Answer:
82,500
Explanation:
The computation of the minutes of grinding machine required to satisfy demand is shown below
= (4,800 units × 4.60 + 4,800 units × 6.10 + 3,800 × 5.10 + 2,800 × 4.20)
= 22,080 + 29,280 + 19,380 + 11,760
= 82,500
We simply multiplied the Grinding minutes per unit with the Monthly demand in units and the same is to be considered above
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $2,000. The division sales for the year were $1,049,000 and the variable costs were $859,000. The fixed costs of the division were $192,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
a. 57600 decrease
b. 132400 decrease
c. 54700 decrease
d. 190000 decrease
e. 190000 increase
Answer:
The impact on operating income for eliminating this business segment would be a decrease in profit of $132,400. The right answer is b.
Explanation:
According to the data, we have the following details:
division sales=$1,049,000
variable costs= $859,000
Hence, contribution= division sales-variable costs
=$1,049,000-$859,000
=$190,000
30% of the fixed costs allocated to that division could be eliminated
Decrease in fixed cost=$192,000×30%= $57,600
Therefore, the impact on operating income for eliminating this business segment would be $190,000-$57,600= $132,400, which means that there would a decrease in profit.
Answer:
Net decrease in operating income $132,400
Explanation:
The relevant cash flows to determine the impact of eliminating the division are:
lost contribution from shut down Savings in fixed cost from shut downPlease, note that only 30% of the fixed costs to be saved is relevant, the balance is not relevant for this decision. Simply because they would be incurred either way.
$
The impact on operating income:
Lost contribution = ( 1,049,000 - 859,000)= (190,000)
Savings in fixed cost = 30% ×192,000 = 57,600
Net decrease in operating income 132,400
Indigo Corporation significantly reduced its requirements for credit sales. As a result, sales during the current year increased dramatically. It had receivables at the beginning of the year of $35,100 and ending receivables of $196,800. Credit sales were $361,800.
(a) Determine cash collections during the period.
(b) Cash collections during the period $
Answer:
(a) $200,100
(b) $200,100
Explanation:
The movement in the accounts receivable balance at the start and end of an accounting period is due to cash payments, additional credit sales, and any amount written off during the period.
This may be expressed mathematically as
opening balance + sales - cash collected - amount written off = closing balance
$35,100 + $361,800 - cash collected = $196,800
Cash collected = $35,100 + $361,800 - $196,800
= $200,100
Set up the payoff matrix. You are deciding whether to invade France (F), Sweden (S) or Norway (N), and your opponent is simultaneously deciding which of these three countries to defend. If you invade a country that your opponent is defending, you will be defeated (payoff: −1), but if you invade a country your opponent is not defending, you will be successful (payoff: +1).
Answer:
Suppose:
F stands for France, S stands for Sweden, and N stands for Norway.
The game according to the given condition is:
[ Find the matrix in attachment ]
Each point indicates that you invaded.
In 2021, the controller of Sytec Corporation discovered that $62,000 of inventory purchases were incorrectly charged to advertising expense in 2020. In addition, the 2020 year-end inventory count failed to include $40,000 of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year-end inventory count was correct. The amounts of the errors are deemed to be material. Required: 1. Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors.
Answer:
Reduction is retained earnings by $40,000
The correcting journal entries:
Dr merchandise inventory $40,000
Cr Retained earnings $40,000
Explanation:
The impact of the omitted consigned inventory and the inventory purchases debited to advertising expenses are shown below
increase in purchases $62,000
omitted closing inventory ($40,000)
increase in cost of goods sold $22,000
Reduction in advertising expenses $62,000
Increase in retained earnings $40,000
The implication of this is that the closing inventory was lower by $40,000 and retained earning was lower by the same amount
The correcting journal entries:
Dr merchandise inventory $40,000
Cr Retained earnings $40,000
It is noteworthy that a lower closing inventory means a higher cost of goods ,as a result a lower operating profit and retained earnings
Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 14 comma 700 units. Southeastern estimates its annual holding cost for this item to be $24 per unit. The cost to place and process an order from the supplier is $76. The company operates 300 days per year, and the lead time to receive an order from the supplier is 3 working days. a) What is the economic order quantity? nothing units (round your response to the nearest whole number).
Answer:
305 units
Explanation:
The calculation of the economic order quantity is given below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
where,
Annual demand is 14,700 units
Ordering cost is $76 per order
And, the holding cost or carrying cost is $24 per unit
So the economic order quantity is
[tex]= \sqrt{\frac{2\times \text{14,700}\times \text{\$76}}{\text{\$24}}}[/tex]
= 305 units
We simply applied the above formula to determine the economic order quantity
Turnbull Co. is considering a project that requires an initial investment of $270,000. The firm will raise the $270,000 in capital by issuing $100,000 of debt at a before-tax cost of 9.6%, $30,000 of preferred stock at a cost of 10.7%, and $140,000 of equity at a cost of 13.5%. The firm faces a tax rate of 40%. What will be the WACC for this project
Answer:
10.32%
Explanation:
WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs. weightage can be calculated by using the market value of the equity and debt.
