Answer:
The bond's option premium is $11.88
Explanation:
Acording to the data we have the following:
The Maturity Value of Bond=$1000
The Coupon Rate = 10%
Hence, there is an interest of $100 Per year but it is semi anually , Therefore there is an interest of $50 received per year .
Also, the YTM = 14% , which means 7% for 6 months
Therefore, to calculate the bond's option premium, we have to use first the formula to calculate the fair value of bond.
The Fair Value of Bond = PVAF( 7% , 20 )*50 + PV( 7% , 20 )*1000
= 50*10.594 + 1000*0.2584
= $529.70 + $258.419
=$788.119
Hence, The bond's option premium = $800 - $788.119 = $11.88
This line consists of single-machine stations and is almost balanced (i.e. station rates are nearly equal). A manufacturing engineer has estimated the bottleneck rate of the line to be 1,000 fans per 20-hour day and the raw process time to be 50 minutes. The line has averaged 850 fans per 20-hour day, and the cycle time has averaged 2.8 hours. What would you estimate the WIP level to be
Answer:
119 fans
Explanation:
The computation of the estimated WIP is shown below:
= Average fans per hour × average hours
where,
Average fans per hour is
= 850 fans ÷ 20 hours
= 42.5 fans
And, the average hours is 2.8
So, the estimated WIP is
= 42.5 × 2.8
= 119 fans
We assume we have to find out the average estimated WIP level
Identify the type of responsibility center.
1. The 3M Company manufactures and distributes products under the Post-it, Scotch, Nexcare, and Thinsulate brand names.
2. The J.M. Smucker Company Store and Café is located in Orrville, Ohio. The store sells a variety of company products, while the café offers items made with ingredients from the Smucker's brands.
3. The Fairmont Chicago, The Fairmont Royal York in Toronto, and The Fairmont Orchid in Hawaii are all hotels owned by their parent corporation, Fairmont Hotels & Resorts.
A. Cost
B. Investment
C. Profit
D. Revenue
Answer:
1. The 3M Company manufactures and distributes products under the Post-it, Scotch, Nexcare, and Thinsulate brand names. B. Investment
2. The J.M. Smucker Company Store and Café is located in Orrville, Ohio. The store sells a variety of company products, while the café offers items made with ingredients from the Smucker's brands. C. Profit
3. The Fairmont Chicago, The Fairmont Royal York in Toronto, and The Fairmont Orchid in Hawaii are all hotels owned by their parent corporation, Fairmont Hotels & Resorts. A. Cost
Explanation:
An investment is the allocation of the money for some benefits n the future and a benefit form the investment is return and includes the sales of the property like the products and brand names etc. Profits are the benefits or the advantages that are earned in buying and spending or profit of something like the sales of the company products etc. A cost is an expense that is associated with the group or the individual or the owner of the assets such as to hotels and the corporations.Suppose that in the last year the variation in the real exchange rate was −5% and that all this variation was due to the imposition of a tariff by the US to the imports of Chinese manufacturing goods. Assume that, absent the tariff, the law of one price held for both goods:_______
Answer:
Country with fallen exchange rate (fall - 5%) , will face domestic Inflation.
Explanation:
Law of One price suggests that goods cost same in two countries, when their prices are converted into common currency based on exchange rate.
International Price of a good = Domestic Price x Exchange Rate
So maintaining 'Law of one price' : Fall in exchange rate is accompanied by Increase in domestic prices (Inflation). And, Increase in exchange rate is accompanied by Decrease in domestic prices (Deflation).
Given : Fall in real exchange rate by 5%. So, corresponding domestic currency prices will inflate.
Under its executive stock option plan, National Corporation granted 15 million options on January 1, 2021, that permit executives to purchase 15 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $32 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose that unexpected turnover during 2022 caused the forfeiture of 5% of the stock options. Compute the amount of compensation expense for 2022 and 2023
Answer:
Compensation expense for 2022 and 2023 are $12 million and $16 million respectively.
Explanation:
Total compensation expenses = Number of options × Option fair of value = 15 million × $4 = $60 million
Number of years the option is allowed to be exercised = January 1, 2021 to December 31, 2023 = 3 years
Annual compensation expenses = Total compensation expenses ÷ Number of years the option is allowed to be exercised = $60 million ÷ 3 = $20 million
That shows that $20 million is recognized as compensation expenses in 2021.
As there is a 20% forfeiture of the options due to an unexpected turnover, total compensation expenses reduces to:
New total compensation expenses = $60 million × (100% - 20%) = $48 million
Accumulated expenses in 2022 = ($48 million ÷ 3) × 2 = $32 million
Compensation expenses recognized in 2022 = Accumulated expenses in 2022 - Compensation expenses already recognized in 2021 = $32 million - $20 million = $12 million
Compensation expenses recognized in 2023 = $48 million ÷ 3 = $16 million
Therefore, compensation expense for 2022 and 2023 are $12 million and $16 million respectively.
For 2022, the compensation expense is $0 since the options are not yet vestible. The total value of the options after forfeiture is $57 million. The compensation expense for 2023 needs to be calculated based on the time passed in the vesting period.
Explanation:Under National Corporation's executive stock option plan, 15 million options were granted initially. However, due to unexpected turnover, 5% of these options were forfeited. This means that only 95% of the original options remained, which amounts to 14.25 million options (15 million * 95%). As the fair value of each option is $4, the total fair value of these options sums up to $57 million (14.25 million options * $4 per option).
