Answer:
1. Gain or loss on exchange = $4,200 (Loss)
Initial value of the new tractor = $32,300
2. In case the fair value of old tractor = $17,000
Gain or loss on exchange = $3,500 Gain
Initial value of the new tractor = $40,000
Explanation:
Note: When a transaction has commercial substance, it means it is marketable and can be sold at fair value provided, in that case book value of old asset to be sold is not considered for calculating initial cost of new asset.
Since the transaction has commercial substance
Fair value of the old tractor will be considered.
Cost of new tractor = Cash paid + Fair value of old tractor
= $23,000 + $9,300 = $32,300
1. Gain or loss on exchange = Exchange value of old tractor - Book value of old tractor
Exchange value of old tractor = Fair value of old tractor as transaction had commercial substance = $9,300
Gain or loss on exchange = $9,300 - $13,500 = -$4,200 (Loss)
Initial value of the new tractor = Cost of new tractor as computed above = $32,300
2. In case the fair value of old tractor = $17,000
Then
Gain or loss on exchange = Exchange value of old tractor - Book value of old tractor = $17,000 - $13,500 = $3,500 Gain
because exchange value of old tractor = Fair value of old tractor as transaction had commercial substance
Initial value of the new tractor = Cost of new tractor = $23,000 + $17,000 = $40,000
Final Answer is as follows:
1. Gain or loss on exchange = $4,200 (Loss)
Initial value of the new tractor = $32,300
2. In case the fair value of old tractor = $17,000
Gain or loss on exchange = $3,500 Gain
Initial value of the new tractor = $40,000
Kapono Farms would recognize a loss of $4,200 with the new tractor valued at $32,300 in the first scenario and a gain of $3,500 with the new tractor valued at $40,000 in the second scenario.
Explanation:1. For the first scenario, Kapono Farms would recognize a loss on the exchange since the fair value of the old tractor ($9,300) is less than its book value ($13,500). The loss would be $4,200 ($13,500 - $9,300). The initial value of the new tractor would be the sum of the fair value of the old tractor and the additional cash paid, i.e. $9,300 + $23,000 = $32,300.
2. For the second scenario, where the fair value of the old tractor is deemed to be $17,000, Kapono Farms would recognize a gain on the exchange as the fair value exceeds the book value. The gain would be $3,500 ($17,000 - $13,500). The initial value of the new tractor would be the sum of the fair value of the old tractor and the additional cash paid, i.e. $17,000 + $23,000 = $40,000.
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Which of the following are examples of job amenities?A. a child-care center at work B. health insurance benefits C. pleasant working conditions D. a workplace gymnasiumE. all of the above
Answer:
The correct option here is E) all of the above.
Explanation:
Job amenities are nothing but the perks or benefits that a employee receives from his or her employer company . There can be various benefits that a employee can receive like health insurance, pension plan , dental insurance, vacation, or sick days , good working conditions etc.
All of the choices given in the question are examples of job amenities that a employee receives
g How much do you need when you retire to provide a $2,500 monthly check that will last for 25 years? Assume that your savings can earn 0.5% a month. $402,766.67 $414,008.24 $388,017.16 $361,526.14
Answer:
The correct answer is $388,017.16
Explanation:
The assumption is that you have to save x money, that generates 0.5% a month, and that provide $2,500 monthly. The savings at second month will be (x-2500) * 1.005. At third month, the saving will be (((x - 2500) * 1.005)-2500)* 1.005. This continues until the twelfth month of the twenty fifth year. The short form of this calculations is [tex]C * (1-(1+i)x^{-t})/ i[/tex], where C is the monthly provision (2500), i is the interest (0.5%) and t is the time (12 months per year, 25 years, 300 months). The result is [tex]2,500 * (1-(1.005)x^{-300} )/0.005 = $388,017.16[/tex].
The amount you need at retirement to provide a $2,500 monthly check that will last for 25 years, with an interest rate of 0.5% per month, is approximately $388,017.16.
To calculate the amount you need at retirement to provide a $2,500 monthly check for 25 years with an interest rate of 0.5% per month, you can use the formula for the present value of an annuity. The formula is:
[tex]PV=\frac{(PMT)(1-(1+r)^{-n} }{r}[/tex]
Where:
PV is the present value of the annuity (the amount you need when you retire).
PMT is the monthly payment ($2,500).
r is the monthly interest rate (0.5%, or 0.005 as a decimal).
n is the total number of payments (25 years × 12 months/year = 300 months).
Let's calculate it:
[tex]PV=\frac{(2500)(1-(1+0.005)^{-300} }{0.005}[/tex]
[tex]PV=388,017.16[/tex]
The amount you need at retirement to provide a $2,500 monthly check for 25 years, assuming your savings can earn 0.5% a month, is approximately $388,017.16. This matches one of the provided options, confirming the calculation.
If consumption increases, a) the SRAS curve will shift rightward, which will push the price level up. b) the SRAS curve will shift leftward, which will push the price level up. c) the AD curve will shift leftward, which will push the price level down. d) the AD curve will shift rightward, which will push the price level up.
Answer: Option (d) is correct
If consumption increases, the AD curve will shift rightward, which will increase the price level.