The formula for WACC is
Weighted average cost of capital = (Cost of Common stock x Weightage of Common stock) + (Cost of debt (1 - tax ) x Weightage of debt) + (Cost of Preferred stock x Weightage of Preferred stock)
Weighted average cost of capital = (13.5% x 140,000 / 270,000) + (9.6%(1 - 0.4) x $1,00,000 / $270,000 ) + (10.7% x $30,000 / $270,000 )
Weighted average cost of capital = 7% + 2.13% + 1.19% = 10.32%
The Weighted Average Cost of Capital (WACC) for Turnbull Co.'s project, given the provided funding mix and costs, is approximately 10.36%.
Explanation:The Weighted Average Cost of Capital (WACC) for Turnbull Co. will be calculated by taking the percentage of each type of debt in the total capital and multiplying it with its related cost. Each of these resulting values is then summed up. For the debt: ($100,000 / $270,000) * 9.6% * (1 - 0.40) = 0.02133 or 2.133%. For the preferred stock: ($30,000 / $270,000) * 10.7% = 0.0119 or 1.19%. For common equity: ($140,000 / $270,000) * 13.5% = 0.07037 or 7.037%. So, the total WACC for this project will be 2.133% + 1.19% + 7.037% = 10.360, or approximately 10.36%.
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Annual starting salaries for college graduates with degrees in business administration are generally expected to be between $43,000 and $61,600. Assume that a 95% confidence interval estimate of the population mean annual starting salary is desired. (Round your answers up to the nearest whole number.)
Answer: 332
Explanation:
Lowest value = $43,000
Highest value = $61,600
Range = ( HV - LV ) / 4
= ( $61,600 - $43,000 ) / 4
= $4650
Where p = $4650
Required sample size (n)
n = ( Za /2 × P/E )²........... equation 1
Using 95% confidence level
Za/2 = Z 1 - 0.95
= Z0.025
= 1.96 using Z-table
Substituting Z into equation 1
n = ( 1.96 × 4650/500 )²
= ( 1.96 × 9.3 )²
= 332.25
To the nearest whole number
= 332
Return on Investment, Margin, Turnover Ready Electronics is facing stiff competition from imported goods. Its operating income margin has been declining steadily for the past several years. The company has been forced to lower prices so that it can maintain its market share. The operating results for the past 3 years are as follows: Year 1 Year 2 Year 3 Sales $14,500,000 $ 9,500,000 $ 9,000,000 Operating income 1,200,000 1,345,000 945,000 Average assets 15,000,000 15,000,000 15,000,000 For the coming year, Ready's president plans to install a JIT purchasing and manufacturing system. She estimates that inventories will be reduced by 70% during the first year of operations, producing a 20% reduction in the average operating assets of the company, which would remain unchanged without the JIT system. She also estimates that sales and operating income will be restored to Year 1 levels because of simultaneous reductions in operating expenses and selling prices. Lower selling prices will allow Ready to expand its market share. (Note: Round all numbers to two decimal places.) Required: 1. Compute the ROI, margin, and turnover for Years 1, 2, and 3. Year 1 Year 2 Year 3 ROI 0.77 % 0.09 % 0.06 % Margin 0.08 % 0.01 % 0.10 % Turnover 0.97 0.63 0.6 2. Conceptual Connection: Suppose that in Year 4 the sales and operating income were achieved as expected, but inventories remained at the same level as in Year 3. Compute the expected ROI, margin, and turnover. ROI % Margin % Turnover Why did the ROI increase over the Year 3 level? 3. Conceptual Connection: Suppose that the sales and net operating income for Year 4 remained the same as in Year 3 but inventory reductions were achieved as projected. Compute the ROI, margin, and turnover. ROI % Margin % Turnover Why did the ROI exceed the Year 3 level? 4. Conceptual Connection: Assume that all expectations for Year 4 were realized. Compute the expected ROI, margin, and turnover. ROI % Margin % Turnover Why did the ROI increase over the Year 3 level?
Answer:
See explaination
Explanation:
1. see attachment for the table
2: Conceptual connection
Year 4 : Sales = 14500000, Operating Income = 1200000, Average Assets = 15000000
ROI= Operating Income/Average Assets = 1200000/15000000 = 0.08
Margin = Operating income/Sales = 1200000/14500000 = 0.08
Turnover ratio :Sales/Average Assets = 14500000/15000000 = 0.97
The ROI has increased in year 4 over the 3rd Year’s ROI because Operating income is increased but inventory were same . So we are earning more amount of profit from the same level of investment which is the reason of increase in ROI.
3. Conceptual connection
Year 4 : Sales = 9000000, Operating Income = 945000, Average Assets = 12000000
ROI= Operating Income/Average Assets = 945000/12000000 = 0.08
Margin = Operating income/Sales = 945000/9000000 = 0.11
Turnover ratio :Sales/Average Assets = 9000000/12000000 = 0.75
The ROI has exceeded level of year 3 because operating profit is same but the investment in assets is lower under year 4. So we are able to earn same amount i.e. 945000 by investing lesser. The same return of profit with lower investment has increased the ROI.