For 2022, there is no compensation expense as the options are not yet vestible. The compensation expense for these options is recognized over the vesting period which starts on December 31, 2023. Therefore, the compensation expense for 2022 is $0, and for 2023 will need to be calculated based on the proportion of time passed in the vesting period.
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Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently sells 30,000 gallons of polyol per year at an average price of $15 per gallon. Fixed costs of manufacturing polyol are $90,000 per year and total variable costs equal $180,000. The operations research department has estimated that a 15 percent increase in output would not affect fixed costs but would reduce average variable costs by 60 cents per gallon. The marketing department has estimated the arc elasticity of demand for polyol to be -2.0.
a. how much would Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quality sold?
b. evaluate the impact of such a price cut on
(i) total revenue.
(ii) total costs, and
(iii) total profits.
Answer:
a.–7.5% or -0.075
bi.$35,321
bii.$8,271
biii.$27,050
Explanation:
Wyandotte Chemical Company
a.
ED = %ΔQD / %ΔP
–2.0 = 15% / %ΔP. (15% more sales)
%ΔP = 15% / -2.0
%ΔP = –7.5% or -0.075
b.
Using the arc price formula, the new price will be:
%ΔP = P2 – P1/ [(P2+ P1)/2]
–0.075 = (P2– 15.00)/ [(P2+ 15)/2] -0.075P2– 1.125 = 2P2– 30
-2.075P2= -28.875
P2= $13.92
ΔP = $15 –$13.92 = $1.08
Finding new quantity using the arc price formula:
%ΔQ = Q2 – Q1/ [(Q2+ Q1)/2]
0.15 = (Q2– 30,000)/ [(Q2+ 30,000)/2]
Q2= 34,865 gallons (QUANTITY SOLD)
Therefore impact of the price cut on the following are:
i). On Total Revenue:
TR = P · Q
Before cut price: TR1, = 15(30,000) = $450,000
After cut price: TR2= 13.92(34,865)
= $485,321,
Consequently, ΔTR = $35,321 (change in total revenue)
ii). On Total Cost: we first find the FC and VCBefore price cut:
FC1=$90,000
After price cut: FC2= $90,000
VC per unit = $6.00 – 0.60 = $5.40
VC2= $5.40 × 34,865 = $188,271
TC2= FC + VC = 90,000 + 188,271 = $278,271
ΔTC = $8,271 (change in total cost)
iii). On Total Profits (π):
Before price cut: π, = $450,000 – $270,000 = $180,000
After price cut: π2= $485,321 – $278,271 = $207,050
(ΔTR - ΔTC = Δπ: $35,321 - $8,271 = 27,050)
Multiple Choice Question 92 Conversion cost per unit equals $9.00. Total materials costs are $81300. Equivalent units of production for materials are 27100. How much is the total manufacturing cost per unit? $12.00. $6.00. $9.00. $3.00.
Answer:
$3.00
Explanation:
Manufacturing cost per unit= Total material cost/Equivalent unit
Cost per Unit= $81300/$21700
Cost per unit = $3.00
Answer:
$ 12
Explanation:
Conversion cost per unit equals $9.00.
Total materials costs are $81300
Equivalent units of production for materials are 27100
MAterial Costs per unit = Total materials costs /Equivalent units of production
Material Costs per unit =$81300/ 27100= $ 3 per unit
Total manufacturing cost per unit= Conversion cost per unit +Material Costs per unit = $ 9+ $3= $ 12
We find the material costs per unit and add it with the conversion cost per unit to get the total manufacturing cost per unit
Last year, a toy manufacturer introduced a new toy truck that was a huge success. The company invested $4.50 million in a plastic injection molding machine (which can be sold for $4 million immediately) and $300,000 in plastic injection molds specifically for the toy (not valuable to anyone else). The cost of labor and materials necessary to make each truck runs about $4. This year, a competitor has developed a similar toy, significantly reducing demand for the toy truck. Now, the original manufacturer is deciding whether it should continue production of the toy truck. If the estimated demand is 100,000 trucks, the break-even price is $ per truck.
Answer:
Break-even price = $7
Explanation:
The break-even price is the price at which the the total contribution from the sale is equal to the fixed cost of $300,000.
(x- 4)× 100,000 = 300,000
100,000X - 400,000 = 300,000
100,000X = 300,000 + 400,000
x= 700,000/100,000
X = $7
Break-even price = $7
The break-even price per truck is $48.
Explanation:In order to determine the break-even price per truck, we need to calculate the total cost of production and divide it by the estimated demand. The total cost of production includes the cost of the plastic injection molding machine, the plastic injection molds, and the cost of labor and materials for each truck.
The total cost of production would be the sum of the initial investment in the machine ($4.5 million) minus the immediate resale value of the machine ($4 million), plus the cost of the molds ($300,000), and the cost of labor and materials for 100,000 trucks ($4 per truck * 100,000 trucks). This gives us a total cost of production of $4.8 million.
Dividing the total cost of production by the estimated demand of 100,000 trucks, we get a break-even price of $48 per truck.
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Minder Industries stock has a beta of 1.08. The company just paid a dividend of $.65, and the dividends are expected to grow at 4 percent. The expected return on the market is 10.5 percent, and Treasury bills are yielding 3.4 percent. The most recent stock price for the company is $72. a. Calculate the cost of equity using the DCF method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations and enter your answer as a percent rounded to
Answer:
a. Under DCF method, the cost of equity is 4.945
b. The cost of equity under SML is 11.07%
Explanation:
a.