Explanation:
If the consumption increases in an economy as a result there is a rightward shift in the aggregate demand curve. This shift in the aggregate demand curve lead to increase in the price level as well as in the output level.
Because there is more demand in the economy which gives an advantage for the producer to charge higher price.
If consumption increases, the AD curve will shift rightward, which will push the price level up. The correct answer is option D.
When consumption rises, aggregate demand (AD) increases, leading to a rightward shift of the AD curve. This higher demand, with the same short-run aggregate supply (SRAS), results in upward pressure on the price level, reflecting inflationary tendencies. This is a fundamental concept in macroeconomics where demand-side factors directly influence the price levels and economic output.
Increase in consumption leads to higher aggregate demand.AD curve shift rightward increases price levels.Reflects inflationary pressure in the short run.Understanding these shifts helps in analyzing economic policies and their impact on inflation and overall economic health.
Classify the following items as Direct materials, Selling and administrative expense, Factory overhead, or Direct labor. a. Rent expense on factory building b. Sales supplies used c. Factory supplies used d. Indirect materials used e. Wages of assembly line personnel f. Cost of primary material used to make product g. Depreciation on office equipment h. Rent on office facilities i. Insurance expired on factory equipment j. Utilities incurred in the office k. Advertising expense
Answer:
a. Rent expense on factory building = Factory overhead, because it is the factory building. b. Sales supplies used = Selling and administrative expense.c. Factory supplies used = Factory overhead.d. Indirect materials used = Factory overhead.e. Wages of assembly line personnel = Direct Labor.f. Cost of primary material used to make product = Direct Materials.g. Depreciation on office equipment = Selling and administrative expense.h. Rent on office facilities = Selling and administrative expense.i. Insurance expired on factory equipment = Factory overhead. j. Utilities incurred in the office = Selling and administrative expense.Advertising expense = Selling and administrative expense.Direct materials, direct labor, factory overhead, and selling and administrative expenses are different categories of costs in a business.
Explanation:To classify the items, we need to understand their nature and purpose. Direct materials are materials used in the production of a product, such as the cost of primary material used to make the product. Direct labor refers to the wages of assembly line personnel who directly work on producing the product. Factory overhead includes indirect materials used, factory supplies used, and rent expense on the factory building. Selling and administrative expenses include sales supplies used, depreciation on office equipment, rent on office facilities, insurance expired on factory equipment, utilities incurred in the office, and advertising expense.
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Russo Corporation manufactured 16,000 air conditioners during November. The variable overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November: Actual Budgeted Production 16,000 units 18,000 units Machine-hours 7,875 hours 9,000 hours Variable overhead cost per machine-hour: $31.00 $31.50 7. What is the variable overhead spending variance? A) $4,500 unfavorable B) $3,937.50 unfavorable C) $4,500 favorable D) $3,937.50 favorable
Answer:
D) $3,937.50 favorable
Explanation:
We need to use the formula to work out the variance:
[tex]$$Actual hours worked * (standard overhead rate - Actual overhead rate)\\=Variable overhead spending variance[/tex]
We post the know values in your table and calculate the variance.
[tex]7,875 * (31.5 - 31) = 3.937,5[/tex]
It is favorable because the actual price was lower than standart, the company saved cash, it was a favorable spending.
Remember:
If Standard - Actual = positive --> favorable variance
If Standard - Actual = negative --> unfavorable variance
Bayside Coatings Company purchased waterproofing equipment on January 2, 20Y4, for $190,000. The equipment was expected to have a useful life of four years and a residual value of $9,000. Instructions: Determine the amount of depreciation expense for the years ended December 31, 20Y4, 20Y5, 20Y6, and 20Y7, by (a) the straight-line method and (b) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method. Depreciation Expense Year Straight-Line Method Double-Declining-Balance Method 20Y4 $ $ 20Y5 20Y6 20Y7 Total $
Answer & Explanation:
Straight Line table
[tex]\left[\begin{array}{cccc}Year&dep \: expense&acc \: dep&net\: book \: value\\0&-&-&190,000\\1&45,250&45,250&144,750\\2&45,250&90,500&99,500\\3&45,250&135,750&54,250\\4&45,250&181,000&9,000\\\end{array}\right][/tex]
The straight-line Method is simply and easy to understand, It distribute the depreciation equally between years. So that implies that the formula should be:
[tex]\frac{Adquisition \: Value- \: Salvage \: Value}{useful \: life}= Depreciation \: coplete \: year[/tex]
195,000 - 9,000 = 181,000
181,000 / 4 = 45,250
Double Declining table
[tex]\left[\begin{array}{cccc}Year&Dep \: Exp&Acc \: Dep&Ending \:Book \:Value\\0&-&-&190,000\\1&95,000&95,000&95,000\\2&47,500&142,500&47,500\\3&23,750&166,250&23,750\\4&14,750&181,000&9,000\\\end{array}\right][/tex]
The Double declining You double the straight line rate
[tex]\frac{1}{useful \: life} \times 2 = DD \: rate \\\\(1/4) \times 2 = 1/2[/tex]
Current Book Value x rate = depreciation expense
190,000 x 1/2 = 95,000
The straight-line method results in a total depreciation expense of $181,000 over four years, while the double-declining-balance method results in a total depreciation expense of $200,500 over the same period.