4. Conceptual Connection
Year 4 : Sales = 14500000, Operating Income = 1200000, Average Assets = 12000000
ROI= Operating Income/Average Assets = 1200000/12000000 = 0.10
Margin = Operating income/Sales = 1200000/14500000 = 0.08
Turnover ratio :Sales/Average Assets = 14500000/12000000 = 1.21
The ROI has exceeded the level of year 3 because operating profit is increased at the same time the investment in assets is also decresed. So we are able to earn more amount by investing lesser. So there are two factors which has increased ROI first is more operating income and second the lower investment. We are able to earn more with lesser investment.
1. The computation of the ROI, margin, and turnover for Year 1, 2, and 3 is as follows:
ROI 8% ($1.2/$15 x100) 8.97% 6.3%
Margin 8.28% 14.16% 10.5%
Turnover 0.97x 0.63x 0.60x
2. The computation of the ROI, margin, and turnover for Year 4 is as follows:
Basis:
Sales in Year = $14,500,000
Operating income = $1,200,000
Average assets = $15,000,000
a. ROI = 8% ($1,200,000/$15,000,000 x 100)
b. Margin = 8.28% ($1,200,000/$14,500,000 x 100)
c. Turnover = 0.97x ($14,500,000/$15,000,000)
d. The Year 4's ROI increased over the Year 3 level because of the increased operating income.
3. The computation of the ROI, margin, and turnover for Year 4 is as follows:
Basis:
Sales in Year = $9,000,000
Operating income = $945,000
Average assets = $12,000,000
a. ROI = 7.88% ($945,000/$12,000,000 x 100)
b. Margin = 6.52% ($945,000/$14,500,000 x 100)
c. Turnover = 0.75x ($9,000,000/$12,000,000)
d. The Year 4's ROI exceeded the Year 3 level because of the reduced average assets versus the stable operating income.
4. The computation of the ROI, margin, and turnover for Year 4 is as follows:
Basis:
Sales in Year = $14,500,000
Operating income = $1,200,000
Average assets = $15,000,000
a. ROI = 8% ($1,200,000/$15,000,000 x 100)
b. Margin = 8.28% ($1,200,000/$14,500,000 x 100)
c. Turnover = 0.97x ($14,500,000/$15,000,000)
d. The Year 4's ROI increased over the Year 3 level because of the increased average assets and operating income.
Data and Calculations:
Ready Electronics Operating Results
Year 1 Year 2 Year 3 Projected Year 4
Sales $14,500,000 $ 9,500,000 $ 9,000,000 $14,500,000
Operating income 1,200,000 1,345,000 945,000 1,200,000
Average assets 15,000,000 15,000,000 15,000,000 12,000,000
Average assets in Year 4 = $12,000,000 ($15,000,000 x (1 - 20%).
Formula:
ROI (Return on Investment) = Operating Income/Average Assets x 100
Margin = Operating Income/Sales x 100
Turnover = Sales/Average Assets
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7. Suppose that people expect inflation to equal 3%, but in fact, prices rise by 5%. Describe how this unexpectedly high inflation rate would help or hurt the following: 1. the government 2. a homeowner with a fixed-rate mortgage 3. a union worker in the second year of a labor contract 4. a college that has invested some of its endowment in government bonds
Answer:
The answer is:
1. Help
2. Help
3. Hurt
4. Hurt
Explanation:
1. Help. This unxpected increase in inflation will help the government because this will increase its revenue and also reduce the real value of government outstanding debts.
2. Help. Paying at a fixed rate that was agreed when the interest rate was 3percent will be of help with the home owners because the real interest rate he will be paying lower. The lenders lose during this period.
3. Hurt. It will hurt this worker because the contract was agreed when the interest rate was 3percent. Now that prices of goods and services have increased, purchasing power will be reduced.
4. Hurt. Because with increased inflation, interest rates will be lower. So the college is earning lower interest rate.
What is the payback period for Tangshan Mining company's new project if its initial after-tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $700,000 in year 3, and $1,800,000 in year 4
Answer:
Explanation:
Payback period calculates the amount of time it takes to recover the amount invested in a project to be recovered from the cumulative cash flow.
In year 1 , the amount recovered is = $-5,000,000 + $1,800,000 = $-3,200,000
In year 2, the amount recovered is = $-3,200,000 + $1,900,000 = $-1,300,000
In year 3, the amount recovered is = $-1,300,000 + $700,000 = $-600,000
In year 4, the amount recovered is 3 + (600,000 / 1,800,000) = 3.33 years
I hope my answer helps you
Shao Airlines is considering two alternative planes. Plane A has an expected life of 5 years, will cost $100 million and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million and will produce net cash flows of $27 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares is expected to be zero, and the company's cost of capital is 11%.By how much would the value of the company increase if it accepted the better project (plane)? What is the equivalent annual annuity for reach plane?