The DCF method values the stock based on the present value of the future expected dividends. The price per share for a stock whose dividends are expected to grow at a constant rate is calculated as follows,
P0 = D0 * (1+g) / r - g
We, know the price today, the growth rate in dividends and D0. Plugging in these values in the formula, we calculate r to be,
72 = 0.65 * (1+0.04) / (r- 0.04)
72 * (r-0.04) = 0.676
72r - 2.88 = 0.676
72r = 0.676 + 2.88
r = 3.556 / 72
r = 0.04938 or 4.938% rounded off to 4.94%
b.
The SML approach is used to calculate the required rate of return or cost of equity of a stock based on the stock's beta, the risk free rate and the market risk premium. The formula for r under this method is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free rate or t bills raterM is the expected return on marketr = 0.034 + 1.08 * (0.105 - 0.034) = 0.11068 or 11.068% rounded off to 11.07%
Polo Publishers purchased a multi-color offset press with terms of $40,000 to be paid at the date of purchase, and a noninterest-bearing note requiring payment of $30,000 at the end of each year for five years. The interest rate implicit in the purchase contract is 11%. Polo would record the asset at:
Answer:
$150,876.91
Explanation:
To calculate, the present value of an ordinary annuity formula is used as follows:
PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)
Where;
PV = Present value of the payments =?
P = yearly payment = $30,000
r = interest rate = 11% = 0.11
n = number of years = 5
Substitute the values into equation (1) to have:
PV = $30,000 × [{1 - [1 ÷ (1+0.11)]^5} ÷ 0.11] = $110,876.91
Amount to record = $40,000 + $110,876.91 = $150,876.91
Final answer:
To calculate the recording price of the multi-color offset press purchased by Polo Publishers, we add the initial payment to the present value of the annuity payments, discounted using the implicit 11% interest rate.
Explanation:
The valuation of Polo Publishers' multi-color offset press purchase involves recording the acquisition by calculating the present value of the noninterest-bearing note payments at the implicit interest rate of 11%. The purchase includes a cash payment of $40,000 at the time of purchase and a series of five annual payments of $30,000 each. To record the asset, we need to discount these future payments back to their present value using the implicit interest rate of 11%.
Using present value tables or a financial calculator, each $30,000 payment will be multiplied by the present value factor for an annuity at 11% for five years. This sum, plus the initial $40,000 cash payment, will give us the total recording price of the asset. For instance, if the present value factor at 11% for five years is 3.696, the calculation for the note would be $30,000 x 3.696 = $110,880. Adding the initial $40,000 payment gives us a total of $150,880 as the recording price for the asset.
Assume that you purchased 140 shares of Misty Company stock for $78 a share, that you received an annual dividend of $1.60 a share, and that you sold your Misty Company stock for $90 a share at the end of one year. What is the total return for your investment? (Ignore commission amounts for this question.)
Answer:
Return (%) = 17.43%
Explanation:
The return on investment is the sum of the dividends earned and capital gains made during the holding period of the investment.
Dividend is the proportion of the profit made by a company which is paid to shareholders.
Capital gains is another type of the return made on an equity investment as a result of increase in the value of the shares. It is difference between the cost of the share and the value at the time of disposal.
Therefore, we can can compute the return on the investment as follows:
Dividend= ($1.60× 140)= $224
Capital gains= (90-78) × 140= $1680
Total dollar return on Investment = $224+ $1680= $1904
Total return in (%) = Return/ cost of shares × 100
= 1904/ (140 × 78) × 100
= 17.43%
Sheffield Corp. was organized on January 1, 2021. During its first year, the corporation issued 2,500 shares of $50 par value preferred stock and 150,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2021, $5,500; 2022, $12,300; and 2023, $27,200.
Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 5% and noncumulative.
Answer:
Preferred stock Dividend Common stock dividend
2021 $5500 $0
2022 $6250 $6050
2021 $6250 $20950
Explanation:
Th dividends are distributed by the firm from he Net Income and are first paid to the preferred stockholders. The dividends paid to preferred stockholders remain constant and any dividend available after paying the preferred stockholders is paid to the common stockholders.
The preferred stock is non cumulative which means that if the company fails to pay full dividends or pays no dividends in a particular year to preferred stockholders, those dividends will not accumulate and will not be paid in the next year or whenever the company declares dividends.
The cash dividends that will be paid to Each class of stock for each year will be as follows,
The preferred stock dividends are fixed at = 50 * 0.05 = $2.5 per share
The total dividends on preferred stock is = 2.5 * 2500 = $6250
2021
Total Dividend declared = $5500
Dividend paid to Preferred stockholders = $5500
Dividend paid to Common stockholders = $0
2022
Total Dividend declared = $12300
Dividend paid to Preferred stockholders = $6250
Dividend paid to Common stockholders = 12300 - 6250 = $6050
2023
Total Dividend declared = $27200
Dividend paid to Preferred stockholders = $6250
Dividend paid to Common stockholders = 27200 - 6250 = 20950
Final answer:
To allocate dividends to each class of stock, calculate the preferred stock dividend for each year and allocate any remaining cash dividends to the common stockholders.
Explanation:
To calculate the allocation of dividends to each class of stock, we need to understand the terms and conditions of the preferred stock. In this case, the preferred stock has a par value of $50 and a dividend rate of 5%. However, it is noncumulative, which means that if the corporation skips or fails to pay a dividend in any year, it does not owe any past dividends to preferred stockholders.
