Accounting Expert Answers & Study Resources : Page 120

48) Tex Corporation trades in a Class 10 (30%) asset during the current year. The opening UCC balance in the Class 10 pool is $420,000. Tex trades in an asset for $25,000, which is deducted from the $125,000 price of the new machine (also Class 10). The appropriate tax rate.

7) No matter how low the transfer price, the manager of the selling division should sell the division's product to other company divisions in the interests of overall company profitability. 8) The costs used in cost-based transfer prices can only be actual costs. 9) Companies may approach tax authorities to.

19) Under what conditions would transferring products or services at market prices lead to optimal decisions within the organization? A) when the immediate market is a monopoly B) when there is minimal interdependence between subunit divisions C) when there is excess capacity D) when the immediate market is not a monopoly, and there is.

21) Canada, like most taxing authorities, uses different methods for calculating depreciation for tax purposes. The Income Tax Act uses which of the following methods? A) accelerated amortization B) straight-line and accelerated amortization C) straight-line, double declining balance, and accelerated amortization D) straight-line and declining balance E) double declining balance and accelerated amortization only 22) Wilf.

21) Which of the following is NOT a responsibility centre within an organization, whether centralized or decentralized? A) cost centre B) profit centre C) revenue centre D) savings centre E) investment centre 22) All of the following are benefits of decentralization EXCEPT A) it creates greater responsiveness to local needs. B) it decreases management and worker morale. C) it.

23.3   Assess the market-based transfer price method. 1) When the intermediate market is perfectly competitive, interdependencies of subunits are minimal, and there are additional costs to the corporation as a whole in using the market instead of transacting internally. 2) When demand outstrips supply, market prices may drop below historical averages. These.

6) The differential approach is often considered superior to the total project approach to capital budgeting A) because it is easier to select the components for the model. B) because it uses only net cash flows instead of gross cash flows. C) for all large investment decisions. D) because it is faster if analyzing.

15) Bacon Jewelers are interested in buying a new stone-polishing machine for $25,000. The new machine will reduce stone polishing time substantially and annual operating costs are expected to be only $5,000. The current machine, with a fair market value of $10,000 and a book value of $15,000, has annual.

21) Crofton Inc. is evaluating new machinery in its foundry. The machinery would replace existing equipment. The new machinery would cost $230,000, would last 5 years, and would have a salvage value of $28,000. The existing machinery currently has a net book value of $52,000 and could be sold for.

23.1   Integrate the accounting internal control system assurance framework with existing legislation. 1) A management control system is a means of gathering and using information to aid and coordinate the process of making planning and control decisions throughout the organization, and to guide employee behaviour. 2) Subunit managers are better informed about.

42) Bedtime Bedding Ltd. manufactures pillows. The Cover Division makes covers and the Assembly Division makes the finished products. The covers can be sold separately for $5.00. The pillows sell for $6.00. The information related to manufacturing for the most recent year is as follows: 43) Sportswear Ltd. manufactures socks. The.

61) Outline and discuss the steps involved in making decisions on performance measures. 1.Identify and align accounting performance measures with financial goals. 2.Decide on time horizons appropriate for each performance measure. 3.Decide on how to define the components in each performance measure. 4.Decide on an appropriate measurement method for each performance measure. 5.Decide on criteria/targets.

  9) The Production Division has no alternative use for the facilities used to manufacture the stuffing. What is the monthly operating income advantage (disadvantage) if the goods are purchased internally? A) $400,000 B) $640,000 C) $240,000 D) $(240,000) E) $(400,000) 10) What is the monthly operating advantage (disadvantage) of purchasing the goods internally assuming the Production.

27) Assume 100,000 kilograms are transferred from the Production Division to the Distribution Division for a transfer price of $0.40 per kilogram. The Distribution Division sells the 100,000 kilograms at a price of $0.55 each to customers. What is the operating income of both divisions together? A) $10,000 B) $15,000 C) $20,000 D).

30) What is the purpose of the internal control system within an organization? 31) Discuss some of the recent legislation and frameworks relating to assurance and internal controls. 23.2   Apply transfer-pricing processes. 1) Products transferred between subunits within an organization are considered intermediate products. 2) Department A charges Department B $1,350 for copying services.

40) Next Service Centre is considering purchasing a new computer network for $82,000. It will require additional working capital of $13,000. Its anticipated eight-year life will generate additional client revenue of $33,000 annually with operating costs, excludingdepreciation, of $15,000. At the end of eight years, it will have a salvage.

