This figure definitely could be different for different customers. 4. Suppose one of GP Manufacturing’s executives typically uses the payback as a primary capital budgeting decision tool and wants some payback information. a. What is the project’s payback period?
The retained earnings statement reconciles the beginning and ending balances of the retained earnings. Some organizations sometimes combine it with the income statement. The final amount of the retained earnings is the ending balance, which indicates why the earnings may have increased or decreased for that period. If there is a net loss, the loss is deducted from the dividends in the retained earnings (Weygandt, 2008). As for the balance sheet, it shows the assets, liabilities, and stockholder’s equity for a specified date.
Net initial investment outlay is $302,040. (Cost of new system + Installation) + (Proceeds from old equipment + Tax on proceeds + Removal cost) = Total cost + NCF (old) = 303,000 +-960 2. Tax depreciation savings = (36% tax rate) x (depreciation of each year) Depreciation for each year based on MACRS 5-year (Wikipedia) 3. Incremental cash flows = (Deprn. Tax savings + A.T. cost savings) each year [pic]2.
Financial statements for each individual prior period presented shall be adjusted to reflect correction of the period-specific effects of the error. Zumiez’s ability to determine the materiality of the error also falls in line with the rules and regulations set forth. In FASB 250-10-45-27, determining materiality for the purpose of reporting the correction of an error, amounts shall be related to the estimated income for the full fiscal year and also to the effect on the trend of earnings. Changes that are material with respect to an interim period but not material with respect to the estimated income for the full fiscal year or to the trend of earnings shall be separately disclosed in the interim
Materiality of NFP organizations should be based on the Total Assets figure. Therefore, Total Assets will be used to set materiality based on: (i) User needs and (ii) Risk. Planning materiality should therefore be set at 0.5% of Total Assets. Performance materiality should in turn be 75% of planning materiality. In calculating materiality, we have considered legal, regulatory or contractual requirements, restrictions imposed by donors and the requirements or restrictions set by grantor organizations.
This stage is used to help realise if the current financial position is likely to lead to achieving the goals you set out – this can be done through research of seeking out professional advice. The next stage is Decide – this is where you decide on your action points to achieve your goals. This can be done through deciding to use financial products to achieve your goals, setting budget to decrease expenditures or exploring increasing income or holding back on planned expenditures. Stage 3, Act, is the implementation stage. This is putting your action points from the Decide stage into action to achieve the goals laid out in the assess stage – whether it is shopping around for the best value financial products, or looking for ways to increase your income.
SciTronics had $ 75,000 of owners’ equity and earned $ 14,000 after taxes in 2008. Its return on equity was 18.67% an improvement from the 8.2% earned in 2005. Activity Ratios: How well does the company employ its assets? 1. Total asset turnover for SciTronics in 2008 can be calculated by dividing $ 244,000 into $ 159,000.
Can the firm repay its loan within a reasonable period? 3. What are the key driver assumptions of the firm’s future financial performance? What are the managerial implications of those key drivers? That is, what aspects of the firm’s activities should Koh focus on especially?
Prepaid expenses are costs that have been paid but that apply to future periods or to the production of future revenue. Examples include insurance, rent, taxes, patent, trademark and copyright. When designing the audit program the auditor should consider the nature of prepaid account balances and the risks associated with transactions flowing through the accounts. Also other assets that provide economic benefit for less than a year are classified as current assets and are called prepaid expenses. When preparing this program the auditor should consider and design audit procedures that address relevant presentation and disclosure requirements.
What typically happens is that a relevant invoice has not yet been received or a payment relating to this period was made in an earlier period. In either case variances will arise in both the month the invoice was expected and not received, and the later month when the invoice is entered but not expected. The idea of ‘Accrual accounting’ is to recognize all the income and outgoings for the period in that same period, irrespective of whether cash has passed between customer and supplier. Timing variances “reverse” because what was short this period will appear in the next, or what was extra in this period will be missing next period. i.e.