Mideque, inc. is considering a project to produce pens. it estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $24,000. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $15,000. The other yearly expense will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. the loan will be paid at the rate of $2,000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the equipment will have no salvage value at the end of its life. Assume a corporate-profits tax rate of 50 percent.

Assume that this is a replacement project. The old equipment can be sold for $10,000. It was bought five years ago for $22,000 and assumed to last for 10 years.

Obtain the initial investment?

Obtain the annual cash flow of the last period?

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Midyear on July 31st, the Digby Corporation’s balance sheet reported:Total Assets of $216.239 millionTotal Common Stock of $6.350 millionCash of $10.050 millionRetained Earnings of $48.505 million. What were the Digby Corporation’s total liabilities? Select: 1 $167.734 million. $171.434 million. $161.384 million. $151.334 million.

Midyear on July 31st, the Digby Corporation’s balance sheet reported:Total Assets of $216.239 millionTotal Common Stock of $6.350 millionCash of $10.050 millionRetained Earnings of $48.505…

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Midwest Nut Company produces cans of mixed-nuts on a high volume assembly line. Using data of last two months, it established average and range control charts to monitor the can-weight (utilizing samples of 5 cans). The control limits of X-bar and R chart are respectively as follows:X-bar Chart: UCL = 4.25 and LCL = 3.75 and R Chart: UCL = 1.00 and LCL = 0A recent sample is: 3.7; 4.1; 3.8; 4.1; and 4.0.(a) Is the process still in control? (b) Why or why not? (Show all your calculations)

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Midwest Advertising Agency handles advertising for clients under contracts that require the agency to develop advertising copy and layouts, as well as place advertisements in various media. The agency typically charges clients a commission of 15% of the media cost. The agency makes advance billings to its clients of the estimated media cost plus its 15% commission. Adjustments to these advances usually are small.

Frequently, both the billings and receipt of cash from these billings occur before the period in which the advertising actually appears in the media. A conference meeting is held between officers of the agency and the new firm of Certified Public Accountants (CPAs) recently engaged to perform annual audits. In this meeting, consideration is given to four possible points for measuring revenue:

1. At the time the advanced billing is made
2. When payment is received from the client
3. In the month when the advertising appears in the media
4. When the bill for advertising is received from the media, generally in the month following its appearance

The agency has been following the first method for the past several years, on the basis that a definite contract exists and the revenue is earned when billed. When the billing is made, an entry is prepared to record the estimated receivable and liability to the media. Estimated expenses related to the contract are also recorded. Adjusting entries are made later for any differences between the estimated and actual amounts.

As a member of the CPA firm attending this meeting, how would you react to the agency’s method of recognizing revenue? Discuss the strengths and weaknesses of each of the four methods of revenue recognition and indicate which one you would recommend the agency follow. Explain the reasons for your choice.

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(c)  Suppose that there is a cap and trade system in place (marketable emission per- mits). The firm receives 30 pollution permits and must abate and/or purchase permits to cover the remainder of its baseline emissions. Suppose that the firm is small and takes the permit price as given. If the permit price is $120 per unit, will the firm buy or sell permits? How many will it buy or sell?

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