Answer:
If the rate is 4%: 70/4 = 17.5 years - about 18 years
Explanation:
The rule of seventy allows you to determine how long the amount invested will double. For this, just divide 70 by the annual rate of return. The rule of seventy can be applied intuitively for the calculation of other growth rates, such as a country's GDP.
The calculation is simple, just divide 70 by the value of the growth rate.
If the rate is 4%: 70/4 = 17.5 years - about 18 years
If the rate is 5%: 70/5 = 14 years
If the rate is 6%: 70/6 = 11.6 years - about 12 years
Using the rule of 70, we can determine the number of years it will take for the economy to double at different growth rates.
Explanation:To determine the number of years it will take for an economy to double at different growth rates, we can use the rule of 70. The rule of 70 states that the doubling time of a variable is approximately equal to 70 divided by the growth rate. Therefore, for a 4% growth rate, it will take approximately 17 years for the economy to double (70 / 4 = 17.5). For a 5% growth rate, it will take approximately 14 years (70 / 5 = 14). And for a 6% growth rate, it will take approximately 12 years (70 / 6 = 11.67).
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The required return on the stock of Moe's Pizza is 12.2 percent and after tax required return on the company's debt is 3.82 percent. The company's market value capital structure consists of 72 percent equity. The company is considering a new project that is less risky than current operations and it feels the risk adjustment factor is minus 2.1 percent. The tax rate is 35 percent. What is the required return for the new project?
Answer:
WACC 7.71894%
Explanation:
[tex]WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})[/tex]
Ke = 0.101
ER = 0.72
Kd = 0.0382
DR = 0.18
t = 0.35
WACC 7.71894%
Final answer:
The required return for Moe's Pizza's new less risky project is 6.65%, calculated using the weighted average cost of capital formula with a risk adjustment factor applied to the company's equity return.
Explanation:
The question seeks to determine the required return for a new project Moe's Pizza is considering. Given that the project is less risky than the current operations, a risk adjustment of minus 2.1 percent is applied to the company's required return on equity. Moe's Pizza requires a 12.2 percent return on equity and a 3.82 percent after-tax return on debt, with a capital structure of 72 percent equity and 28 percent debt (calculated as 100% - 72%).
To calculate the weighted average cost of capital (WACC) for the new project, which represents the new project's required return, we use the following formula:
WACC = E/V × Re × (1 - Risk Adjustment) + D/V × Rd × (1 - Tax Rate)
Substituting the given values:
WACC = 0.72 × 12.2% × (1 - (-0.021)) + 0.28 × 3.82% × (1 - 0.35)
After calculations:
WACC = 0.72 × 12.2% × 1.021 + 0.28 × 3.82% × 0.65
WACC = 8.97% × 0.72 + 0.69% × 0.28
WACC = 6.46% + 0.19%
Required return for the new project = WACC = 6.65%.
This value takes into account the tax shield on the debt and the risk adjustment for the new project being less risky than the current operations.
EarlKeen Co. sold $260,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 4% of the sales price. On August 15, a customer required a $100 part replacement plus $50 of labor under the warranty. Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales on page 10 of the journal and (b) the August 15 warranty work on page 14 of the journal. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
warranty expense 10,400 (260,000 x 4%)
warranty liablity 10,400
warranty liability 150
wages payable 50
inventory 100
Explanation:
we recognize the expected warranty expense at the moment of the sale.
Then expenses associate with the warranty will decrease the prevision "warranty liability"
The part used come from the company's inventory
and the wages for work on the product, will have to be paid.
Note: it could be cash directly instead of using wages payable account. But because there is no information about those wages being paid I assume are not.
All else being equal, which is true about a firm with high operating leverage relative to a firm with low operating leverage? Select one: A. A higher percentage of the high operating leverage firm's costs are fixed. B. The high operating leverage firm is exposed to less risk. C. The debt payments limit the high operating leverage firm's opportunities to turn a big profit. D. The high operating leverage firm has more debt.
Answer:
A. A higher percentage of the high operating leverage firm's costs are fixed.
Explanation:
Let's first focus on what is operating leverage:
It represents the degree on which an increase in sales revenue, will also increase the operating income of the company
So Being Contribution Margin the amount generate for sales, dividing that for the profit, we got the relationship between sales and income.
[tex]\frac{ContributionMargin}{Profit} = $Operating Leverage\\[/tex]
We can expand those like this
[tex]\frac{Q * CM} {Q * CM - Fixed Cost} = $Operating Leverage\\[/tex]
Where Q is the uantity of units sold
and CM is the contribution margin per unit.
Resuming: relationship between sales and operating income
That definition cuts "C" and "D" because they talk about debt, this measurement doesn't involve debt.
