 P-12.3ECh-12 P-12.4ECh-12 P-12.5ECh-12 P-12.6ECh-12 P-12.7ECh-12 P-12.8ECh-12 P-12.9ECh-12 P-12.10ECh-12 P-12.11ECh-12 P-12.12ECh-12 P-12.13ECh-12 P-12.14ECh-12 P-12.15ECh-12 P-12.16ECh-12 P-12.17ECh-12 P-12.18ECh-12 P-12.1.1PCh-12 P-12.1.2PCh-12 P-12.1.3PCh-12 P-12.2.1PCh-12 P-12.2.2PCh-12 P-12.3.1PCh-12 P-12.3.2PCh-12 P-12.4.1PCh-12 P-12.4.2PCh-12 P-12.5.1PCh-12 P-12.5.2PCh-12 P-12.5.3PCh-12 P-12.5.4PCh-12 P-12.5.5PCh-12 P-12.5.6PCh-12 P-12.1MBACh-12 P-12.2MBACh-12 P-12.3.1MBACh-12 P-12.3.2MBACh-12 P-12.3.3MBACh-12 P-12.4.1MBACh-12 P-12.4.2MBACh-12 P-12.4.3MBACh-12 P-12.5.1MBACh-12 P-12.5.2MBACh-12 P-12.5.3MBACh-12 P-12.1CCh-12 P-12.2CCh-12 P-12.3CCh-12 P-12.4.1CCh-12 P-12.4.2C

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