Chapter 13 Risk Analysis and Project Evaluation 13-1. Crusik Distribution Company thinks that there are two possible outcomes for its new facial care product: Either it will be very successful‚ or customers will not appreciate its “unique appeal.” The two outcomes are equally likely‚ but the successful outcome obviously comes with higher revenues. We can picture the situation like this: 50% 40% 30% 20% 10% 0% $1‚000‚000 $5‚000‚000 Thus Crusik’s revenues will be either $1M or $5M. The expected
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Financial Accounting (BEA 2001) Tutorials PROPERTY‚ PLANT & EQUIPMENT Question 1: Measurement at recognition; components; depreciation Olympic plc is a diversified industrial company with many different areas of operation. The following information relates to the company’s property‚ plant and equipment. The company has a 30 September year end. All the plant was purchased and brought into use on 1 October 20X1 at a cost of £800 000. The cost of testing the plant amounted to £45 000 and samples
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Historical Cost the company carries the asset on the balance sheet at the purchase cost less any depreciation taken. At the time of sale‚ the company records a gain or a loss against the purchase cost of an asset less any depreciation if applicable. For example if Tom purchased an asset for $5‚000 and estimated depreciation expense of $500 per yr for 10 yrs the cost of asset after the 1st yr less depreciation is $4500. If the market value of the asset were $4800 after one year in the open market Tom
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CHAPTER 21 Accounting for Leases ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Brief Exercises Topics Questions *1. Rationale for leasing. 1‚ 2‚ 4 *2. Lessees; classification of leases; accounting by lessees. 3‚ 5‚ 7‚ 8‚ 14 *3. Disclosure of leases. 19 *4. Lessors; classification of leases; accounting by lessors. 5‚ 6‚ 9‚ 10‚ 11‚ 12‚ 13 6‚ 7‚ 8‚ 11 *5. Residual values; bargainpurchase options; initial direct costs. 15‚ 16‚ 17‚ 18 *6
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PRICING STRATEGY Price v/s non price competition • Dettol soap is priced at retail price of Rs. 38.00 (115 gms) and Rs. 26.00 (70 gms) which is at a premium of Rs 3 and Rs. 2 to its competition (Safeguard and Lifebuoy). Discounts and allowances • RB give a special trade offer on Dettol Soap of 2% during the summer season so as to push to product into retail and an additional discount of 4 % to wholesalers to maximize loading in the channel and improved distribution when demand (consumer
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Analyzing Lease vs. Buy Dec To buy or not to buy is the question for many companies acquiring assets for their business. Equipment and other assets are extremely important when a company is trying to get off the ground in a new business. The chief executive officer would have to ask how would we finance the equipment needed‚ pay back investors‚ and make the company profitable for all. This new biotech company is seeking financial remedies in becoming a profitable company
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Solution to Case 103 IF THE COAT FITS WEAR IT – TEACHING NOTE Questions 1. Your supervisor‚ Vic Gonzales‚ has asked you to prepare a capital budgeting report indicating whether ISGC should replace the existing machine or not. Indicate how would you proceed (without making any calculations)? I would estimate the incremental cash flows over the economic life of the new machine‚ taking into consideration the after-tax salvage values of the old and new machine respectively. Changes in
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SECTION A Answer any FOUR questions from this section. Each question carries 10 marks. 1. a. Explain the following accounting concepts and illustrate each with an example: i. Historical cost ii. Stable monetary measures (5 marks) b. For each of the independent situations described below‚ list the accounting principle or concept that has been violated and give your explanation: i. Andy Company accrued interest expense on the personal bank loan of the owner at year end
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IPSAS 17—PROPERTY‚ PLANT AND EQUIPMENT Acknowledgment This International Public Sector Accounting Standard (IPSAS) is drawn primarily from International Accounting Standard (IAS) 16 (revised 2003)‚ “Property‚ Plant and Equipment” published by the International Accounting Standards Board (IASB). Extracts from IAS 16 are reproduced in this publication of the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) with the permission
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Q: Is depreciation expense or depreciation cost is fixed cost or variable cost in nature? Fixed costs: Fixed costs are such costs that do not change with the change in activity level within the relevant range. Where relevant range can be defined in terms of time or activity level. Variable costs: Variable costs are such costs that change with the change in activity level . Coming to the question‚ depreciation expense or depreciation cost can either be fixed or variable and this depends on the
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