Now let's check "A"
It state that higher fixed cost amkes the leverage go higher, let's see if that is true:
[tex]\frac{Q * CM} {Q * CM - Fixed Cost} = $Operating Leverage\\[/tex]
Fixed Cost is subtracting in the divisor, so higher fixed cost makes the divisor lower.
When this happens, the result of the division is higher.
[tex]\lim_{n \to 0} \frac{a}{n}= \infty[/tex]
So this example is true
As an example:
If you have 100 CM and 80 Fixed cost then
[tex]\frac{100}{100-80}= 100/20 = 5\\[/tex]
IF you have 100 CM and 50 Fixed cost then
[tex]\frac{100}{100-50}= 100/50 = 2\\[/tex]
Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold 20,000 Selling price per unit $ 30 Variable selling expense per unit $ 4 Variable administrative expense per unit $ 2 Total fixed selling expense $ 40,000 Total fixed administrative expense $ 30,000 Beginning merchandise inventory $ 24,000 Ending merchandise inventory $ 44,000 Merchandise purchases $ 180,000. Required: 1) Prepare a traditional income statement. 2 )Prepare a contribution format income statement.
Answer:
1) Traditional Income Statement
Particulars Value Total Amount
Sales 20,000 units @ $30 = $600,000
Less: Manufacturing Expenses
Cost of goods sold $24,000 + $180,000 - $44,000 $160,000
Gross Margin $440,000
Less: Operating Expenses
Administrative Expense $70,000
Selling expense $120,000 $190,000
Operating Income $250,000
Note: In traditional statement fixed and variable are not segregated and only direct cost associated is subtracted to calculate cost of goods sold, then gross margin is calculated. After that selling and administration expenses are deducted to calculate net operating income.
2) Contribution format income Statement
Particulars Total Amount
Sales 20,000 units @ $30 = $600,000
Less : Variable Costs
Cost of goods sold $24,000 + $180,000 - $44,000 $160,000
Variable selling expense $4 X 20,000 $80,000
Variable Administrative Cost $2 X 20,000 $40,000
Contribution Margin $320,000
Less: Fixed Cost
Fixed Selling expense $40,000
Fixed Administration Expense $30,000
Net operating Income $250,000
Note: In contribution statement fixed and variable expenses are segregated and firstly after deducting variable expense contribution margin on sales is calculated, and then after that deducting fixed cost we get net operating income.
Here, we are going to Prepare the traditional income statement and contribution format income statement.
Traditional Income Statement
Particulars Amount Amount
Sales $600,000
(20,000 units * $30)
Less: Manufacturing Expenses
Cost of goods sold $160,000
($24,000 + $180,000 - $44,000)
Gross Margin $440,000
Less: Operating Expenses
Administrative Expense $70,000
Selling expense $120,000 $190,000
Operating Income $250,000
Contribution format income Statement
Particulars Amount Amount
Sales $600,000
(20,000 units*$30)
Less: Variable Costs
Cost of goods sold $160,000
($24,000 + $180,000 - $44,000)
Variable selling expense $80,000
($4 X 20,000)
Variable Administrative Cost $40,000 $280,000
($2 X 20,000)
Contribution Margin $320,000
Less: Fixed Cost
Fixed Selling expense $40,000
Fixed Administration Expense $30,000
Net operating Income $250,000
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You have the following information on a potential investment. Capital investment - $70,000 Estima... You have the following information on a potential investment. Capital investment - $70,000 Estimated useful life - 5 years Estimated salvage value - zero Estimated annual net cash inflow - $20000 Required rate of return - 8% What is the net present value of the investment (to the nearest dollar)? a. -56388 b. 20000 c. 9,854 d. 79854 You have the following information on a potential investment. Capital investment - $80,000 Estimated useful life - 5 years Estimated salvage value - 5000 Estimated annual net cash inflow - $6375 What is the annual rate of return on the investment (to the nearest dollar)?
Answer:
Part I
Net Present Value = $9,860
Part II
Annual rate of Return = 8.5%
Explanation:
Part I
Calculating net present value = Present value of cash inflow - Present value of cash outflow.
