} inces Home Properties is developing a subdivision that includes 370 home lots. The 160 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 210 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $45,000 and for each Hilltop lot is $106,000. The developer acquired the land for $1,600,000 and spent another $3,100,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,700,000 to the Canyon section and the Hilltop section using the value basis of allocation (Do not round your intermediate calculations.) Canyon section Hilltop section Totals Sales Value L Numerator Percent of Sales Value Denominator % of Sales Value 0 0 0 Cost to Allocate Allocated Cost Quantity of Lots 160 210

} inces Home Properties is developing a subdivision that includes 370 home lots. The 160 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 210 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $45,000 and for each Hilltop lot is $106,000. The developer acquired the land for $1,600,000 and spent another $3,100,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,700,000 to the Canyon section and the Hilltop section using the value basis of allocation (Do not round your intermediate calculations.) Canyon section Hilltop section Totals Sales Value L Numerator Percent of Sales Value Denominator % of Sales Value 0 0 0 Cost to Allocate Allocated Cost Quantity of Lots 160 210

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Home Properties is developing a subdivision that includes 340 home lots. The 200 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 140 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $47,000 and for each Hilltop lot is $96,000. The developer acquired the land for $1.700,000 and spent another $2,700,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,400,000 to the Canyon section and the Hilltop section using the value basis of allocation. (Do not round your intermediate calculations.) Canyon section Hilltop section Totals Sales Value Numerator Percent of Sales Value Denominator % of Sales Value 0 0 0 Cost to Allocate Allocated Cost Quantity of Lots
Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 11,300 square yards. Bid A: A surface that costs $5.25 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface. Bid B: A surface that costs $10.75 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 12 cents per square yard. Click here to view factor tables. Compute present value of the bids. You may assume that the cost of capital is 12%, that the annual maintenance…
The Blowing Rock Partnership purchased land for $1,200,000 with plans to build a spa on the site. The partnership tore down several buildings on the property for $20,000. Salvaged materials with a cost of $6,000 will be repurposed in the spa. Trees were removed for $5,000 and drainage was added for $30,000. The area was fenced for $41,000. A preliminary consultation with an architect cost $2,500 and legal fees of $3,200 were paid in connection with changing the zoning of the property. What accounts will be debited for these costs? O Land, $1,249,000; Land Improvements, $41,000; Building, $5,700 O Land, $1,235,000; Land Improvements, $55,000; Architect Expense, $2,500,000; Legal Expense, $3,200 Land, $1,255,000; Land Improvements, $41,000; Building, $11,700 O Land, $1,249,000; Land Improvements, $41,000; Building, $2,500; Legal Expense, $3,200
MIRR unequal lives. Grady Enterprises is looking at two project opportunities for a parcel of land the company currently owns. The first project is a restaurant, and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of $1,470,000 with cash flows over the next six years of $240,000 (year one). $280,000 (year two), $280,000 (years three through five), and $1,700,000 (year six), at which point Grady plans to sell the restaurant. The sports facility has the following cash flows: an initial cost of $2,450,000 with cash flows over the next four years of $360,000 (years one through three) and $3,120,000 (year four), at which point Grady plans to sell the facility. The appropriate discount rate for the restaurant is 9.5% and the appropriate discount rate for the sports facility is 11.5%. What are the MIRRS for the Grady Enterprises projects? What are the MIRRS when you adjust for the unequal lives? Do the MIRR adjusted for unequal lives…
Home Properties is developing a subdivision that includes 470 home lots. The 170 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 300 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $51,000 and for each Hilltop lot is $98,000. The developer acquired the land for $2,400,000 and spent another $2,000,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,400,000 to the Canyon section and the Hilltop section using the value basis of allocation. Note: Do not round your intermediate calculations. Canyon section Hilltop section Totals Sales Value Numerator Percent of Sales Value Denominator % of Sales Value Cost to Allocato Allocated Cost
The city of Columbia is considering extending the runways of its municipal airport so that commercial jets can use the facility. The land necessary for the runway extension is currently a farmland that can be purchased for $350,000. Construction costs for the runway extension are projected to be $600,000, and the additional annual maintenance costs for the extension are estimated to be $22,500. If the runways are extended, a small terminal will be constructed at a cost of $250,000. The annual operating and maintenance costs for the terminal are estimated at $75,000. Finally, the projected increase in flights will require the addition of two air traffic controllers at an annual cost of $100,000. Annual benefits of the runway extension have been estimated as follows (shown): Apply the B–C ratio method with a study period of 20 years and a MARR of 10% per year to determine whether the runways at Columbia Municipal Airport should be extended.
A community is looking to build a dam over a stretch of river that is currently being used for recreation. The dam will generate electricity. The dam will have a useful life of 50 years after which its reservoir will be full of sediment and the dam will need to be removed. The following are the characteristics of the dam:Initial cost: $350,000,000Electricity produced: 200,000 MWh per year at $150/MWh Value of recreation lost: $20,000,000 per year a. If the social discount rate is a constant 2% per year, is the dam a good idea? Show your work and explain your rationale.
Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $335,000, has a four-year life, and requires $129,000 in pretax annual operating costs. System B costs $415,000, has a six-year life, and requires $123,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. The tax rate is 24 percent and the discount rate is 9 percent. Calculate the NPV for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) System A System B
A private gym is looking at a new set of sports equipment with an installed cost of $450,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sports equipment can be scrapped for (TIP: "scrapped for" = sold for) $55,000. The sports equipment will save the gym $140,000 per year in pretax operating costs, and the equipment requires an initial investment in net working capital of $25,500. If the tax rate is 24 percent and the discount rate is 12 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
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Acme Investors is considering the purchase of the undeveloped Baker Tract of land. It is currently zoned for agricultural use. If purchased, however, Acme must decide how to have the property rezoned for commercial use and then how to develop the site. Based on its market study, Acme has made estimates for the two uses that it deems possible, that is, office or retail. Based on its estimates, the land could be developed as follows: Rentable square feet Rents per square foot Operating expense ratio Average growth in NOI per annum Required return (r) Total construction cost per square foot Office 100,000 $ 42.00 Required: Which would be the highest and best use of this site? Which would be the highest and best use of this site? 40% 3% 13% $118 Retail 80,000 $ 52.50 50% 3% 14% $118
Washington County’s Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board’s decision appear below. Cost of acquiring additional land for runway $ 70,000 Cost of runway construction 200,000 Cost of extending perimeter fence 29,840 Cost of runway lights 39,600 Annual cost of maintaining new runway 28,000 Annual incremental revenue from landing fees 40,000 In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $100,000. The old snowplow could be sold now for $10,000. The new, larger plow will cost $12,000 more in annual operating costs. Second, the County Board of Representatives believes that the…