Answer:
Building:
cost of bulding 25,100
write-off demolished building (25,100)
Balance: 0
Building under construction:
exacavation cost 13,100
architect's fees 32,100
contractor 640,100
Balance: 685,300
Land:
acquisition cost 255,100
property taxes paid at purchase 2,180
Balance: 257,280
Land improvements:
parking lot and driveways 28,100
fences 5,810
balance 33,910
period cost:
demolition expense 24,100
salvage from demolition (11,000)
property taxes expense 5810
loss at disposal (building) 25,100
balance: 44,010
Explanation:
For building and land we should follow the accounting procedure of include all the incurred or assumed cost to contruct and leave it ready to use.
As there is no indication that construction was completed we should assume the building is under construction.
As we demolish the old building we should write-off and recognize the loss and the demolition expense.
The property taxes after the purcahse are cost of the period.
Before the taxes were a necessary cost to acquire the land.
The salvage from the demolition decrease the expense are not considered revenue.
The given transactions are analyzed using table column headings to record the debit and credit amounts for each. Each transaction is appropriately categorized based on the account title and entered in the respective columns. The total debit amount is $1,031,500, with various expenditures on plant assets.
Explanation:To analyze the transactions, we can use the table column headings. In the Item column, enter the number of each transaction. Then, enter the amounts in the appropriate columns. For amounts in the Other Accounts column, indicate the account title. Here is the breakdown of each transaction:
Excavation costs for new building: Debit $13,100 in the Buildings column.Architect’s fees on building plans: Debit $32,100 in the Buildings column.Full payment to building contractor: Debit $640,100 in the Buildings column.Cost of real estate purchased as a plant site: Debit $280,200 in the Land column.Cost of parking lots and driveways: Debit $28,100 in the Buildings column.Accrued real estate taxes paid at time of purchase of real estate: Debit $2,180 in the Land column.Installation cost of fences around property: Debit $5,810 in the Buildings column.Cost of demolishing building to make land suitable for construction of new building: Debit $24,100 in the Buildings column.Real estate taxes paid for the current year on land: Debit $5,810 in the Land column.Proceeds from salvage of demolished building: Credit $11,000 in the Buildings column.Learn more about Analyzing plant asset transactions here:https://brainly.com/question/31699236
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Perpetuities Suppose that today's date is January 1,2019. You have the opportunity to make an investment that will pay you $100 on January 1 of every year, starting in 2020 and continuing forever.
Assume the relevant discount rate is 7%.
a. What would you pay now for this investment?
b. Suppose the investment's first cash flow comes immediately, on January 1,2019, P5-27 with subsequent cash payments every January 1 thereafter. Now how much would you pay? It might be helpful to draw the first few years of a timeline here and compare it to the situation in part a.
c. Suppose the investment's first cash flow is 3 years from now, on January 1, 2022. On every January 1 thereafter you will receive $100. How much is this worth to you today, January 1, 2019?
Answer:
a) Value of a perpetuity =$1,428.57
b) Present value of perpetuity due will include extra cash flow received at start: =$1,528.57
c) Present value = 1428.57/(1.07^2)=$1,247.77
Explanation:
a) Value of a perpetuity = Cash flow/rate=100/0.07=$1,428.57
b) Present value of perpetuity due will include extra cash flow received at start:
=Cash flow/rate+Cash flow=100+(100/0.07)=$1,528.57
c) This will be equal to PV of perpetuity at end of year 2=100/0.07=$1428.57 after 2 years
Present value = 1428.57/(1.07^2)=$1,247.77
Final answer:
The present value of receiving an annual payment of $100 starting in 2020 in perpetuity at a 7% discount rate is $1,428.57. If the first payment is immediate, the value is higher at $1,528.57. Receiving the first payment in 2022 has a present value today of $1,165.96.
Explanation:
To calculate the present value of a perpetuity (an infinite series of cash flows), we use the perpetuity formula: Present Value (PV) = Payment (PMT) / Discount Rate (r). For an investment that pays $100 each year in perpetuity, starting in 2020, and with a discount rate of 7%, the present value calculation would be:
PV = $100 / 0.07 = $1,428.57
This represents the sum a rational investor would be willing to pay for receiving $100 annually, starting a year from now, indefinitely.
In the case where the first $100 payment comes immediately on January 1, 2019, we add the immediate payment to the present value of the perpetuity:
PV = $100 + ($100 / 0.07) = $100 + $1,428.57 = $1,528.57
Finally, if the investment's first cash flow is to be received in 3 years (on January 1, 2022), we have to discount the perpetuity value back 3 years using the discount rate:
PV = ($100 / 0.07) / (1 + 0.07)^3 = $1,428.57 / 1.225043 = $1,165.96
So, today's value of receiving $100 each year, starting three years from now infinitely, is approximately $1,165.96.