Explanation:To calculate the depreciation expense using the straight-line method, we subtract the residual value from the initial cost of the equipment, and then divide that value by the useful life of the equipment. For each year, the depreciation expense will be the same ($45,250). Therefore, the total depreciation expense for the four years using the straight-line method will be $181,000.
To calculate the depreciation expense using the double-declining-balance method, we start with the initial cost of the equipment and multiply it by twice the straight-line rate (2/4 = 0.5). For each year, we multiply the previous year's book value by the double-declining-balance rate. The double-declining-balance method allows for higher depreciation expense in the early years. The total depreciation expense for the four years using the double-declining-balance method will be $200,500.
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Which of the following is most likely to characterize a fascist regime? Select one: a. a strong respect for human rights b. tolerance of ethnic and religious diversity c. centralized planning of the economy d. a propensity to engage in war
Answer: (D.) a propensity to engage in war
Explanation: A fascist regime or government is a political philosophy, movement, or regime that lauds nation and often race above the individual and that stands for a centralized authoritarian government headed by a dictator, severe economic and social regimentation, and forcible suppression of opposition.
The term was first used by Italian political leader Benito Mussolini under his totalitarian, anti-communist government.
Suppose you know that a company’s stock currently sells for $65 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Final answer:
The current dividend per share is $6.50.
Explanation:
To find the current dividend per share, we need to determine the growth rate in dividends. Since the total return on the stock is evenly divided between the capital gains yield and the dividend yield, we can assume that the growth rate in dividends is the same as the growth rate in stock price. The capital gains yield is the difference between the required return and the dividend yield:
Capital gains yield = Required return - Dividend yield
In this case, the required return is 15% and the stock price is $65 per share. Let's assume the dividend yield is x:
Capital gains yield = 0.15 - x
We know that the dividend yield is equal to the dividend per share divided by the stock price:
Dividend yield = Dividend per share / Stock price
Substituting the values, we can solve for the dividend per share:
x = (Dividend per share) / 65
Capital gains yield = 0.15 - (Dividend per share) / 65
Since the total return is evenly divided between the capital gains yield and the dividend yield, the growth rate in dividends is equal to half of the total return:
Growth rate in dividends = (Capital gains yield) / 2
Growth rate in dividends = (0.15 - (Dividend per share) / 65) / 2
Now we can set up an equation to solve for the dividend per share:
Dividend per share = $65 * (0.15 - (Dividend per share) / 65) / 2
Simplifying the equation:
Dividend per share = $65 * (0.15 - (Dividend per share) / 65) / 2
Dividend per share = $9.75 - (Dividend per share) / 2
Dividend per share + (Dividend per share) / 2 = $9.75
3/2 * Dividend per share = $9.75
Dividend per share = ($9.75 * 2) / 3
Dividend per share = $6.50
Milly Adams, the marketing manager for Nuance Cosmetics believes that in order for the company to succeed in international markets, it has to address the choices that is has about product attributes, distribution strategy, communication strategy, and pricing strategy in its targeted markets. What is mill adams referring to?
Answer: Marketing mix
Explanation: To achieve its objectives in the market, every company uses certain tools, the set of such tools is called marketing mix. It involves decision making in four levels product, price,place and promotion.
In the given case Milly Adams suggested the company to take decisions regarding product and distribution etc. So, from the above explanation we can conclude that she is referring to marketing mix.
Jill invests $1,000.00 to buy ten shares of Good Corporation. The corporation goes bankrupt having no assets and $1 million in liabilities. The most Jill can lose is the $1,000.00 she invested. This is an example of the corporate characteristic of: A. Limited liability. B. Free transferability of shares. C. Perpetual existence. D. Centralized management.
Answer:
A. Limited liability.
Explanation:
The limited Liabilities company's protects their members and managers.
It protects their personal assets from the business liabilities.
The laiblities of the business will be settle with the busieness assets. IF there are no more assets, then debts defaults and become uncollectible.
Orange Corporation manufactures custom-made wallets. The following data pertains to Job GH7: Direct materials placed into production $5,000 Direct labor hours worked 75 hours Direct labor rate per hour $35 Machine hours worked 200 hours Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $100,000 for the year, and the direct labor hours were estimated to be 25,000. Job GH7 consists of 60 units. What is overhead cost assigned to Job GH7
Answer: Overhead cost assigned to Job GH7 is $300.
Explanation:
Given that,
Direct materials placed into production = $5000
Direct labor hours worked = 75 hours
Direct labor rate per hour = $35
Machine hours worked = 200 hours
Factory overhead was budgeted = 100000
direct labor hours were estimated = 25000
Job GH7 consists = 60 units
Predetermined rate = [tex]\frac{Factory\ Overhead\ Budgeted}{Direct\ Labor\ hours\ estimated}[/tex]
= [tex]\frac{100000}{25000}[/tex]
=$4
Hence,
overhead cost assigned to Job GH7 = Direct labor hours worked × Predetermined rate
= 75 × 4
=$300
The overhead cost assigned to Job GH7 is $300, which was determined by calculating the plant-wide overhead rate of $4 per direct labor hour and multiplying it by the direct labor hours worked for Job GH7.
