3. Feng Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $42,300 (A+)

Feng Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $42,300. The machine’s useful life is estimated at 10 years, or 363,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 35,000 units of product.

Required:

1 Determine the machine\’s second-year depreciation using the double-declining-balance method

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2. Feng Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $42,300 (A+)

Feng Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $42,300. The machine’s useful life is estimated at 10 years, or 363,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 35,000 units of product.

Required:

1 Determine the machine’s second-year depreciation using the units-of-production method.

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What is meant by the term ‘depreciation’ in financial accounting, and where do the depreciation calculations impact on entries in both the balance sheet and the profit and loss accounts (A+)

What is meant by the term ‘depreciation’ in financial accounting, and where do the depreciation calculations impact on entries in both the balance sheet and the profit and loss accounts? (10%)

b) A company has production machinery and delivery vehicles, both currently valued at £150,000. The company has two options for depreciation – straight line depreciation at 20% per annum or an accelerating depreciation method of 25% of net book value. Select the method you would advise for both asset types (with justifications) and calculate the depreciation charge for this year. (30%)

c) What is meant by the term Financial Ratios, giving examples of typical ratios used to assist investors in comparing company accounts? (30%)

d) In comparing the accounts of two companies the cost of production for the companies was as follows. Comment fully upon these results from an investor perspective (explain why you think the figures differ, how this might lead you to conclusions on efficiency etc..) (30%)

Company A Company B

Sales Revenue £2,000,000 £2,000,000

Less cost of sales

Plant depreciation £300,000 £50,000

Production labour £500,000 £700,000

Materials £500,000 £550,000

GROSS PROFIT £700,000 £700,000

Please Follow Instruction:

No more than 1500 words.

No plagiarism, Please reference everything.

The referencing is Harvard style.

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An Arizona Farmer operates an 1100 acre irrigated farm in the Red River Valley of Arizona (A+)

An Arizona Farmer operates an 1100 acre irrigated farm in the Red River Valley of Arizona. His principal activities are raising wheat, alfalfa, and beef. The Red River Valley Water Authority has just given its water allotments for next year (the farmer was allotted 1500 acre-feet), and the famer is busy preparing his production plan for next year. He figures that beef prices will hold at around $980 per ton and that wheat will sell at $8 per bushel. Best guesses are that he will be able to sell alfalfa at $120 per ton, but if he needs more alfalfa to feed his beef than he can raise, he will have to pay $150 per ton to get the alfalfa to his feedlot.

Some technological features of the famer’s operation are wheat yield, 70 bushels per acre; alfalfa yield, 4 tons per acre. Other features are given in the following table:

Activity

Labor, Machine Cost ($)

Water Requirements (Acre-Ft)

Land Requirements (Acres)

Alfalfa Requirements (Tons)

1 acre of wheat

$80.00

2

1

1 acre of alfalfa

$100.00

3

1

1 ton of beef

$200.00

0.1

0.1

5

Help the farmer to come up with a good production for the coming year.

– Questions based on the LP output:

How much water is being used?
How much beef is being produced?
Does the famer buy or sell alfalfa?
How much profit will the famer receive from the optimal operation of his farm?
Among all possible activities the famer might take, which is most attractive and which least attractive?
How much should the famer pay to acquire another acre-ft of water? another acre of land? What will he use the additional resource for?
What happens to the optimal planting policy if the price of wheat triples and the labor and machinery costs for wheat planting decreases by 50%?
What happens to the profit if both purchasing and selling prices of alfalfa increase by $2?
The labor and machinery costs listed may vary by up to 20% in both directions. Discuss the potential change in the current planting policy.
Do you suggest the famer to plant soybean, which currently sells for $5/bushel and each acre of land will produce 100 bushel of soybean. Other features of soybean is given below:

Activity

Labor, Machine Cost ($)

Water Requirements (Acre-Ft)

Land Requirements (Acres)

Alfalfa Requirements (Tons)

1 acre of soybean

$30

1

1

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Sonic Corporation purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX (A+)

Sonic Corporation purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX, at a cost of $27,000. The equipment has an estimated residual value of $1,500. The equipment is expected to process 255,000 payments over its three-year useful life. Per year, expected payment transactions are 61,200, year 1; 140,250, year 2; and 53,550, year 3.

Required:

1 Complete a depreciation schedule for each of the alternative methods.

(a) Straight-line

(b) Units-of-production

(c) Double-declining-balance

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Plastic Works Corporation bought a machine at the beginning of the year at a cost of $12,000 (A+)

Plastic Works Corporation bought a machine at the beginning of the year at a cost of $12,000. The estimated useful life was five years, and the residual value was $2,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production was: year 1, 3,000 units; year 2, 3,000 units; year 3, 2,000 units; year 4, 1,000 units; and year 5, 1,000 units.

Required:

1 Complete a depreciation schedule for each of the alternative methods.

(a) Straight-line

(b) Units-of-production

(c) Double-declining-balance

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Dunay Corporation is considering investing $860,000 in a project (A+)

Dunay Corporation is considering investing $860,000 in a project. The life of the project would be 6 years. The project would require additional working capital of $36,000, which would be released for use elsewhere at the end of the project. The annual net cash inflows would be $182,000. The salvage value of the assets used in the project would be $46,000. The company uses a discount rate of 13%. (Ignore income taxes.)

Required:

Compute the net present value of the project.

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Brewer Company is considering purchasing a machine that would cost $752,800 and have a useful life of 12 years (A+)

Brewer Company is considering purchasing a machine that would cost $752,800 and have a useful life of 12 years. The machine would reduce cash operating costs by $94,100 per year. The machine would have a salvage value of $107,230 at the end of the project. (Ignore income taxes.)

Required:

a. Compute the payback period for the machine.

b. Compute the simple rate of return for the machine.

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The management of an amusement park is considering purchasing a new ride for $56,000 (A+)

The management of an amusement park is considering purchasing a new ride for $56,000 that would have a useful life of 8 years and a salvage value of $7,000. The ride would require annual operating costs of $27,000 throughout its useful life. The company\’s discount rate is 10%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly because customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers.

Required:

How much additional revenue would the ride have to generate per year to make it an attractive investment?

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Lugano’s Pizza Parlor is considering the purchase of a large oven and related equipment for mixing and baking “crazy bread.” (A+)

Lugano’s Pizza Parlor is considering the purchase of a large oven and related equipment for mixing and baking “crazy bread.” The oven and equipment would cost $281,600 delivered and installed. It would be usable for about 15 years, after which it would have a 10% scrap value. The following additional information is available:

a. Mr. Lugano estimates that purchase of the oven and equipment would allow the pizza parlor to bake and sell 78,000 loaves of crazy bread each year. The bread sells for $1.50 per loaf.

b. The cost of the ingredients in a loaf of bread is 40% of the selling price. Mr. Lugano estimates that other costs each year associated with the bread would be as follows: salaries, $27,000; utilities, $5,000; and insurance, $3,000.

c. The pizza parlor uses straight-line depreciation on all assets, deducting salvage value from original cost.

Required:

1. Prepare a contribution format income statement showing the net operating income each year from production and sale of the crazy bread.

2a. Compute the simple rate of return for the new oven and equipment.

2b. If Mr. Lugano accepts any project with a simple rate of return greater than 5%, will he acquire the franchise?

3a. Compute the payback period on the oven and equipment.

3b. If Mr. Lugano accepts any investment with a payback period of less than nine years, will he acquire the franchise?

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