Evaluate the following statement: "Tests of sales and cash receipts transactions are such an essential part of every audit that I like to perform them as near the end of the audit as possible. By that time I have a fairly good understanding of the client's business and its internal controls because confirmations, cutoff tests, and other procedures have already been completed." (Select all answers that apply.) A. As long as the auditor has performed sufficient analytical procedures to evaluate the financial information through analysis of plausible relationships among financial and nonfinancial data, it is acceptable to perform tests of sales and cash receipts transactions as near the end of the audit as possible. B. The auditor should attempt to understand the entity and its environment, including internal controls, as early as practical through the analysis of the accounting system, tests of controls, and substantive tests of transactions. C. The primary purpose of testing sales and cash receipts transactions is to evaluate the internal controls so that the scope of the substantive tests of the account balances may be set. If the auditor performs the tests of details of balances prior to testing internal controls, no benefit will be derived from the tests of controls. D. None of the above.
Answer:B. The Auditor should attempt to understand the entity and it's environment, Including Internal controls as early as practical through the analysis of the accounting system, test of controls and substantive test of transaction.
Explanation:
The first major duty of the Auditor is to understand the entity and it's environment to determine it's inherent risks, to evaluate the existing Internal controls to determine it's workability which invariably determines the level of substantive test to be carried out.
The test of sales and cash receipt thus not hereald an audit work but are carry out to confirm the strength or weakness of the internal control already documented.
For an effective audit, understanding the client's internal controls early (Option B) and evaluating them to set the scope of substantive tests (Option C) is crucial. Performing these tests late might omit critical insights gained from early evaluations.
The statement to evaluate suggests performing tests of sales and cash receipts transactions near the end of the audit. While there is some practicality in understanding the client’s business and internal controls by this time, the timing and sequence of audit procedures play a crucial role. Here, selecting the right options is important:
B: The auditor should attempt to understand the entity and its environment, including internal controls, as early as practical through the analysis of the accounting system, tests of controls, and substantive tests of transactions. Performing this understanding early helps in planning and executing further audit procedures effectively.C: The primary purpose of testing sales and cash receipts transactions is to evaluate the internal controls so that the scope of the substantive tests of the account balances may be set. If the auditor performs tests of details balances before testing internal controls, the benefits of such tests may be underutilized.Option A is less relevant because, while analytical procedures are useful, they are not a replacement for early testing of internal controls.
Following are financial statement numbers and ratios for Snap-On Incorporated for the year ended December 28, 2016 (in millions).
If we expected revenue growth of 5% in the next year, what would projected revenue be for the year ended December 30, 2017?
NOPAT $ 590.4
NOA 3,567.8
Net operating profit margin (NOPM) 15.9%
Net operating asset turnover (NOAT) 1.04
Hint: NOPM = (NOPAT/Sales) and NOAT =(Sales/Avg. NOA)
A) $3,567.8 million
B) $3,551.0 million
C) $3,898.9 million
D) $3,713.2 million
Answer:
C) $3,898.9 million
Explanation:
Please see attachment.
The following items appear on the balance sheet of a company with a one-year operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, L if it is a long-term liability, or N if it is not a liability. Notes payable (due in 13 to 24 months). Notes payable (due in 6 to 12 months). Notes payable (mature in five years). Current portion of ling-term debt. Notes payable (due in 120 days). FUTA taxes payable. Accounts receivable. Sales taxes payable. Salaries payable. Wages payable.
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.
Final answer:
Items on a balance sheet are classified based on when they are due. Notes payable due within one year are current liabilities, while those maturing beyond one year are long-term liabilities. Accounts receivable is not a liability, but an asset.
Explanation:
Items on a company's balance sheet are classified as either current liabilities, long-term liabilities, or not liabilities based on their nature and the duration within which they are expected to be settled. The classifications for the given items are as follows:
Notes payable (due in 13 to 24 months) - L (long-term liability)
Notes payable (due in 6 to 12 months) - C (current liability)
Notes payable (mature in five years) - L (long-term liability)
Current portion of long-term debt - C (current liability)
Notes payable (due in 120 days) - C (current liability)
FUTA taxes payable - C (current liability)
Accounts receivable - N (not a liability)
Sales taxes payable - C (current liability)
Salaries payable - C (current liability)
Wages payable - C (current liability)
It is important to note that accounts receivable represent money that is owed to the company and is therefore an asset, not a liability. Items classified as current liabilities are those expected to be paid within the company's one-year operating cycle, while long-term liabilities are obligations that are due beyond one year.
Novak Corp. redeemed $134,000 face value, 10% bonds on April 30, 2022, at 103. The carrying value of the bonds at the redemption date was $121,002. The bonds pay annual interest, and the interest payment due on April 30, 2022, has been made and recorded. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
bonds payable 134,000 debit
loss on redemption 17,018 debit
cash 138,020 credit
discount on bonds payabke 12,998 credit
Explanation:
redemption disbursement:
face value x redemption quote
134,000 x 103/100 = 138,020
carrying value: 121,002
loss at redemption 17,018
We are using 138,020 cash(asset) to pay a liability for 121,002
discount/premium on the bonds:
face value 134,000
carrying value 121,002
discount: 12,998
In the journal entry we must write-off the bond payable and the discount. Then, declare the loss at redemption and the cash used.
Novak Corp made a loss of $17,018 in the early redemption of the bonds due to paying out more than the carrying value. This example illustrates how bond redemption works in financial accounting, where the principles of present value and interest rate effect are significant in bond pricing calculations.
