Principles of Accounting: Chapter Twenty-Four

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Chapter 24 examines analytical methods and reasoning that are applicable to management decision-making activities. The chapter begins with a presentation of cost characteristics, including emphasis on the concepts of relevant and sunk costs. This is followed by the construction of a general frame of reference for decision making, which is then illustrated with examples related to outsourcing, special orders, and discontinuance of products/departments.

The chapter then turns to consideration of the evaluation of capital expenditures. Such decisions are heavily dependent upon a number of intrinsic calculations related to future and present value concepts, and the chapter provides in-depth coverage of each. Next, the chapter shows how these considerations are utilized in net present value calculations and internal rate of return calculations. Alternative capital investment evaluation tools, like the accounting rate of return and payback method, are also examined.

Exercises

To aid in your understanding of this chapter, exercises with solutions are available for free download at Bookboon.com. You will find these exercises very helpful in providing models and guidelines for solving all of the problems at principlesofaccounting.com.

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Problems
Goals Achievement
Fill in the Blanks
Multiple Choice
Objectives
Key Terms

Problems: Chapter Twenty-Four

Obtain the entire Budgeting/Decision Making Problem Workbook via the linked image at left. Our high volume production process makes this an economical option as compared to printing these files on your own printer!



Basic		Problem	Worksheet	Combined	Objective

	B-24.01				Identification of relevant items

	B-24.02				Outsourcing calculations

	B-24.03				Special orders

	B-24.04				Eliminating a product

	B-24.05				Future value of lump sum

	B-24.06				Future value of annuities

	B-24.07				Present value lump sum

	B-24.08				Present value of annuities

	B-24.09				Alternative capital budgeting methods



Involved		Problem	Worksheet	Combined	Objective

	I-24.01				Multiple decision-making scenarios

	I-24.02				Various present/future values calculations

	I-24.03				Net present value with multiple cash flows

	I-24.04				Team-based capital budgeting evaluations

	I-24.05				After-tax consideration of net present value

The preceding table includes links to "Basic" and "Involved" problems. Each link will download the file containing a spreadsheet for the problem and a template worksheet on which you can prepare the solution electronically. If you see a light bulb icon on a worksheet, just mouse over above the icon and a comment box will appear. The comments include useful suggestions for improving your spreadsheet skills.

Solutions to these problems may be obtained from your instructor, however you may not post or redistribute, electronically or otherwise, any such solution material. Solution material may be provided to you for your sole use only, at the discretion of your individual instructor. Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found under the "Exercises" tab within each chapter. Video solutions to selected problems are available to students enrolling in the online course.