Rate of Return And NPV – Homework – Accounting & Finance

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Rate of Return And NPV – Homework – Accounting & Finance

The key terms in these Finance Chapters include Rate of Return, NPV, Costs, Accounts Receivables, Bad Debts, Allowance for Doubtful Accounts, Cowboy Ice Cream. Homework – Accounting & Finance


A company has two different investment opportunities, both requiring an initial payment of $150,000.  The company’s desired rate of return is 10%.

Project AProject B
Year 1$100,000$40,000
Year 2$100,000$170,000

What is the NPV of Project B?

26,859.5


A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $24,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $675. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Bad Debts Expense24,750 
Allowance for Doubtful Accounts 24,750
Bad Debts Expense24,075 
Allowance for Doubtful Accounts 24,075
Bad Debts Expense25,425 
Allowance for Doubtful Accounts 25,425

Correct

Accounts Receivable24,750 
Bad Debts Expense675 
Sales 25,425
Accounts Receivable25,425 
Allowance for Doubtful Accounts 25,425
Explanation
    
Desired balance in allowance account:$24,750credit
Current balance: 675debit
Required: adjustment to allowance$25,425credit

A company has two different investment opportunities, both requiring an initial payment of $150,000.  The company’s desired rate of return is 10%.

Project AProject B
Year 1$100,000$40,000
Year 2$100,000$170,000

Which project would you recommend based on NPV?

A

B


A company has two different investment opportunities, both requiring an initial payment of $150,000.  The company’s desired rate of return is 10%.

Project AProject B
Year 1$100,000$40,000
Year 2$100,000$170,000

What is the NPV of Project B?

26,859.5


Rubio, Inc. is considering eliminating one of its segments.  The segment incurs the following fixed costs.  If the segment is eliminated, the building it uses will be sold.

Advertising expense$140,000
Supervisory salaries300,000
Allocation of company-wide facility costs130,000
Original cost of building220,000
Book value of building100,000
Market value of building160,000
Maintenance costs on equipment112,000
Real estate taxes on building12,000

Identify the relevant costs associated with the segment. (Select all that apply)

Advertising expense

Book value of building

Maintenance costs on equipment

Supervisory Salaries

Allocation of company-wide facility costs

Original cost of building

Real estate taxes on building

Market value of building


What was Cowboy Ice Cream’s sales volume variance, and was it favorable or unfavorable?

500; favorable

$32,000; favorable

$33,750; unfavorable

$1,750; unfavorable

$33,750; favorable

$32,000; unfavorable

$4,000; favorable

500; unfavorable

$2,250; favorable

$2,250; unfavorable

$1,750; favorable

$4,000; unfavorable


A company has two different investment opportunities, both requiring an initial payment of $150,000.  The company’s desired rate of return is 10%.

Project AProject B
Year 1$100,000$40,000
Year 2$100,000$170,000

What is the NPV of Project B?

26,859.5


A company has two different investment opportunities, both requiring an initial payment of $150,000.  The company’s desired rate of return is 10%.

Project AProject B
Year 1$100,000$40,000
Year 2$100,000$170,000

Which project would you recommend based on NPV?

A

B


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