Explanation:Novak Corp. redeemed its bonds that had a face value of $134,000 at an early redemption price of 103% of the face value. This would mean that Novak paid out $138,020 (134,000 x 1.03) to redeem the bonds. However, the carrying value of the bonds at the redemption date was $121,002. Subtracting the carrying value from the redemption value, Novak incurs a loss of $17,018 due to the early redemption ($138,020-$121,002). This is an application of bond redemption, a concept in financial accounting.
Similar to the explanation in a bond value calculation, where a $3,000 bond, issued at 8% would essentially have the same value to both the borrower and lender, Novak Corp's bond redemption underscores the principles of present value and interest rate effect in bond pricing calculations.
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The Sedgwick Company estimates sales of a new product at 5,000 units and $3.00 per unit. Management feels the sales quantity is accurate within a 10 percent plus-or-minus range while the sales price is accurate within a 5 percent plus-or-minus range. What dollar amount should the company use for total sales in their worst-case scenario analysis of this product?A) $12,150B) $12,825C) $13,500D) $14,250E) $15,000
Answer:
B) $12,825
Explanation:
In order to calculate the worst case scenario of sales first we need to calculate the worst case for sales of units.
The Company estimates that 5,000 units will be sold with a 10 percent plus-or-minus range. So, let calculate the worst case for the sale of units, in this case being 90% of the 5,000 unit estimate. Calculate 90% of 5,000, and this gives us 4,500 units as the worst case scenario.
To calculate the the worst case scenario for price, lets use the $3.00 per unit estimated by the Company, and apply the same concept, however, taking into account that sales price has a 5 percent plus-or minus range. So we caclulate %95 of $3.00, and this gives us $2.85 as our worst case scenario for price.
Now, we take our worst case scenario for amount of units and price:
4,500 units x $2.85 = $12,825
$12,825 is the total dollar amount for the worst case scenario of this product.
A number of years ago, Lee acquired a 20% interest in the BlueSky Partnership for $60,000. The partnership was profitable through 2018, and Lee's amount at risk in the partnership interest was $120,000 at the beginning of 2019. BlueSky incurred a loss of $400,000 in 2019 and reported income of $200,000 in 2020. Assuming that Lee is not a material participant, how much of his loss from BlueSky Partnership is deductible in 2019 and 2020? Consider the at-risk and passive activity loss rules, and assume that Lee owns no other passive investments.
Answer:
Please see attachment
Explanation:
Please see attachment
Suppose that two firms, A and B, are considering the same project. The project is in the same risk class as firm A's overall operations. The project has an IRR of 13.0 percent. Firm A has a beta of 1.2, while firm B's beta is 0.9. The risk-free rate is 4.5 percent and the market risk premium is 7.0 percent. Which firm(s) should accept the project?A) firm A onlyB) firm B onlyC) both firms A and BD) neither firm A nor BE) The answer cannot be determined without more information.
Answer:
Firm A should accept the project beacause it has high required rate of return which means low risk involved.
Explanation:
Rate of return = risk free return + Beta ( market risk premium)
Firm A
rate of return = 0.045 + 1.2 (0.07)
= 0.045 + 0.084
= 12.9%
Firm B ;
rate of return = 0.045 + 0.9(0.07)
= 0.045 + 0.063
= 10.8%
The Baldwin's workforce complement will grow by 10% (rounded to the nearest person) next year. Ignoring downsizing from automating, what would their total recruiting cost be? Assume Baldwin spends the same amount extra above the $1,000 recruiting base as they did last year. Relevant information: The workforce complement this year is 471, recruiting cost is 543k, recruiting spend is 5000k. Answer choices: 3.108 mil, 235k, 2.59 mil, or 282k
Answer:
3.108 mi
Explanation:
at present the workforce complement = 471 which has to grow by 10%
So, the complements after growth = 471 x 1.1 = 518 (rounded off)
Total recruiting cost = No. of complements x ($1000 + Recruiting spend)
= 518 x ($1000 + $5000)
= $3,108,000 i.e. 3.108 mi
The recruitment cost for Baldwin's workforce next year, given the same additional spend per person as the previous year and a 10% increase in the workforce, is expected to be $2.842866 Million. This isn't among the answer options given, which may suggest an error in the question or in the options.
Explanation:In this question, the Baldwin's workforce complement is expected to grow by 10% next year. The workforce complement this year is 471, meaning it would become 471×1.1=518 next year (rounded to the nearest person). We were given that the recruiting cost this year is 543k, and the additional amount spent above the $1,000 recruiting base last year is $5,000k - $543k = $4,457k.
Assuming the Baldwin spends the same additional amount as they did last year, their total recruiting cost next year can be estimated. Given: Base Recruiting cost = $1,000 , Additional Recruiting cost = $4,457/person. Hence , if they hire 518 people, The total cost of the recruiting would be (Base cost + Additional per person cost)× number of people hired = (1000+4457)× 518 = $2.842866 Million.
However the given options do not include this amount, so there might be an error in the question or in the specified options.