72) Coptermagic Company supplies helicopters to corporate clients. Coptermagic has two sources of funds: long term debt with a market and book value of $32 million issued at an interest rate of 10%, and equity capital that has a market value of $18 million (book value of $8 million). The.

13) Good Bread Bakery installed an oven costing $100,000 on January 1 of the current year. Due to unexpected advances in technology, the equipment's value was reduced to $24,000 in only one week. The equipment is class 8 which has a CCA rate of 20% for tax purposes. The incremental.

41) A company has total assets of $500,000, a required rate of return of 10%, and operating income for the year was $200,000. What is the residual income? A) $150,000 B) $200,000 C) $250,000 D) $480,000 E) $175,000 42) Which of the following performance measures is more likely to promote goal congruence? A) inventory turnover B) marginal income C).

34) Walton Industries has two divisions: Machining and Assembly. The Assembly Division is looking to source 20,000 units annually of specialized component product from Machining Division. The special components have variable costs of $260 per unit in variable production costs. The Machine Products Division has a bid from an outside.

11) Management control systems motivate managers and other employees to exert effort through a variety of rewards tied to the achievement of goals. 12) A benefit of decentralization should be increased motivation of subunit managers. 13) One benefit of centralization is an increase in development of an experienced pool of.

69) Capital Investments has three divisions. Each division's required rate of return is 15 percent. Planned operating results for 2011 are: a.Compute the current ROI for each division. b.Compute the current residual income for each division. c.Rank the divisions according to their current ROIs and residual incomes. d.Determine the effects after adding the new.

16) What will be the sales figures for years one and two, respectively, assuming the owner uses the nominal rate approach and there is no growth in sales? A) $880,000 and $968,000 B) $904,000 and $1,021,520 C) $824,000 and $848,720 D) $906,400 and $1,026,951 E) $906,400 and $1,113,920 17) When cash flows are stated in real.

11) A company is considering purchasing a new machine, at a cost of $50,000. This amount will be written off over 5 years at $10,000 per year. The company will have to increase its accounts receivable by $4,000 in the first year. The disposal value of the machine being replaced.

23.5   Analyze income tax considerations in multinational transfer pricing. 1) Additional factors that arise in multinational transfer pricing include tariffs and customs duties levied on imports of products into a country. 2) It is possible to increase the overall after-tax profit of a multinational corporation by adjusting transfer prices. 3) A Canadian.

44) Fisher Ltd. is considering the purchase of new equipment. Details of the investment follow: a.Calculate payback. b.Calculate accrual accounting rate of return based on the initial investment. c.Calculate the net present value. a. b. c. 45) Hiroshima Inc. is evaluating 3 investment alternatives. Each alternative requires a cash outflow of $176,000 and is to.

10) The Assembly Division of Canadian Car Company has offered to purchase 90,000 batteries from the Electrical Division for $104 per unit. At a normal volume of 250,000 batteries per year, production costs per battery are as follows: a.Should the Electrical Division manager accept the offer? Explain. b.From the company's perspective, will.

52) Johnson's Mini Mart is considering the purchase of a new electronic bar code scanner that will keep detailed records of every sale transaction. The scanner is likely to have little effect on operating revenues and expenses. Its acquisition is primarily for increasing management information about sales. The scanner costs.

6) Declines in the general purchasing power of the dollar will inflate future cash flows above what they would have been without inflation. 7) The Columbian Coffee Company is planning on purchasing a special coffee grinding machine that costs $30,000 and is in a CCA class with a 20% rate. The.

41) A new machine will cost $720,000. It is in a CCA class pool that uses a declining balance rate of 20%. The company's tax rate is 42% and it requires a 12% rate of return on investments. Calculate the cash savings from the tax shield the first year assuming.

21.4   Assess the complexities in capital budgeting within an interdependent set of value-chain business functions. 1) Companies should make decisions concerning investing in computer-integrated technology, based solely on the relevant costs. 2) "Faster response to market changes" is a benefit of computer-integrated technology. 3) The accrual accounting rate of return for evaluating performance.

29) The Surrey Division of Columbia Ltd. has approached the Burnaby Division and requested that it supply 25,000 units of the component. The Burnaby Division will save $3 per unit of direct materials costs for the components manufactured for the Surrey Division. Assuming Burnaby Division has idle capacity, what is.

18) The Toronto Deli & Cafeteria adjoins a large university and receives mostly student customers. It recently purchased a new electronic scanner for student debit card purchases at a cost of $20,000. Amortization has been recorded for one year with six more years remaining. The cafeteria owner has just returned.

