1 Mountain Gear has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $100,000. The old machines presently have a book value of $60,000 and a market value of $6,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $50,000 and have operating expenses of $9,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $15,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $5,000 a year. Select the true statement.

The company will be $11,000 better off over the 5-year period if it replaces the old equipment.

The company will be $20,000 better off over the 5-year period if it keeps the old equipment.

The company will be $12,000 better off over the 5-year period if it replaces the old equipment.

The company will be $6,000 better off over the 5-year period if it replaces the old equipment.

2.

Markham Company has completed its sales budget for the first quarter of 2014. Projected credit sales for the first four months of the year are shown below: The company's past records show collection of credit sales as follows: 40% in the month of sale and the balance in the following month. The total cash collection from receivables in March is expected to be:

$18,000.

$45,000.

$41,400.

$39,600.

3.

Skymont Company wants an ending inventory each month equal to 30% of that month's cost of goods sold. Cost of goods sold for February is projected at $45,000. Ending inventory at the end of January was $12,000. Based on this information, purchases for February would be:

$31,500.

$46,500.

$43,500.

$33,000.

4.

Hilliard Company budgeted the following transactions for April 2014: The beginning cash balance was $50,000. The company desires to have a $25,000 ending cash balance. What is the amount of the cash surplus or shortage?

$40,000 surplus

$40,000 shortage

$20,000 shortage

There is no surplus or shortage.

January February March April $30,000 $36,000 $45,000 $48,000 Sales (75% collected in month of sale) Cash Operating Expenses Cash Purchases of Investments Cash Payment of Debt Depreciation on Operating Assets $200,000 105,000 75,000 15,000 12,000