Present value of cash outflow = $70,000
Present value of cash inflow = Annual cash inflow X Present value factor @ 8 % for 5 years
= $20,000 X 3.993
= $79,860
Net Present Value = $79,860 - $70,000 = $9,860
Part II
Capital outlay = $80,000
Salvage value = $5,000
Annual net cash inflow = $6,375
Annual rate of return = [tex]\frac{Annual cash inflow}{Capital outlay - Salvage value} \times 100[/tex]
= [tex]\frac{6,375}{80,000 - 5,000} \times 100 = 8.5%[/tex]
Final Answer
Part I
Net Present Value = $9,860
Part II
Annual rate of Return = 8.5%
Selected income statement data follow for Harley Davidson, Inc., for the year ended December 31, 2016 (in thousands): Income before Provision for Income Taxes Interest Expense Statutory Tax Rate Provision for Income Taxes Net Income $1,023,911 $29,670 37% $331,747 $692,164 What is the company's times interest earned ratio? Select one: A. 34.5 B. 24.3 C. 17.8 D. 35.5 E. None of the above
Answer:
D. 35.5
Explanation:
Times Interest Earned
[tex]\frac{EBIT}{Interest \:Expense}[/tex]
Where EBIT = Earning before interest and taxes
In your assingment we have the Income before the income taxes, whgich means it is including the interest expense, we need to remove it:
EBT + Interest expense = EBIT
1,023,911 + 29,670 =1,053,581
Now we calculate the TIE
1,053,581 / 29,670 = 35.50997641 = 35.51 = 35.5
The company earns their interest 35.5 times.
Tommy McCartney is a sixteen-year-old high school student. He has worked forty hours per week at the local convenience store over the last year, and has diligently saved $6,000 for the purchase of his first car. While visiting a local car dealership, Tommy finds the “car of his dreams,” a used yellow Camaro. Tommy walks into the dealership, announces to the dealership owner that he is “ready to buy,” negotiates $6,000 as the purchase price, and leaves the dealership a proud car owner. Over the course of the next six months, Tommy drives the Camaro eight thousand miles, wears the tires thin, dents the left front fender, and regrets his purchase. He realizes that in two short years college will beckon, and he knows that his parents cannot afford to pay for his higher education. In short, he wants his money back. On a Saturday morning, Tommy returns to the car dealership, walks into the sales office, and hands the keys to the seller, asking for the return of his $6,000. The dealer chuckles, and then his look turns stern, saying “Son, I don’t owe you anything. You’ve just learned a lesson in the ‘School of Hard Knocks.’ The car is still yours, and the money is still mine!” Who will prevail? Is it legal and/or ethical to allow Tommy to escape his contractual obligations?
Explanation:
First of all, the dealer should not have sold the car to the sixteen year old boy without the presence of his parents or any guardian. It is illegal to have a contract with a child who is not legally allowed to drive the car before the age of eighteen.
Now secondly if the dealer has somehow sold the car to the boy, the boy cannot come back after few months and ask for returning his money because he purchased the car, the condition of the condition of the car got worse during the whole time when car was with him, and also there is no legal clause in the agreement which allows him to demand his money back after using the car for this long time. So demanding his money back from the dealer is totally unethical as well as illegal. The dealer is true that the car is still the property of the boy and the money is still the dealer's money.
What is the principle of quality? What is the principle of quantity? Give an example in which a physical activity professional would use each principle to design an appropriate physical activity experience.
Answer:
The principle of quality states that the experiences that engage us in the most critical components of an activity are most likely to increase our capacity to perform that activity. Critical components are the elements of an activity that are most important for performing it at a high level. To be really good at an activity, you must focus on what factor you need most and improve that area.The principle of quantity states that when all other factors are equal, increasing the frequency of our engagement with the critical components of an activity usually
results in the largest performance improvement in that activity. Generally, the performer whose experiences have engaged her most often in the critical components of an activity usually becomes the most competent in that activity.A physical activity professional asked to create a plan to decrease the time in a marathoner’s performance would begin by conducting a analysis. The critical components in this activity relate to physical performance capacity more than skill.
Explanation:
The principle of quality in physical activities refers to the importance of the type of activity, while the principle of quantity refers to the amount or volume of the activity. In designing physical activity experiences, professionals use these principles along with the understanding of physical principles and physical quantities.
Explanation:The principle of quality refers to the concept that in physical activities, the type of physical activity (for instance, its intensity and level of difficulty) is important in achieving certain goals. For example, a physical education instructor refers to this principle when planning a circuit training activity that includes high-intensity exercises for students aiming to improve body strength and endurance.
On the other hand, the principle of quantity refers to the idea that the amount or volume of a physical activity (such as its duration, frequency, and repetition) is crucial in yielding desired outcomes. A professional trainer may apply this principle in designing a running program for a beginner where the distance covered gradually increases over time, helping the trainee improve stamina over a given period.
The application of these principles requires the understanding of physical principles and physical quantities. Understanding how to measure and compute physical quantities, and how physical principles work in different scenarios, allow fitness professionals to design more effective physical activity experiences.
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As a result of immigration, the demand for labor would _______, thesupply of labor would ______, and the real wage would ________.a. remain the same, decrease, decreaseb. increase, decrease, remain the samec. remain the same, increase, decreased. decrease, increase, remain the samee. decrease, increase, decrease
Answer:
The correct answer is option c.
Explanation:
As a result of immigration the population will increase. This will further cause the supply of labor to increase. The increase in supply of labor will further lead to a rightward in the labor supply curve. Consequently, wage rate will fall.