Answer:
1. If this is accepted the value of the company will increase by $27.0084 million.
2. The equivalent annual annuity for each plane:
Plane A = $2.973 million
Plane B = $4.586 million
Explanation:
1. Let's calculate Net Present Value (NPV) for Plane A:
Initial investment = $100 million
Annual cash flows = $30 million per year
Cost of capital = 11%
n = 5 years
NPV = (Annual cash flows × PVIFA (Cost of capital, n) - Initial investment
where PVIFa is Present Value Interest Factor
NPV = (30 million ×PVIFA (11%, 5) - 100 million
NPV = (30 million × 3.659) - 100 million
NPV = $10.877 million
Let's calculate Net Present Value (NPV) for Plane B:
Initial investment = $132 million
Annual cash flows = $27 million per year
Cost of capital = 11%
n = 10 years
NPV = (Annual cash flows × PVIFA (Cost of capital, n) - Initial investment
where PVIFa is Present Value Interest Factor
NPV = ($27 million ×PVIFA (11%, 10) - $132 million
NPV = ($27 million × 5.8892) - $132 million
NPV = $27.0084 million
In conclusion, the better project is Plane B as it has a higher net present value. If this is accepted the value of the company will increase by $27.0084 million.
2. equivalent annual annuity = NPV/ Present Value Annuity Factor
For Plane A:
equivalent annual annuity = NPV/ Present Value Annuity Factor ( 11%, 5)
equivalent annual annuity = $10.877 million/ 3.659
equivalent annual annuity = $2.973 million
The equivalent annual annuity for plane A is $2.973 million
For Plane B:
equivalent annual annuity = NPV/ Present Value Annuity Factor ( 11%, 10)
equivalent annual annuity = $27.0084 million/5.8892
equivalent annual annuity = $4.586 million
The equivalent annual annuity for plane B is $4.586 million
Marvin Gaye's song "Gotta Give It Up" was protected by ___________ .
a
not selected option a collective mark
b
not selected option b utility parent
c
not selected option c trademark
d
not selected option d copyright
e
not selected option e design patent
Answer:
d. not selected option d copyright
Imagine your employer asks you to assist in determining whether their DC plan meets several of the criteria to be considered a qualified plan. For each of the following plan features, please indicate whether or not the plan meets the requirements. If so, explain why. If not, please explain how the plan can be changed to ensure that the plan complies. (Do not worry about plan qualification requirements that are not listed.)
a. The plan requires individuals to wait 6 months before becoming eligible to participate.
b. The employer has 250 employees, 40 of whom are considered highly compensated. 38 of the highly compensated employees are covered by the plan. 145 of the non-highly compensated employees are also covered by plan.
c. Employer contributions vest according to the following schedule:
After this many years of service Employee is vested in this % of employer contributions
1 15
2 30
3 45
4 60
5 80
6 100
Answer:
a) meets the requirements. It sets eligibiity criteria for the plan.
b) doesn't meet the requirements. This feature doesn't give out details of the employees as to why or why they aren't covered by the plan. The details of highly compensated employees covered or not covered by plan must be listed.The details of non-highly compensated employees must also be listed.
c) meets the requirements. The employees who have spent greater number of years with the companies must get larger contribution from the employer in the plan. This feature meets this requirement
Explanation:
Every defined contribution plan or DC plan must have an eligibility criteria. It must have complete records and details of employees who are going to be covered or not covered by the plan. It must also have the details of amount of benefit that will be received by employees and the details of contribution made by the employer. The plan must also differentiate the amount of benefit received by different groups of employees.
Camilo’s property, with an adjusted basis of $155,000, is condemned by the state. Camilo receives property with a fair market value of $180,000 as compensation for the property taken.
a. What is Camilo’s realized and recognized gain?
b. What is the basis of the replacement property
Answer:
The correct answer for (a) is $25,000 and $0 and for option (b) is $155,000.
Explanation:
According to the scenario, the computation of the given data are as follows:
Adjusted basis = $155,000
Fair market value = $180,000
(a). Realized gain = Fair market value - Adjusted basis
= $180,000 - $155,000
= $25,000
As, fair market value is more than the adjusted basis, so there will be no recognized gain.
So, Recognized gain = $0
(b). We can calculate the basis of the replacement by using following formula:
Basis = Market value - Realized gain
= $180,000 - $25,000
= $155,000
A company purchased an asset for $3,400,000 that will be used in a 3-year project. The asset is in the 3-year MACRS class. The depreciation percentage each year is 33.33 percent, 44.45 percent, and 14.81 percent, respectively. What is the book value of the equipment at the end of the project?
When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred, then the lowest acceptable transfer price as far as the selling division is concerned is: A. variable cost of producing a unit of product. B. the full absorption cost of producing a unit of product. C. the market price charged to outside customers, less costs saved by transferring internally. D. the amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.
