Chester Company
1) The Chester Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,090,000. What will the book value of this purchase (exclude all other plant and equipment) be after its third year of use? (Use FASB GAAP)
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$33,538,000
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$35,446,667
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$29,448,000
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$32,720,000
2) What is the Quick Ratio of Chester?
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1.39
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1.61
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.62
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.72
3) Digby has a ROS of 0.09 (ROS = Net income/Sales). That means:
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There are sales of $9 for every dollar of profit.
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There is a 9% profit on each dollar of sales.
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There are sales of $91 for every dollar of profit.
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For every $9 of sales there is a profit of 1%.
4) Midyear on July 31st, the Baldwin Corporation’s balance sheet reported:
Total Liabilities of $103.453 million
Cash of $8.040 million
Total Assets of $172.520 million
Total Common Stock of $5.080 million.
What were the Baldwin Corporation’s retained earnings?
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$74.147 million
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$63.987 million
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$72.027 million
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$82.187 million
5) Review the Inquirer to determine Baldwin’s current strategy. How will they seek a competitive advantage? From the following list, select the top five sources of competitive advantage that Baldwin would be most likely to pursue.
Select: 5
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Seek high plant utilization, even if it risks occasional small stockouts
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Increase demand through TQM initiatives
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Add additional products
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Seek high automation levels
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Offer attractive credit terms
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Seek the lowest price in their target market while maintaining a competitive contribution margin
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Reduce cost of goods through TQM initiatives
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Seek excellent product designs, high awareness, and high accessibility
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Accept lower plant utilization and higher capacities to insure sufficient capacity is available to meet demand
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Reduce labor costs through training and recruitment
6) Rank the following companies from high to low cumulative profit, (in descending order, 1=highest, 4=lowest).
Rank in order from 1 to 4
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Chester
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Baldwin
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Andrews
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Digby
7) Which description best fits Chester in your industry? For clarity:
– A differentiator competes through good designs, high awareness, and easy accessibility.
– A cost leader competes on price by reducing costs and passing the savings to customers.
– A broad player competes in all parts of the market.
– A niche player competes in selected parts of the market.
Which of these four statements best describes this competitor?
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Chester is a niche cost leader
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Chester is a broad differentiator
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Chester is a broad cost leader
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Chester is a niche differentiator
8) If Baldwin issued 1000 shares of common stock at last year’s end price, the effect on the balance sheet would be:
Select: 1
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Retained earnings would increase by $4,804
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Retained earnings would increase by $48,039
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Equity would decrease by $4,804
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Equity would increase by $48,039
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