Computer Consulting Limited Was Started in Early 2010 and Continued

question 110

Essay

Computer Consulting Limited was started in early 2010 and continued to operate until early 2013, when it was wound up due to disputes between the two principal shareholders. When it started, the company used these accounting policies:
1. Use straight-line depreciation for the firm's only asset, a computer which cost $1,100,000 and has an estimated useful life of four years.
2. Estimate warranty expense as 9% of sales.
3. Estimate bad debts expense as 5% of sales.
Derive the annual net cash flows for 2010 to 2012. For the year-end balance for 2013, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved.

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Definitions:

Double Positioning

A branding strategy where a product or service is positioned to appeal to two different target markets or segments simultaneously.

Key Customer

A significant client who contributes a substantial portion of a business's revenue, often receiving special attention and preferential treatment.

Sales Policy

A set of guidelines or rules that govern the sales processes and practices of an organization, aiming to ensure efficiency and consistency.

Sales And Travel Expenses

Costs incurred by employees or representatives of a company related to traveling for the purpose of conducting sales activities.