Answer:
C. the market price charged to outside customers, less costs saved by transferring internally.
Explanation:
Divisional manager performance is evaluated separately from one department to another. The Selling department need a minimum price equivalent to price the items fetch in market transaction to raise performance.
However goal congruence has to be met, therefore the price must exclude savings as a result of Internal transfer for the interest of the firm as a whole.
A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units? Use a contribution margin format. You must show how you calculated each number for credit. Use the template below for all of the remaining problems. Check: Operating income should be greater than $43,000. (3 points)Sales $Variable costs $Contribution margin $Fixed costs $Operating income $
Answer:
Calculation of Operating Income if company produces and sells 70,000 units
Sales ($96,000/60,000 units × 70,000) $112,000
Less variable costs ( $36,000/60,000×70,000) ($42,000)
Contribution $70,000
Less Period Costs
fixed costs (26,000)
Operating Income 44,000
Explanation:
First Determine the Standard Cost or Revenue
Then Flex the Budget to the new level of 70,000 units produced and sold
JT Engineering is deciding between two machines. Machine A costs $352,000, with inflows of $209,000 and outflows of $154,000. Machine B costs $380,000, with inflows of $231,000 and outflows of $166,000. Both have a 10-year life and no salvage value. JT uses the straight-line method for depreciation and requires a return of 12%. How desirable are the machines? Use annual rate of return to determine the answer.
Answer:
Machine B is preferrable with annual rate of return of 14.21%,higher than the required annual rate of return of 12%
Explanation:
Annual rate of return of both machine needs to ascertained ,then compared with the required annual rate of rate of 12% in order to determine which machine gives at least 12% annual rate of return and worth investing in.
Annual rate of return=net income/average investment
net income=inflows-outflows-depreciation
Machine A average investment=$352,000/2=$176,000
Machine B average investment=$380,000/2=$190,000
Machine A net income=$209,000-$154,000-($355,000/10)
=$209,000-$154,000-$35,500
=$19,500
Machine B net income=$231,000-$166,000-($380,000/10)
=$231,000-$166,000-$38,000
=$27,000
Machine A annual rate of return=$19,500/$176,000
=11.08%
Machine B annual rate of return=$27,000/$190,000
=14.21%
The Machine B is more preferable because its annual rate of return (14.21%) is higher than the required annual rate of return (12%).
The Annual rate of return of both machine needs to known to encourage comparison with the required annual rate of return
Given Information
The required annual rate of rate = 12%
Machine A average investment = $352,000/2
Machine A average investment = $176,000
Machine B average investment = $380,000/2
Machine B average investment = $190,000
Net income = Inflows - Outflows - DepreciationMachine A Net income = $209,000 - $154,000 - ($355,000/10)
Machine A Net income = $209,000 - $154,000 - $35,500
Machine A Net income =$19,500
Machine B Net income = $231,000 - $166,000 - ($380,000/10)
Machine B Net income = $231,000 - $166,000 - $38,000
Machine B Net income = $27,000
Annual rate of return = Net income/Average investmentMachine A Annual rate of return = $19,500/$176,000
Machine A Annual rate of return = 11.08%
Machine B Annual rate of return =$27,000/$190,000
Machine A Annual rate of return = 14.21%
Therefore, the Machine B is more preferable because its annual rate of return (14.21%) is higher than the required annual rate of return (12%).
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A firm is considering changing their credit terms. It is estimated that this change would result in sales increasing by $ 1 comma 400 comma 000 $1,400,000. This in turn would cause inventory to increase by $ 175 comma 000 $175,000, accounts receivable to increase by $ 140 comma 000 $140,000, and accounts payable to increase by $ 60 comma 000 $60,000. What is the firm's expected change in net working capital?
Answer:
The firm's expected change in net working capital: Net working capital increases by $255,000
Explanation:
Net working capital is calculated by using following formula:
Net working capital = Current assets - Current Liabilities
The inventory increases by $175,000, accounts receivable increases by $140,000.
The Current assets increases by: $175,000 + $140,000 = $315,000
The accounts payable increases by $60,000, the Current Liabilities increases by $60,000
Net working capital increases by: $315,000 - $60,000 = $255,000
Answer:
$255,000
Explanation:
As we Know Working capital is the the net or current assets and current liabilities.
Increase in Current Assets
Accounts receivable $140,000
Inventories $175,000
Total Increase in CA $315,000
Increase in Current Liabilities
Accounts payable $60,000
Increase in Working Capital = Increase in Current Assets - Increase in Current Liabilities
Change in Working Capital = $315,000 - $60,000 = -$255,000
As current Liabilities increased more than the current assets, so the working capital will decrease by $255,000
The following information relates to Halloran Co.'s accounts receivable for 2018: Accounts receivable balance, 1/1/2018 $ 844,000 Credit sales for 2018 3,470,000 Accounts receivable written off during 2018 54,000 Collections from customers during 2018 3,050,000 Allowance for uncollectible accounts balance, 12/31/2018 205,000 What amount should Halloran report for accounts receivable, before allowances, at December 31, 2018?A. $1,210,000.B. $1,264,000.C. $1,005,000.D. None of these answer choices are correct.