22.1   Analyze the impact of income taxes on operating and capital cash flows. 1) After-tax savings from an operating cash outflow are calculated by multiplying the cash flow by (1 - t), where t = the tax rate. 2) The Income Tax Act does not permit a company to deduct depreciation.

21) Which of the following incorporates the amount of investment into a performance measure? A) dividend income B) residual income C) return on investment D) both residual income and return on investment E) both dividend income and residual Use the information below to answer the following question(s).   Berger Publishing has two divisions which operate autonomously. Their results.

19) Book & Bible Bookstore desires to buy a new coding machine to help control book inventories. The machine sells for $36,586 and requires working capital of $4,000. Its estimated useful life is five years and will have a salvage value of $4,000. Recovery of working capital will be $4,000.

10) Many new capital projects are investments in new technologies. Both benefits and costs of these new technologies are hard to estimate. 21.5   Apply the concept of defensive strategic investment to the capital budgeting process. 1) Net present value can be used to examine the effects of alternative ways of increasing customer.

37) If the Assembly Division sells 1,000 air conditioners at a price of $750.00 per air conditioner to customers, what is the operating income of both divisions together? A) $200,500 B) $207,000 C) $194,000 D) $165,750 E) $230,500 38) For each of the following transfer price descriptions or operating situations, tell which of the general.

11) The first step in designing accounting based performance measures is to choose performance measures that align with top management's financial goals. 12) Return on investment is also called the accrual accounting rate of return. 13) Investment turnover is calculated by dividing investments by revenues. 14) Return on sales is calculated.

24.1   Analyze and evaluate alternative measures of financial performance. 1) Many common performance measures rely on internal financial and accounting information. 2) Some companies present financial and non-financial performance measures for various organization units in a single report called the financial performance scorecard. 3) In establishing performance measures and compensation policy, the issues.

16) EIF Manufacturing company needs to overhaul its drill press or buy a new one. The facts have been gathered, and are as follows: 17) ABC Boat Company is interested in replacing a moulding machine with a new improved model. The old machine has a salvage value of $20,000 now and.

31) What is the balance in the Class 8 pool after the addition of the new equipment? A) $350,000 B) $410,000 C) $450,000 D) $430,000 E) $460,000 32) What is the CCA claim in year 1? A) $3,500 B) $7,000 C) $8,000 D) $16,000 E) $18,400 33) What are the tax savings in year 2 from the investment? A) $3,500 B) $7,000 C) $8,000 D) $5,040 E).

  17) What is the transfer price per litre assuming the method used is 175% of variable costs? A) $10.50 B) $12.00 C) $17.50 D) $24.50 E) $12.50 18) What is the transfer price per litre from the Production Division to the Refining Division assuming the method is 120% of full costs? A) $16.80 B) $12.00 C) $9.50 D) $7.20 E) $12.50 19).

Answer the following question(s) using the information below:   Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. Springfield.

65) An art distribution company has three divisions which operate autonomously. Their results for 2010 were as follows: a.Compute each division's ROI. b.Compute each division's residual income. c.Rank each division by both ROI and residual income. d.Which division had the best performance in 2011? Why? a. b. c. d.As to which division was the best, it is.

11) Depreciation tax deductions result in tax savings that partially offset the cost of acquiring the capital asset. 12) The use of an accelerated method of depreciation for tax purposes would usually increase the present value of the investment. 13) In the net present value (NPV) method, after-tax cash flows.

21.3   Apply the concept of relevance to DCF methods of capital budgeting. 1) Initial machine investment costs include cash outflows for installation and transportation. 2) Relevant cash flows are expected future cash flows that differ among the alternative uses of investment funds. 3) In determining whether to keep a machine or replace.

46) Explain what transfer prices are, and what are the four criteria used to evaluate them? 47) Briefly explain each of the three general methods used to determine a transfer price. 48) Briefly describe the arm's length principle and how it applies to transfers among international divisions. 49) Transfer prices among.

31) An automotive dealership, with a book value of $3,000,000, and total assets of $5,000,000, has a long history of earning 18%. Last year, the company earned $900,000. The owner is considering acquiring another dealership in a nearby town. If the expansion increases income by 50%, what is the maximum.

11) A company has a plant in a high tax jurisdiction that produces products for a facility in a low tax jurisdiction. Suggest a strategy, including transfer prices, which will result in the lowest tax for the overall corporation. 12) Empire Ltd. has two divisions. Division C is located in.