Step 1: Calculate the preferred stock dividend for each year.
2021: 2,500 shares x $50 par value x 5% dividend rate = $6,2502022: 2,500 shares x $50 par value x 5% dividend rate = $6,2502023: 2,500 shares x $50 par value x 5% dividend rate = $6,250Step 2: Allocate any remaining cash dividends to the common stockholders.
2021: $5,500 - $6,250 = -$750 (no cash dividend for common stock)2022: $12,300 - $6,250 = $6,050 (cash dividend for common stock)2023: $27,200 - $6,250 = $20,950 (cash dividend for common stock)Therefore, the allocation of dividends to each class of stock is as follows:
Preferred Stock:2021: $6,2502022: $6,2502023: $6,250Common Stock:2021: $02022: $6,0502023: $20,950Choose the appropriate stage of the venture life cycle in which the following activities would occur.
Transition from one-person leadership to team management leadership
New-product development
Search for capital Increased competition
Venture assessment Attempts to acquire other firms
Consumer indifference to the entrepreneur's goods or services
Accumulation of resources
Major changes in entrepreneurial strategy
Development of an effective entrepreneurial team
Answer:
Transition from one-person leadership to team management leadership - GrowthNew-product development - Innovation or declineSearch for capital - Start-upIncreased competition - StabilizationVenture assessment - New-Venture DevelopmentAttempts to acquire other firms - Innovation or declineConsumer indifference to the entrepreneur's goods or services - StablizationAccumulation of resources - New-Venture DevelopmentMajor changes in entrepreneurial strategy - GrowthDevelopment of an effective entrepreneurial team - Start-upSuppose that the total utility from consuming one unit of good Z is 220 utils, the total utility from consuming two units of good Z is 320 utils, and the total utility from consuming three units of good Z is 400 utils. The marginal utility received from consuming the third unit of good Z is ____________.
Answer:
80 utils
Explanation:
Marginal utility (MU) is the extra or additional utility received from consuming an additional unit of a good.
From the question, we have:
MU from consuming the third unit of Z = Total utility from consuming three units of good Z - Total utility from consuming two units of good Z = 400 - 320 = 80 utils
Therefore, the marginal utility received from consuming the third unit of good Z is 80 utils.
Leadership versus management:
1. As a manager seeks to develop her leadership skills, she should be aware that ______.
A) Leadership is primarily about personal efficiency
B) Many different styles of leadership can be effective
C) There is one best leadership style to which all managers should aspire
D) Leadership is first and foremost about establishing a personal bond with employees
Answer:
B) Many different styles of leadership can be effective
Explanation:
Leadership refers to guiding, directing and motivating employees in such a manner so as to induce them to act in a desired way which contributes to fulfillment of organizational goals and group objectives.
Management is a more authoritative function in relation to leadership. A manager and leader both have followers, but a manager's following is owed to his authority and control while a leader creates his followers via personal traits such as charisma or sound judgement.
A manager is accountable for his own performance and his subordinates while there is no clear accountability for a leader, who is more concerned with group goals.
Thus, as a manager seeks to develop her leadership skills, she needs to be aware that leadership is more informal and thrives upon the state of interpersonal relationships, a leader builds with the followers.
There is no single leadership style which can be universally applied. Rather, leadership is situational and a leadership style should be based upon various parameters such as group goals, interests, the dynamics of the team, and the state of interpersonal relationships, etc.
The manager should be aware that many different styles of leadership can be effective. Leadership is not primarily about personal efficiency, nor is it mainly about establishing a personal bond with employees. Moreover, there isn’t one best leadership style for all situations.
Explanation:1. One key aspect of leadership versus management is that the manager seeking to develop her leadership skills should be aware that B) Many different styles of leadership can be effective. This is because different situations, teams, and organizational cultures may require different leadership styles for optimal effectiveness.
2. Contrary to A), leadership is not primarily about personal efficiency, but rather about inspiring and motivating others. Moreover, according to D), while establishing a personal bond with employees can be part of leadership, it is not the primary focus of leadership.
3. Lastly, C) is incorrect as it suggests a one-size-fits-all approach, which doesn't realistically apply to leadership as it should be adaptable based on the circumstances.
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A quality inspector for Alpha-Beta Co. is concerned about the quality of the batch of several thousand blank DVD disks which his company produced this week and is preparing to ship. If the cost of replacing a defective DVD disk once it has been shipped is $2.50, while the cost for 80% inspection prior to shipment is $0.32 each, while the cost of 100% inspection prior to shipment is $0.40 each, at what point is she indifferent between 100% inspection and shipment without inspection?
Answer:
at point of 25% she indifferent between 100% inspection and shipment without inspection.
Explanation:
Let say x be the number of defects
N be units shipped
At no sampling the replacement cost is equal to inspection cost is:
2.50x = 0.4N
x/N = 0.4/2.50
= 0.16
The defect% is then given by:
= x/N*100
= 0.25*100
= 25%
Therefore, at point of 25% she indifferent between 100% inspection and shipment without inspection.
The operations manager at a chemical company that produces insecticide for use in commercial applications is attempting to set a safety stock level for a key ingredient that is used in their most powerful product. She believes that demand during lead time for this ingredient is normally distributed based on past data. In addition, she believes that future use is accurately depicted by these historical demand-duringlead-time data (in gallons): 55, 75, 75, 70, 80, 60, 50, 70, 60, and 85. She estimates the standard deviation of demand during the lead time to be 8.5 gallons.
a. What is the average demand during the lead time for this key ingredient?
b. What is the safety stock they need to provide a 95% service level?
c. What is the order point the company should use?
