Answer:
C. $24,000
Explanation:
We assume that the company follows the percentage-of-sales method. In this method, the company ignored the previous balance of allowance for Doubtful Accounts
So, the amount of the adjusting entry to record the estimate of the uncollectible accounts would be
= Net credit sales × estimated percentage given
= $600,000 × 4%
= $24,000
All other information which is given is not relevant. Hence, ignored it
A bank has $320 million in deposits and is holding $39 million in reserves. If the required reserve ratio is 10%, what is the maximum new loan amount the bank can extend? Type an answer and press enter to submit million dollars
Answer:
$7 million.
Explanation:
remember that, the bank can give new loan amount only from its excess reserves.calculation of required reserves:required reserves= deposits*required reserve ratio
=$320m*10/100
=$32million
(it is given that, deposits =$320m and required reserve ratio=10%)
therefore, the excess reserves = reserves held by bank-required reserves=$39m-$32m
=$7m
hence, the maximum new loan amount the bank can extend = $7 million
Answer:
$70 million
Explanation:
first we must calculate excess reserves:
total deposits = $320 million
required reserve ratio = 10% = 10% x $320 million = $32 million
excess reserves = total reserves - required reserves = $39 million - $32 million = $7 million
once we calculates excess reserves, we must multiply that amount by the money multiplier to determine the maximum amount of new loans:
new loans = excess reserves x money multiplier = $7 million x (1 / 10%) = $7 million x 10 = $70 million
Discounters, Inc. issued $50,000, 4-year, 6% bonds that pay interest annually on January 1 when the going market interest rate was 7%. On the issue date, the carrying value of bonds, net of discount or including premium, rounded to the nearest $1, is ______.
Answer:
$48,307
Explanation:
The carrying value is the value of the bond plus any unamortized premiums or less any unamortized discounts.
Several years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2016, Zack Corporation (a wholly owned subsidiary of Brant) purchased $180,000 of these bonds on the open market for $201,000, a price based on an effective interest rate of 7 percent. The bond liability had a carrying amount on that date of $760,000. Assume Brant uses the equity method to account internally for its investment in Zack.
1. What consolidation entry would be required for these bonds on December 31, 2016?
2. What consolidation entry would be required for these bonds on December 31, 2018?
Answer:
The Journal entries are as follows:
(1) On December 31, 2016
Bonds payable A/c Dr. $154,040
Interest income A/c Dr. $14,070
Loss on retirement of debt A/c Dr. $49,000
To investment in bonds $198,870
To Interest expense $18,240
(To record consolidation entry)
(2) On December 31, 2018
Bonds payable A/c Dr. $158,884
Interest income A/c Dr. $13,761
Investment in Zack A/c Dr. $40,266
To investment in bonds $194,152
To Interest expense $18,759
(To record consolidation entry)
Workings:
Interest expense for December 31, 2016:
Book value = 20% of Bond liability (as per equity method)
= 0.2 × $760,000
= $152,000
Interest expense = 12% of Book value
= 0.12 × $152,000
= $18,240
Interest expense for December 31, 2016:
= 12% of Book value
= 0.12 × $156,325
= $18,759
The consolidation entry required for the bonds on December 31, 2016, would involve eliminating the intercompany bond transaction and the discount on the bonds. This would also be the case for the consolidation entry on December 31, 2018, if the bonds have not been retired or repurchased.
Explanation:1. On December 31, 2016, the consolidation entry required for these bonds would involve eliminating the intercompany bond transaction. Since Brant owns Zack, the $81,000 cash interest payment made by Zack to the public on the bonds would be eliminated from the consolidated financial statements. In addition, the discount on the bonds ($41,000) would also need to be eliminated.
2. On December 31, 2018, if the bonds have not been retired or repurchased, the consolidation entry would be the same as in 2016. The cash interest payment made by Zack and the discount on the bonds would still need to be eliminated from the consolidated financial statements.
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You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. What is the monthly loan payment? What is the loan’s EFF%?
Final answer:
The monthly loan payment for a $20,000 car loan with a 12% interest rate over 5 years is approximately $424.55. The loan's EFF% is approximately 12.68%.
Explanation:
To find the monthly loan payment, we can use the formula for the amortization of a loan:
Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^-Total Months)
For this loan, the loan amount is $20,000, the monthly interest rate is 12% divided by 12 months (0.12 / 12 = 0.01), and the total months are 60. Plugging in these values, we get:
Monthly Payment = (20000 * 0.01) / (1 - (1 + 0.01)^-60)
Simplifying the equation and calculating, the monthly loan payment is approximately $424.55.
To find the loan's EFF%, we can use the formula:
EFF% = (1 + Monthly Interest Rate)^12 - 1
For this loan, the monthly interest rate is 0.12 divided by 12 (0.12 / 12 = 0.01). Plugging in this value, we get:
EFF% = (1 + 0.01)^12 - 1
Calculating, the loan's EFF% is approximately 12.68%.
$5,000,000, 12% bonds for $5,325,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Cardenas should report unamortized bond premium of:
Answer:
$307,500 .
Explanation:
Please see attachment
Suppose there is free entry in the market for microphones. The demand for microphones is given by: QD= 176-7P. All firms that produce microphones have identical long run average total cost functions given by: ATC = 32/q + 4 + 2q.
Calculate the long run number of firms in this market.
Answer:
The number of firms in the long run is 9.
Explanation:
Demand function: QD = 176 - 7P
Average total cost functions: ATC = 32/q + 4 + 2q
The long-run price of a perfectly competitive market is equal to the minimum average total cost.
The output at minimum average total cost is found by differentiating ATC and equating to zero.
[tex]\frac{dATC}{dq}=\frac{-32}{q^{2} }+2=0[/tex]
[tex]q^{2}=\frac{32}{2}[/tex]
[tex]q^{2}=16[/tex]
[tex]q=\sqrt{16}[/tex]
q = 4
Price = ATC = (32/4) + 4 + (2 × 4)
= 8 + 4 + 8
= 20
The market quantity is
QD = 176 - 7P
Q = 176 - (7 × 20)
Q = 176 - 140
Q = 36
Number of firms = Q ÷ q
= 36 ÷ 4
= 9
Therefore, the number of firms in the long run is 9.
An electronics firm is considering how best to supply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs approximately $500 million to construct and requires a highly skilled work force. The total value of the world market for this product over the next 10 years is estimated to be between $10 and $15 billion. The tariffs prevailing in this industry are currently low. Should the firm adopt a concentrated or decentralized manufacturing strategy? What kind of location(s) should the firm favor for its plant(s)?
The firm should adopt a concentrated manufacturing strategy. This is because based on the fact that tariffs are low in terms of the sum above that was paid, this factory is said to be able to supply different markets at little higher cost.
What is concentrated manufacturing?A centralized manufacturing strategy is known to be a type of method used that consist of only one principal facility through which one's product is moved and distributed.
It is known to help makes consistent quality easy as a person only need to validate only one process. The Centralized manufacturing is known to be the option that best suit the firm above as priority is focus on just on methods instead of multiple.
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Given the significant startup investment and other factors, the firm should likely adopt a concentrated manufacturing strategy. Location decision should consider various factors, with a emphasis on the availability of a skilled workforce and other substantial elements rather than just low-cost environments.
Explanation:Considering the given information, it appears the electronics firm would likely benefit from a concentrated manufacturing strategy. Justifying a $500 million investment requires significant production volume, which is more feasible with a centralized approach. Factors including the total value of the world market and low tariffs further support this strategy.
When deciding on plant location, firms must evaluate a variety of factors, including labor and capital costs, proximity to suppliers and customers, infrastructure quality, tax levels, and local government competence. Given the need for a highly skilled work force in this case, the firm may favor locations with a strong technical education system and existing high-tech industries.
Though environmental regulations can be a concern, they typically make up only 1 to 2% of a large industrial plant's costs. Therefore, this should not be a determining factor in location decision. The company should favor a location that aligns with these considerations while also providing the necessary facilities and a suitable environment for large scale production.
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Combining two assets having perfectly positively correlated returns will result in the creation of a portfolio with an overall risk that ________. A. remains unchanged B. increases to a level above that of either asset C. decreases to a level below that of either asset D. lies between the asset with the higher risk and the asset with the lower risk
Answer:
The correct option is (B)
Explanation:
The main objective of creating a portfolio is to minimise the overall risk of investments. Two investments with the same correlation signs are riskier because, if one investment gives a negative return, the other investment will do the same. The combined loss is more than the loss one investment will sustain. The portfolio is always constructed by adding investments with opposite correlation signs.
Dexter owns a large tract of land and subdivides it for sale. Assume that Dexter meets all of the requirements of § 1237 and during the tax year sells the first eight lots to eight different buyers for $113,000 each. Dexter's basis in each lot sold is $79,100, and he incurs total selling expenses of $4,520 on each sale. What is the amount of Dexter’s capital gain and ordinary income?
Answer:
Please see attachment
Explanation:
Please see attachment
Dexter's capital gain is $235,040, and he has no ordinary income from the sales of the lots. The gain is calculated by subtracting the total basis value and the total selling expenses from the total revenue.
Explanation:To find out Dexter's gain from these transactions, we first need to determine his total revenue, total basis, and total selling expenses. Total revenue is the sale amount he gets, which will be 8 sales at $113,000 each, equal to $904,000. The total basis is the original value of each lot, which is 8 lots times $79,100, equal to $632,800. Total selling expenses are 8 times $4,520, equal to $36,160. The total gain or loss is calculated by subtracting from total revenue, the sum of total basis and total selling expenses. That makes his combined gain $904,000 - $632,800 - $36,160 = $235,040.
This entire amount will be considered a capital gain by § 1237 because Dexter has met all requirements. This means that there is no ordinary income from these transactions.
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Your company just bought a new distillation unit for $175,000 to be used for research and development. Such equipment has a 3-year MACRS classification. The MACRS percentages are 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent, respectively. What is the book value of the distillation unit at the end of year 2?A) $12,968.00B) $38,902.50C) $49,833.50D) $77,770.00E) $116,673.50
Answer:
B) $38,902.50
Explanation:
The MACRS percentages are
First year = 33.33 percent
Second year = 44.44 percent
Third year = 14.82 percent
Fourth year = 7.41 percent
First Year 33.33% = $175,000 * 33.33/100 = $116,672.50
Second Year 44.44% = $116,672.50 - ($175,000 * 44.44/100)
= $116,672.50 - $77,770.00 = $38,902.50
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15. Refer to Scenario 12-1. Suppose the government levies a tax of $1 on each cigar, and the equilibrium price of a cigar increases to $16. What is total consumer surplus after the tax is levied?
Answer:
$5
Explanation:
Consumer surplus is defined as the difference between the highest amount a consumer is willing to pay for a product and the amount the consumer actually pays for the product.
Consumer surplus = willingness to pay - market price
The willingness to pay is the highest amount a consumer would be willing to pay for the purchase of a good or service. It is the value a consumer places on a product.
Before the tax, Ken's consumer surplus = $20 - $15 = $5
Before the tax, Mark's consumer surplus = $17 - $15 = $2
Total consumer surplus- $2 +$5 = $7
After the tax, ken's consumer surplus =$20-$16=$4
After the tax, Mark's consumer surplus = $17 - $16 = $1
Total consumer surplus- $4 + $1 = $5
After the tax on cigars, the total consumer surplus for Ken and Mark combined is $5, which is the sum of the difference between their valuation of the cigar and the new price after the tax.
Explanation:The student is asking about consumer surplus after the imposition of a tax on cigars. Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. In the scenario described, Ken values the cigar at $20 and Mark values it at $17, while the equilibrium price is $15. After the government imposes a $1 tax, the new price becomes $16. The total consumer surplus for Ken and Mark after the tax would be the sum of their individual surpluses: ($20 - $16) for Ken and ($17 - $16) for Mark, which equals $4 + $1 = $5.
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Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output. If the two firms successfully reach and maintain the cooperative outcome of the game, then :a. both the combined profit of the firms and total surplus are maximized.b. the combined profit of the firms is maximized but total surplus is not maximized.c. the combined profit of the firms is not maximized but total surplus is maximized.d. neither the combined profit of the firms nor total surplus is maximized.
Answer:
c. the combined profit of the firms is not maximized but total surplus is maximized.
Explanation:
Where there is a duopoly market, it basically means that for the concerned product there are only two producers in the market for the product, and accordingly they rule the market.
When one company produces high quantity and the other low then they might be able to reach at the combined level profit which is maximized, but there will not be any kind of surplus.
This is because when there are only two companies producing each shall produce quantities in bulk, which shall generate huge amount of surplus in the market, although in that case when there is huge supply the profits might be low.
.According to supply-side fiscal policy, reducing tax rates on wages and profits will:
a.Group of answer choices
b.reduce both unemployment and inflation.
c.create demand-pull inflation.
d.lower the price level but may trigger a recession.
e.result in stagflation.
Answer:
The answer is C.
Explanation:
Reducing tax rate according to supply - side policy creates demand pull inflation.
Demand pull inflation is a situation whereby people have more buying power due to the availability of cash thereby leading to high demand and consequentially leading to an increase in the price of goods and services by suppliers.
That is the process where demand outplays supply due to the high purchasing power thereby causing price to increase which is the demand pull inflation effect.
Consider the economies of Blahnik and Gobbledigook, both of which produce glops of gloop using only tools and workers. Suppose that, during the course of 40 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same.
Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2013 and 2053.
Year
Blahnik
Physical Capital Labor Force Output Productivity
(Tools per worker) (Workers) (Glops of gloop) (Glops per worker)
2013 11 30 1,800
2053 16 30 2,160
Year
Gobbledigook
Physical Capital Labor Force Output Productivity
(Tools per worker) (Workers) (Glops of gloop) (Glops per worker)
2013 8 30 900
2053 13 30 1,620
Initially, the number of tools per worker was higher in Blahnik than in Gobbledigook. From 2013 to 2053, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Blahnik to rise by a _______ amount than productivity in Gobbledigook. This illustrates the concept of ______, which makes it ______ for countries with low output to catch up to those with higher output.
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Springfield National Bank organizes its loan operations based on the market served, such as consumer, small business, and nonprofit organizations. Departmentalization based on ________ allows Springfield to better serve borrowers with different needs.
Answer: Customer group
Explanation:
The main role and responsibility of the customer group is that it aggregate the customers and this type of group basically interact with the customers about the requirement of the specific customer and tell them about the best deal that is available.
They usually help the customer and solve their all the doubt regarding the issue. The customer group is basically refers to the coupon group of members. It is also sometimes known as the customer group.
According to the question, the customer group basically allow the spring filed for serving the borrowers the best loan deal available in the market according the customer requirement.
Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a current market value of $52,000. Variable manufacturing costs are $36,000 per year for this machine. Information on two alternative replacement machines follows. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?
Alterantive A Alternative B
Cost $115,000 $125,000
Variable manufacturing 19,000 15,000
costs per year
Answer:
Please see attachment
Explanation:
Please see attachment
To decide whether Xinhong Company should replace its manufacturing machine, one must compare the total costs over five years. Although the current machine has a lower book value, the variable costs are higher compared to both alternatives. Therefore, Xinhong should replace the machine with Alternative B, which has the lowest combined purchase price and operating costs.
Explanation:When Xinhong Company is considering replacing its manufacturing machine, the decision should be based on comparing the total costs associated with keeping the current machine versus the total costs of purchasing and operating the alternative machines. If we consider only the variable manufacturing costs provided in the question, the current machine costs $36,000 per year. Over the remaining five years, this adds up to $180,000. On the other hand, Alternative A, costing $115,000, will have annual variable costs of $19,000, totaling up to $95,000 over five years, and Alternative B, at $125,000, will have yearly costs of $15,000, amounting to $75,000 over the same period.
If we sum the purchase cost and five-year variable costs, Alternative A would have a total cost of $210,000, and Alternative B would have a total cost of $200,000. Thus, even without considering other factors like the current market value of the existing machine, opportunity costs, and the time value of money, it is evident that Xinhong Company should replace the existing machine with Alternative B, as it has the lowest total cost over five years.
A company’s inventory records report the following in November of the current year: BeginningNovember 15 units @ $10 PurchaseNovember 210 units @ $12 PurchaseNovember 66 units @ $14 On November 8, it sold 18 units for $40 each. Using the LIFO perpetual inventory method, what was the amount recorded in the cost of goods sold account for the 18 units sold?
The amount recorded in the cost of goods sold account for the 18 units sold on November 8 is $224.
To determine the cost of goods sold (COGS) using the LIFO (Last In, First Out) perpetual inventory method, we follow these steps:
Step 1: Identify Inventory Transactions:
Beginning Inventory (November 1): 5 units at $10 each
Purchase (November 2): 10 units at $12 each
Purchase (November 6): 6 units at $14 each
Step 2: Calculate Total Units Available for Sale:
Total units = 5 (beginning) + 10 (Nov 2) + 6 (Nov 6)
Total units = 21 units
Step 3: Sales Data:
Sold on November 8: 18 units
Selling Price: $40 each (but this won't affect COGS calculation)
Step 4: Using LIFO Method:
Under LIFO, the most recently purchased inventory is sold first. Thus, we need to sell from the most recent purchases:
First: The last purchase on November 6: 6 units at $14 each
Second: The next purchase on November 2: 10 units at $12 each
Third: We now need to sell 2 more units from the beginning inventory.
Last: The beginning inventory on November 1: 2 units at $10 each (from 5 units available).
Step 5: Calculating COGS:
From November 6 (6 units) = 6 * $14 = $84
From November 2 (10 units) = 10 * $12 = $120
From November 1 (2 units) = 2 * $10 = $20
Step 6: Total COGS:
COGS = 84 + 120 + 20
COGS = $224.
Correct Question:
A company’s inventory records report the following in November of the current year:
Beginning: November 1 = 5 units at $10
Purchase: November 2: 10 units at $12
Purchase: November 6: 6 units at $14
On November 8, it sold 18 units for $40 each. Using the LIFO perpetual inventory method, what was the amount recorded in the cost of goods sold account for the 18 units sold?
Offenbach & Son has just made its sales forecasts and its marketing department estimates that the company will sell 237,000 units during the coming year. In the past, management has maintained inventories of finished goods at approximately one month’s sales. The inventory at the start of the budget period is 16,000 units. Sales occur evenly throughout the year. Required: Estimate the production level required for the coming year to meet these objectives. (Do not round intermediate calculations.)
Answer:
240,750 units
Explanation:
For computing the production level, first we have to determine the required inventory at the end of the year which is shown below:
Required inventory = Estimated sales ÷ total number of months in a year
= 237,000 units ÷ 12 months
= 19,750 units
Now the total units would be
= 237,000 units + 19,750 units
= 256,750 units
And the inventory at the beginning of the period is $16,000 units
So, the production level would be
= 256,750 units - 16,000 units
= 240,750 units
Ross and Reba are both in their 30s, and they are married. Reba earns $64,000 annually, and Ross earns $1,800 annually working part-time. Their adjusted gross income is $81,500. Reba participates in an employer-sponsored retirement plan. Ross and Reba contribute the maximum amount allowable annually to their IRAs. What is their allowable deduction for this year's contributions? a.$5,000 b.$6,800 c.$-0- d.$1,800 e.$12,000
Answer:
$11000 (Not part of the options)
Explanation:
Given the following information
Reba salary is $64,000 P/A
Ross salary is $1,800 P/A
Adjusted gross income is $81,500
To calculate their allowable deduction for the year's contributions:
If their spouse is an active participant in the employer sponsored retirement plan .It means that the deduction is limited MAGI. In this case, their MAGI is less than the threshold limit .Therefore 5500*2 = $11000 can be deductible .
Marvin received Form 1099-C reporting canceled credit debt of $7,000. His total liabilities immediately before the cancellation were $43,000. The FMV of assets immediately before the cancellation were $38,000. What amount of canceled debt will Marvin report on his return?
Answer:
$2000 of canceled debt that Marvin must report on his return
Explanation:
Please see attachment
Answer:
$2.000
Explanation:
First we calculate the debt incurred as the result of the cancellation by deducting liabilities with asset value as follows:
43,000 - 38,000 = $5,000
Under the insolvency exception rule Marvin can exclude the $5,000 cancelled debt from income.
7,000 - 5,000 = $2,000
Hence, Marvin must report the addition of $2,000 aside from his income on his returns.
The difference between zero profit and zero economic profit is that:
a. economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero profit.
b. economists do not include opportunity cost in zero economic profit, while accountants do include opportunity cost in zero profit.
c. economists include opportunity cost in zero profit, while accountants do not include opportunity cost in zero economic profit.
d. economists do not include opportunity cost in zero profit, while accountants do include opportunity cost in zero economic profit.
Answer:
The correct answer is letter "A": economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero profit.
Explanation:
Normal profit is an economic term that means zero economic profits. To an economist, this is normal since total revenue equals total cost which includes both explicit and implicit costs. It differs from the accounting profit or zero profits since the latter does not take into consideration implicit cost.
Zero profit refers to the accounting concept where total revenue equals explicit costs, while zero economic profit includes both explicit and implicit costs, the latter encompassing opportunity costs that accountants do not consider.
Explanation:The difference between zero profit and zero economic profit lies in the inclusion of opportunity costs in the calculation. A zero profit, often referred to in the context of accounting, means that the total revenue equals explicit costs, which encompass only the actual cash transactions involved in running a business. On the other hand, zero economic profit, a concept used by economists, factors in both explicit and implicit costs, the latter including opportunity costs, which represent the potential gains from alternative uses of the resources.
Accordingly, the correct answer to the question is:
a. economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero profit.
The difference between zero profit and zero economic profit is that economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero profit.
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The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and it lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000. Using the high-low method, the estimated fixed costs are
Answer:
Estimated fixed cost is $17,500.
Explanation:
Applying the high-low method, first, we calculated the variable cost per unit of the firm: ( 125,000 - 55,000) / (4,300 - 1,500) = $25 per tutoring hour.
We have : Total cost of a firm = Variable cost per tutoring hour x tutoring hour delivered + fixed cost.
put the number in the formula, using the high point ( using low point will also result in the same result of fixed cost), we have:
125,000 = 25 x 4,300 + fixed cost <=> Fixed cost = 125,000 - 25 x 4,300 = $17,500.
To estimate fixed costs using the high-low method, first calculate the variable cost per unit. Next, to find the fixed costs, subtract the total variable costs from the total costs. In this case, the estimated fixed costs are $17,500.
Explanation:The high-low method is a cost estimation technique used in managerial accounting. It's used to separate a mixed cost into its fixed and variable components. The first step in the high-low method is to calculate the variable cost per unit.
To do this, we subtract the total cost at the lowest activity level from the total cost at the highest activity level and divide by the difference in hours. Here, it's ($125,000 - $55,000) / (4,300 hours - 1,500 hours) = $70,000 / 2,800 hours = $25/hour. This is the variable cost per hour.
Next, to find the fixed costs, we need to subtract the total variable costs at either the high or low point from the total costs at that point. Using the high point, the total variable cost is 4,300 hours * $25/hour = $107,500. So, the total fixed costs are $125,000 - $107,500 = $17,500.
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Horace sells equipment with an adjusted basis of $20,000 to his great-grandson, Matthew, for its fair market value of $15,000. Matthew sells the equipment to an unrelated party for $17,000. What are Matthew’s realized and recognized gains (losses) upon the sale?
Answer:
The recognized gains upon the sale is $2000.
Explanation:
As the cost of purchase of the equipment to Mathew is $15000 and the sale proceeds received is $17000. The gain is actually calculated as follows;
Gain = Sale proceeds –Cost of equipment
Gain = Matthew sells the equipment to an unrelated party for $17,000 – Matthew bought equipment for its fair market value of $15,000
Which is $1700 -$1500 = $2000
Therefore the recognized gains upon the sale is $2000.
Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in R&D, which is assumed to benefit five years. R&D spending is made uniformly throughout the year. UEI has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows. Consumer Commercial Sales revenue $ 54,000 $ 85,000 Divisional income 11,500 11,925 Divisional investment 35,500 39,750 Current liabilities 4,200 4,000 R&D 4,200 4,200 Required: Evaluate the performance of the two divisions assuming UEI uses economic value added (EVA)
To evaluate the performance of UEI's divisions, we calculate the EVA for both divisions. The Commercial division had a higher EVA of $12,658 compared to the Consumer division which had an EVA of $11,857, thus it is performing better financially.
Explanation:The performance of Universal Electronics Inc. (UEI)'s divisions can be evaluated using Economic Value Added (EVA). The EVA of a division is calculated as the net operating profit after tax (NOPAT) minus the weighted average cost of capital (WACC) multiplied by the total capital employed. The capital employed is divisional investment minus current liabilities. The NOPAT can be calculated as the divisional income plus R&D costs.
For the Consumer Division:
NOPAT = $11,500 + $4,200 = $15,700
Capital Employed = $35,500 - $4,200 = $31,300
EVA = $15,700 - (0.11 * $31,300) = $11,857
For the Commercial Division:
NOPAT = $11,925 + $4,200 = $16,125
Capital Employed = $39,750 - $4,000 = $35,750
EVA = $16,125 - (0.11 * $35,750) = $12,658
The division with the higher EVA, in this case the Commercial division, is performing better financially.
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Excelsior stock is expected to pay $3.00 per share as its next annual dividend. The firm has a policy of increasing the dividend by 11.0 percent annually. The stock has a market price of $13.65 and a beta of 2.8. The market risk premium is 8.56 percent and the risk-free rate is 4.90 percent. What is the cost of equity?
Answer:
30.92%
Explanation:
Use CAPM (Capital Asset Pricing Model) to find the cost of equity;
cost of equity ;r = risk free rate + Beta (Market Risk Premium)
risk free rate = 4.90% or 0.049 as a decimal
Beta = 2.8
Market Risk Premium = 8.56% or 0.0856 as a decimal
Next, plug in the numbers to the above CAPM formula;
r = 0.049 + 2.8(0.0856)
r = 0.049 + 0.23968
r = 0.2887 or 28.87%
Therefore, cost of equity using CAPM is 28.87%
Next. find cost of equity using Dividend growth model ;
r = (D1/P0) +g
r = (3/13.65) + 0.11
r = 0.2198 + 0.11
r = 0.3298 or 32.98%
Cost of equity using Dividend growth model is 32.98%
Find the average of the two to find the cost of equity of this stock;
= (28.87% + 32.98%) /2
= 61.85%/2
= 30.92%
Carson Company purchased a depreciable asset for $280,000. The estimated salvage value is $14,000, and the estimated useful life is 10,000 hours. Carson used the asset for 1,500 hours in the current year. The activity method will be used for depreciation. What is the depreciation expense on this asset?
26,600
39,900
44,100
266,000
Answer:
The correct answer is B.
Explanation:
Giving the following information:
Carson Company purchased a depreciable asset for $280,000. The estimated salvage value is $14,000, and the estimated useful life is 10,000 hours. Carson used the asset for 1,500 hours in the current year. The activity method will be used for depreciation.
Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced
Annual depreciation= [(280,000 - 14,000)/10,000]*1,500= $39,900
Ryngard Corp's sales last year were $38,000, and its total assets were $16,000. What was its total assets turnover ratio (TATO)?
2.04
2.14
2.26
2.38
2.49
Answer:
Total assets turnover ratio (TATO): 2.38
Explanation:
Total assets turnover ratio (TATO) helps investors understand how effectively companies are using their assets to generate sales. Total assets turnover ratio is calculated by using following formula:
Total assets turnover = Total Sales or Revenue/ Average Total Assets
where:
Total Sales= Annual net sales
Average Total Assets = (Assets at the beginning of year +Assets at the end of year )/2
In Ryngard Corp:
Total Sales: $38,000
Total assets: $16,000
Total assets turnover = $38,000/$16,000 = 2.38
Salman is a new employee at a quarry. Being a new employee, he feels lonely at work. However, he finds a group of people who share jokes and speak informally with each other to reduce work-related stress. Salman feels confident being with them and joins their group. In the context of the reasons for joining groups, which of the following is the reason why Salman joined the group?
A. ClosenessB. Strength in numbersC. Achievement as objectiveD. Common goals
Answer:
The answer is letter B
Explanation:
The reason why he joined the group was strength in numbers. Salmon joined the group because he felt confident being in the group. Having ties to others gives people confidence they may lack when they act alone. Their sense of confidence is well founded. In an organization, a group of people tends to be more influential than one person acting alone.
Salman joined the group at work for the solidary benefit of experiencing belonging and social interaction, which aligns with options related to closeness or common goals.
Explanation:The reason why Salman joined the group at his new workplace is likely because of a solidary benefit, which is the satisfaction derived from the experience of working with other people who share similar interests and social needs. As the new employee felt lonely and subsequently found a group that shares jokes and interacts informally to alleviate work-related stress, the group provides a sense of belonging and social interaction which is vital to most people's well-being and can significantly improve job satisfaction. This aligns with options involving closeness or common goals from the given choices.
Company XYZ has a target capital structure of 50% equity and 50% debt. Its cost of equity is 6%, and cost of debt is 8% What would happen to XYZ's WACC if its capital structure were to shift to 75% equity and 25% debt? Assume a tax rate is40%.
A. WACC decrease
B. WACC increases
C. WACC remains constant
Answer:
Option (B) is correct.
Explanation:
WACC = (We × ke) + [Wd × kd × (1 - t)]
where,
We = Equity
Wd = Debt
ke = cost of equity
kd = cost of debt
t = tax rate
At 50% equity and 50% debt,
WACC = (50% × 6%) + [50% × 8% × (1 - 0.4)]
= 5.40%
At 75% equity and 25% debt,
WACC = (75% × 6%) + [25% × 8% × (1 - 0.4)]
= 5.70%
Therefore, there is an increase in the XYZ's WACC if its capital structure were to shift to 75% equity and 25% debt.
A firm has a profit margin of 6% and an equity multiplier of 1.5. Its sales are $230 million, and it has total assets of $115 million. What is its ROE? Do not round intermediate calculations. Round your answer to two decimal places.
Answer:
18%
Explanation:
In this question, we use the DuPont Analysis which is shown below:
ROE = Profit margin × Total assets turnover × Equity multiplier
ROE = 6% × 2 × 1.5
= 18%
The total assets turnover is shown below:
= Sales ÷ total assets
= $230 million ÷ $115 million
= 2
Simply we apply the ROE formula in which the profit margin is multiplied with the total assets turnover and the equity multiplier