Survey of Accounting (Accounting I)

8th Edition

ISBN: 9781305961883

Author: Carl Warren

Publisher: Cengage Learning

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Survey of Accounting (Accounting I)

Capital Investment Analysis. 8CDQ

BusinessAccountingSurvey of Accounting (Accounting I)NPV: Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows: N P V = P r e s e n t v a l u e o f c a s h i n f l o w s – P r e s e n t v a l u e o f c a s h o u t f l o w s To Indicate: The meaning of the Net present value amount

Question

Chapter 15, Problem 8CDQ

To determine

**Concept Introduction:**

**NPV:**

Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

**To Indicate:**

The meaning of the Net present value amount

Expert Solution & Answer

Survey of Accounting (Accounting I)

8th Edition

ISBN: 9781305961883

Author: Carl Warren

Publisher: Cengage Learning

Not helpful? See similar books

Survey of Accounting (Accounting I)

Capital Investment Analysis. 8CDQ

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Survey of Accounting (Accounting I)

Ch. 15 - Prob. 1SEQCh. 15 - Prob. 2SEQCh. 15 - Prob. 3SEQCh. 15 - Prob. 4SEQCh. 15 - Prob. 5SEQCh. 15 - Prob. 1CDQCh. 15 - Prob. 2CDQCh. 15 - Prob. 3CDQCh. 15 - Prob. 4CDQCh. 15 - Prob. 5CDQ

Ch. 15 - Prob. 6CDQCh. 15 - Prob. 7CDQCh. 15 - Prob. 8CDQCh. 15 - Prob. 9CDQCh. 15 - Prob. 10CDQCh. 15 - Prob. 11CDQCh. 15 - Prob. 12CDQCh. 15 - Prob. 13CDQCh. 15 - Prob. 14CDQCh. 15 - Prob. 15CDQCh. 15 - Prob. 16CDQCh. 15 - Prob. 15.1ECh. 15 - Prob. 15.2ECh. 15 - Prob. 15.3ECh. 15 - Prob. 15.4ECh. 15 - Prob. 15.5ECh. 15 - Prob. 15.6ECh. 15 - Prob. 15.7ECh. 15 - Prob. 15.8ECh. 15 - Prob. 15.9ECh. 15 - Prob. 15.10ECh. 15 - Prob. 15.11ECh. 15 - Prob. 15.12ECh. 15 - Prob. 15.13ECh. 15 - Prob. 15.14ECh. 15 - Prob. 15.15ECh. 15 - Prob. 15.16ECh. 15 - Prob. 15.17ECh. 15 - Prob. 15.18ECh. 15 - Prob. 15.19ECh. 15 - Prob. 15.20ECh. 15 - Prob. 15.21ECh. 15 - Prob. 15.22ECh. 15 - Prob. 15.1.1PCh. 15 - Prob. 15.1.2PCh. 15 - Prob. 15.2.1PCh. 15 - Prob. 15.2.2PCh. 15 - Prob. 15.3.1PCh. 15 - Prob. 15.3.2PCh. 15 - Prob. 15.3.3PCh. 15 - Prob. 15.4.1PCh. 15 - Prob. 15.4.2PCh. 15 - Prob. 15.4.3PCh. 15 - Prob. 15.5.1PCh. 15 - Prob. 15.5.2PCh. 15 - Prob. 15.5.3PCh. 15 - Prob. 15.6.1PCh. 15 - Prob. 15.6.2PCh. 15 - Prob. 15.6.3PCh. 15 - Prob. 15.6.4PCh. 15 - Prob. 15.6.5PCh. 15 - Prob. 15.6.6PCh. 15 - Prob. 15.6.7PCh. 15 - Prob. 15.6.8PCh. 15 - Prob. 15.1.1MBACh. 15 - Prob. 15.1.2MBACh. 15 - Prob. 15.1.3MBACh. 15 - Prob. 15.1.4MBACh. 15 - Prob. 15.2.1MBACh. 15 - Prob. 15.2.2MBACh. 15 - Prob. 15.2.3MBACh. 15 - Prob. 15.3.1MBACh. 15 - Prob. 15.3.2MBACh. 15 - Prob. 15.3.3MBACh. 15 - Prob. 15.4MBACh. 15 - Prob. 15.5.1MBACh. 15 - Prob. 15.5.2MBACh. 15 - Prob. 15.5.3MBACh. 15 - Prob. 15.5.4MBACh. 15 - Prob. 15.1CCh. 15 - Prob. 15.2.1CCh. 15 - Prob. 15.2.2CCh. 15 - Prob. 15.2.3CCh. 15 - Prob. 15.3.1CCh. 15 - Prob. 15.3.2CCh. 15 - Prob. 15.4CCh. 15 - Prob. 15.5.1CCh. 15 - Prob. 15.5.2CCh. 15 - Prob. 15.6C

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The Company provided the following data:
Value of biological asset at acquisition cost on 12/31/19, P 600,000
Fair valuation surplus on initial recognition at fair value on 12/31/19 P 700,000
Change in fair value to 12/31/20 due to growth and price fluctuation, P 100,000
Decrease in fair value due to harvest, P 90,000
What is the carrying amount of the biological asset on December 31, 2020?
What is the gain from change in fair value of biological assets in 2020?