Answer:
a) Average demand during the lead time = Sum of all the historical demand during lead time / Number of periods
= (55+75+75+70+80+60+50+70+60+85) / 10
= 680 / 10
= 68 gallons
b) Standard deviation of demand during lead time(\sigmadL) = 8.5 gallons
At 95% service level,value of Z = 1.65
Safety stock = Z(\sigmadL) = 1.65(8.5) = 14.03 gallons
c) Reorder point = Average demand during the lead time + Safety stock
= 68 + 14.03
= 82.03 gallons
According to the textbook, it is useful to think of the firm as a(n) _____ composed of a series of distinct activities, including production, marketing, materials management, R&D, human resources, information systems, and the firm infrastructure. A. functional stream B. momentum machine C. inertia chain D. value chain
Answer:
D. value chain
Explanation:
Value chain comprises of the activities that a firm in an industry performs to deliver a product as goods and services for the market this concept has been developed by the porter. At the form level, the value chain is a business unit that states the product pass through distinct activities in order to gain some value. The primary activities include the inbound operations, marketing, and sales functions of the form. While the supporting includes the infrastructure, technology development, human resource management, and procurement of goods and services.Madrid Company plans to issue 9% bonds with a par value of $5,300,000. The company sells $4,770,000 of the bonds at par on January 1. The remaining $530,000 sells at par on July 1. The bonds pay interest semiannually on June 30 and December 31. 1. Record the entry for the first interest payment on June 30. 2. Record the entry for the July 1 cash sale of bonds.
Answer and Explanation:
The journal entry are as follows
1. Interest expense $214,650
To Cash $214,650
(Being the first interest payment is recorded)
The computation is shown below
= $4,770,000 × 9% × 6 months ÷ 12 months
= $214,650
For recording this we debited the interest expense as it increased the expenses while on the other hand the cash is paid which reduced the cash balance so it is credited
2. Cash $530,000
To Bond payable $530,000
(Being the cash sale of bond is recorded)
For recording this we debited the cash as cash is received that increased the cash balance and at the same time we credited the bond payable
Archie Hamilton is 45 years old and single. Archie had wage income of $55,000. He also had gambling winnings of $1,000. He is not sure if he should itemize or take the standard deduction. Archie paid the following: $5,200 qualifying home mortgage interest. $9,507 for real estate taxes. $5,040 for state income taxes withheld in 2019. Unreimbursed doctor and dentist bills in the amount of $7,000. Unreimbursed prescription drugs for $14. Vitamins for $120. A statement received from his church showing donations made throughout the year totaling $1,200. Receipts for donations of furniture and clothing in good, used condition to Goodwill. The total estimated fair market value is $100. Tax preparation fee of $315 for his 2018 tax return. $50 paid in 2019 on his 2018 balance due state income tax return. $45 investment expense $250 in gambling losses 11. What is the total amount of state income and real estate taxes deductible on Archie's Form 1040, Schedule A
Answer:
$10,000
Explanation:
Given information:
Archie Hamilton
paid $9,507 for real estates taxes.paid $5,040 for state income taxes withheld in 2019From the information above, it can be referred that;
deductions are allowed up to $10,000 for a combination of State income taxes and Real estate taxes as imposed by the U.S Internal Revenue Service.
In our scenario, the total amount of State income and Real estate taxes deductible on Archie's Form 1040, Schedule A is $10,000 for the year.
Answer:
$5,000
Explanation:
Even though Archie's state income and real estate property taxes are much higher, $9,507 + $5,040 = $14,547, his deductions are capped to only $5,000 per year (he is single) or $10,000 if he was married filing jointly.
The Tax Cuts and Jobs Act limited the amount that you can deduct from state taxes. Before 2018 the deductions were not limited to a certain amount.
Garcia Co. owns equipment that cost $81,200, with accumulated depreciation of $43,000. Garcia sells the equipment for cash. Record the sale of the equipment under the following three separate cases assuming Garcia sells the equipment for (1) $50,300 cash, (2) $38,200 cash, and (3) $33,100 cash.
Answer and Explanation:
The journal entries are as follows
1. For sale of equipment at $50,300
Cash Dr $50,300
Accumulated depreciation $43,000
To Equipment $81,200
To Gain on sale of equipment $12,100
(Being the sale of equipment is recorded)
Since the equipment is sold for $50,300 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited plus the balancing figure is transferred to gain on sale of equipment because the sale value is more than the book value
2. For sale of equipment at $38,200
Cash Dr $38,200
Accumulated depreciation $43,000
To Equipment $81,200
(Being the sale of equipment is recorded)
Since the equipment is sold for $38,200 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited
The book value and the sale value is equal so there is no loss or no gain recognized in this case
3. For sale of equipment at $33,100
Cash Dr $33,100
Accumulated depreciation $43,000
Loss on sale of equipment $5,100
To Equipment $81,200
(Being the sale of equipment is recorded)
Since the equipment is sold for $$33,100 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited plus the balancing figure is transferred to loss on sale of equipment because the sale value is less than the book value
A homeowner sued a plumber for damages resulting from the plumber's allegedly faulty installation of water pipes in her basement, which caused flooding. At trial, the homeowner was prepared to testify that when she first detected the flooding, she turned off the water and called the plumber at his emergency number for help and that the plumber responded, "I'll come by tomorrow and redo the installation for free."