Explanation:To calculate the overhead cost assigned to Job GH7, we need to determine the plant-wide overhead rate using the given factory overhead and estimated direct labor hours. The plant-wide overhead rate is calculated as follows:
Plant-wide overhead rate = Total budgeted factory overhead / Total estimated direct labor hours
Plant-wide overhead rate = $100,000 / 25,000 hours = $4 per direct labor hour
Now, we can apply the overhead to Job GH7 based on the actual direct labor hours worked:
Overhead cost assigned to Job GH7 = Plant-wide overhead rate * Direct labor hours worked for Job GH7
Overhead cost assigned to Job GH7 = $4 * 75 hours = $300
Stu is working on a bid for a contract. Thus far, he has determined that he will need $218,000 for fixed assets and another $41,000 for net working capital at Time 0. He had also determined that he can recover $79,900 aftertax for the combined fixed assets and net working capital at the end of the 3-year project. What operating cash flow will be required each year for the project to return 14 percent in nominal terms?
Answer:
The cash flow should be equal to 88,634.74
Explanation:
218,000 investment on fixed assets
41,000 working capital
investment at year 0 259,000
present value of salvage value
79,900
time = 3 years
rate = 0.14
[tex]\frac{Principal}{(1 + rate)^{time} } = PV[/tex]
[tex]\frac{79,900}{(1 + 0.14)^{3} } = PV[/tex]
PV 53,222.75
259,000 - 53,222.75 = 205,777.25 present value of the operating cash flow
Now we have to calcualte the cuota of a 3 years annuity of present value equal to 205,777.25 at 14% rate
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
[tex]C \times \frac{1-(1+.014)^{-3} }{0.14} = 205,777.25\\[/tex]
[tex]205,777.25 \div \frac{1-(1+.014)^{-3} }{0.14} = C\\[/tex]
C = 88,634.74
The cash flow should be equal to 88,634.74
a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. b. A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Answer:
NPV of Project A = $1,023,425 +$5,640 - $520,000 = $509,065
NPV of Project B= $560,175 + $9,320 - $380,000 = $189,495
Explanation:
Net Present Value = Present value of cash inflows - Present value of cash outflow
For project A
Annual cash inflow = After tax income + Depreciation
= $150,000 + ($520,000 - $10,000)/6 = $150,000 + $85,000 = $235,000
Present value of out flow = $520,000
Present value of inflows = PVAF 10%, 6 years = 4.355 X $235,000 = $1,023,425
Present value of Salvage = PVIF 10%, 6th year = 0.564 X $10,000 = $5,640
NPV of Project A = $1,023,425 +$5,640 - $520,000 = $509,065
For project B
Annual cash inflow = After tax income + Depreciation
= $60,000 + ($380,000 - $20,000)/8 = $60,000 + $45,000 = $105,000
Present value of out flow = $380,000
Present value of inflows = PVAF 10%, 8 years = 5.335 X $105,000 =$560,175
Present value of Salvage = PVIF 10%, 8 = 0.466 X $20,000 = $9,320
NPV of Project B= $560,175 + $9,320 - $380,000 = $189,495
NPV of Project A = $1,023,425 +$5,640 - $520,000 = $509,065
NPV of Project B= $560,175 + $9,320 - $380,000 = $189,495
Albright Motors is expected to pay a year-end dividend of $3.00 a share (D1 = $3.00). The stock currently sells for $30 a share. The required (and expected) rate of return on the stock is 16 percent. If the dividend is expected to grow at a constant rate, g, what is g?
Answer: 14.4%
Explanation: The G that we are computing in this question is the sustainable growth rate, it is the growth rate that a company can attain and maintain without any problem.
we know that,
growth = (retention ratio)*(return on equity)
growth = (1- dividend payout ratio)*(return on equity)
[tex]growth\:=\:\left ( 1-\frac{3}{30} \right )*\left ( 0.16 \right )[/tex]
growth = 14.4%
Last year, Johnson Mills had annual revenue of $37,800, cost of goods sold of $23,200, and administrative expenses of $6,300. The firm paid $700 in dividends and had a tax rate of 35 percent. The firm added $2,810 to retained earnings. The firm had no long-term debt. What was the depreciation expense?
