Ashley projects that she can get $100,000 cash per year for 5 years on a real estate
investment project. If Ashley wants to earn a rate of return of 12%, what is the
maximum that she should pay for the investment? (rounded to the nearest dollar)
A.$56,743
B.$446,429
C.$360,478
D.$560,000
Which of the following statements is incorrect?
A.The further into the future a cash receipt is expected to occur, the lower is its present
value.
B.The return on investment measures the compensation a company expects to receive
from investing in capital assets.
C.Most companies use their cost of capital to estimate the minimum return on
investment required from capital investments.
D.When a company invests in capital assets, it sacrifices future dollars for the
opportunity to receive present dollars.
The following balance sheet information is provided for Gaynor Company:
Assuming 2014 cost of goods sold is $153,300, what is the company’s inventory
turnover?
A.4.0 times
B.4.4 times
C.4.2 times
D.None of these answers is correct.
For a capital investment project to be acceptable, it must generate a rate of return:
A.less than the hurdle rate.
B.equal to or greater than the cost of capital.
C.equal to the conversion rate.
D.none of these answers is correct.
Which one of the following unsecured liabilities has the highest priority when an
insolvent company is about to be liquidated?
A.federal income taxes payable.
B.claims for expenses of administering the bankruptcy.
C.loans made to the company by its stockholders.
D.employees’ claims for salaries.
E.bank loans.
Consider the following independent scenarios:
a) At January 1, 2013, accounts receivable was $22,000. Cash collected on accounts
receivable during 2011 was $15,000. At December 31, 2011, accounts receivable was
$30,000.
What were the revenues earned on account during 2011?
b) At January 1, 2013, accounts payable was $19,000. During 2013, expenses on
account were $28,000. At December 31, 2013, accounts payable was $15,000.
What was the amount of cash paid on accounts payable during 2013?
c) At January 1, 2013, the balance in the prepaid insurance account was $480. On
March 1, 2013, the company paid $2,940 for insurance coverage for the next 12
months. What was the amount of insurance expense for 2013?
d) At January 1, 2013, the balance in the supplies account was $550. At December 31,
2013, the company counted $600 of supplies on hand. The company reported supplies
expense in 2013 of $2,300. What was the total of supplies purchases during 2013?
An investment that costs $20,000 will produce annual cash flows of $5,000 for a period
of 6 years. Further, the investment has an expected salvage value of $3,000. Given a
desired rate of return of 12%, the investment will generate a (Do not round your PV
factors and intermediate calculations. Round your answer to the nearest whole dollar.):
A.positive net present value of $2,077.
B.negative net present value of $2,077.
C.positive net present value of $22,077.
D.positive net present value of $557.
As of December 31, 2013, Gant Corporation had a current ratio of 1.29, quick ratio of
1.05, and working capital of $18,000. The company uses a perpetual inventory system
and sells merchandise for more than it cost. On January 1, 2014, Gant collected $5,200
of accounts receivable. As a result of this transaction, Gant’s working capital will:
A.Increase.
B.Decrease.
C.Remain the same.
D.Cannot be determined.
P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who
share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively,
when they agree to admit C for a 20% interest.
If C contributes $40,000 to the partnership and the goodwill method is used, what
amount will be debited for goodwill?
A.$15,000
B.$20,000
C.$25,000
D.$28,000
E.$60,000
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments
of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed
to (1) interest of 10% of the beginning capital balance each year, (2) annual
compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss
in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was
$150,000 in 2012 and $180,000 in 20 Each partner withdrew $1,000 for personal use
every month during 2012 and 20
What was the total capital balance for the partnership at December 31, 2012?
A.$600,000
B.$564,000
C.$535,000
D.$523,000
E.$545,000
Callahan Company earned $1,500 of cash revenue, paid $1,000 for cash expenses, and
paid a $200 cash dividend to its owners. Which of the following statements is true?
A.The net cash flow from operating activities was $500.
B.The net cash flow from investing activities was an outflow or decrease of $200.
C.The net cash flow from operating activities was $300.
D.Cash flows from financing activities were unchanged.
On December 31, 2013, Allen Company’s total current assets were $600,000 and its
total current liabilities were $380,000. On January 1, 2014, Allen paid $20,000 on
accounts payable.
Required:
(a) Compute Allen’s working capital before and after paying the account payable.
(b) Compute Allen’s current ratio before and after paying the account payable. Round
your answer to two decimal places.
Which of the following would be considered a cash inflow in determining the value of a
capital investment?
A.Incremental revenues from increased productivity
B.Cost savings from a reduction in labor hours
C.An increase in working capital commitments
D.Both incremental revenues from increased productivity and cost savings from a
reduction in labor hours are correct.
An analysis procedure that uses percentages to compare each of the parts of an
individual statement to a key dollar amount from the financial statements is:
A.Ratio analysis.
B.Contribution analysis.
C.Horizontal analysis.
D.Vertical analysis.