(A) Is the homeowner's testimony regarding the plumber's response admissible?
Answer: The correct answer is YES it is admissible as evidence of the plumber's fault.
Explanation: An Evidence has probative value if it tends to prove an issue. The testimony of the homeowner of the regarding the plumber's response is a party admission. It is admissible as a hearsay exemption under Rule 801(d)(2)(A) which explains that a statement or statemens made by a party in a case cannot be excluded as hearsay when offered against him by the opponent. As such, the statement is a probative evidence.
Yes, the homeowner's testimony regarding the plumber's response could be admissible evidence in a trial as it can be seen as a tacit admission of negligent work by the plumber. However, rules for admissibility of evidence can vary, hence a consultation with a legal expert is advised.
Explanation:The subject matter pertains to the admissibility of evidence in a legal proceeding or trial. Specifically, it pertains to whether the homeowner's testimony regarding the plumber's response is admissible.
In most court rooms, an admission of defective installation can be a potential evidence to be used in court against the defendant, in this case, the plumber. In this situation, the plumber's admission of his fault and the promise to fix it can be seen as a tacit admission of negligent work. This can be interpreted as the acceptance on his part that the installation he did was faulty. Hence, the homeowner's testimony regarding the plumber's response can be considered admissible in a trial, subject to other evidentiary rules.
The rules for admissibility of evidence can vary depending on the jurisdiction and certain other factors, though. Therefore, a consultation with a legal expert is necessary for specifics of the case.
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Yakov lives in San Diego and runs a business that sells boats. In an average year, he receives $704,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $404,000; he also pays wages and utility bills totaling $286,000. He owns his showroom; if he chooses to rent it out, he will receive $3,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Yakov does not operate this boat business, he can work as an accountant and receive an annual salary of $20,000 with no additional monetary costs. No other costs are incurred in running this boat business. Identify each of Yakov's costs in the following table as either an implicit cost or an explicit cost of selling boats. Complete the following table by determining Yakov's accounting and economic profit of his boat business. If Yakov's goal is to maximize his economic profit, he stay in the boat business because the economic he would earn as an accountant would be __________
Answer:
Yakov's explicit costs are the monetary costs that he pays while running his business:
Payment to manufacturer: $404,000
Wages and utility bills: $286,000
Total explicit costs: $690,000
Yakov's implicit costs are his opportunity costs, in other words, the things he gives up in order to run his business:
Rent he would get for his showroom: $3,000
Wage he would get as an accountant: $20,000
Total implicit costs: $23,000
Yakov's accounting profit is equal to revenue minus total explicit costs:
Accounting profit = $704,000 - $690,000
= $14,000
Yakov's economic profit is equal to revenue minus total costs (the sum of implic costs and explicit costs)
Economic profit = $704,000 - $713,000
= ($9,000)
Despite the fact that Yakov is not earning an economic profit selling boats, as an accountant, he would give up on the $704,000 that he is been making from selling boats. For that reason, he should keep the boat selling business.
Yakov's costs can be classified as explicit or implicit. Accounting profit is calculated by subtracting explicit costs from sales revenue, while economic profit considers both explicit and implicit costs. Yakov would have a negative economic profit if he worked as an accountant instead of running his boat business.
Explanation:Yakov's costs can be classified as either explicit costs or implicit costs. Explicit costs are direct monetary expenses that Yakov incurs in running his boat business, such as the wholesale cost of boats, wages, utility bills, and the rental cost of the showroom. On the other hand, implicit costs are opportunity costs associated with forgoing alternative opportunities. In this case, Yakov's implicit cost is the salary he would earn as an accountant if he didn't operate the boat business.
To calculate Yakov's accounting profit, subtract the explicit costs from the sales revenue. Accounting profit = sales revenue - explicit costs. Economic profit, on the other hand, considers both explicit and implicit costs. To calculate economic profit, subtract both the explicit and implicit costs from the sales revenue. Economic profit = sales revenue - explicit costs - implicit costs.
If Yakov's goal is to maximize his economic profit, he should stay in the boat business because the economic profit he would earn as an accountant would be negative (-$10,000 per year).
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Suppose the economy exhibits a large, unexpected increase in productivity growth that lasts for a decade. Policymakers are (quite reasonably) slow to learn what has happened to potential output and incorrectly interpret the increase in output as a boom that leads actual output to exceed potential. Suppose they adjust macroeconomic policy so that the mismeasured level of short-run output is zero.
(a) What happens to the true amount of short-run output Y?
(b) What happens to inflation over time?
Answer:
W
Explanation:
A. What will happen to the true amount of short-run output is that the real output will drop to a new lower level, this implies that recession will be accidentally created by policy markers.
B. There will be a fall in inflation.
The following information has been provided to you by Watts Corporation: Net income $ 175,300 Increase in accounts payable 18,500 Increase in inventory 17,500 Increase in accounts receivable 9,700 Increase in bonds payable 75,000 Amortization of bond premium 5,400 Depreciation expense 21,300 Decrease in income taxes payable 7,300 What is Watts Corporation’s net cash flow from operating activities?
Answer:
$186,000
Explanation:
Cash Flow from operating activities cash generated from to day to day activities of the business. All the cash flows needed to operate the business smoothly.