Answer:
Depreciation expense = 2,900
Explanation:
Our goal would be to construct the formula where depreciation expense is and then increase deepth until find something we can work:
[tex]$$Revenue - Expenses = Net Income[/tex]
Expanding expenses we find depreciation expense
[tex]$$Revenue - COGS - Admin Expense - Dep Expense = Income Before Taxes[/tex]
Here we don't Know Income Before taxes so we have to work that first
[tex]$$Income Before Taxes x (1-tax rate) = Net Income[/tex]
Here we don't Know Net Income taxes so we have to work that first
[tex]$$Net Income - Dividends = change in Retained Earnings[/tex]
Here we got the other component of the formula, so it is possible to solve for net income and from there achieve the answer
Net income = 2,810 + 700 = 3,510
Income before taxes = 3,510/0.65 = 5,400
37,800 - 23,200 - 6,300 - dep expense = 5,400
dep expense = 2,900
[tex]\ $Net income = 2,810 + 700 = 3,510 \\Income before taxes = 3,510/0.65 = 5,400\\37,800 - 23,200 - 6,300 - dep expense = 5,400\\dep expense = 2,900[/tex]
The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed $550,000 in the common stock account and $4.7 million in the additional paid-in sur+ account. The 2015 balance sheet showed $590,000 and $5.1 million in the same two accounts, respectively. If the company paid out $505,000 in cash dividends during 2015, what was the cash flow to stockholders for the year? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Answer:
cash flow to stockholders = 65,000
Explanation:
2014
550,000 CS
4,700,000 Additional Paid-In
5,250,000 Total beginning Capital
2015
590,000 CS
5,100,000 Additional Paid-IN
5,690,000 Total ending Capital
Dividends - (Ending Capital - Beginning Capital) = cash low to stockholders
505,000 - (5,690,000 - 5,250,000) = 65,000
Suppose a company which sells breakfast cereal puts a coupon in each box of cereal that it sells during the month of December 2017. The coupon permits $1 off the purchase price of the next box of cereal. Customers will present the coupons to grocery stores when they wish to redeem the coupons. The manufacturer will reimburse the grocery stores $1 for each coupon that the stores send to the manufacturer. The manufacturer sells 1,000,000 boxes of cereal in December of 2017. Should the manufacturer accrue an expense in 2017 for the coupon promotion? Why or why not?
Answer: The manufacturer should accrue an expense for $1,000,000 (i.e. 1,000,000 boxes [tex]\times[/tex] $1 coupon) in December 2017.
Explanation:
The manufacturer should accrue an expense for $1,000,000 (i.e. 1,000,000 boxes [tex]\times[/tex] $1 coupon) in December 2017.
As per the matching concept, revenue should be matched with expenses that has been incurred to earn such revenue.
Hence, since the $1,000,000 is an expense incurred for the sales in Dec 2017, the same should be recognized in Dec 17, though the actual payment will be done in future.
Treasury bills are currently paying 8 percent and the inflation rate is 2.8 percent. What is the approximate real rate of interest? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Approximate real rate % What is the exact real rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer: Approximate real rate of interest = 5.2% and Exact real rate of interest = 5.058%
Explanation:
Inflation rate, π = 2.8%
T- bills currently paying = 8%
Approximate real rate of interest:
So, approximate real rate of interest = current rate - inflation rate
= 8% - 2.8%
= 5.2%
Exact real rate of interest:
Exact real rate of interest = [tex](\frac{1 + nominal rate}{1 + inflation rate} )-1[/tex]
= [tex](\frac{1 + 8%}{1 + 2.8%} )-1[/tex]
= 1.05 - 1
= 5.058%
Determine the discounted payback period (in years) for a project that costs $1,000 and would yield after-tax cash flows of $525 the first year, $485 the second year, $445 the third year, and $405 for the fourth year. The firm's cost of capital is 11%.
Answer:
During the 3rd year:
It will be in the 5th month of the Third year
Explanation:
We have to discount each year cash flow at present day using the firm's cost of capital of 11%
[tex]\left[\begin{array}{ccc}\\$Year&$Cash Flow&$Discounted Cash Flow \\\\1&525&472.97 \\2&485&393.63\\3&445&325.38\\4&405&266.78\end{array}\right] \\[/tex]
Adding the discounted cash flow we got that the firm will achieve the payback during the third year.
Now in the attempt of being more precise:
At the end of the 2nd year, we are 133.40 away from payback
By the end of the third year, the company receive 325.38
So in 12 months, we generate 325.38
In how many months do we manage to generate 133.40 and payback the investment?
133.40*12/325.38 = 4.91
So in the 5th month of the Third year, the firm will achieve the payback.
Final answer:
The discounted payback period for the project is approximately 2.416 years. It is obtained by discounting the future cash flows at the firm's cost of capital of 11%, and then calculating the time at which the cumulative discounted cash flows exceed the initial investment of $1,000.
Explanation:
Determining the Discounted Payback Period
To calculate the discounted payback period for a project, we need to discount the projected after-tax cash flows by the firm's cost of capital and compare them to the initial outlay. The cost of capital in this case is 11%, and the project costs $1,000. The future cash flows are $525 in the first year, $485 in the second year, $445 in the third year, and $405 in the fourth year.
To find out when the payback period occurs, we calculate the discounted cash flow for each year using the formula:
Discounted Cash Flow = Actual Cash Flow / (1 + r)^t
where r is the discount rate (0.11 in this case), and t is the time period.
First Year: $525 / 1.11 = $473.42
Second Year: $485 / (1.11)^2 = $393.78
Third Year: $445 / (1.11)^3 = $319.61
Fourth Year: $405 / (1.11)^4 = $260.79
Now, we sum these discounted cash flows until the cumulative amount exceeds the initial investment of $1,000. The payback period occurs during the third year, as the total discounted cash flows after the second year is $867.20, which is less than $1,000. By adding the discounted cash flow of the third year ($319.61), the total becomes $1,186.81, exceeding the initial investment. Therefore, the discounted payback period is somewhere in the third year.
To be more precise, we need to calculate how much into the third year the payback occurs. For this, we take the remaining amount to be recovered after the second year ($1,000 - $867.20 = $132.80) and divide it by the discounted cash flow of the third year: $132.80 / $319.61 = 0.416 (approximately 41.6% of the year). Hence, the discounted payback period is approximately 2.416 years.
Columbus Company provides the following ABC costing information: Activities Total Costs Activity dash cost drivers Labor $ 480 comma 000 10 comma 000 hours Gas $ 32 comma 000 4 comma 000 gallons Invoices $ 110 comma 000 5 comma 500 invoices Total costs $ 622 comma 000 The above activities used by their three departments are: Lawn Department Bush Department Plowing Department Labor 3 comma 000 hours 1 comma 200 hours 5 comma 800 hours Gas 1 comma 700 gallons 900 gallons 1 comma 400 gallons Invoices 1 comma 500 invoices 400 invoices 3 comma 600 invoices If labor hours are used to allocate the nonminuslabor, overhead costs, what is the overhead allocation rate
Answer:
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Explanation:
Provided
Activity Total costs Cost Driver
Labor $480,000 10,000 hours
Gas $32,000 4,000 gallons
Invoices $110,000 5,500 invoices
Total costs $622,000
Used as follows
Particulars Lawn Dept. Bush dept. Plowing Dept.
Labor 3,000 hours 1,200 hours 5,800 hours
Gas 1,700 gallons 900 gallons 1,400 gallons
Invoices 1,500 invoices 400 invoices 3,600 invoices
If labor hours are used even for non labor activities then
Overhead costs will be allocated in ratio of labor hours i.e. 3000:1200:5800
= 15:6:29 (Total = 50)
Total overheads = $622,000
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Lawn Department = $62.2 [tex]\times[/tex] 3,000 hours = $186,600
Bush Department = $62.2 [tex]\times[/tex] 1,200 hours = $74,640
Plowing Department = $62.2 [tex]\times[/tex] 5,800 hours = $360,760
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Lohn Corporation is expected to pay the following dividends over the next four years: $16, $12, $11, and $6.50. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 12 percent, what is the current share price?
Answer:
Intrinsic Value of the bond $90.69
Explanation:
[tex]\left[\begin{array}{ccc}Year&Dividends&Present Value\\1&16&14.2857142857143\\2&12&9.56632653061224\\3&11&7.82958272594752\\4&92.8571428571429&59.0123929947343\\Intrinsic&Value&90.6940165370084\\\end{array}\right][/tex]
The dividends value are givens:
Then on year 4 we apply the Dividends growth model
[tex]\frac{divends}{return-growth} = Intrinsic \: Value[/tex]
[tex]\frac{6.50 }{0.12-0.05} = Intrinsic \: Value[/tex]
Next step, we take all the values to present date
[tex]\frac{Nominal}{(1+rate)^{time} } = PV[/tex]
Year 1 /1.12
Year 2 /1.12^2
Year 3 /1.12^3
Year 4 /1.12^4
Final step, we add them to get the intrinsic value of the bond today.
The current share price is found by calculating the present value of dividends for the first four years, then calculating the present value of the growing perpetuity starting at year 5 and discounting it back to today.
Explanation:The current share price of Lohn Corporation can be calculated using the concept of the present value of dividends and the required return on the stock. In the first four years, we calculate the present value of each year's dividend by dividing them by (1 + required return) raised to the power of the respective year number. Therefore, the present value of the dividends for the initial 4 years would be: (16/(1+0.12)) + (12/(1+0.12)²) + (11/(1+0.12)³) + (6.50/(1+0.12)^4). After these four years, the dividends will grow at a stable rate of 5%. This represents a growing perpetuity which can be calculated by the formula: Dividend in year 5 / (Required return - Constant growth rate) which gives us (6.5*1.05) /(12% - 5%). We find the present value of this perpetuity at year 4 before adding it to the present value of the first four dividends to find the current share price.
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Policy and standards often change as a result of business drivers. One such driver, known as ___________________, occurs when business shifts and new systems or processes are incorporated; these business shifts and new systems and processes may differ from what a standard or policy requires.
Answer:
Business exceptions
Explanation:
Policy and standards often change as a result of business drivers. One such driver, known as business exceptions, occurs when business shifts and new systems or processes are incorporated.
Factory overhead rates LO P3 At the beginning of the year, a company estimates the following manufacturing costs for the next period: direct labor, $488,000; direct materials, $212,000; and factory overhead, $132,000. Required: 1. Compute its predetermined overhead rate as a percent of direct labor. 2. Compute its overhead cost as a percent of direct materials.
Answer:
1.- 25.205%
2.- 58.019%
Explanation:
The goal of the rate is to distribute the manufacturing overhead over a cost driver.
[tex]\frac{CostOf Manufacturing Overhead}{Cost Driver}= $Overhead Rate[/tex]
So the amount in the dividend remains the same, and the divisor will cahnge according to the driver we are asked for:
1.- Compute its predetermined overhead rate as a percent of direct labor.
[tex]\frac{132,000}{488,000}= 0.25205 = 25.205%[/tex]
2.- Compute its overhead cost as a percent of direct materials.
[tex]\frac{132,000}{212,000} = 0.58019 = 58.019%[/tex]
On December 31, 2011, Daggett Company issued $750,000 of ten-year, 9% bonds payable for $700,353, yielding an effective interest rate of 10%. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2012, and (c) the semiannual interest payment and discount amortization on December 31, 2012. Round amounts to the nearest dollar.
Answer:
(A)
cash 700,353
discount 49,647
bonds payable 750,000
(B)
interest expense 70035.3
cash 67,500
discount on bonds 2535.3
(C)
interest expense 70,288.83
cash 67,500
discount on bonds 2,788.83
Explanation:
(A) face value - issued amount = discount
(B)
[tex]purchase \: cost * effective \: rate = interest \: expense[/tex]
[tex]700,353 \times 0.10 = 70035.3 \: interest \: expense[/tex]
[tex]750,000 \times 0.09 = 67,500 cash \:disbursement[/tex]
Amoritization On discounts will be the diference 2535.3
(C) same procedure as (B) but now the bond value increase.
It is 700,353 + 2535.3 = 702,888.3
[tex]702,888.3 \times 0.10 = 70,288.83 \: interest \: expense[/tex]
[tex]750,000 \times 0.09 = 67,500 \:cash \:disbursement[/tex]
Amoritization On discounts will be the diference 2,788.83
Final answer:
The company's journal entries for the bond issuance and interest payments involve recording the initial cash received, the bond payable, and the discount on bonds payable. Subsequent entries record the interest expense, actual interest paid, and the discount amortized using the effective interest method on semiannual interest payment dates.
Explanation:
To answer the student's question regarding the journal entries for bond issuance and interest payments using the effective interest method, we need to follow three main steps:
(a) Issuance of the bonds
The journal entry to record the issuance of the bonds payable in the company's books on December 31, 2011, would be:
Dr Cash $700,353
Cr Bonds Payable $750,000
Dr Discount on Bonds Payable $49,647
(b) Semiannual interest payment on June 30, 2012
Interest Expense for the six months would be the carrying amount of the bond ($700,353) times the effective interest rate (5% semiannually, which is half of the annual effective interest rate of 10%): Interest Expense = $700,353 x 5% = $35,018 (rounded to the nearest dollar).
Since the bond's stated interest rate is 9% per annum, the actual cash interest paid for six months is $750,000 x 4.5% = $33,750.
The discount amortization would be the Interest Expense minus the Interest Paid: $35,018 - $33,750 = $1,268. This will reduce the discount on bonds payable and increase the carrying amount of the bond.
Dr Interest Expense $35,018
Cr Cash $33,750
Cr Discount on Bonds Payable $1,268
(c) Semiannual interest payment on December 31, 2012
Before making this journal entry, we must update the carrying amount of the bond for the amortized discount ($1,268 from the previous six months). The new carrying amount is $700,353 + $1,268 = $701,621.
The Interest Expense now would be $701,621 x 5% = $35,081 (rounded to the nearest dollar).
The discount amortization for this period is $35,081 - $33,750 = $1,331, further reducing the discount and increasing the carrying amount of the bond for future interest calculations.
Dr Interest Expense $35,081
Cr Cash $33,750
Cr Discount on Bonds Payable $1,331
During June, Cisco Company produced 12,000 chainsaw blades. The standard quantity of material allowed per unit was 1.5 pounds of steel per blade at a standard cost of $8 per pound. The actual cost was $7 per pound. The actual pounds of steel that Cisco purchased were 19,500 pounds. All materials purchased were used. Calculate Cisco's materials usage variance. a. $10,500 F b. $10,500 U c. $12,000 U d. $12,000 F
Answer:
Hence, Cisco's materials usage variance is 12,000 Unfavorable
So, the correct option is c. $12,000
Explanation:
Material Usage variance : The computation of material usage variance is shown below:
= (Standard Quantity - Actual Quantity ) × Standard price per pound
where,
Standard Quantity = Production units × Material allowed per unit
= 12,000 × 1.5
= 18,000 pounds
So,
Material Usage Variance = (18,000 - 19,500) × $8
= 12,000 Unfavorable
Hence, Cisco's materials usage variance is 12,000 Unfavorable
So, the correct option is c. $12,000
Imagine you are the director of global business development for a large Swedish engineering company that wants to win a contract to build roads in Kenya, a project funded by the World Bank. You need to develop a relationship with the Ministry of Transportation in Kenya. Using what you learned in this course, discuss how you would handle a situation in which your firm wants to win the contract but has been directly asked for a bribe by a local official in charge of the decision making. Imagine that your competitors are from other countries, some of which are less concerned about the ethics of gift giving. Given what you have read in this course, how can you still win business in such a situation? What would you advise your senior management?
Answer: I would reject his demand for bribe straight away and i will recommend senior management to protect business ethics at all cost.