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A start-up will not pay any dividends for 3 years. At the end of the third year, it is expected to pay a dividend of $0.30. This dividend should then grow at a rate of 12% for 6 years, and at a reduced rate of 6% thereafter. The market required rate of return for similar high growth start-up companies is 16%. Estimate the price of the company's shares today.
Answer:
The price of share at today is $1.724.
Explanation:
- First, calculate the present value of the estimated value of the dividend stream from end of Y3 to end of Y9 using growing annuity formula:
[0.3/ ( 0.16 -0.12)] x [ 1 - [ (1+0.12)/(1+0.16) ] ^6 ] x (1/1.16^2) = $1.058
- Second, calculate the Dividend receipt at the end of year 10 which is 0.3 x 1.12^6 x 0.94 = $0.557
- Calculate the present value of the dividend stream after Y9 which is a perpetuity:
[ 0.557/ ( 0.16 - (-0.06) ] x (1/1.16^9) = $0.666
- The stock price is equal to the sum of the present value of the two dividend streams calculated above = 1.058 + 0.666 = $1.724.
Which of the following is NOT a benefit of budgeting. (Select all the answers that apply) Group of answer choices The budget provided the foundation for preparing financial statements included in the 10K report to the SEC. Requires all levels of management to plan ahead Facilitates coordination of activities within the business It motivates personnel throughout organization to meet planned objectives Provides definite objectives for evaluating performance
Answer:
The budget provided the foundation for preparing financial statements included in the 10K report to the SEC.
Explanation:
The foundation for preparing financial statements is not budgeting but accounting. Financial statements such as a balance sheet or an income statement are reports that must be according to generally accepted accounting principles Accounting helps to prepare a budget or management plan providing financial data.
Only the statement 'The budget provides the foundation for preparing financial statements included in the 10K report to the SEC' seems not directly related to the benefits of budgeting, as preparation for the 10K SEC report requires additional data not always included in a budget. Budgeting focuses on planning, coordination, motivated personnel, and performance evaluation. The budget constraint framework also considers future decisions and consumption, not past 'sunk costs'.
Explanation:The benefit that seems not to fit with the concept of budgeting is: 'The budget provides the foundation for preparing financial statements included in the 10K report to the SEC.'
While the budget can provide details about expected income and expenditures and can feed into the financial statements, it is not directly responsible for preparing the 10K SEC report - this involves additional information not necessarily in a budget like corporate governance. All the other benefits listed here are characteristic for budgeting in the sense that they involve planning, coordination, motivation of personnel, and evaluation of performance.
The budget constraint framework involves decisions about what will happen next and does not consider past 'sunk costs'. It is focused on income, what you will consume, and the relationship between these two variables. Therefore, budgeting cannot undo past financial actions, but it can help for proper planning of future activities and resources, aligning them with business strategy, and forecasting possible situations.
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Quanti Co., a calendar-year taxpayer, purchased small tools for $5,000 on December 21, Year 1, representing the company’s only purchase of tangible personal property that took place during Year 1. Assume Quanti Co. does not want to take §179 or bonus depreciation on the tools. On its Year 1 tax return, how many months of MACRS depreciation may Quanti Co. claim on the tools?
1. one month
2. none
3. one and a half month
4. six months.
Answer: Option A is the right answer
Explanation: Evidences in most cases has shown that MACRS is all about applying convention for one and a half year on assets. So when an entities owns 35-40% of an asset in forth quarter, Mid quarter convention will be applied for only one half of the last quarter, logically one and half month in the last quarter.
everly Company has determined a standard variable overhead rate of $2.75 per direct labor hour and expects to incur 1.0 labor hour per unit produced. Last month, Beverly incurred 1,100 actual direct labor hours in the production of 1,200 units. The company has also determined that its actual variable overhead rate is $2.70 per direct labor hour.
Calculate the variable overhead rate and efficiency variances also indicate if the variable are favorable or unfavorable the total amount of over- or underapplied variable overhead. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)
Variable Overhead Rate Variance
Variable Overhead Efficiency Variance
Over- or Underapplied Variable Overhead
Answer:
Variable Overhead Rate Variance - $55 favorable
Variable Overhead Efficiency Variance - $275 favorable
Over applied efficiency variance - $330 favorable
Explanation:
The computations are shown below:
Variable Overhead Rate Variance = Actual Hours × (Actual Rate - Standard variable overhead Rate)
= 1,100 hours × ($2.70 - 2.75)
= $55 favorable
Variable Overhead Efficiency Variance = Standard variable overhead Rate × (Actual Hours - Standard Hours)
= $2.75 × (1,100 hours - 1 × 1,200)
= $275 favorable
So, the over-applied variable overhead would be
= $55 favorable + $275 favorable
= $330 favorable
Good credit: The Fair Isaac Corporation (FICO) credit score is used by banks and other lenders to determine whether someone is a good credit risk. Scores range from 300 to 850, with a score of 720 or more indicating that a person is a very good credit risk. An economist wants to determine whether the mean FICO score is more than the cutoff of 720. She finds that a random sample of 100 people had a mean FICO score of 737 with a standard deviation of 92. Can the economist conclude that the mean FICO score is greater than 720? Use the =α0.01 level of significance and the critical value method.