Cash flows from operating activities
Net Income $175,300
Add: Non cash Expense Adjustments:
Depreciation expense $21,300
Amortization of bond premium $5,400
$26,700
Change in Working Capital:
Increase in inventory ($17,500)
Increase in accounts receivable ($9,700)
Increase in accounts payable $18,500
Decrease in income taxes payable ($7,300)
($16,000)
Net Operating Cash flow $186,000
Cash Flow from operating activities cash generated from to day to day activities of the business. All the cash flows needed to operate the business smoothly.
Depreciation and amortization are non cash expenses which was deducted in the calculation of Net income.
Increase in Liability will provide the cash and increase in assets will use the cash.
Increase in Bond Payable is the change in long term liability which is not included in the working capital and it is the part of the cash flow from financing activities.
The SML helps determine the risk-aversion level among investors. The flatter the slope of the SMC, the the level of risk aversion. Which of the following statements best describes a shift in the SML caused by increased risk aversion? O The risk-free rate will increase. O The risk-free rate will decrease. O The risk-free rate will remain constant.
Increased risk aversion causes a shift in the SML, and the risk-free rate will decrease.
Explanation:Increased risk aversion leads to a shift in the Security Market Line (SML). The SML represents the relationship between an investment's expected return and its systematic risk (beta). When risk aversion increases, investors become less willing to take on risky investments, which leads to a flatter slope of the SML.
As risk aversion increases, the risk-free rate will typically decrease. The risk-free rate represents the return on a risk-free investment, such as a government bond. When investors are more risk-averse, they prioritize the safety of their investments and are willing to accept a lower return on risk-free assets.
The correct statement is c. The risk-free rate will remain constant.
The Security Market Line (SML) is a representation of the Capital Asset Pricing Model (CAPM) and shows the expected return of an investment as a function of its beta, or systematic risk. The equation for the SML is given by:
[tex]\[ E(R_i) = R_f + \beta_i \times (E(R_m) - R_f) \][/tex]
where:
- [tex]\( E(R_i) \)[/tex] is the expected return on the capital asset.
- [tex]\( R_f \)[/tex] is the risk-free rate of interest.
- [tex]\( \beta_i \)[/tex] is the beta of the investment.
- [tex]\( E(R_m) \)[/tex] is the expected return of the market.
- [tex]\( (E(R_m) - R_f) \)[/tex] is the market premium (the expected market return minus the risk-free rate).
An increase in risk aversion among investors will affect the market premium, not the risk-free rate. The risk-free rate is typically considered to be independent of investor risk preferences because it represents the return on an investment with no risk of financial loss. It is often represented by the yield on short-term government bonds, which are considered to be free of default risk.
When investors become more risk-averse, they demand a higher return for taking on additional risk. This increased risk aversion is reflected in a higher market premium, [tex]\( (E(R_m) - R_f) \)[/tex], because investors require a greater compensation for bearing the risk of the market portfolio. As a result, the SML will become steeper, as the expected return for a given level of beta increases.
To summarize, an increase in risk aversion will:
- Increase the market premium, [tex]\( (E(R_m) - R_f) \)[/tex].
- Make the SML steeper.
- Not affect the risk-free rate, [tex]\( R_f \)[/tex].
Therefore, the risk-free rate will remain constant, and the SML will shift upwards, indicating higher expected returns for all levels of systematic risk (beta).
The complete question is- The SML helps determine the risk-aversion level among investors. The flatter the slope of the SMC, the the level of risk aversion. Which of the following statements best describes a shift in the SML caused by increased risk aversion?
a. The risk-free rate will increase.
b. The risk-free rate will decrease.
c. The risk-free rate will remain constant.
While it may not be possible to make the receiver happy when you deliver bad news, you can reduce bad feelings by structuring your message in a sensitive way. Most negative messages take an indirect approach, using a buffer, providing reasons, delivering the bad news with empathy, and closing pleasantly.
What buffering technique are you using if you show in your opening that you care and are concerned?
A. Best news
B. Understanding
C. Facts
Answer:
C. Facts
Explanation:
When offering bad news to a person it is important to reduce the negative effect of the news.
Buffering is the method by which effect of bad news is communicated without causing a negative reaction.
In opening the best technique is to present facts. This makes the receiver reason with the logic of the bad news.
For example if a staff is to be laid off. A good opening can be to state the need for the business to reduce staff in order to survive a trying economic climate.
The following selected transactions were taken from the records of Shipway Company for the first year of its operations ending December 31: Apr. 13 Wrote off account of Dean Sheppard, $6,530. May 15 Received $3,270 as partial payment on the $8,680 account of Dan Pyle. Wrote off the remaining balance as uncollectible. July 27 Received $6,530 from Dean Sheppard, whose account had been written off on April 13. Reinstated the account and recorded the cash receipt. Dec. 31 Wrote off the following accounts as uncollectible (record as one journal entry): Paul Chapman $4,380 Duane DeRosa 3,270 Teresa Galloway 1,960 Ernie Klatt 2,740 Marty Richey 980 Dec. 31 If necessary, record the year-end adjusting entry for the uncollectible accounts. For those amount boxes in which no entry is required, leave the box blank. If an entry is not required, select "No entry" from the dropdown box(es).
