Net operating cash flow. This cash flow is the revenue net of expenses and tax liabilities for the time period under consideration. Net salvage value. The net salvage value is the after tax net cash flow for the termination, liquidation or sale of an investment, project or business that is financially unsustainable or which the owner simply no longer wishes to keep. This
This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet. Formally retiring shares restores the balances in both the common stock account and paid-in capital - excess of par to how those balances would have looked if the shares never had been issued. Any net increase in assets produced from the sale and ensuing repurchase is reflected as Paid-in capital—share repurchase. On the other hand, any net decrease in assets resulting from the sale and subsequent repurchase is repeated as a subtraction of retained earnings. Inversely, when a share repurchase is seen as treasury stock, the cost of the treasury stock is naturally disclosed as a decrease in total shareholders’ equity.
3.1.10 Cash Budget The cash budget is “an estimation of the cash inflows and outflows for a business for a specific period of time. Cash budget are used to assess whether the entity has sufficient cash to fulfil regular operations and whether too much cash is being left in unproductive capacities”. (Reference 2) The cash budget is prepared in advance for the first 6 months, and a cash deficit of £20,364 and £2,228 were incurred in January and February. A second-hand bottling plant was purchased in January which cost £420,000. The business required £30,000 cash for working capital.
Since the Walton Work Wear line is in the production stage, its accumulated development costs should be capitalized. The Carroway Cool Top has not started it commercial production which would allow the development costs not to be amortized yet. Also interest costs on loans to generate financing for the R&D activates of a product can be capitalized rather than expensed. The capitalization of interest would allow CCL to reduce taxable income in the future when it is more profitable. I would recommend that CCL make the above changes immediately so that the financail statements are not incorrect.
Name:_______________ Part I Open-ended question (10 points; 20% of exam) ID:____________ For Quick Start the first month in business has ended. In the last days of December 2005, they already received contributed capital of € 6,000 and they obtained a five-year bank loan of € 24,000 at an annual rate of interest of 10 percent. Interest has to be paid each year on October 31. On December 31, 2005 various store equipment was purchased at a total cost of € 12,000, paid in cash. It is expected that the equipment has to be replaced after five years.
Basic flexible budgeting Centron, Inc., has the following budgeted production costs: |Direct materials |$0.40 per unit | |Direct labor |1.80 per unit | |Variable factory overhead |2.20 per unit | |Fixed factory overhead | |Supervision |$24,000 | |Maintenance |18,000 | |Other |12,000 | The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500,
Intangibles are categorized as having either a limited life or an indefinite life. The issue with intangible assests is amortization. Amortization is when a company increases (debits) Amortization Expense, and decreases (credits) the specific intangible asset. (Unlike depreciation, no contra account, such as Accumulated Amortization, is usually
5. Question: (TCO 9) It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 2,000 units at $18 each. Lannon has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?
only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements. B. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold C. a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline. D. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale. 15) Designated market value A. may sometimes exceed net realizable value. B. should always be equal to net realizable value less a normal profit margin.
Outlays are securities that are used to make purchases; or to improve an asset that is already held and that will increase the value of Caledonia Products for a length of time. Caledonia Products has allocated $100,000.00 to get production started for the company; $7,900,000.00 to purchase a new operating facility along with equipment. The cost of equipment and plant, plus shipping and installation charges, plus net working capital equals a project’s initial outlay. The cost for shipping and installation is an additional $100,000.00 resulting in $8,100,000.00 in initial cash flow. These are the main examples of capital outlay.