The one-sample t-test can be used to test if the mean FICO score is more than 720. We calculate a t statistic and compare it to a critical value at a 0.01 significance level. We reject H0 if our statistic is greater than the critical value, concluding that the mean score is greater than 720.
Explanation:In this case, the economist can use a one-sample t-test to determine if the mean FICO score of the population is greater than 720. The null hypothesis (H0) is that the population mean is 720, and the alternative hypothesis (Ha) is that the population mean is greater than 720.
First, we need to calculate the t statistic using the formula: t = (Xbar - μ) / (s/√n), where Xbar is the sample mean (737), μ is the population mean under the null hypothesis (720), s is the sample standard deviation (92), and n is the sample size (100).
After calculating, we would compare this t statistic with the t critical value at α = 0.01 level of significance. If the calculated t is greater than the critical value, then we would reject H0 and conclude that the mean FICO score is greater than 720. If it's less than or equal to the critical value, we would fail to reject H0, meaning we would have insufficient evidence to conclude that the mean score is more than 720.
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Final answer:
To determine if the mean FICO score is greater than 720, a hypothesis test is conducted using the critical value method. The test statistic is calculated and compared to the critical value at the α = 0.01 level of significance. Based on the calculations, the economist cannot conclude that the mean FICO score is greater than 720.
Explanation:
To determine whether the mean FICO score is greater than 720, we can perform a hypothesis test using the critical value method. The null hypothesis (H0) is that the mean FICO score is equal to or less than 720, while the alternative hypothesis (Ha) is that the mean FICO score is greater than 720. Using the given information, we calculate the test statistic as follows:
test statistic = (sample mean - hypothesized mean) / (standard deviation/sqrt (sample size))
Plugging in the values, we get: test statistic = (737 - 720) / (92 / sqrt(100)) = 1.847
Next, we find the critical value at the α = 0.01 level of significance. Since this is a one-tailed test and the sample size is large (n ≥ 30), we can use the normal distribution. The critical value for α = 0.01 is Z = 2.33.
Since the test statistic (1.847) is less than the critical value (2.33), we fail to reject the null hypothesis. Therefore, the economist cannot conclude that the mean FICO score is greater than 720 at the α = 0.01 level of significance.
Consider this simplified balance sheet for Geomorph Trading: Current assets $ 275 Current liabilities $ 210 Long-term assets 650 Long-term debt 205 Other liabilities 120 Equity 390 $ 925 $ 925 a. What is the company’s debt-equity ratio?
Answer:
1.37
Explanation:
Total Debts (D) = Current liabilities + Long-term debt + Other liabilities
Total Debts (D) = $210 + $205 + $120 = $535
Owner's Equity (E) = $390
The debt-equity ratio (DER) is given by:
[tex]DER = \frac{D}{E} =\frac{535}{390}\\DER=1.37[/tex]
Geomorph Trading’s debt-equity ratio is 1.37
In Munich, a bratwurst costs 5 euros; a hot dog cots $4 at Boston’s Fenway Park. At an exchange rate of $1.05/euro, what is the price of a bratwurst in terms of a hot dog? All else equal, how does this relative price change if the dollar deprecates to $1.25/euro? Compared with the initial situation, has a hot dog become more or less expensive relative to a bratwurst?
Answer:
Please see attachment .
Explanation:
Please see attachment .
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,130,000 and will last for six years. Variable costs are 35 percent of sales, and fixed costs are $270,000 per year. Machine B costs $5,351,000 and will last for nine years. Variable costs for this machine are 30 percent of sales and fixed costs are $200,000 per year. The sales for each machine will be $11.6 million per year. The required return is 8 percent, and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis. Calculate the EAC for each machine. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
The equivalent annual cost (EAC) for Machine A is -$191,929.34 and for Machine B is -$162,787.02. Hence, Machine B is more cost-effective despite its higher initial cost due to having a lower EAC.
Explanation:To calculate the equivalent annual cost (EAC) of each machine, we need to first calculate their respective net present values (NPV) and then spread this cost over the life of the machine.
For Machine A, the depreciation per year is $3,130,000 / 6 = $521,666.67. After-tax operating profit each year would be: ($11,600,000 - $4,060,000 (variable cost) - $270,000 (fixed cost) - $521,666.67 (depreciation)) * (1 - 0.21) = $4,809,083.33. The tax shield provided by the depreciation would be $521,666.67 * 0.21 = $109,550. Now, we find the NPV of these cash flows for 6 years, minus the initial cost of the machine. Using an 8% discount rate, this comes out to -$879,016.04. Spreading this over 6 years gives an EAC of -879,016.04 / (1 - (1 + 0.08)^-6) / 0.08) = -$191,929.34.
Since the calculations for the NPV and EAC of Machine B follow the same steps, we only replace the respective values. The EAC of Machine B comes out to be -$162,787.02. Therefore, despite the higher initial cost, Machine B is the more cost-effective choice because it has a lower equivalent annual cost.
