Sharkey's Fun Center contalns a number of electronic games as well as a miniature golf course and varlous rides located outside the building. Paul Sharkey, the owner, would like to construct a water slide on one portion of his property. Mr. Sharkey gathered the following Information about the slide: a. Water slide equipment could be purchased and Installed at a cost of $435,000. According to the manufacturer, the slide would be usable for 12 years after which it would have no salvage value. b. Mr. Sharkey would use stralght-line depreciation on the slide equipment. c. To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreciated, but they could be sold for $11,250 to an amusement park in a nearby city. d. Mr. Sharkey concluded that about 50,000 more people would use the water slide each year than have been uslng the rides. The admission price would be $4.40 per person (the same price the Fun Center has been charging for the old rides). e. Based on experlence at other water slides, Mr. Sharkey estimates that annual Incremental operating expenses for the slide would be: salarles, $89,000; Insurance, $5,200; utilitles, $14,000; and malntenance, $10,800. Required: 1. Prepare an Income statement showing the expected net operating Income each year from the water slide. 2-a. Compute the simple rate of return expected from the water slide. 2-b. Based on the above computation, would the water slide be constructed if Mr. Sharkey requlres a simple rate of return of at least 12% on all investments? 3-a. Compute the payback period for the water slide. 3-b. If Mr. Sharkey accepts any project with a payback perlod of five years or less, would the water slide be constructed? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 28 Req 3A Req 38 Prepare an income statement showing the expected net operating income each year from the water slide. Sharkey's Fun Center Income Statement Selling and administrative expenses: Total selling and administrative expenses

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Sharkey's Fun Center contalns a number of electronic games as well as a minlature golf course and varlous rides located outside the
building. Paul Sharkey, the owner, would like to construct a water slide on one portion of his property. Mr. Sharkey gathered the
following Information about the slide:
a. Water slide equlpment could be purchased and Installed at a cost of $435,000. According to the manufacturer, the slide would be
usable for 12 years after which it would have no salvage value.
b. Mr. Sharkey would use stralght-line depreclation on the slide equipment.
c. To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreclated, but they could be
sold for $111,250 to an amusement park In a nearby city.
d. Mr. Sharkey concluded that about 50,000 more people would use the water slide each year than have been using the rides. The
admission price would be $4.40 per person (the same price the Fun Center has been charging for the old rides).
e. Based on experlence at other water slides, Mr. Sharkey estimates that annual Incremental operating expenses for the slide would
be: salarles, $89,000; Insurance, $5,200; utilitles, $14,000; and malntenance, $10,800.
Requlred:
1. Prepare an Income statement showing the expected net operating Income each year from the water slide.
2-a. Compute the simple rate of return expected from the water slide.
2-b. Based on the above computation, would the water slide be constructed if Mr. Sharkey requires a simple rate of return of at least
12% on all Investments?
3-a. Compute the payback perlod for the water slide.
3-b. If Mr. Sharkey accepts any project with a payback perlod of five years or less, would the water slide be constructed?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Reg 28
Req 3A
Req 3B
Prepare an income statement showing the expected net operating income each year from the water slide.
Sharkey's Fun Center
Income Statement
Selling and administrative expenses:
Total selling and administrative expenses
Req 1
Req 2A >
Transcribed Image Text:Sharkey's Fun Center contalns a number of electronic games as well as a minlature golf course and varlous rides located outside the building. Paul Sharkey, the owner, would like to construct a water slide on one portion of his property. Mr. Sharkey gathered the following Information about the slide: a. Water slide equlpment could be purchased and Installed at a cost of $435,000. According to the manufacturer, the slide would be usable for 12 years after which it would have no salvage value. b. Mr. Sharkey would use stralght-line depreclation on the slide equipment. c. To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreclated, but they could be sold for $111,250 to an amusement park In a nearby city. d. Mr. Sharkey concluded that about 50,000 more people would use the water slide each year than have been using the rides. The admission price would be $4.40 per person (the same price the Fun Center has been charging for the old rides). e. Based on experlence at other water slides, Mr. Sharkey estimates that annual Incremental operating expenses for the slide would be: salarles, $89,000; Insurance, $5,200; utilitles, $14,000; and malntenance, $10,800. Requlred: 1. Prepare an Income statement showing the expected net operating Income each year from the water slide. 2-a. Compute the simple rate of return expected from the water slide. 2-b. Based on the above computation, would the water slide be constructed if Mr. Sharkey requires a simple rate of return of at least 12% on all Investments? 3-a. Compute the payback perlod for the water slide. 3-b. If Mr. Sharkey accepts any project with a payback perlod of five years or less, would the water slide be constructed? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Reg 28 Req 3A Req 3B Prepare an income statement showing the expected net operating income each year from the water slide. Sharkey's Fun Center Income Statement Selling and administrative expenses: Total selling and administrative expenses Req 1 Req 2A >
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