Answer:
The correct option is A.
Explanation:
Let us journalize the effects of the transactions as follows:
Debit Accounts receivable $3,470,000
Credit Sales revenue $3,470,000
(To record credit sales during the year)
Debit Allowance for doubtful accounts $54,000
Credit Accounts receivable $54,000
(To write-off accounts receivable)
Debit Cash $3,050,000
Credit Accounts receivable $3,050,000
(To record collections on account)
The net effects of the above journals on Accounts receivable is: $844,000 + $3,470,000 - $54,000 - $3,050,000 = $1,210,000
1. Peter's Audio Shop has a before-tax cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter's Audio Shop?
Answer:
9.14%
Explanation:
The computation of the weighted average cost of capital is shown below:-
Debt = $500,000 × 1.02
= $0.51 m
Preferred = 40,000 × $34
= $1.36 m
Common = 104,000 × $20
= $2.08 m
Total = $0.51 m + $1.36 m + $2.08 m
= $3.95 m
So, Weighted average cost of capital = ($2.08 ÷ $3.95 m × 0.11) + ($1.36 m ÷ $3.95 m × 0.08) + (($0.51 m ÷ 3.95 m × 0.07 × (1 - 0.34))
= 0.057924 + 0.027544 + 0.005965
= 0.091433
or 9.14%
Therefore for computing the weighted average cost of capital we simply applied the above equation.
Each of these items must be considered in preparing a statement of cash flows for Irvin Co. for the year ended December 31, 2017. For each item, state how it should be shown in the statement of cash flows for 2017. (a) Issued bonds for $200,000 cash. Choose the type of cash inflows and outflows (b) Purchased equipment for $180,000 cash. Choose the type of cash inflows and outflows (c) Sold land costing $20,000 for $20,000 cash. Choose the type of cash inflows and outflows (d) Declared and paid a $50,000 cash dividend. Choose the type of cash inflows and outflows
Answer:
(a) Issued bonds for $200,000 cash. - cash inflow from financing activity;
(b) Purchased equipment for $180,000 cash. - cash outflow from investing activity;
(c) Sold land costing $20,000 for $20,000 cash. - cash inflow from investing activity;
(d) Declared and paid a $50,000 cash dividend. - cash outflow from financing activity
On January 3, 2014, Trusty Delivery Service purchased a truck at a cost of $90,000. Before placing the truck in service, Trusty spent $3,000 painting it, $1,500 replacing tires, and $4,500 overhauling the engine. The truck should remain in service for five years and have a residual value of $9,000. The truck's annual mileage is expected to be 22,500 miles in each of the first four years and 10,000 miles in the fifth year - 100,000 miles in total.
In deciding which depreciation method to use, Mikail Johnson, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance).
Answer:
Accumulated depreciation for Years 1 - 5 under:
the Straight-line method is $90,000.the Units-of-production method is $90,000.the Double-declining-balance method is $86,170.Explanation:
The total cost of the asset is $90,000 + $3,000 + $1,500 + $4,500 = $99,000, since all the other costs were directly attributable cost and were necessary to bring the asset to usable form.
The painting is capitalized because it is the first time Trust Delivery would be using the asset, otherwise it would have been expendedOverhauling cost can be regarded as a separate asset, if we were provided with different useful lives - componentization.Under straight-line method, depreciation expense is (cost - residual value) / No of years = ($99,000 - $9,000) / 5 years = $18,000 yearly depreciation expense.
Accumulated depreciation for Years 1 to 5 is $18,000 x 5 years $90,000.
The unit-of-production method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
At Year 1, depreciation expense (DE) is: ($99,000 - $9,000) / 100,000 miles x 22,500 miles = $20,250/year
Accumulated depreciation for the first four years is $20,250 x 4 years = $81,000.
At Year 5, depreciation = $90,000 / 100,000 miles x 10,000 miles = $9,000
Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in Years 1 - 4.
Accumulated depreciation expense for Years 1 to 5, under this method, is $90,000 (addition of first four years and the Year 5).
The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/5years = 20%, then 20% multiplied by 2 to give 40%
At Year 1, 40% X $99,000 = $39,600
At Year 2, 40% X $59,400 ($99,000 - $39,600) = $23,760
At Year 3, 40% X $35,640 ($59,400 - $23,760) = $14,256
At Year 4, 40% X $21,384 ($35,640 - $14,256) = $8,554 approximately (the depreciation expense would stop at this stage since the amount falls below the residual value).
Accumulated depreciation expense for Years 1 to 4, under this method, is $86,170 (addition of all the yearly depreciation).
Operating profits and losses for the seven industry segments of Cullumber Corporation are:
Penley $94 Cheng $(18 )
Konami (41 ) Takuhi 34
KSC 27 Molina 136
Red Moon 50
Based only on the operating profit (loss) test, which industry segments are reportable?