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You observe that the inflation rate in the United States is 1.4 percent per year and that T-bills currently yield 1.9 percent annually. Use the approximate international Fisher effect to answer the following questions.
a. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 9 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Inflation rate_____________ %
b. What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 12 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Inflation rate___________ %
c. What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Inflation rate_________ %
Answer:
(a) 8.47%
(b) 11.45%
(c) 9.46%
Explanation:
International Fisher effect is as follows:
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
where,
ih = Nominal interest rate of home country
if = Nominal interest rate of foreign country
ph = Inflation rate of home country
pf = Inflation rate of foreign country
(a) Inflation rate to be in Australia, if the short-term Australian government securities yield 9% per year,
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
[tex]\frac{1.019}{1.09}=\frac{1.014}{1+pf}[/tex]
1 + pf = 1.0847
pf = 1.0847 - 1
= 0.0847 or 8.47%
Therefore, the inflation rate in Australia is 8.47%.
(b) Inflation rate to be in Canada, if short-term Canadian government securities yield 12 percent per year,
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
[tex]\frac{1.019}{1.12}=\frac{1.014}{1+pf}[/tex]
1 + pf = 1.1145
pf = 1.1145 - 1
= 0.1145 or 11.45%
Therefore, the inflation rate in Canada is 11.45%.
(c) Inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year,
[tex]\frac{1+ih}{1+if}=\frac{1+ph}{1+pf}[/tex]
[tex]\frac{1.019}{1.1}=\frac{1.014}{1+pf}[/tex]
1 + pf = 1.0946
pf = 1.0946 - 1
= 0.0946 or 9.46%
Therefore, the inflation rate in Taiwan is 9.46%.
7. Debt Irrelevance. Digital Fruit is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt and to use the proceeds to buy back common stock. There are no taxes. (LO16-1) a. What is the expected market price of the common stock after the announcement? b. How many shares can the company buy back with the $160 million of new debt that it will issue? c. What is the market value of the firm (equity plus debt) after the change in capital structure? d. What is the debt ratio after the change in capital structure?
Answer:
a. $10 per share
b. 16 million shares
c. $250 million
d. 64%
Explanation:
The computations are shown below:
a. The expected market price of the common stock is same as given in the question i.e $10 per share
b. The buy back shares would be
= New debt value ÷ market price per share
= $160 million ÷ $10
= 16 million shares
c. The market value of the firm would be
= (Outstanding shares - buy back shares) × market price per share + debt value
= (25 million shares - 16 million shares) × $10 + $160 million
= $90 million + $1260 million
= $250 million
d. The debt ratio would be
= Debt value ÷ market value of the firm
= $160 million ÷ 250 million
= 64%
Is there a difference in the average donation given in Presbyterian vs Catholic church on Sundays? The 41 randomly selected members of the Presbyterian church donated an average of $28 with a standard deviation of $12. The 38 randomly selected members of the Catholic church donated an average of $31 with a standard deviation of $14. What can be concluded at the 0.05 level of significance?
Answer:
Since the p>0.05,we do not reject H0 .There is insufficient evidence to conclude that there is a difference in the average donation given in Presbyterian vs Catholic church on Sundays.
Explanation:
Since the p>0.05,we do not reject H0 .There is insufficient evidence to conclude that there is a difference in the average donation given in Presbyterian vs Catholic church on Sundays.
Please see calculation attached .
While attending a convention, Noah spoke with Amy, a sales representative from an alternative energy company, who insisted that fuel cell technology is the solution to the world's energy problems. At home, Noah read through the literature she gave him, and acknowledged that the material was interesting. However, he still wasn't certain that she was right about fuel cells. What should Noah do to decide whether he agrees with Amy's argument?
Answer:
This question lacks answers, here they are:
a. Go with his gut feeling
b. Accept that Amy knows more about the topic than he does
c. Keep looking for more evidence
d. Dismiss Amy's argument because she is trying to sell something
The answer is c.
Explanation:
In this kind of argument-fueled debate, it is essential to constantly have arguments up to your sleeve.
In this example, Amy has a robust base for her point of view (the literature). Since Noah acknowledged that, he has to provide his own argument basis (evidence). Otherwise, stating his point of view without it cannot be taken seriously in this kind of conversation.
With every side delivering a new amount of arguments, the other side should have appropriate arguments to defend a particular point of view, as it both feeds the debate and protects one's image at industry events like conventions, meetups...
The outcome of the argument-intensive debate is always a strong opinion, reflecting the pluses and minuses of the topic at hand.
Presented below is information related to Waterway Company. Cost Retail Beginning inventory $374,710 $283,000 Purchases 1,393,000 2,165,000 Markups 93,800 Markup cancellations 16,500 Markdowns 37,300 Markdown cancellations 4,500 Sales revenue 2,181,000 Compute the inventory by the conventional retail inventory method.
Answer:
$218,050
Explanation:
Please see attachment.
The conventional retail inventory method calculates the ending inventory value by applying the markup or markdown percentages to the retail value of the goods. To compute the inventory using this method, we need to start with the beginning inventory at retail and cost, add the net purchases and net markups, and subtract the markdowns and markdown cancellations.
