Current Attempt in ProgressPharoah Manufacturing Inc. is installing a new plant at its production facility. It has incurred these costs:Cost of the manufacturing plant (cost per supplier's invoice plus non-recoverable taxes)Initial delivery and handling costsCost of site preparationConsultants used for advice on the acquisition of the plantInterest charges paid to supplier of plant (indirect financing charges for amounts borrowed by supplier)Estimated dismantling costs to be incurred after seven yearsOperating losses before commercial productionDetermine which costs Pharoah Manufacturing can capitalize in accordance with IAS 16.According to IAS 16, following costs can be capitalized:eTextbook and MediaSave for Later$2,450,000205,000603,000108,000201,000309,000401,000Attempts: 0 of 3 usedSubmit Answer

Cost to be capitalized includes all direct costs which are necessary to bring the asset in usable…

Answered: Pharoah Manufacturing Inc. is…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 12.2.2P: Differential analysis report for machine replacement proposal Catalina Tooling Company is...

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Thornton Corporation is considering the elimination of one of its segments. The segment incurs the following fixed costs. If the segment is eliminated, the building it uses will be sold. $ 85,000 165,000 53,000 Advertising expense Supervisory salaries Allocation of companywide facility-level costs Original cost of building Book value of building Market value of building Maintenance costs on equipment Real estate taxes on building 115,000 64,000 83,000 80,000 8,000 Required Determine the amount of avoidable cost associated with the segment. Avoidable cost
Metal Recycling and Salvage receives the opportunity to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sign over the site to Enviro at no cost. Enviro intends to extract scrap metal at the site for 24 months and then will clean up the site, return the land to useable condition, and sell it to a developer. Projected costs associated with the project follow: Read the requirements2. Requirement 1. Assuming that Enviro expects to salvage 70,000tons of metal from the site, what is the total project life cycle cost? Total Life-Cycle Costs Variable costs: Metal extraction and processing Fixed costs: Metal extraction and processing Rent on temporary buildings Administration Clean-up Land restoration Selling land Total life-cycle cost Requirement 2. Suppose Enviro can sell the metal for $110 per ton and wants to earn a…
Walton Corporation is considering the elimination of one of its segments. The segment incur is eliminated, the building it uses will be sold. Advertising expense Supervisory salaries Allocation of companywide facility-level costs Original cost of building Book value of building Market value of building Maintenance costs on equipment Real estate taxes on building $ 95,000 179,000 54,000 128,000 66,000 97,000 75,000 11,000 Required Determine the amount of avoidable cost assoclated with the segment.
Differential analysis report for machine replacement proposal Catalina Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Annual nonmanufacturing operating expenses and revenue are not expected to be affected by the purchase of the new machine. Instructions List other factors that should be considered before a final decision is reached.
At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $1,800,000, and it will be depreciated on a straight-line basis over a period of six years (years 1–6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net operating working capital (NOWC) of $50,000 that will be recovered at the end…
Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a factory. Teradene made the following expenditures related to the acquisition of the land, building, and equipment for the factory: Purchase price of the land Demolition and removal of old building Clearing and grading the land before construction Various closing costs in connection with acquiring the land Architect's fee for the plans for the new building Payments to Maxtor for building construction Equipment purchased Freight charges on equipment Trees, plants, and other landscaping Installation of a sprinkler system for the landscaping Cost to build special platforms and install wiring for the equipment Cost of trial runs to ensure proper installation of the equipment Fire and theft insurance on the factory for the first year of use Assets In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $29,000 cash and…
CH Kilo Inc. is evaluating a proposal to supply warehouse space to a potential customer as well as maintain all the required warehouse records. Kilo has a storage barn not currently in use; however, it will require the installation of additional shelving and a special concrete pad for delivery truck access Kilo's existing accountant will assume the additional accounting duties and receive an additional $8,000 per annum. The potential customer will pay a fee to Kilo based on the volume of product stored. Required: Which of the following items is not a relevant consideration in deciding whether Kilo should provide the warehouse space to the potential customer? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer, Any boxes left with a question mark will be automatically graded as incorrect.) Original purchase price of the storegeben…
Identify the following costs that could be capitalized on the firm’s balance sheet (included in property, plant, and equipment). New windshield wiper blades on the company’s truck New sidewalks in front of the firm’s factory Freight expenses for new equipment installed in the factory Installation costs for the new equipment Realtor’s fees associated with land purchase Minor engine repair on the truck Engine replacement on the truck Razing or demolishing a building on newly acquired land Design costs for a new building Value-added tax Construction expenses associated with building a garage Costs required to bring the equipment to its intended location Administration and other general overhead costs Idle capacity Wasted materials, labour and other resources
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In a cost center, the manager has responsibility and authority for making decisions that affect a. costs b. investments in assets c. both costs and revenues d. revenues Keating Co. is considering disposing of equipment with a cost of $68,000 and accumulated depreciation of $47,600. Keating Co. can sell the equipment through a broker for $27,000 less 8% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $46,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is a. $11,160 b. $7,812 c. $16,740 d. $13,392 If sales are $828,000, variable costs are 68% of sales, and operating income is $278,000, what is the contribution margin ratio? a. 64% b. 36% c. 68% d. 32%
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Bonus Corporation is installing a new machine at its production facility. It has incurred these costs: Purchase price (including input tax of P300,000) P2,800,000 Initial delivery and handling costs 200,000 Costs of site preparation 600,000 Consultants used for advice on the acquisition of the machine 700,000 Installation and assembly costs 500,000 Costs of testing 100,000 Costs of training employees on how to use the machine 80,000 Estimated dismantling costs to be incurred after 7 years 300,000 Operating losses before commercial production 400,000 The cost of the machine is A. 4,900,000 B. 5,200,000 C. 4,200,000 D. 4,980,000

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