Question 1) The term F.O.B. means:

29 Jun Question 1) The term F.O.B. means:

Question
1) The term F.O.B. means:

2) A purchase order is used to:

3) The account used to record the purchase of goods is:
Question

A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 45% of sales. Indirect incremental costs are estimated at $95,000 a year. The project requires a new plant that will cost a total of $1,500,000, which will be a depreciated straight line over the next 5 years. The new line will also require an additional net investment in inventory and receivables in the amount of $200,000. Assume there is no need for additional investment in building the land for the project. The firm’s marginal tax rate is 35%, and its cost of capital is 10%. To receive full credit on this assignment, please show all work, including formula and calculations used to arrive at financial values. Assignment Guidelines: Using the information in the assignment description: Prepare a statement showing the incremental cash flows for this project over an 8-year period. Calculate the payback period (P/B) and the net present value (NPV) for the project. Answer the following questions based on your P/B and NPV calculations: Do you think the project should be accepted? Why? Assume the company has a P/B (payback) policy of not accepting projects with life of over 3 years.If the project required additional investment in land and building, how would this affect your decision?

Explain. Your submitted assignment (125 points) must include the following:

A double-spaced Word document of 2–3 pages that contains your calculation values, your complete calculations, any formula that you used, and your answers to the two questions listed in the assignment guidelines.

You must include your explanation of how you used Microsoft Excel for your calculations if applicable.
4) On March 30, Bailey’s Dog Bakery purchased $1,000 of merchandise on account from theWilliams Company. The goods were shipped F.O.B. shipping point. The freight charge of $80was paid by Williams Company and added to the invoice. The amount to record in theAccounts Payable account is:

5) The entry to record a payment on a $900 account within the 1% discount period wouldinclude a:

.

6) A purchase discount was recorded as a credit to the Purchases account – the remainder wascorrectly recorded. This error will cause:

.

Unit 4 Examination

135

Introduction to Accounting

7) The freight paid on equipment purchased F.O.B. shipping point was debited to the Freight-Inaccount. This error will cause:

8) A purchase discount that was earned and taken was never recorded. This error will cause:

.

9) Returned merchandise paid for within the discount period for a cash refund. This will berecorded with:

Answer D) a debit to an asset.

10) Purchase returns and allowances:

11) Returned merchandise for credit. The perpetual inventory system is in use. This will:

12) Under the perpetual system, the purchase of merchandise is recorded by a(n):

.

Unit 4 Examination

136

Introduction to Accounting

13) The inventory method where the cost flows tend to follow the physical flows are:

14) The inventory method that matches old costs with current selling prices is:

15) The advantage of the LIFO method is:

16) The principle of consistency states that:

17) If the ending inventory is overstated,

18) The ending inventory for this year is understated. This error would cause:

.

Unit 4 Examination

137

Introduction to Accounting

19) A business is using LIFO when FIFO should have been used during an inflationary period. Thiserror would cause:

20) Which of the following is an example of a land improvement?

21) Which depreciation method deducts residual value when computing depreciation expense?

22) Capital expenditures would include:

23) Greetings Online disposed of a van that cost $22,000 with accumulated depreciation of $15,000. The journal entry would be to:

.

24) All of the following are intangible assets except:

Unit 4 Examination

138

Introduction to Accounting

25) When calculating declining balance depreciation, the straight-line rate was used instead ofdouble the straight-line rate. In the first year of ownership, this error would cause: