Answer:
1. 2.92%
2. 14.59%
3. The risk premium on the stock market does not change.
Explanation:
1. The T-bill rate: real rate + inflation = 0.56% real rate + 2.36 % inflation = 2.92%
The T-bill rate is 2.92%
2. Expected return on Big/Value: T-bill rate + historical risk premium
Expected return on Big/Value: 2.92% T-bill rate + 11.67% historical risk premium = 14.59%
The expected rate of return on the Big/Value portfolio is 14.59%
3. A risk premium is a return on investment above the risk-free rate that an investor needs to be compensated for investing in higher-risk investments. Since the systematic risk i.e the market risk, is expected to remain the same, the risk premium on the stock market is also not expected to experience any change.
To predict the T-bill rate, use the historical average rate. Predict the rate of return on the Big/Value portfolio by subtracting inflation from the mean excess return. Calculate the risk premium on the stock market by subtracting the T-bill rate from the mean excess return for the Market Index.
Explanation:To predict the T-bill rate, we can use the historical average rate of 3.46% annually. So, the predicted T-bill rate would be 3.46%.<\/p>
To predict the expected rate of return on the Big/Value portfolio, we can subtract the inflation rate from the mean excess return for Big Value, giving us a predicted rate of return of 11.67% - 2.35% = 9.32%.<\/p>
The risk premium on the stock market can be calculated by subtracting the T-bill rate from the mean excess return for the Market Index. Therefore, the risk premium on the stock market would be 0.83% - 3.46% = -2.63%.<\/p>
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Prepare a 4–6 page case analysis on the topic of strategic management and why it is critical to the success of an organization in meeting its goals and mission. In your analysis respond to the following question: What is strategic management and why is it critical to the success of an organization in meeting its goals and mission?
Answer:
Strategic management can be defined as the correct management of the resources of a certain organization, whose objective is to achieve the proposed goals. This means having very clear business objectives, analyzing the competition, internally analyzing the internal organization, having clear strategies and having them carried out by the administration in the business organization.
In order to achieve the established objectives, certain aspects must be taken into account, such as the business culture, the skills of all employees and the organizational structure of the company. Companies that do not conform to these characteristics may have some difficulties and problems to achieve business success.
Lower-level managers or employees can have a significant influence in establishing and implementing business strategies, although in the end, top management is responsible for applying business strategies.
Organizational leaders need to be responsible for learning from past strategies and examining their business environment, in search of other strategies. Excellent strategic management is paramount to have an overall perspective, both internal and external.
Explanation:
Strategic management is essential for organizational success, encompassing planning, execution, and monitoring of strategies to meet goals and missions. It ensures financial and management stability, fosters strategic thinking, and enhances the ability to handle pressure and challenges in the business environment.
Explanation:What is Strategic Management and Its Importance?Strategic management is a comprehensive approach to planning, implementing, monitoring, and analyzing an organization's strategies to achieve its goals and fulfill its mission. It serves as a fundament for decision-making processes, directing organizations towards sustainable growth and competitive advantage.
The importance of strategic management lies in its capacity to guide companies through a constantly changing business environment. By analyzing the organization's overall financial position and comparing it to peer organizations, strategic management provides insights into how operations and policies can be adjusted to strengthen financial positions and manage liabilities effectively.
Moreover, strategic management emphasizes the importance of keeping management issues in perspective. It provides strategies to prevent or remedy problems, ensuring that management challenges do not derail the organization's objectives. The integration of management and organization, along with a detailed financial plan, further illustrates how strategic decisions underpin the structural and financial stability of a company.
Key Components of Strategic ManagementAnalysis of the financial and competitive landscape.Development of a strategic vision aligned with the organization's mission.Implementation of strategies through effective organization and management structures.Monitoring and adjusting strategies based on performance and external changes.In conclusion, strategic management is critical to the success of any organization as it encompasses planning, executing, and monitoring strategies essential for meeting goals and fulfilling the mission. This structured approach not only addresses financial and managerial aspects but also emphasizes strategic thinking and the ability to work under pressure, making it indispensable for surviving and thriving in today's complex business world.
Data for January for Bondi Corporation and its two major business segments, North and South, appear below: Sales revenues, North $660,000 Variable expenses, North $383,000 Traceable fixed expenses, North $79,000 Sales revenues, South $510,000 Variable expenses, South $291,000 Traceable fixed expenses, South $66,000 In addition, common fixed expenses totaled $179,000 and were allocated as follows: $93,000 to the North business segment and $86,000 to the South business segment. A properly constructed segmented income statement in a contribution format would show that the segment margin of the North business segment is:_______
Answer:
Net income 105,000
Explanation:
Income statement for North Segment
$
Revenue 660,000
variable cost ( 383,000)
Contribution 277,000
Fixed expenses (79,000)
income before allctd. cost 198000
Allocated fixed cost (93,000)
Net income 105,000
Final answer:
The segment margin for the North business segment is $198,000, calculated by subtracting the variable and traceable fixed expenses from the sales revenues for that segment.
Explanation:
To calculate the segment margin for the North business segment of Bondi Corporation, we need to subtract all expenses that can be directly attributed to the segment from its sales revenues. This would include both variable and traceable fixed expenses specific to the North segment.
Here's how we calculate the segment margin:
Sales revenues, North: $660,000Less: Variable expenses, North: $383,000Less: Traceable fixed expenses, North: $79,000Segment margin for North: $660,000 - $383,000 - $79,000 = $198,000Note that the common fixed expenses allocated to the North segment are not included in the segment margin calculation. They are considered when calculating the net income for the entire company.
Which of the following is not a result of following a well-designed budgeting process? Multiple Choice Assurance of future profits. Improved performance evaluations. Improved coordination of business activities. Improved communication of management's action plans. Improved decision-making processes.
Answer:
Assurance of future profits
Explanation:
Budgeting refers to estimating a future cost or revenue as on today so as to reduce business uncertainty and achieve planned goals. For example, budgeted costs reveal the estimated costs that would be incurred in the near future.
Budgeting is based upon past figures and current trends so as to estimate the future prospects of an activity under consideration. Such an activity reveals the course of action and aids better planning for the future.
For instance, a cash budget reveals the cash surplus or defict which shall arise in the near future and such a budget draws a firm's attention towards the funds it will require in the near future and from what sources those can be raised.
Since budgeting is an estimate and cannot account for unforeseen business events whose indications did not exist at the time of preparing such budgets, it's results cannot guarantee or assure future profits to a business. It's purpose is to reduce uncertainity, it cannot altogether eliminate uncertainity.
Zoe's Bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase, so all of the cost curves (with the exception of fixed cost) shift leftward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will ________ its price and ________ its level of production.
Answer:
Not change
Decrease
Explanation:
A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply.
The bakery cannot change its price because it operates in a perfectly competitive market.
Instead the bakery would reduce cost by decreasing its level of production.
I hope my answer helps you
Zoe's Bakery will increase its price and decrease its level of production, as the short-term response in a perfectly competitive market leads to only a partial offset of the higher costs.
Zoe's Bakery operates in a perfectly competitive industry where an increase in variable costs leads to a leftward shift in the cost curves, which includes the average total cost, average variable cost, and marginal cost curves. In response to increased costs, to maximize profits, Zoe's Bakery will increase its price and decrease its level of production. This is because, in the short run, firms in perfectly competitive markets can only increase prices to partially offset the higher costs—prices rise, but by less than the increase in cost per unit. This could result in economic losses, potentially causing firms to exit the market in the long run. As a consequence, the price may eventually increase by the full amount of the increase in production cost to reach a new equilibrium.
The stockholders' equity section on the December 31, 2012, balance sheet of Chemfast Corporation reported the following amounts:
Contributed Capital
Preferred Stock (par $20; authorized 10,000 shares, ? issued, of which 1,000 shares are held as treasury stock) $108,000
Additional Paid-in Capital, Preferred 15,390
Common Stock (no-par; authorized 20,000 shares, issued and outstanding 6,200 shares) 632,400
Retained Earnings 32,000
Treasury Stock, 1,000 Preferred shares at cost 9,600
Assume that no shares of of treasury stock have been sold in the past. Complete the following statements (Amounts to be deducted should be indicated by a minus sign. Round "per share values" to 2 decimal places.)
1. The number of shares of preferred stock issued was?
2. The number of shares of preferred stock outstanding was?
3. The average issue price of the preferred stock was? (per share)
4. The average issue price of the common stock was? (per share)
5. The treasury stock transaction increased (decreased) stockholders? equity by?
6. The treasury stock cost? (per share)
7. Total stockholders' equity is?
Answer:
1. The number of Shares of Preferred Stock issued was
88000/20 = 4400
2. Number of shares outstanding was
4400 - 1000= 3400
3. Average issue price of the preferred stock was
(88000+10340)/4400= 22.35
4. Average issue price of the common stock was
(478400/5200)= 92
5. The treasury stock transaction decreased stock equity by 9100
6. The treasury stock cost (9100/1000)= 9.1
7. Total stockholder Equity is 589,640
Stockholders Equity
Capital stock
Preferred stock 88000
paid in capital in excess of par 10340
Common stock 478400
total paid in capital 576740
Retained Earnings 22000
total paid in capital & Retained earnings 598740
less Treasury stock -9100
total Stockholders Equity 589640
Chemfast Corporation has issued 5,400 preferred shares, with 4,400 shares outstanding. The average issue price is $22.87 for preferred and $102.00 for common stock, while the treasury stock transaction decreased equity by $9,600.
Let's break down the provided data regarding Chemfast Corporation's stockholders' equity to answer the questions:
1. The number of shares of preferred stock issued was:
To find the number of issued preferred shares, use the par value:
Total amount of Preferred Stock / Par Value = $108,000 / $20 = 5,400 shares.
2. The number of shares of preferred stock outstanding was:
Issued shares minus treasury shares:
5,400 issued shares - 1,000 treasury shares = 4,400 outstanding shares.
3. The average issue price of the preferred stock was (per share):
Average issue price includes additional paid-in capital:
(Total Preferred Stock + Additional Paid-in Capital) / Number of issued shares = ($108,000 + $15,390) / 5,400 = $22.87 per share.
4. The average issue price of the common stock was (per share):
Total Common Stock / Number of issued shares = $632,400 / 6,200 = $102.00 per share.
5. The treasury stock transaction increased (decreased) stockholders' equity by:
The purchase of treasury stock decreases equity:
-$9,600 (since no shares have been sold).
6. The treasury stock cost (per share):
Cost of treasury stock / Number of treasury shares = $9,600 / 1,000 = $9.60 per share.
