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Weygandt, Accounting Principles, 12e,
Chapter Twenty Six
Solutions to Challenge Exercises
Solution to CE26-1
(a)
Reject
Order
Accept
Order
Net Income
Increase
(Decrease)
Revenues (15,000 X $7.60)
Cost of goods sold
Operating expenses
Net income
$0
0
0
$0
$114,000
78,000
31,000
$ 5,000
(1)
(2)
($114,000)
( (78,000)
( (31,000)
($ 5,000)
because incremental revenues exceed incremental expenses by $5,000.
(c)
Reject
Order
Accept
Order
Net Income
Increase
(Decrease)
Revenues (20,000 X $7.60)
Cost of goods sold (20,000 x $5.20)
$0
0
$152,000
104,000
($152,000)
((104,000)
Solution to CE26-2
(a)
Project
Capital
Investment
÷
Net Annual Cash
Flows*
=
Internal
Rate of
Return
Factor
Closest
Discount
Factor
Internal
Rate of
Return
(b) The acceptable projects are 32A and 33A because their rates of return are equal to or
greater than the 11% required rate of return.
(c)
Project
Capital
Investment
÷
Net Annual Cash
Flows*
=
Cash
Payback
Period
In Years
