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NPV of Torrence Hardware investment; entry for job completion

1. Six years ago, Torrence Hardware paid a contractor $45,000 to expand the store. At that time, the company calculated a net present value of about $6,000 for the expansion. Now, the company believes that the investment increased annual cash inflows by $8,000 per year for each of the six years. Torrence has a desired rate of return of 10%. What was the net present value actually achieved for this capital investment?

2. The entry to record the completion of a job in a job costing system would cause

a. An increase to the cost of goods manufactured account.
b. A decrease to the work in process inventory account.
c. An increase to the cost of goods sold account.
d. An increase in net income.

3. Ortiz Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During 2012, Ortiz used $1,200 of direct raw materials for job #132. The recognition of this event would reflect an increase in which of the following accounts?

a. Raw materials inventory
b. Finished goods inventory
c. Work in process inventory
d. Cost of goods sold

4. During 2012, Ortiz applied $14,500 of estimated overhead cost to production. Actual overhead costs were $14,325. The recognition of this transaction will:

a. Decrease total assets and total liabilities.
b. Decrease cost of goods sold.
c. Increase stockholder's equity.
d. Decrease cost of goods sold and increase stockholder's equity

5. Kenyon Company had 800 units of product in its work in process inventory at the beginning of the period. During the period 3,000 additional units of product were started. At the end of the period there were 1,500 units of product in the work in process account. The ending work in process inventory was estimated to be 30% complete. The beginning work in process inventory had a balance of $2,000. There were $42,000 of product costs added to work in process during the period. The amount of cost in ending work in process inventory is:

Solution Summary

NPV of Torrence Hardware investment, entry for job completion, raw materials used and overhead costs are examined.