7. Total stockholders' equity is:
Summing up all components:
(Preferred Stock + Additional Paid-in Capital, Preferred + Common Stock + Retained Earnings) - Treasury Stock = ($108,000 + $15,390 + $632,400 + $32,000) - $9,600 = $778,190.
Yale Company purchased equipment having an invoice price of $21,500. The terms of sale were 2/10, n/30, and Yale paid within the discount period. In addition, Yale paid a $320 delivery charge, $350 installation charge, and $1,183 sales tax. The amount recorded as the cost of this equipment is:
Select one:
a. $21,070.
b. $21,500.
c. $21,740.
d. $22,923.
Answer:
Correct option is D
$ 22,923
Explanation:
According to International Accounting standards (IAS) 16 property plan and equipment (PPE), the cost of an asset is the purchase cost plus other costs of bringing it to the intended working conditions.
So we will add the purchase cost to the cost of delivery, tax and installation.
The purchase cost less discount = (100-2)% × 21,500= $21,070
The cost of the equipment = $21,070 + 320 + 350 + 1183
=$ 22,923
Symon's Suppers Co. has announced that it will pay a dividend of $4.19 per share one year from today. Additionally, the company expects to increase its dividend by 4.2 percent annually. The required return on the company's stock is 10.4 percent. What is the current share price?
Answer:
$67.6
Explanation:
MV=D1/(Ke-g)
D1=4.19
g=4.2%
Ke=10.4%
MV=4.19/(10.4%-4.2%)
MV=$67.6
This is a partial adjusted trial balance of Wildhorse Co.. WILDHORSE CO. Adjusted Trial Balance January 31, 2022 Debit Credit Supplies $780 Prepaid Insurance 1,620 Salaries and Wages Payable $1,040 Unearned Service Revenue 710 Supplies Expense 910 Insurance Expense 540 Salaries and Wages Expense 1,770 Service Revenue 4,350 Prepare the closing entries at January 31, 2022.
Answer:
The entries are made as follows;
Explanation:
Service Revenue Dr.$4,350
Income Summary Cr.$4,350
(To close revenue account)
Income Summary
Supplies expense Dr.$910
Insurance Expense Dr.$540
Salaries and Wages Expense Dr.$1,770
Income Summary Cr.$3,220
(To close expenses)
Income Summary (4,350-3,220) Dr.$1,130
Retained Earnings Cr.$1,130
Closing journal entries are made to temporary accounts like revenue and expense accounts. For Wildhorse Co., debit Service Revenue and credit Income Summary for the amount of revenue. Debit the total of all expenses to Income Summary and credit each individual expense. Lastly, debit Income Summary for the balance of net income and credit Retained Earnings.
Explanation:In closing the books for Wildhorse Co. on January 31, 2022, you group accounts into two categories: revenues and expenses. First, close revenues to Income Summary. The entry is a debit to Service Revenue for $4,350 and a credit to Income Summary for $4,350. Second, close the expense accounts. Debit Income Summary for the summed value of Supplies Expense ($910), Insurance Expense ($540), and Salaries and Wages Expense ($1,770), which totals $3,220, and then credit each expense individually. The balance in the Income Summary (representing net income) is $1,130 which is the difference between Service Revenue ($4,350) and total expenses ($3,220). Finally, close Income Summary and Retained Earnings. Debit Income Summary for $1,130 and credit Retained Earnings for $1,130.
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Smashed Pumpkins Co. paid $184 in dividends and $610 in interest over the past year. The company increased retained earnings by $510 and had accounts payable of $666. Sales for the year were $16,475 and depreciation was $744. The tax rate was 40 percent.
Required:
1. What was the company's EBIT?
Answer: $1,766.67
Explanation:
Alright then.
First we will calculate the Earnings after tax by using the retained earnings and dividends as dividends are shared after tax.
After tax profit = Retained Earnings + Dividends.
= 510 + 184
= $694
Now we add the tax back. That looks something like,
694 = (1 - T) * x
x = 694/1 - T
x = 694 / 1 - 0.4
x = 1156.66666667
Earnings before tax was $1,156.67
Now we add the Interest back to get EBIT
= 1,156.67 + 610
= $1,766.67
$1,766.67 was the company's EBIT.
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The company's EBIT (Earnings Before Interest and Taxes) for Smashed Pumpkins Co. is $1766.67.
To calculate the company's EBIT (Earnings Before Interest and Taxes), we need to consider the dividends, interest, increase in retained earnings, and the tax rate provided.
First, we calculate the net income after taxes by adding the increase in retained earnings ($510) to the dividends paid ($184), giving us $694.
Next, to find the pre-tax income, we divide the net income after taxes by (1 - tax rate). With a tax rate of 40%, this gives us a pre-tax income of $694 / (1 - 0.4) = $1156.67.
Finally, we can determine the EBIT by adding the interest incurred ($610) to the pre-tax income, which results in an EBIT of $1156.67 + $610 = $1766.67.
This calculation assumes all other operating expenses are already included in the sales and depreciation figures and that there are no other income or expenses to consider.
Yeaman Company manufactures luggage sets. Yeaman sells its luggage sets to department stores. Yeaman expects to sell 1 comma 850 luggage sets for $ 345 each in January and 2 comma 250 luggage sets for $ 345 each in February. All sales are cash only. Prepare the sales budget for January and February.
Answer and Explanation:
The preparation of the sales budget for the month of Jan and Feb is presented below:
Particulars January February
Budgeted luggage sets to be sold 1,850 2,250
Sales price per unit $345 $345
Total sales $638,250 $776,250
By multiply the luggage sets with the sales price per unit we can get the total sales and the same is shown above
Stockholders’ equity of Ernst Company consists of 79,000 shares of $5 par value, 9% cumulative preferred stock and 275,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company’s inception. Ernst did not declare any dividends in the prior year, but it now declares and pays a $120,000 cash dividend at the current year-end. Determine the amount distributed to each class of stockholders for this two-year-old company.
Answer:
Preferred stock dividends is $71,100
Common stock dividends is $48,900
Explanation:
The cumulative preferred stockholders would be paid prior year dividends as well as the current year's,hence would be entitled to two years' dividends with remnant thereafter being paid to common stockholders.
preferred stock dividends=79,000*$5*9%=$35,550
The preferred stock dividends per year is $35,550,which means that they would get $71,100 (dividends for two years).
Common stock dividends=$120,000-$71,100 =$48,900
The rationale for preferred stocks receiving arrears of dividends is because of the cumulative nature which entitles them to arrears of dividends
Answer:
Explanation:
Amount paid as a preferred dividend
preferred dividend = previous year dividend + current year dividend
{number of share × par value + {number of share × par value
× preferred dividend percentage} × preferred dividend percentage}
{79,000 shares × $5 each × 9%} + {79,000 shares × $5 each × 9%}
$35,550 + $35,550 = $71,100
the amount paid as preferred dividend is $71,100
Amount paid as common stock dividend = Total cash dividend paid - preferred dividend = $120,000 - $71,100
$48,900
the amount paid as common stock dividend is $48,900
A sporting goods manufacturer budgets production of 48,000 pairs of ski boots in the first quarter and 39,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 19,200 kg and the cost per kg is $9. What is the budgeted materials purchases cost for the first quarter
Answer:
$831,600
Explanation:
The budget must account for all of the production of the first quarter and 20% of the production of the second quarter, the number of boots considered in the budget is:
[tex]b= 48,000 +0.20*39,000\\b=55,800\ boots[/tex]
Assuming that each boot uses exactly 2kg of raw material and that the company has 19,200 kg on hand, the amount of raw material still required is:
[tex]m = 2*55,800-19,200\\m=92,400\ kg[/tex]
If the cost per kg is $9, then the budgeted materials purchases cost for the first quarter is:
[tex]C=92,400*\$9\\C=\$831,600[/tex]
The budgeted materials purchases cost is $831,600.
Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Flower Depot have to achieve to earn a target profit of $240,000
Answer:
Break-even point (dollars)= $600,000
Explanation:
Giving the following information:
Selling price per unit= $10
Variable costs per unit= $4
Fixed costs= $120,000
Desired profit= $240,000
To determine the sales level to achieve the desired profit, we need to use the break-even point in dollars formula:
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= (120,000 + 240,000) / [(10 -4)/10]
Break-even point (dollars)= 360,000/ 0.6
Break-even point (dollars)= $600,000
Newhard Company assigns overhead cost to Jobs on the basis of 125% of direct labor cost. The job cost sheet for Job 313 includes $10,000 in direct materials cost and $12,000 in direct labor cost. A total of 1,000 units were produced in Job 313.
Required:
a. What is the total manufacturing cost assigned to Job 313?
b. What is the unit product cost for Job 313?
a. Total manufacturing cost _____
b. Unit product cost _____
Answer:
a. Total manufacturing cost $37,000
b. Unit product cost $37
Explanation:
Total Cost = Sum of all manufacturing costs
Total manufacturing cost -
direct materials $10,000
direct labor $12,000
overhead ($12,000×125%) $15,000
Total $37,000
Unit Product Cost = Total Cost / Number of Units
= $37,000/ 1,000 units
= $37
Answer:
a. Total manufacturing cost is $37,000
b. Unit product cost is $37 per unit
Explanation:
The total manufacturing cost is the sum of the direct and indirect costs. The indirect costs are also known as overheads.
Given that the job cost sheet for Job 313 includes $10,000 in direct materials cost and $12,000 in direct labor cost,
Total direct cost = $10,000 + $12,000
= $22,000
Also given that the Company assigns overhead cost to Jobs on the basis of 125% of direct labor cost
Total overheads = 125% * $12,000
= $15,000
Hence total manufacturing cost
= $22,000 + $15,000
= $37,000
Given that 1,000 units were produced,
Unit cost = $37,000/1000
= $37 per unit
The short-run is- a time period in which the prices of output cannot change but in whihc the prices of inputs have time to adjust- a time period in which output prices can change in response to supply and demand but in which all input prices have not yet been able to completely adjust- a time period in which neither the prices of output nor the prices of inputs are able to change- any time period ofless thatn a year
Answer:
a time period in which output prices can change in response to supply and demand but in which all input prices have not yet been able to completely adjust
Explanation:
Short run are the period in that at least one factor in production is fixed, in which the product can be increased by increasing the owners and increasing the number of variable factors such as purchasing more raw materials. Therefore, output may change with the increase in supply and demand.so the correct option is a time period in which output prices can change in response to supply and demand but in which all input prices have not yet been able to completely adjustIndicate whether each of the following transactions represents an increase in net exports, a decrease in net exports, an increase in net capital outflow, or a decrease in net capital outflow for the United States.
a. An American buys a Sony TV.
b. An American investor buys a controlling share in a South Korean electronics firm.
c. The Sony pension fund buys a bond from the U.S. Treasury.
d. A South Korean tourist buys some Sunkist oranges from an American farmer.
Answer: a. Decrease in Net Exports
b. Increase in Net Capital
c. Decrease in Net Capital.
d. Increase in Net Exports
Explanation:
a. A Decrease in Net Exports
Net Exports is Exports - Imports. In buying a Television from a foreign company, the American has imported the good. This will reduce Net Exports by the aforementioned formula.
b. An INCREASE in NET CAPITAL OUTFLOW
This is essentially Capital being invested in other countries. It increases when more is invested in other countries as opposed to less.
c. A DECREASE in NET CAPITAL OUTFLOW.
As previously stated, Net Capital Outflow increases when a country invests more in another country. Since we are looking at it from the perspective of the USA, Sony, which is not an American company, buying into such capital is considered a Decrease in Net Capital Outflow as money is coming into the US.
d. An INCREASE in NET EXPORTS
Here, a foreigner is buying goods in the USA. That translates to Export. And by the Net Export Equation, Net Exports will rise.
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Net exports decrease when an American buys a Sony TV, while it increases when a South Korean tourist buys Sunkist oranges. Net capital outflow increases with purchase of a share in a South Korean company by an American and decreases when Sony pension fund buys a U.S. Treasury bond.
Explanation:Here are the transactions and their impact:
An American buys a Sony TV. This is an import and would decrease net exports for the United States.An American investor buys a controlling share in a South Korean electronics firm. This would increase net capital outflow as money is leaving the U.S and going to South Korea.The Sony pension fund buys a bond from the U.S. Treasury. This would decrease net capital outflow, as money is entering the U.S. from abroad.A South Korean tourist buys some Sunkist oranges from an American farmer. This would increase net exports as this is an export from the U.S to South Korea.Learn more about Net Exports and Net Capital Outflow here:https://brainly.com/question/37531629
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1. Dougie’s Donuts most recent free cash flow (FCF) was $225 million; the FCF is expected to grow at a constant rate of 4%. The firm’s WACC is 12.55%, and it has 15 million shares of common stock outstanding. The firm has $75 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other non-operating assets. It has $545 million in debt and $50 million in preferred stock. a. What is the value of operations? b. Immediately prior to the repurchase, what is the intrinsic value of equity? c. Immediately prior to the repurchase, what is the intrinsic stock price? d. How many shares will be repurchased? How many shares will remain after the repurchase? e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock prices.
Answer:
a. What is the value of operations? = 2736.84 millions
b. Immediately prior to the repurchase,= 2811.84millions
what is the intrinsic value of equity? = 2216.84 millions
c. Immediately prior to the repurchase, what is the intrinsic stock price? = 147.79
d) How many shares will be repurchased?= 0.51million
How many shares will remain after the repurchase? = 14.49 millions
e. Immediately after the repurchase,= 2141.84millions
what is the intrinsic value of equity? The intrinsic stock prices. = 147.79
Explanation:
Find the picture in the attachment
On January 1, 2018, Truesdale, Inc., purchased a piece of machinery for use in operations. The total acquisition cost was $33,000. The machine was expected to produce a total of 60,000 units during its life. The machine actually produced 16,000 units during 2018, 23,000 units during 2019, and 21,000 units during 2020. The machine has a salvage value of $3,000. Using the units-of-production method, the amount of depreciation that should be recorded during 2018, is approximately A. $8,000 B. $10,000 C. $8,800 D. $11,000
Answer:
A. $8,000
Explanation:
For computing the amount of depreciation expenses, first, we need to find out the depreciation expense per unit which is shown below:-
Depreciation expense per unit = (Total acquisition cost - Salvage value) ÷ Total units
= ($33,000 - $3,000) ÷ 60,000
= $30,000 ÷ 60,000
= 0.50 per unit
Amount of depreciation expenses = Actual Machine produced × Depreciation expense per unit
= 16,000 × 0.50
= $8,000
Therefore for computing the depreciation expenses we simply multiply the actual machine produced with depreciation expense per unit.
Gonzalez Company acquired $200,000 of Walker Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $70,000 of the bonds for 97. Journalize entries to record the following in Year 1: For a compound transaction, if an amount box does not require an entry, leave it blank.
Answer and Explanation:
The journal entries are shown below:
a. Investment Dr $200,000
To Cash $200,000
(Being the acquirement is recorded)
b. Cash Dr $6,000
To Interest revenue $6,000
(Being the cash is recorded)
The computation is shown below:
= $200,000 × 6% × 6 months ÷ 12 months
= $6,000
c. Cash $67,900 ($70,000 × 97%)
Loss on sale of investment $2,100
To Investment $70,000
(Being the cash is recorded)
d. Interest receivable $1,300
To Interest revenue $1,300
(Being the interest receivable is recorded)
= ($200,000 - $70,000) × 6% × 6 months ÷ 12 months
= $1,300
MoveIt Corporation is the world’s leading express-distribution company. In addition to the world’s largest fleet of all-cargo aircraft, the company has more than 54,000 ground vehicles that pick up and deliver packages. Assume that MoveIt sold a delivery truck for $26,000. MoveIt had originally purchased the truck for $43,000 and had recorded depreciation for three years.
1.Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was
(a) $17,000,
(b) $12,000, and
(c) $19,000
2.Using the following structure, indicate the effects on disposal of the truck, assuming that Accumulated Depreciation was (a) $17,000, (b) $12,000, and (c) $19,000.
3.Prepare the journal entry to record the disposal of the truck, assuming that Accumulated Depreciation was (a) $17,000, (b) $12,000, and (c) $19,000.
The gain or loss on disposal is calculated by subtracting the net book value (cost less accumulated depreciation) from the sale price of the asset. Depending on the amount of accumulated depreciation, the MoveIt Corporation would record a break-even, a loss, or a gain on the sale of its delivery truck.
Explanation:Calculating Gain or Loss on Disposal:
To calculate the gain or loss on the disposal of the delivery truck, we need to consider the truck's original cost, the accumulated depreciation, and the sale price. The formula for calculating gain or loss is:
Sale Price - (Original Cost - Accumulated Depreciation) = Gain or Loss
For (a) $17,000 in accumulated depreciation: $26,000 - ($43,000 - $17,000) = $0 (no gain or loss)For (b) $12,000 in accumulated depreciation: $26,000 - ($43,000 - $12,000) = -$5,000 (loss)For (c) $19,000 in accumulated depreciation: $26,000 - ($43,000 - $19,000) = $2,000 (gain)Journal Entry for Disposal of the Truck:
The journal entry varies based on the accumulated depreciation and whether there was a gain or loss:
For (a) $17,000 accumulated depreciation, the entry would balance with no gain or loss accounted for.For (b) $12,000 accumulated depreciation, the loss of $5,000 would be recorded.For (c) $19,000 accumulated depreciation, a gain of $2,000 would be recorded.QUESTION 20 The South Division reported income from operations of $400,000 and total service department charges of $200,000. As a result, a. the gross profit margin was $200,000 b. income from operations before service department charges was $600,000 c. net income was $200,000 d. consolidated net income was $200,000
Answer:
Option (b) is correct.
Explanation:
Given that,
Income from operations = $400,000
Total service department charges = $200,000
The income from operations already takes into account the service department charges which means that it is already deducted. Hence, if we add the total service department charges to the income from operations then we can get the income from operations before service department charges.
So, the income from operations before service department charges is as follows:
= Income from operations + Total service department charges
= $400,000 + $200,000
= $600,000
The centralized computer technology department of Hardy Company has expenses of $320,000. The department has provided a total of 4,000 hours of service for the period. The Retail Division has used 2,750 hours of computer technology service during the period, and the Commercial Division has used 1,250 hours of computer technology service. Additional data for the two divisions is following below: Retail Division Commercial Division Sales $2,150,000 $1,200,000 Cost of goods sold 1,300,000 800,000 Selling expenses 150,000 175,000 Determine the divisional income from operations for the Retail Division and the Commercial Division. Do not round interim calculations. Hardy Company Divisional Income from Operations Retail Division Commercial Division $ $ $ $ $ $ Income from operations $ $
Answer:
Retail Division $480,000
Commercial Division $30,000
Explanation:
To measure divisional income consider only those items attributable to a particular division.
Retail Division
Sales 2,150,000
Less Cost of Sales (1,300,000)
Controllable Contribution 850,000
Less Controllable Fixed Cost :
Selling expenses (150,000)
Allocated Central Cost (2,750/4,000×$320,000) (220,000)
Divisional Profit Contribution 480,000
Commercial Division
Sales 1,200,000
Less Cost of Sales (800,000)
Controllable Contribution 400,000
Less Controllable Fixed Cost :
Selling expenses (150,000)
Allocated Central Cost (1,250/4,000×$320,000) (220,000)
Divisional Profit Contribution 30,000
David Company uses the gross method to record sales made on credit. On June 10, 2017, it sold goods worth $250,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2017, David received payment for 1/2 of the amount due from Charles Inc. David's fiscal year end is on June 30, 2017. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc?
Answer:
$125,000
Explanation:
Good worth $250,000-$125,000
=$125,000
The amount that will be reported in the financial statements for the accounts receivable due from Charles Inc is $125,000 due to the fact that On June 10, 2017 goods worth $250,000 where sold to Charles Inc and On June 19, 2017, David received payment for 1/2 of the amount due from Charles Inc which makes us to arrived at $125,000 which is the 1/2 of $250,000 then less the actual amount which is $2,50,000 which in turn make us to arrived at $125,000 as the answer.
(1/2×$250,000)=$125,000
Winthrop Enterprises is a holding company (a firm that owns all or most of some other companies' outstanding stock). Winthrop has four subsidiaries. Each subsidiary borrows capital from the parent company for projects. Ervin Company is successful with its projects 93% of the time, Morten Company 76% of the time, Richmond Company 95 % of the time, and Garfield Company 82% of the time. What loan rates should Winthrop Enterprises charge each subsidiary for loans?
Answer:
Ervin loan rate is 10.8%
Morten loan rate is 8.80%
Richmond loan rate is 11.00%
Garfield loan rate is 9.50%
Explanation:
The amount to charge to each subsidiary is the weighting of each subsidiary project success rate multiplied by aggregate loan rate.
Ervin subsidiary project success weighting=(93%*4)/(93%+76%+95%+82%)
=1.08
the figure 4 represents 4 subsidiaries
Morten subsidiary project success weighting=(76%*4)/(93%+76%+95%+82%)
=0.88
Richmond subsidiary project success weighting=(95%*4)/(93%+76%+95%+82%)
=1.10
Garfield subsidiary project success weighting=(82%*4)/(93%+76%+95%+82%)
=0.95
Assuming the aggregate loan rate is 10%
Ervin loan rate=10%*1.08
=10.8%
Morten loan rate=10%*0.88
=8.80%
Richmond loan rate=10%*1.10
=11.00%
Garfield loan rate=10%*0.95
=9.5%
After the amount due on a sale of $28,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment. The cost of the merchandise returned was $ 16,800.
What is the amount of the refund owed to the customer? $ _____
Journalize the entries made by the seller to record (A) the refund and ( B) the return of merchandise.
A. Sales Returned and Allowances _____ Sales Discounts _____ Cash _____
B. Merchandise Inventory _____ Cost of Merchandise Sold _____
Answer: Please see explanation column for answers
Explanation:
A) Amount refund owed to customer=
Sale of item - discount on item
=$28000- ($28000 x 2%) = $27,440
B)Journal of the entries made by the seller to record refund
Dr Sales Returned and allowances - $28,000
Cr Sales Discount $560
Cr Cash $27,440
c) Journal of the entries made by the seller to record return of merchandise
Cr Merchandise Inventory-$16,800
Dr Cost of Merchandise Sold -$16,800
Answer:
The amount of refund owed to customer is the amount of cash $27,440 received from the customer.
Dr sales returned and allowances $28,000
Cr Cash $27,440
Cr sales discount $560
Return of merchandise:
Dr merchandise inventory $16,800
Cr Cost of merchandise sold $16,800
Explanation:
The entries passed initially that need to be reversed now are:
The discount on the sale is 2% of $28,000=$560 debit to sales discount
Cash received from the customer =$28000-$560=$27,440 debit to cash account
Actual amount debited to sales is $28,000 credit to sales account
Upon return of the merchandise,the merchandise inventory is debited and cost of merchandise sold is credited with cost of merchandise at $16,800
Sisters of Charity of the Incarnate Word, operates a health and Wellness Center. Meaux was a paying member of the Health Center. The rules of the center which Meaux had been given state, "The Health and Wellness Center is not responsible for lost or stolen items." A sign stating, "We cannot assure the safety of your valuables" was posted at the check in desk. The Wellness Center furnished a lock and key to each member but had a master key to open lockers in case a member forgot or lost a key. One day, Meaux went to the Wellness Center and placed his clothes, an expensive Rolex watch, and a money clip with $400 cash in the locker assigned him. On returning from swimming, Meaux discovered that his locker had been pried open and that his watch and money had been stolen by some unknown person. Meaux sued the Sisters of Charity alleging that a bailment had been created between him and the sisters and that the sisters, as bailee, were negligent and therefore liable to him for the value of the stolen property. Was a bailment created between Meaux and the Sisters of Charity? What is required for a bailment to be made?
Answer:
a) A bailment was not created between Meaux and the Sisters of Charity. This answer is supported by the two requirements for a bailment to be made, stated in answer b) below.
b) A bailment is the temporary transfer of physical control of an item of personal property from the bailor to the bailee. It is not a transfer of ownership.
For a bailment to be made, there must be physical control of the bailed item and intention to control on the part of the bailee. Items kept in the lock are not under the custody of the Sisters of Charity and they did not have any intention to safeguard them; no wonder the rule and warning sign.
Explanation:
The alleged bailee, the Sisters of Charity, did not have any intention to control and there was no way they could have known what Meaux deposited in the lock. That was why the rules of the health and wellness center clearly declared that the Center was not responsible for lost or stolen items and went further with a sign that "we cannot assure the safety of your valuables."
These rule and sign are good warnings which Meaux should have taken into consideration before enrolling as a member of the center and also before bringing his expensive Rolex watch and cash to the center.
That the Sisters of Charity kept the master key for locks was for the interest of the Center patrons when they lost or forgot their keys.
Consider the following statements regarding Company A and Company B:The two companies have identical operating results but have made different accounting method choices.Company B reported lower COGS than Company A this year. Prices rose throughout the year.Both companies took a PP&E write downs in 2016. Company B reversed the write down and wrote the assets back up this year.Which of the two companies most likely reports under US GAAP?A. A onlyB. B onlyC. A and BD. Neither A nor B
Answer:
A. A only
Explanation:
U.S. Generally Accepted Accounting Principles (GAAP) does not allow property, plant, and equipment to be written up or revalued. If the fair value of PP&E falls below the book value and the amount is material then a company must write down the asset to fair value.
Since under US GAAP, once PPE is written, it can not be reversed. as Company B is indicated to have reversed the write down while company A did not. It therefore means that Company A only is reporting under US GAAP.
Final answer:
Company A is most likely to report under US GAAP because US GAAP does not permit reversal of PP&E write-downs, and higher COGS reported by Company A could be indicative of using the LIFO method, permitted under US GAAP when prices rise.
