Accounting assignment

| March 14, 2016

E11-1 If Halley Industries

reimburses employees who earn master’s degrees and who agree to remain with the

firm for an additional 3 years, should the expense of the tuition reimbursement

be categorized as a capital expenditure or an operating expenditure?

E11-2 Iridium Corp. has spent

$3.5 billion over the past decade developing a satellite-based

telecommunication system. It is currently trying to decide whether to spend an

additional $350 million on the project. The firm expects that this outlay will

finish the project and will generate cash flow of $15 million per year over the

next 5 years. A competitor has offered $450 million for the satellites already

in orbit. Classify the firm’s outlays as sunk costs or opportunity costs, and

specify the relevant cash flows,

E11-3 Canvas Reproductions, Inc.,

has spent $4,500 dollars researching a new project. The project requires

$20,000 worth of new machinery, which would cost $3,000 to install. The company

would realize $4,500 in after-tax proceeds from the sale of old machinery. If

Canvas’s working capital is unaffected by this project, what is the initial

investment amount for this project?

E11-4 A few years ago, Largo

Industries implemented an inventory auditing system at an installed cost of

$175,000. Since then, it has taken depreciation deductions totaling $124,250.

What is the system’s current book value? If Largo sold the system for $110,000,

how much recaptured depreciation would result?

E11-5 Bryson Sciences is planning

to purchase a high-powered microscopy machine for $55,000 and incur an additional

$7,500 in installation expenses. It is replacing similar microscopy equipment

that can be sold to net $35,000, resulting in taxes from a gain on the sale of

$11,250. Because of this transaction, current assets will increase by $6,000

and current liabilities will increase by $4,000. Calculate the initial

investment in the high-powered microscopy machine.

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