The Markert Company won a contract to build a shopping center at a price of $300 million. The following schedule details the estimated and actual costs of construction and the actual cash collections under the contract: Estimated (Actual) Costs Cash Collections of Construction From Customer Year 1 $40,000,000 Year 2 60,000,000 Year 3 70,000,000 Year 4 30,000,000 $200,000,000 Required 1. Prepare an income statement for the Markert Company for each year assuming that the company recognizes revenue at a point in time. Year 1 Year 2Year 3 Year 4Total Revenues $60,000,000 75,000,000 75,000,000 90,000,000 $300,000,000 Less: Expenses Net Income

The Markert Company won a contract to build a shopping center at a price of $300 million. The following schedule details the estimated and actual costs of construction and the actual cash collections under the contract: Estimated (Actual) Costs Cash Collections of Construction From Customer Year 1 $40,000,000 Year 2 60,000,000 Year 3 70,000,000 Year 4 30,000,000 $200,000,000 Required 1. Prepare an income statement for the Markert Company for each year assuming that the company recognizes revenue at a point in time. Year 1 Year 2Year 3 Year 4Total Revenues $60,000,000 75,000,000 75,000,000 90,000,000 $300,000,000 Less: Expenses Net Income

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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A company is considering two mutually exclusive investments with a discount rate of 10%.The cash flows of the projects over time follows: Time Project A Project B 0 - RM300,000 - RM405,000 1 - RM387,000 RM134,000 2 - RM193,000 RM134,000 3 - RM100,000 RM134,000 4 RM600,000 RM134,000 5 RM600,000 RM134,000 6 RM850,000 RM134,000 7 - RM180,000 RM0 A. What is the Net Present Value (NPV) for each project? B. Since the projects are mutually exclusive, which project would you recommend?Justify your recommendation. C. Suppose that the projects are independent projects, which project (s) would yourecommend? Justify your recommendation.
The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $1,104,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year OfficeExpansion Server 1 $308,000 $407,000 2 308,000 407,000 3 308,000 407,000 4 308,000 407,000 5 308,000 6 308,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $385,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…
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