Penley ReportableNot Reportable Cheng ReportableNot Reportable
Konami ReportableNot Reportable Takuhi ReportableNot Reportable
KSC ReportableNot Reportable Molina ReportableNot Reportable
Red Moon ReportableNot Reportable
Answer:
Penley Reportable
Cheng Not Reportable
Konami Reportable
Takuhi Not Reportable
KSC Reportable
Molina Not Reportable
Red Moon Reportable
Explanation:
total profits pf projectable segments
= 94 + 18 + 41 + 27 + 136 + 50
= $400
operating profit(loss) test = $400*10%
= $40
Alkyl Fliers Company produces model airplanes. During the month of November, it produced 3,000 planes. The actual labor hours were 5 hours per plane. Its standard labor hours are 10 hours per plane. The standard labor rate is $8 per hour. At the end of November, Alkyl Fliers found that it had a favorable labor rate variance of $12,000. What was Alkyl Fliers' actual cost per labor hour
Answer:
$108,000
Explanation:
Favorable rate variance arises when the actual cost is lower than the implied cost. Implied cost can be calculated by multiplying standard rate with actual hours.
Labor rate variance = Actual Labor cost - Implied Labour cost
Favorable Labor rate variance = Implied Labour cost - Actual Labor cost
Favorable Labor rate variance = (Standard rate x Actual hours) - Actual Labor cost
$12,000 = ($8 x (5 x 3000)) - Actual Labor cost
$12,000 = ($8 x 15,000) - Actual Labor cost
$12,000 = $120,000 - Actual Labor cost
Actual Labor Cost = $120,000 - $12,000 = $108,000
Assume you’ve just started a new business to manufacture Fry-Plate, a new solar-powered cooking pan for camping. Your business analyst tells you that in the long run Fry-Plate will sell for $32.50 because, after a few years pass, similar products will be introduced by your competitors. Assume that, in the long run, you want to earn $4.50 on each unit of Fry-Plate sold. What is the target price? What is the target profit? What is the target cost? (Round your answers to 2 decimal places.)
Answer:
Target price $32.50
Target profit $4.50
Target cost $28.00
Explanation:
Target price $32.50
Target profit $4.50
Target cost ($32.50-$4.50)
$28.00
Therefore the target price is $32.50,
The target profit is $4.50 while the target cost is $28.00
Answer:
First of all let's understand that Target costing is a system under which a company plans the price, costs, and the margins that it wants to achieve for a new product in advance. The following are the three terms that should be familiarized.
(a) Target price – It is the price the company is expected to sell.
(b) Target profit – It is the required margin the company is expected to gain on selling price.
(c) Target cost – It is the cost the company is expected to incur on manufacturing of the product.
Based on the given information, the target price, target profit and target cost is determined as below:
(a) Target price is the selling price. That is $32.50.
(b) Target profit is the amount we wish to earn. That is $4.50.
(c) Target cost is the difference between the target price and the target profit. That is $28 ($32.50 - $4.50).
Explanation:
Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of 3.9 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price? What will the price be in three years? In 15 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Answer: a) $40.76
b) $45.72
c) $72.36
Explanation:
We shall use the dividend discount model of stock valuation to solve for this with the following formula,
P0 = D1 / (Ke - g)
Where,
P0 = Current Price
D1 = Expected Div AFTER 1 YEAR
Ke = Cost of Equity
g = Growth Rate
We have only the current dividend so we will apply the growth rate to find the next one.
a) Current Price
PO = D(1+g) / Ke - g
PO = 2.55(1+0.039) / 0.104 - 0.039
PO = $40.76
b) In 3 years. So we would need to use the dividend, 4 years from now to be able to calculate
P3 = D(1+g)^4 / Ke - g
P3 = 2.55(1+0.039) ^4 / 0.104 - 0.039
P3 = $45.72
c) In 15 years. So we would need to use the dividend, 16 years from now to be able to calculate,
P15 = D(1+g)^16 / Ke - g
P15 = 2.55(1+0.039) ^16 / 0.104 - 0.039
P15 = $72.36
If you need any and I mean any clarification, do comment. Cheers.
To find the current price of the stock, we can use the Gordon Growth Model (also known as the Dividend Discount Model), which is a method used to calculate the value of a stock that assumes that dividends will increase at a constant growth rate indefinitely. The formula for the model is:
P0 = D1 / (r - g),
where:
- P0 = Current price of the stock
- D1 = Dividend expected next year
- r = Required rate of return (or discount rate)
- g = Growth rate of dividends
Given that the last dividend (D0) was $2.55 and it is expected to grow at a rate of g = 3.9% per year, we first need to calculate the dividend expected next year (D1):
D1 = D0 * (1 + g) = $2.55 * (1 + 0.039) = $2.55 * 1.039 = $2.64945.
Now we can calculate the current stock price (P0) using the required rate of return r = 10.4%:
P0 = D1 / (r - g) = $2.64945 / (0.104 - 0.039) = $2.64945 / 0.065 = $40.76.
