Law and You Test 2 Flashcards

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accounting

Arlington Steel Company is a producer of raw steel and steel-related products. On January 3, 2022, Arlington enters into a firm commitment to purchase 10,000 tons of iron ore pellets from a supplier to satisfy spring production demands. The purchase is to be at a fixed price of $63 per ton on April 30, 2022. To protect against the risk of changes in the fair value of the commitment contract, Arlington enters into a futures contract to sell 10,000 tons of iron ore on April 30 for$63/ton (the current price). The contract calls for net cash settlement, and the company must report changes in the fair values of its hedging instruments each quarter.

On March 31, the price of iron ore fell to $61/ton, and then to$60/ton on April 30.

Calculate the net cash settlement at April 30, 2022.
Prepare the journal entries for the period January 3 to April 30, 2022, to record the firm commitment, necessary adjustments for changes in fair value, and settlement of the futures contract.

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accounting

Buckeye Incorporated had the following balances at the beginning of November.

\text{BUCKEYE INCORPORATED Trial Balance}\\ \begin{matrix} \text{Accounts} & \text{Debits} & \text{Credits}\\ \hline \text{Cash} & \text{$\$ 3,200$}\\ \text{Accounts Receivable} & \text{600}\\ \text{Supplies} & \text{700}\\ \text{Equipment} & \text{$9,400$}\\ \text{Accounts Payable} & \text{ } & \text{$\$ 2,000$}\\ \text{Notes Payable} & \text{ } & \text{$4,000$}\\ \text{Common Stock} & \text{ } & \text{$7,000$}\\ \text{Retained Earnings} & \text{ } & \text{900}\\ \end{matrix}

The following transactions occur in November.

\begin{matrix} \text{November 1} & \text{Issue common stock in exchange for $\$ 13,000$ cash.}\\ \text{November 2} & \text{Purchase equipment with a long-term note for $\$ 3,500$ from Spartan Corporation.}\\ \text{November 4} & \text{Purchase supplies for $\$ 1,000$ on account.}\\ \text{November 10} & \text{Provide services to customers on account for $\$ 9,000$ .}\\ \text{November 15} & \text{Pay creditors on account, $\$ 1,100$ .}\\ \text{November 20} & \text{Pay employees $\$ 3,000$ for the first half of the month.}\\ \text{November 22} & \text{Provide services to customers for $\$ 11,000$ cash.}\\ \text{November 24} & \text{Pay $\$ 1,400$ on the note from Spartan Corporation.}\\ \text{November 26} & \text{Collect $\$ 7,000$ on account from customers.}\\ \text{November 28} & \text{Pay $\$ 1,100$ to the local utility company for November gas and electricity.}\\ \text{November 30} & \text{Pay $\$ 5,000$ rent for November.}\\ \end{matrix}

Record each transaction. 2. Post each transaction to the appropriate T-accounts. 3. Calculate the balance of each account at November 30. 4. Prepare a trial balance as of November 30.

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accounting

If the working papers that accompany this book are unavailable, do not attempt to solve this exercise.

King Company produces variations of its product, a megatron, in response to custom orders from its customers. On June 1, the company had no inventories of goods in process or finished goods but held the following raw materials.


Material M	120 units @ $200	$24,000
Material R	80 units @ 160	12,800
Paint	44 units @ 72	3,168
Total cost		$39,968

On June 3, the company began working on two megatrons: Job 450 for Encinita Company and Job 451 for Fargo, Inc.

Required
Received the following employee time tickets for work in June.

Time tickets Nos. 1 to 10 for direct labor on Job 450,$40,000.
Time tickets Nos. 11 to 20 for direct labor on Job 451, $32,000.
Time tickets Nos. 21 to 24 for equipment repairs,$12.000.

Record direct labor from the time tickets on the job cost sheets and then debit indirect labor to the Indirect Labor account in the subsidiary factory overhead ledger. Do not record a journal entry at this time.

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business

Haley's Graphic Designs Inc. is considering two mutually exclusive projects. Both projects require an initial investment of $\$ 10,000$ and are typical average-risk projects for the firm. Project A has an expected life of $2$ years with after-tax cash inflows of $\$ 6,000$ and $\$ 8,000$ at the end of Years $1$ and $2$ , respectively. Project B has an expected life of 4 years with after-tax cash inflows of $\$ 4,000$ at the end of each of the next $4$ years. The firm's WACC is $10 \%$ .

a. If the projects cannot be repeated, which project should be selected if Haley uses NPV as its criterion for project selection?

b. Assume that the projects can be repeated and that there are no anticipated changes in the cash flows. Use the replacement chain analysis to determine the NPV of the project selected.

c. Make the same assumptions as in part above. Using the equivalent annual annuity (EAA) method, what is the EAA of the project selected?

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