Explanation: first of all i would not accept the demand of bribe from the official and would try to report this corruption to the concerned authorities.I would try to pressure the authorities to take strict actions against the official and to make the process to be fair and honest in every way.
I as a representative of my company would recommend senior management to take hands off from the project until appropriate actions are taken by the authority as getting into unethical actions might result in problems in future .
Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:
Answer: The answer is as follows:
Explanation:
From these numbers, we can conclude that USA has a comparative in producing cars and France has a comparative advantage in producing bottles.
Opportunity cost shows that how many units of one good have to be foregone in order to produce one additional unit of other good.
In USA:
Opportunity cost of producing bottles = [tex]\frac{15000000}{20000000}[/tex]
= 0.75
Opportunity cost of producing cars = [tex]\frac{20000000}{15000000}[/tex]
= 1.33
In France:
Opportunity cost of producing bottles = [tex]\frac{10000000}{18000000}[/tex]
= 0.55
Opportunity cost of producing cars = [tex]\frac{18000000}{10000000}[/tex]
= 1.8
Above calculations clearly shows that USA has a lower opportunity in producing 1 unit of car as compared to the France, so it has a comparative advantage in producing cars.
Whereas, France has a lower opportunity in producing 1 unit of bottle as compared to the USA, so it has a comparative advantage in producing Bottles.
Final answer:
The USA has an absolute advantage over France in producing both cars and wine because it can produce a greater quantity of both with the same amount of labor. Comparative advantage suggests countries should specialize in producing goods with the lowest opportunity cost, enhancing trade efficiency.
Explanation:
The question you've asked pertains to the economic concept of opportunity costs and production possibilities, which fall under the subject of comparative advantage and absolute advantage in international trade theory.
When examining the production capabilities of the USA and France, we can determine their comparative and absolute advantages. The USA can produce 15,000,000 cars or 20,000,000 bottles of wine in a year with their labor. France can produce 10,000,000 cars or 18,000,000 bottles of wine in the same timeframe. By these numbers, the USA has an absolute advantage in producing both cars and wine since it can produce a greater quantity of both goods with a year's worth of labor than France can.
In contrast, when workers are analyzed in terms of productivity, such as in the example provided where 40 workers in the United States and Mexico make different products, we notice productivity differences. The comparison of how many products a certain number of workers can make in each country helps determine which country should specialize in which good. Specialization, according to comparative advantage, is based on which country has the lowest opportunity cost for producing a good. This concept promotes international trade efficiency.
Presented below is information for Carla Vista Co. for the month of January 2017. Cost of goods sold $220,100 Rent expense $33,000 Freight-out 9,500 Sales discounts 9,100 Insurance expense 13,400 Sales returns and allowances 20,000 Salaries and wages expense 63,100 Sales revenue 399,500 Income tax expense 5,000 Other comprehensive income (net of $400 tax) 2,000 . Prepare an income statement using the multi-step format.
Answer:
Explanation:
The income statement is that statement which reflects gains & income and expenditure & losses for a particular year
A multi step format of income statement show a classification of sales and expenses.
Like to compute net sales, we deduct sales discount & sales return and allowances from sales revenue
like this, there are various expenses such as administrative expenses, selling expenses which come under operating expenses.
Administrative expenses includes rent and sales & wages expenses. whereas, selling expenses includes freight out charges.
The insurance expenses is come when these all expenses are recorded.
The preparation of income statement using the multi-step format is given under attachment sheet.
Osborn Manufacturing uses a predetermined overhead rate of $20.10 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $279,390 of total manufacturing overhead for an estimated activity level of 13,900 direct labor-hours. The company actually incurred $277,000 of manufacturing overhead and 13,400 direct labor-hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin
Answer:
1. Amount of overapplied manufacturing overhead = $7,660
2. Company's gross margin will decrease by $7,660
Explanation:
Provided overhead predetermined rate = $20.10
Provided actual hours = 13,400
Therefore overhead cost based on predetermined rate = 13,400 X $20.10
= $269,340
Whereas actual incurred overheads = $277,000
Amount of overapplied manufacturing overhead = $277,000 - $269,340 = $7,660
Now since the cost is increased of goods sold, company's gross margin will decrease with the same amount = $7,660
1. Amount of overapplied manufacturing overhead = $7,660
2. Company's gross margin will decrease by $7,660
Underapplied overhead= $3,900 underapplied
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Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $321,400 Number of purchase orders Scheduling $209,300 Number of production orders Materials handling $471,600 Number of moves Product development $797,200 Number of engineering changes Production $1,463,600 Machine hours Number of Purchase Orders Number of Production Orders Number of Moves Number of Engineering Changes Machine Hours Number of Units Disk drives 3,810 430 1,380 15 1,900 2,000 Tape drives 2,100 175 650 7 9,300 3,800 Wire drives 11,500 990 4,500 20 11,700 2,700 Determine the activity rate for procurement per purchase order.
Answer:
803.5 Activity rate
Explanation:
Determine the activity rate for procurement per purchase order.
321,400 Procurement cost
430 Number of purchase order
Any other data is irrelevant, we only need procurement cost and the number of purchase order.
[tex]cost\div driver = rate[/tex]
321,400 / 430 = 803.5
803.5 Activity rate