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Stella [2.4K]
2 years ago
5

A company has a process that results in 36000 pounds of Product A that can be sold for $8 per pound. An alternative would be to

process Product A further at a cost of $241200 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?
Business
1 answer:
RoseWind [281]2 years ago
6 0

Answer:

Sell now, the company will be better off by $25,200

Explanation:

The effect of the action of shown below:-

Profits if sold now = Product Pound A × Sold pound

= 36,000 pounds × $8

= $288,000

If processed further Profits

= (36,000 x $14) - $241,200

= $262,800

Selling product A now = Profits if sold now - Further Profits

= $288,000 - $262,800

= $25,200

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Answer:

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The board of directors declared cash dividends totaling $585,000 during the current year. The comparative balance sheet indicate
Lelechka [254]

Answer:

$606,375

Explanation:

The computation of the amount of cash payments to stockholders is shown below:

= Beginning dividend payable  + cash dividend declared - ending dividend payable

= $167,625 + $585,000 - $146,250

= $606,375

We simply added the dividend declared amount and deducted the ending dividend payable to the beginning dividend payable so that the accurate amount can come.

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Read 2 more answers
Whispering Winds Corp. has the following transactions during August of the current year. Aug. 1 Issues shares of common stock to
k0ka [10]

Answer:

Aug. 1 Issues shares of common stock to investors in exchange for $10,800.

<u>Accounting equation:</u>

Asset + 10,800

Equity +10,800

<u>Journal entry:</u>

cash   18,000 debit

  common stock   18,000 credit

Aug. 4 Pays insurance in advance for 3 months, $1,200.

<u>Accounting equation:</u>

Asset  + 1,200

Assets <u>- 1,200</u>

Net              0

<u>Journal entry:</u>

prepaid rent    1,200 debit

          cash              1,200 credit

Aug. 16 Receives $730 from clients for services rendered.

<u>Accounting equation:</u>

Asset  + 730

Equity +730

<u>Journal entry:</u>

cash       730 debit

  revenues   730 credit

Aug. 27 Pays the secretary $580 salary

<u>Accounting equation:</u>

Asset  - 580

Equity - 580

<u>Journal entry:</u>

salaries expense  580 debit

         cash                    580 credit

Explanation:

We need to disclose how the impact in the accounting equation and the journal entry should be done:

Aug 1st the common stock is an equity account that is increasing

we receive cash that is an asset

August 4th we are using our cash to pay in advance the rent.

this gives a right to use the rental space for 3-months thus, it is not an expense is a new asset. There is no change in the accounting equation only the composition of assets changed.

August 16th we recognize earnings through revenues account this increases the equity of the company as well as assets.

August 27th in this case we pay the salaries which are an incurred cost, therefore, expense. This decreases equity.

We also use cash making assets to decrease as well.

6 0
2 years ago
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternat
Juli2301 [7.4K]

Answer:

1. Net present value of Project A = -41,449.96

2. Net present value of Project B = $143,746.85

3. I would recommend that company accept Project B.

Explanation:

Note: This question is not complete as the requirement are omitted. The requirements are therefore provided to complete the question before answering it as follows:

Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:

                                                                       Project A           Project B

Cost of equipment required                         $ 135,000                $ 0

Working capital investment required                 $ 0               $ 135,000

Annual cash inflows                                       $ 25,000           $ 63,000

Salvage value of equipment in six years        $ 9,800                $ 0

Life of the project 6 years 6 years

The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%.

Required:

1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)

2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)

3. Which investment alternative (if either) would you recommend that the company accept?

The explanation of the answers is now provided as follows:

1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)

Cost of equipment required = $135,000

Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:

PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $25,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $89,729.62

The present value (PV) of the salvage value can be calculated as follows:

PV of salvage value = Salvage value / (1 + + discount rate)^Project life = $9,800 / (1 + 0.17)^6 = $3,820.42

Net present value of Project A = PV of annual cash inflow + PV of salvage value - Cost of equipment required = $89,729.62 + $3,820.42 - $135,000 = -41,449.96

2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)

Working capital investment required = $135,000

Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:

PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $63,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $226,118.64

The present value (PV) of the Working capital investment required can be calculated as follows:

PV of Working capital investment required = Working capital investment required / (1 + + discount rate)^Project life = $135,000 / (1 + 0.17)^6 = $52,628.21

Net present value of Project B = PV of annual cash inflow + PV of Working capital investment required - Working capital investment required = = $226,118.64 + $52,628.21 - $135,000 = $143,746.85

3. Which investment alternative (if either) would you recommend that the company accept?

From parts 1 and 2 above, we have:

Net present value of Project A = -41,449.96

Net present value of Project B = $143,746.85

Since the Net present value of Project A is negative, it should be rejected.

Since the Net present value of Project B is positive, it should be accepted.

Therefore, I would recommend that company accept Project B.

6 0
3 years ago
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