Answer:
The year-end adjusting entries for the uncollectible accounts will be:
April 13:
Debit Allowance for doubtful accounts $6,530
Credit Accounts receivable $6,530
(To record write-off of accounts receivable - Dean Sheppard)
May 15:
Debit Cash $3,270
Credit Accounts receivable $3,270
(To record collection on account - Dan Pyle)
Debit Allowance for doubtful accounts $5,410
Credit Accounts receivable $5,410
(To record write-off of accounts receivable - Dan Pyle)
July 27:
Debit Accounts receivable $6,530
Credit Allowance for doubtful accounts $6,530
(To re-establish accounts receivable from Dean Sheppard)
Debit Cash $6,530
Credit Accounts receivable $6,530
(To record collection on account - Dean Sheppard)
December 31:
Debit Allowance for doubtful accounts $13,330
Credit Accounts receivable $13,330
(To record write-off of accounts receivable - Miscellaneous)
Explanation:
April 13: Shipway Company wrote-off account of Dean Sheppard, this means there would be a reduction in both allowance for doubtful accounts and accounts receivable.The receipt on May 15 of $3,270 reduced the accounts receivable but increased cash. However, the write-off of $5,410 caused a reduction in both the allowance account and accounts receivable.When there was a receipt of $6,530 on July 27, the accounts receivable would be reinstated and then adjusted for the cash receipt.Lastly, the write-off of the uncollectible accounts from miscellaneous customers were added up to arrive at $13,330.During the current year, Mr. Jones made gifts to his son of the following items: A minivan with an adjusted basis of $13,000 and fair market value of $15,000. Bonds with an adjusted basis of $6,000 and fair market value of $18,000. Antique furniture with an adjusted basis of $12,000 and a fair market value of $35,000. An interest-free $10,000 loan on January 1, to buy a boat for his personal pleasure. His son repaid the loan in full on December 31. The applicable federal interest rate was 10%. Mr. and Mrs. Jones elect gift-splitting. What is the total amount of their taxable gifts to their son in the current year
Answer:
$38,000
Explanation:
Since the Jones elected gift splitting, each spouse will may give $15,000 worth of gifts to their son without paying taxes:
the total value of the gifts (must use fair market value) = $15,000 (minivan) + $18,000 (bonds) + $35,000 (furniture) = $68,000
taxable amount = $68,000 - $30,000 (combined tax free gifts) = $38,000
On November 3, the spot price for cotton was $0.81/lb., and the February futures price was $0.83/lb. On November 3, Levi Strauss sold 200 futures contracts on the commodity exchange at $0.83/lb. for delivery in February. Each contract was for 25,000 lbs. Levi Strauss designated these contracts as a cash flow hedge of 5 million lbs. of current inventory which it expected to sell in February. The average spot of this inventory when purchased was $0.58/lb. Levi Strauss properly documented the hedge and employed hedge accounting. On November 30, the company’s fiscal year end, the February commodity exchange futures price was $0.85/lb.If, on November 30, Levi Strauss concluded that the hedge was 100% effective, it should record the hedged cotton inventory in the November 30 balance sheet atA: $4,350,000B: $4,250,000C: $3,000,000D: $2,900,00
Answer:
C : $3,000,000
Explanation:
The Levi Strauss has sold futures at the price of $0.83/lb. The spot price for cotton is $0.81/lb. The difference between spot and exchange price is 0.02/lb ($0.83/lb - $0.81/lb). On November 30, The future prices of cotton raised to 0.85/lb. The average spot of the inventory when purchased was 0.58/lb. To record the inventory in balance sheet we will use average spot plus difference of spot and exchange price $0.58/lb + $0.02/lb = $0.60/lb. The total amount which will be reported in balance sheet will be 200 futures contacts * 25,000lbs * $060/lb = $3,000,000.
Final answer:
Levi Strauss should record the hedged inventory at the lower of cost or market, which is the original cost of D. $2,900,000 for the 5 million lbs. of cotton, despite the increase in futures price to $0.85/lb.
Explanation:
To calculate the proper balance sheet value of Levi Strauss's cotton inventory hedged by futures contracts, we need to consider the change in futures price.
On November 3, Levi Strauss sold 200 futures contracts at the price of $0.83/lb. for a total of 5 million lbs., which implies a commitment to sell cotton at a future value of $4,150,000 (5,000,000 lbs. x $0.83/lb.). By November 30, the futures price had risen to $0.85/lb., representing an unrealized gain on the futures contracts of $0.02/lb., or a total of $100,000 for the 5 million lbs. (5,000,000 lbs. x $0.02/lb.).
This unrealized gain would be recognized in other comprehensive income and would increase the value of the hedged inventory on the balance sheet to the lower of cost or market.
Since the original cost of the inventory was $2,900,000 (5,000,000 lbs. x $0.58/lb.) and the market value through the gain on the hedge is $4,250,000 ($4,150,000 from the future contracts plus $100,000 gain), Levi Strauss should record the hedged inventory at $2,900,000 as it is lower than the hedged market value.
Therefore, the correct answer is D: $2,900,000.
Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $169,000 Credit sales, $469,000 Selling and administrative expenses, $129,000 Sales returns and allowances, $49,000 Gross profit, $509,000 Accounts receivable, $295,000 Sales discounts, $33,000 Allowance for doubtful accounts credit balance, $3,100 Flyer prepares an aging of accounts receivable and the result shows that 3% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded
Answer:
$5,750
Explanation:
The computation of the balance in the allowance for doubtful accounts after bad debt expense is shown below:
= Account receivable × estimated percentage - credit balance of Allowance for doubtful accounts
= $295,000 × 0.03 - $3,100
= $8,850 - $3,100
= $5,750
By deducting the credit balance from the estimated amount we can find out the balance in the allowance for doubtful accounts