Explanation:
The question asks which of the two companies, A or B, most likely reports under US GAAP, given that:
Company B reported lower COGS than Company A this year while prices rose.Company B reversed a PP&E write-down this year that was taken in 2016.Under US GAAP, reversing a write-down of PP&E (property, plant, and equipment) is not permitted once it is recorded. Moreover, if prices rise throughout the year and inventory valuation methods remain constant, COGS (Cost of Goods Sold) would typically increase under the last-in, first-out (LIFO) method which is allowed under US GAAP. This premise leads to the conclusion that Company A, which did not reverse the PP&E write-down and potentially follows LIFO accounting (assuming it led to higher COGS), is the one that most likely reports under US GAAP. Therefore, the correct answer is A. A only.
Harold Manufacturing produces denim clothing. This year, it produced 5,120 denim jackets at a manufacturing cost of $41.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. Jackets can be sold as is to a secondhand clothing shop for $8.00 each. Jackets can be disassembled at a cost of $32,200 and sold to a recycler for $12.00 each. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,120 jackets into only 2,900 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $101,700, but the jackets can then be sold for their regular price of $45.00 each.
Answer:
the best option is number 1, sell the jackets to a secondhand store at $8 will yield $40,960 in profits
Explanation:
the previous manufacturing costs can be considered sunk costs because they cannot be recovered, so we must analyze the options to determine which one yields the highest profit.
option 1
sell 5,120 jackets to secondhand stores at $8 each, profit = $40,960
option 2
disassemble the jackets and sell them at $12 each, profit = $61,440 - $32,200 (disassembling costs) = $29,240
option 3
rework the jackets, profit = ($45 x 2,900) - $101,700 = $28,800
the best option is number 1, sell the jackets to a secondhand store at $8 will yield $40,960 in profits
On January 1, 2021, Tropical Paradise borrows $43,000 by agreeing to a 6%, five-year note with the bank. The funds will be used to purchase a new BMW convertible for use in promoting resort properties to potential customers. Loan payments of $831.31 are due at the end of each month with the first installment due on January 31, 2021.
Required:
Record the issuance of the installment note payable and the first two monthly payments.
Answer and Explanation:
The Journal entry with their narrations is shown below:-
1. Cash Dr, $43,000
To Notes Payable $43,000
(Being Cash is recorded)
2. Interest expenses Dr, $215
($43,000 × 6% ÷ 12)
Notes payable Dr, $616.31
To Cash $831.31
(Being Interest expenses is recorded)
3. Interest expenses Dr, $211.92
($43,000 - $616.31) × 6% ÷ 12)
Notes payable Dr, $619.39
To Cash $831.31
(Being Interest expenses is recorded)
Therefore we have recorded the issuance of the installment note payable and the first two monthly payments.
The issuance of the installment note payable and the first two instalments by Tropical Paradise can be recorded using journal entries. The issuance results in a 'Cash' debit and 'Notes Payable' credit worth $43,000. Payments result in 'Interest Expense' and 'Notes Payable' debits and a 'Cash' credit, where the amount reflects the payment towards interest and principal.
Explanation:Tropical Paradise's decision to borrow and subsequent payments can be recorded via journal entries. The issuance of the installment note payable would result in journal entry namely 'Cash' (Debit $43,000) and 'Notes Payable' (Credit $43,000). This represents the increase in cash by the loan amount and the establishment of the liability to pay this sum back to the bank.
Upon making the first monthly payment of $831.31, Tropical Paradise would make another journal entry: 'Interest Expense' (Debit $215) and 'Notes Payable' (Debit $616.31) to reflect the payment of some of the principal and interest, and 'Cash' (Credit $831.31) to show the reduction in available cash from making the payment. These entries would be repeated for the second payment as well.
The interest expense is calculated as the outstanding principal (in these cases, $43,000 and $42,383.69) multiplied by the annual interest rate (6%), divided by the number of periods in the year (12).
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West Corp. issued 17-year bonds 2 years ago at a coupon rate of 10.3 percent. The bonds make semiannual payments. If these bonds currently sell for 102 percent of par value, what is the YTM
Answer:
10%
Explanation:
The actual return that an investor earn on a bond until its maturity is called the Yield to maturity. It is a long term return which is expressed in annual rate.
According to given data
It is assumed that face value of the bond is $1,000
Coupon Payment = C = $1,000 x 10.3% = $103 annually = $51.5 semiannually
Price of the Bond = P = $1,000 x 102% = $1,020
Numbers of period = n = (17-2) years x 2 = 30 periods
Use Following Formula to calculate YTM
Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]
Yield to maturity = [ $51.5 + ( $1,000 - $1,020 ) / 30 ] / [ ($1,000 + $1,020 ) / 2 ]
Yield to maturity = $50.83 / $1,010 = 0.0503 = 5.03% = 5% per Semiannual
Yield to maturity = 5% x 2 = 10% annually
Yield to maturity = 3.56% semiannually OR 7.12% annually
Answer:
The answer is 10.04%
Explanation:
Yield-to-maturity (YTM) is the of return an investor is expecting from its bonds.
The payment is semiannual.
Number of years, N is 30 years[(7 years - 2 years) x 2]
YTM = ?
Present Value(PV) = $102(102% of $100)
Coupon payment (PMT) = $5.15[(10.3percent ÷ 2) x $100]
Future Value(FV) = $100
Using Financial calculator, we have:
5.02percent
This is for semiannual
Therefore, annual YTM will be:
5.02 percent x 2
10.04%