1. A subsidiary sells merchandise to its parent at a markup of 30% on cost. In the current year, the parent paid $1,170,000 for merchandise received from the subsidiary. By year-end, the parent has sold $975,000 of the merchandise to outside customers for $1,200,000, but still holds the other $195,000 in its ending inventory. The parent did not have any merchandise purchased from the subsidiary in its beginning inventory. Which statement is true concerning how the above information is reported on the consolidated financial statements for the current year? A. Consolidated cost of goods sold should be $750,000. B. Consolidated cost of goods sold should be $975,000. C. Consolidated sales should be $1,170,000. D. The consolidated ending inventory balance should be $195,000.

Posting references on the journal should be a. made when journalizing. b. entered when the journal is totaled. c. entered when posting to the ledger. d. entered in alphabetical order.

Franklin painting company is considering whether to purchase a new spray paint machine that costs $4,800. the machine is expected to save labor, increasing net income by $720 per year. the effective life of the machine is 15 years according to the manufacturer’s estimate. required determine the unadjusted rate of return based on the average cost of the investment.

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?