Explanation:The conventional retail inventory method calculates the ending inventory value by applying the markup or markdown percentages to the retail value of the goods. To compute the inventory using this method, we need to start with the beginning inventory at retail and cost, add the net purchases and net markups, and subtract the markdowns and markdown cancellations.
In this case:
Beginning inventory at retail: $283,000Purchases: $2,165,000Net markups: $93,800Net markdowns: $37,300To find the ending inventory using the conventional retail inventory method, you would calculate:
Ending inventory at retail = Beginning inventory at retail + Purchases + Net markups - Net markdowns
A project manager demonstrates integrity in ways that include making honest decisions, protecting people, defending core values, leading major change, showing respect, establishing a culture of honesty, and displaying total commitment to project and people.
a. True
b. False
Answer:
The statement is true and correct
Explanation:
It is one of the desired project manager behaviors which is called as the Integrity, this terms demonstrates that the project manager should involve the ways, which are protecting people, showing respect, leading the major change, display total commitment towards the project as well as towards people, creating a culture of honesty, defending the core values and the making or taking the hones decisions.
So, the statement states the integrity which should be in a person.
Seashell Corporation has 25,000 shares outstanding of 8 percent, $10 par value, cumulative preferred stock. In 2009 and 2010, no dividends were declared on preferred stock. In 2011, Seashell had a profitable year and decided to pay dividends to stockholders of both preferred and common stock. If Seashell has $200,000 available for dividends in 2011, how much could it pay to the common stockholders?
Answer:
$140,000
Explanation:
For computing the dividend to the common stockholders, first we have to find out the yearly dividend which is shown below:
= Number of shares × par value per share × dividend rate
= 25,000 shares × $10 × 8%
= $20,000
Dividend paid in 2011 would be
= 2009 dividend + 2010 dividend + 2011 dividend
= $20,000 + $20,000 + $20,000
= $60,000
Out of $2000,000, the $60,000 will be paid to preference stockholders and the remaining $140,000 will be paid to equity stockholders
Joi, working at a research facility in Washington, DC, needs to communicate with Jesús, who is in Mexico City, about a project they are working on. Although Jesús has a perfect command of English, they are still facing a(n) ________ barrier to communication.
a. segmentic
b. physical
c. encoding
d. medium
Answer:
The correct answer is B that is physical barrier
Explanation:
Physical barrier is the kind of barrier which is comprise of the natural and environmental condition, act as a barrier or fence in communication while sending the message from the sender to receiver.
In this case, Joi wants to communicate to Jesus regarding a project, on which they will be working on. But still facing the problem while communication. So, it is a barrier which is physical.
Keller Cosmetics maintains an operating profit margin of 7% and asset turnover ratio of 4.
a. What is its ROA? (Enter your answer as a whole percent.)
b. If its debt-equity ratio is 1, its interest payments and taxes are each $8,200, and EBIT is $21,000, what is its ROE? (Do not round intermediate calculations. Enter your answer as a whole percent.)
Answer:
a) 28%
b) 56%
Explanation:
Data provided in the question:
Operating profit margin = 7%
Asset turnover ratio = 4
Now,
a) ROA = Profit margin × Asset turnover ratio
= 7% × 4
= 28%
b) Given:
Debt-equity ratio = 1
Interest payments = $8,200
Taxes = $8,200
EBIT = $21,000
Now,
Total assets = Net income ÷ ROA
Also,
Net income = EBIT - tax - interest
= $21,000 - $8,200 - $8,200
= $4,600
Thus,
Total assets = $4,600 ÷ 28%
= $16428.57
also,
Total assets = Debt + Equity
or
Total assets = Equity × ([tex]\frac{\textup{Debt}}{\textup{Equity}}+1[/tex] )
or
$16428.57 = Equity × ( 1 + 1 )
or
=> Equity = $8214.28
Therefore,
ROE = Net income ÷ Equity
= $4,600 ÷ $8214.28
= 56%
Suppose the average return on an asset is 11.8 percent and the standard deviation is 21.4 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to determine the probability that in any given year you will lose money by investing in this asset.
Phil takes out a loan of $100,000 to be repaid in 360 monthly installments. You are given that the first payment will be one month after the inception of the loan and that the e↵ective annual rate of interest is 10%. Determine which payment will be the first where the amount of principal paid is more than two-thirds the amount of the interest paid.
Answer:
246
Explanation:
Please see attachment .
Final answer:
To find when the principal exceeds two-thirds of the interest on Phil's $100,000 loan, an amortization schedule must be created. Initially, more of the monthly payment goes to interest, but the principal portion grows over time. The schedule reveals when the principal paid first exceeds two-thirds of the interest for a monthly payment of approximately $599.55.
Explanation:
When Phil takes out a loan of $100,000 to be repaid in 360 monthly installments with an effective annual interest rate of 10%, we need to determine which payment will be the first where the amount of principal paid exceeds two-thirds of the interest paid that month. To find this, we must understand how the monthly payments are calculated and how each payment is split between principal and interest over time.