What is proper time or time period over which to match the cost of an intangible asset with revenues if it is likely that the benfit of the asset will last fro an indefinite period?
a. 40 yrs
b. 50 yrs
c. immediately
d. at such time as reduction in value can be quantitatively determined
e. either a or b
f. none from the choices given

Which of the following research and development costs should always be capitalized?
a. costs of intangibles purchased from othersb. costs of materials, equipment, and intangibles with alternative future uses purchased fromothersc. costs of equipment with an expected life greater than three yearsd. costs of contract services purchased from others

The components of the cost of a major item of equipment are given below.GHSPurchase price 780,000Import duties 117,000VAT (refundable) 78,000Site preparation 30,000Installation costs 28,000Pre-production costs 18,000Initial operating losses before the asset reaches planned performance 50,000Estimated cost of dismantling and removal of the asset, recognized as a provision under IAS 37 Provisions,Contingent Liabilities and Contingent Assets 100,0001,201,000In accordance with IAS 16 Property, Plant and Equipment, what amount should be recognized as the cost of the asset?

True or False
_____ PAS 16 defines depreciation as "the decrease in the value of an asset."
______ According to PAS 16, items of PPE are initially measured at cost and subsequently measured using either the cost model or the fair value model.
_______ an entity acquires an asset for P120k. The asset is estimated to have a useful life of 10 years and a residual value P20K. tHE STRAIGHT LINE DEPRECIATION RATE BASED ON DEPRECIABE AMOUNT IS 10%
_______ An entity acquires an asset for P1M. A P200k residual value is estimated for the asset. Ar the end of the asset's useful life, the accumulated depreciation wil be equal to P1M.
_______ A machine acquired on the 20th of Julyv(and ready for its intended use as at this date) would most likely be depreciated starting on the 1st of August.
_______ A change in the depreciation method, useful life or residual value of a PPE is accounted for retrospectively.

The acquisition of a new machine with a purchase price of $96,072, transportation costs of $7,638, installation costs of $6,963, and special acquisition fees of $2,105, would be journalized with a debit to the asset account for
a.$96,072
b.$112,778
c.$105,140
d.$103,035

A fixed asset with a cost of $25,974 and accumulated depreciation of $23,377 is traded for a similar asset priced at $40,828 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,683, the cost basis of the new asset is
Select the correct answer.
$43,425
$38,742
$40,828
$36,145

Use Newell Brands, Inc.'s financial statements to answer to the following questions.
According to the footnotes, what was the initial total acquisition cost of the Property, Plant, and Equipment that Newell Brands owns as of December 31, 2020?
$ _________________
According to the footnotes, what is the total acquisition cost of Land that Newell Brands owns as of December 31, 2020?
$ _________________
According to the footnotes, which of the following methods does Newell Brands use to depreciate its Property, Plant, and Equipment? (Circle one)
Straight-Line
Double-Declining-Balance
Units-of-Activity
Provide the 2020 adjusting journal entry (both accounts and amounts) that Newell Brands made to record depreciation on its Property and Equipment. Assume that Newell Brands makes one adjusting journal entry for depreciation expense at the end of each fiscal year as part of its adjusting entries.
Does…

Use Newell Brands, Inc.'s financial statements to answer to the following questions.
According to the footnotes, what was the initial total acquisition cost of the Property, Plant, and Equipment that Newell Brands owns as of December 31, 2020? $ _________________
According to the footnotes, what is the total acquisition cost of Land that Newell Brands owns as of December 31, 2020?
$ _________________
According to the footnotes, which of the following methods does Newell Brands use to depreciate its Property, Plant, and Equipment? (Circle one)
Straight-Line
Double-Declining-Balance
Units-of-Activity
Provide the 2020 adjusting journal entry (both accounts and amounts) that Newell Brands made to record depreciation on its Property and Equipment. Assume that Newell Brands makes one adjusting journal entry for depreciation expense at the end of each fiscal year as part of its adjusting entries)
Does Newell…

Reck Company is considering the acquisition of Clock Inc. To assess the amount it might be willing to pay, Reck makes the following computations and assumptions.A. Clock, Inc. has identifiable assets with a total fair value of OMR 9,000,000 and liabilities of OMR 6,500,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book value, and land with a fair value 50% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Clock Inc.B. Clock Inc.'s pretax incomes for the years 2018 through 2020 were OMR 580,000, OMR 420,000, and OMR 350,000, respectively. Reck believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments for the following items included in pretax earnings:Depreciation on Buildings (each year) 380,000Depreciation on Equipment…

The components of the cost of a major item of equipment are given below:
$
Purchase price 780,000
Import duties 117,000
VAT (refundable) 78,000
Site preparation 30,000
Installation 28,000
Testing 10,000
Initial losses before asset reaches planned performance 50,000
Discounted cost of dismantling and removal at end of useful life 40,000
1,133,000
What amount should be recognised as the cost of the asset in accordance with
IAS 16 Property, plant and equipment ?

Other Additional Information:-
iii) Plant and equipment disposed of during the year had a net book value of £11,000 (cost £45,000). The loss on disposal of £6,000 is included in the cost of sales.iv) All land was revalued on 31 March 2020, the decrease in value of £65,000 was deducted from the revaluation reserve.
v) The cost of sales includes £15,000 for development expenditure amortized during the year and £10,000 for impairment of the purchased brand name.
vi) On 1 November 2019, Robinson Plc issued £1 equity shares at a premium. No other finance was raised during the year.vii) Robinson Plc paid a dividend during the year.viii) Other provisions relating to legal claims made against Robinson Plc during the year ended 31 March 2020. The amount provided is based on legal opinion on 31 March 2020 and is included in the cost of sales.
Required:With reference to IAS 7, Statement of Cash Flows:a) Prepare a statement of cash flows, using the indirect method, for Robinson Plc for the year…

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