AP13-11A The comparative balance sheets for Gould Company as of December 31 are
ID: 2367564 • Letter: A
Question
AP13-11A The comparative balance sheets for Gould Company as of December 31 are presented below. GOULD COMPANY Comparative Balance Sheets December 31 Assets 2011 2010 Cash $ 70,830 $ 45,140 Accounts receivable 43,720 62,100 Inventory 151,310 141,750 Prepaid expenses 15,130 21,410 Land 104,690 130,050 Equipment 228,200 155,310 Acc. depr. - equipment (45,290) (34,500) Building 199,910 199,910 Acc. depr. - building (60,130) (40,090) Total $708,370 $681,080 Liabilities and Stockholders' Equity Accounts payable $ 48,050 $ 39,610 Bonds payable 260,090 300,340 Common stock, $1 par 199,550 159,300 Retained earnings 200,680 181,830 Total $708,370 $681,080 Additional information: Operating expenses include depreciation expense of $41,940 and charges from prepaid expenses of $6,280. Land was sold for cash at book value. Cash dividends of $18,510 were paid. Net income for 2011 was $37,360. Equipment was purchased for $94,900 cash. In addition, equipment costing $22,010 with a book value of $10,900 was sold for $6,110 cash. Bonds were converted at face value by issuing 40,250 shares of $1 par value common stock. Prepare a statement of cash flows for the year ended December 31, 2011, using the indirect method. (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. If amount decreases cash flow, use either a negative sign preceding the number eg. -45 or parentheses eg (45).) GOULD COMPANY Statement of Cash Flows For the Year Ended December 31, 2011 Cash flows from operating activities $ Adjustments to reconcile net income to net cash provided by operating activities $ Net cash by operating activities Cash flows from investing activities Net cash by investing activities Cash flows from financing activities Net cash by financing activities Net in cash Cash at beginning of period Cash at end of period $ Noncash investing and financing activities $ AP12-5A Goldberg Corp. is thinking about opening a soccer camp in southern California. To start the camp, Goldberg would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year the camp would be run for 8 sessions of 1 week each. The company would hire college soccer players as coaches. The camp attendees would be male and female soccer players ages 12-18. Property values in southern California have enjoyed a steady increase in value. It is expected that after using the facility for 20 years, Goldberg can sell the property for more than it was originally purchased for. The following amounts have been estimated. Cost of land $309,000 Cost to build dorm and dining facility $618,000 Annual cash inflows assuming 150 players and 8 weeks $978,500 Annual cash outflows $865,200 Estimated useful life 20 years Salvage value $1,545,000 Discount rate 8% Calculate the net present value of the project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125. Round computations for Discount Factor to 5 decimal places.) $ Should the project be accepted? Show Solution To gauge the sensitivity of the project to these estimates, assume that if only 125 campers attend each week, annual cash inflows will be $824,000 and annual cash outflows will be $793,100. What is the net present value using these alternative estimates? Discuss your findings. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125. Round profitability index to 2 decimal places, e.g. 10.50. Round computations for Discount Factor to 5 decimal places.) $ Should the project be accepted? Show Solution Assuming the original facts, what is the net present value if the project is actually riskier than first assumed, and a 11% discount rate is more appropriate? (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125. Round profitability index to 2 decimal places, e.g. 10.50. Round computations for Discount Factor to 5 decimal places.) $ Should the project be accepted? Show Solution Assume that during the first 5 years the annual net cash flows each year were only $46,350. At the end of the fifth year the company is running low on cash, so management decides to sell the property for $1,339,000. What was the actual internal rate of return on the project? (Round answer to 0 decimal places, e.g. 125.) %Explanation / Answer
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