Multiple choice questions on accounts receivables and inventory.
1.All of the following are anticipated effects of a proposed project. Which of these should be included in the initial project cash flow related to net working capital?
i.An inventory decrease of $5,000
ii.An increase in accounts receivable of $1,500
iii.An increase in fixed assets of $7,600
iv.A decrease in accounts payable of $2,100
a.i and ii only
b.i and iii only
c.ii and iv only
d.i, iiand iv only
e.i,ii,iii and iv
2.Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $640,000. The lot was recently appraised at $810,000. At the time of the purchase, the company spent $50,000 to grade the lot and another $4,000 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1.2 million. What amount should be used as the initial cash flow for this building project?
a.$1,200,000
b.$1,840,000
c.$1,890,000
d.$2,010,000
e.$2,060,000
3.Walks Softly, Inc. sells customized shoes. Currently, it sells 10,000 pairs of shoes annually at an average price of $68 a pair. It is considering adding a lower-priced line of shoes which sell for $49 a pair. Walks Softly estimates it can sell 5,000 pairs of the lower-priced shoes but will sell 1,000 less pairs of the higher-priced shoes by doing so. What is the amount of the sales that should be used when evaluating the addition of the lower-priced shoes?
a.$177,000
b.$245,000
c.$313,000
d.$789,000
e.$857,000