To find the price of the stock in three years, we need to understand that the price at that time will be based on the dividends expected in the fourth year, as stock value is based on future dividends. So we need to calculate the dividend in the fourth year (D4) and then discount it back to the price in the third year using the constant growth rate.
Let's calculate D4:
D4 = D0 * (1 + g)^4 = $2.55 * (1 + 0.039)^4 = $2.55 * (1.039)^4.
This result gives us the expected dividend in the fourth year. Now we use the Gordon Growth Model again to find the price (P3) at the end of year three:
P3 = D4 / (r - g).
We then calculate the expected dividend in the 16th year (D16) to find out the price in fifteen years, bearing in mind that the stock value in year 15 (P15) will be based on the dividend expected in year 16:
D16 = D0 * (1 + g)^16 = $2.55 * (1 + 0.039)^16.
Then, again, use the model:
P15 = D16 / (r - g).
Let's compute the actual numbers. First, calculate D4:
D4 = $2.55 * (1.039)^4 = $2.55 * 1.169858 = $2.98314.
Now calculate P3:
P3 = D4 / (r - g) = $2.98314 / 0.065 = $45.90.
Now calculate D16:
D16 = $2.55 * (1.039)^16 = $2.55 * 1.816892 = $4.63307.
Finally, calculate P15:
P15 = D16 / (r - g) = $4.63307 / 0.065 = $71.28.
Therefore, the current price of the stock is $40.76, the price in three years will be $45.90, and the price in fifteen years will be $71.28. These prices are based on the given growth rates and required return, using the Gordon Growth Model. Remember that the results may vary slightly due to rounding differences in the intermediate calculations. Rounded to two decimal places, your final prices may read:
- Current price: $40.76
- Price in three years: $45.90
- Price in fifteen years: $71.28
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On January 1, 2009, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000 control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A building was undervalued in the company's financial records by $28,000. This building had a ten-year remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years. Carper earned income and paid cash dividends as follows: NI Div Paid 2009 $105,000 $54,600 2010 $134,400 $61,600 2011 $154,000 $84,000 On December 31, 2011, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition. 1. Show the acquisition date FV allocation, which includes detailed steps such as allocation to BV, FV over BV, and Goodwill allocation, between controlling and noncontrolling interests.
Answer:
Goodwill allocations
Goodwill attributed to Vacker co. - 70% = $104000
Goodwill attributed to non-controllable interest - 30% = $36000
Explanation:
Showing the acquisition date FV allocation , which includes detailed steps such as allocation to BV,FV over BV and Goodwill allocation, between controlling and nocontrolling interests
$28000 was set out as the fair value of the building and will be amortized within ten years remaining
$80000 were to be recognized and amortized over 20 years
Amortized assets are : building and copyright
Goodwill = fair value of the assets acquired - controlling interests
The assets acquired include : copyright, common stocks , retained earnings and buildings
controlling interests = non-controlling interest * 30%
Goodwill allocations
Goodwill attributed to Vacker co. - 70% = $104000
Goodwill attributed to non-controllable interest - 30% = $36000
On December 31, 2018, Perry Corporation leased equipment to Admiral Company for a five-year period. The annual lease payment, excluding nonlease components, is $ 43,000. The interest rate for this lease is 12%. The payments are due on December 31 of each year. The first payment was made on December 31, 2018. The normal cash price for this type of equipment is $ 150,000 while the cost to Perry was $ 126,000. For the year ended December 31, 2018, by what amount will Perry's earnings increase due to this lease (ignore taxes)?
Answer:
The correct answer is $24,000.
Explanation:
According to the scenario, the computation of the given data are as follows:
Fair value of equipment = $150,000
Cost to Perry = $126,000
So, we can calculate the earning by using following formula:
Profit = Fair value of equipment - Cost to Perry
By putting the value in the formula, we get
Profit = $150,000 - $126,000
= $24,000
Consider returns R on a stock XYZ in the follwoing 4 states of he economy. each with probability p Boom state: p=0.15, R=35% Normal state: p=x?, R=8% Slowdown state: p=0.1, R=1% Recession state: p=0.2, R = -33% What is the expected return for stock XYZ? Quote your answer to 1 decimal place, but do not type the "%" Do not round intermediate results.
Answer:
The return on stock XYZ is 3.2
Explanation:
The expected return on a stock whose returns differ based on different scenarios can be calculated by multiplying the return in a scenario by the probability of that scenario and taking a sum of all such scenario returns after they have been multiplied by their respective probabilities.
The formula can be written as,
Return on a stock = rA * pA + rB * pB + ... + rN * pN
Where,
r represents the scenario returnsp represents the probability of scenariosProbability of normal state (x) = 1 - (0.15 + 0.1 + 0.2) = 0.55
Return on stock XYZ = 0.35 * 0.15 + 0.08 * 0.55 + 0.01 * 0.1 + (-0.33) * 0.2
Return on stock XYZ = 0.0315 or 3.15% rounded off to 3.2%