Firstly, the monthly payment is calculated using the formula for the present value of an annuity:
M = P [i / [tex](1 - (1 + i)^{(-n))[/tex]] where P is the principal amount, i is the monthly interest rate, and n is the total number of payments. With an effective annual rate of 10%, the monthly rate i is 0.1/12, since interest is compounded monthly.
For the given scenario, the monthly payment amount is calculated as follows:
$100,000 ×[0.1/12 / (1 - [tex](1 + 0.1/12)^{(-360))[/tex]] which simplifies to approximately $599.55 per month.
Over the tenure of the loan, initially, more of the monthly payment goes towards the interest than the principal. As time goes on, the principal portion increases while the interest portion decreases. The payment schedule needs to be examined to find the first payment where the principal is more than two-thirds of the interest.
This involves creating an amortization schedule that shows the distribution of each payment into interest and principal components. The search through this schedule will reveal the exact payment where the principal exceeds two-thirds of the interest for the first time.
On November 19, Nicholson Company receives a $24,600, 60-day, 10% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)
Answer:
Explanation:
The adjusting entry is shown below:
Interest expense A/c Dr $287
To Interest payable A/c $287
(Being accrued interest adjusted)
The computation is shown below:
Principal × rate of interest × number of days ÷ (total number of days in a year)
= $24,600 × 10% × (42 days ÷ 360 days)
= $287
( 11 days in November + 31 Days in December)
To make the correct adjusting entry for Nicholson Company's year-end on December 31 for a $24,600, 60-day, 10% note, calculate the interest accrued from November 19 to December 31 at a daily rate derived from the annual rate. The interest amount is $287.54, which is recorded as debit to Interest Receivable and credit to Interest Revenue.
Explanation:On November 19, Nicholson Company receives a $24,600, 60-day, 10% note from a customer as payment on account. To calculate the adjusting entry for the year-end on December 31, we need to recognize the interest that has accrued on the note from the date of receipt until the year-end. Given that the year is considered to have 360 days for simplicity in interest calculations, we prorate the annual interest rate to find the interest for the period in question.
To find the interest accrued:
First, calculate the daily interest rate: 10% per year = 0.10 / 360 days = 0.00027778 per dayThen, calculate the number of days from November 19 to December 31. This is 42 days (assuming November has 30 days).Finally, the interest accrued: $24,600 * 0.00027778 * 42 days = $287.54The adjusting entry on December 31 will be:
Debit Interest Receivable for $287.54Credit Interest Revenue for $287.54This entry reflects the interest income earned by Nicholson Company during the year that has not been received in cash, thus adhering to the accrual basis of accounting.
Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor-hours per suit. For June 2017, each suit is budgeted to take 4 labor-hours. Budgeted variable manufacturing overhead cost per labor-hour is $12. The budgeted number of suits to be manufactured in June 2017 is 1,040. Actual variable manufacturing costs in June 2017 were $52,164 for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor-hours for June were 4,536.Compute the flexible- budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.
Answer:
(i) $328 Unfavorable
(ii) $2,268 Favorable
(iii) $2,592 Unfavorable
Explanation:
Total budgeted hours for actual output (SH):
= Actual units × Budgeted hours per suite
= 1,080 suits × 4 hours
= 4,320 hours
Actual variable overhead rate (AR) = Actual cost ÷ Actual hours
= $52,164 ÷ 4,536
= $11.5 per hour
Variable overhead spending variance:
= (Standard rate - Actual rate) × Actual hours
= ($12 - $11.5) × 4,536
= $2,268 Favorable
Variable overhead efficiency variance:
= (Standard hours - Actual hours) × Standard rate
= (4,320 - 4,536) × $12
= $2,592 Unfavorable
Flexible- budget variance:
= variable overhead spending variance + Variable overhead efficiency variance
= $2,268 Favorable + $2,592 Unfavorable
= $328 Unfavorable
a. The flexible- budget variance is $324 Unfavorable.
b. The spending variance is $2,268 Favorable.
c. The efficiency variance for variable manufacturing overhead is $2,592 Unfavorable.
Flexible- budget varianceSpending variance:
Total budgeted hours for actual output (SH)= Actual units × Budgeted hours per suite
Total budgeted hours for actual output (SH)= 1,080 suits × 4 hours
Total budgeted hours for actual output (SH)= 4,320 hours
Actual variable overhead rate (AR) = Actual cost ÷ Actual hour
Actual variable overhead rate (AR)= $52,164 ÷ 4,536
Actual variable overhead rate (AR)= $11.5 per hour
Variable overhead spending variance= (Standard rate - Actual rate) × Actual hours
Variable overhead spending variance= ($12 - $11.5) × 4,536
Variable overhead spending variance=$2,268 Favorable
Efficiency variance:
Variable overhead efficiency variance= (Standard hours - Actual hours) × Standard rate
Variable overhead efficiency variance= (4,320 - 4,536) × $12
Variable overhead efficiency variance= $2,592 Unfavorable
Flexible- budget variance:
Flexible- budget variance= variable overhead spending variance + Variable overhead efficiency variance
Flexible- budget variance= $2,268 Favorable + $2,592 Unfavorable
Flexible- budget variance= $324 Unfavorable
Inconclusion the flexible- budget variance is $324 Unfavorable.
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