The demand for labor will not be affected by influx of workers.
So, option c is the correct answer.
Jack Manufacturing Company had beginning work in process inventory of $8,000. During the period, Jack transferred $34,000 of raw materials to work in process. Labor costs amounted to $41,000 and overhead amounted to $36,000. If the ending balance in work in process inventory was $12,000, what was the amount transferred to finished goods inventory?
Final answer:
To calculate the amount transferred to finished goods inventory, sum the beginning work in process, raw materials, labor costs, and overhead, then subtract the ending work in process. The calculation with provided figures is $107,000.
Explanation:
The student has asked how to calculate the amount transferred to finished goods inventory. To find this amount, we need to use the cost of goods manufactured formula, which includes beginning work in process, raw materials, labor costs, overhead, and ending work in process. The formula would look like this:
Cost of Goods Manufactured = Beginning Work in Process + Raw Materials + Labor Costs + Overhead - Ending Work in Process
Using the figures provided:
Beginning Work in Process: $8,000
Raw Materials: $34,000
Labor Costs: $41,000
Overhead: $36,000
Ending Work in Process: $12,000
We calculate as follows:
Cost of Goods Manufactured = $8,000 + $34,000 + $41,000 + $36,000 - $12,000 = $107,000
So, the amount transferred to finished goods inventory would be $107,000.
The following information pertains to Lessor Company: Total assets $150,000 Total current liabilities 110,000 Total expenses 160,000 Total liabilities 115,000 Total revenues 180,000 If invested capital is defined as total assets, a project earning an ROI of 12% should be _____.
Answer:
Achieved. The ROI currently is 13.33% So the prohect earning a ROI of 12% was accomplished
Explanation:
Return on Investment will be Income/ Investment Capital
Which in this case is defined as total assets.
So it would be Income / Total Assets
The last is a given figure: 150,000
Now let's first find out the income:
180,000 revenues - 160,000 expenses = 20,000 net income
Finally calculate the ROI 20,000/ 150,000 = 13.33%
On June 30, 2018, Hardy Corporation issued $10.5 million of its 8% bonds for $9.5 million. The bonds were priced to yield 10%. The bonds are dated June 30, 2018. Interest is payable semiannually on December 31 and July 1. If the effective interest method is used, by how much should the bond discount be reduced for the six months ended December 31, 2018?
Answer:
The discount will be reduced by 55,000
December 31h 2018
Interest expense 475,000
Cash 420,000
Discount on bond Payable 55,000
Explanation:
Hardy Corporation
face vale 10,500,000 bonds 8%
issued 9,500,000 were priced to yield 10%
Discount 1,000,000
carrying value x effective rate/2 = interest expense
9,500,000 x 10%/2 = 475,000 interest expense
face value x bond rate /2 = cash proceeds
10,500,000 x 8%/2 = (420,000 cash proceeds)
amortization= interest expense - cash proceeds
amortization on discount 55,000
On November 1, 2019, Alpha Omega, Inc. sold merchandise for $ 12 comma 000, FOB destination, with payment terms, n/30. The cost of goods sold was $ 3 comma 840. On November 3, the customer returns on this sale amounted to $ 4 comma 800. The company received the balance on November 9, 2019. Calculate the gross profit from these transactions.
Answer:
Gross Profit is $9552
Explanation:
Given data
sold = $12000
cost of goods = $3840
returns = $4800
to find out
gross profit
solution
we apply here gross profit formula that is
Cost of goods = Cost of goods - ( Return amount × Cost of goods sold / sale ) .....................1
Cost of goods = 3840 - ( 4800 × 3480/ 12000)
Cost of goods = 2448
gross profit
Gross Profit = Sales - Cost of Goods Sold
Gross Profit = 12000 - 2448
Gross Profit is $9552
Final answer:
The gross profit from the transactions after accounting for the merchandise return is $3,360, calculated by subtracting the cost of goods sold from the adjusted sales revenue.
Explanation:
Calculating Gross Profit from Transactions
To calculate the gross profit from these transactions for Alpha Omega, Inc., we must take into account the original sale, the cost of goods sold, and the subsequent return. Initially, the company sold merchandise for $12,000 but then the customer returned $4,800 worth of items. After the returns, the total revenue from sales is $12,000 - $4,800 = $7,200. The cost of goods sold was originally $3,840. The gross profit is found by subtracting the cost of goods sold from the sales revenue after returns, which is $7,200 - $3,840 = $3,360.
Which step in the STP process develops descriptions of the different segments, which helps firms better understand the customer profiles in each segment?
Answer: Step Four - Construct Segments Profile
Explanation:
When practical market segments have been resolved, segment profiles are then created. Segment profiles are point by point depictions of the purchasers in the segments – portraying their needs, behaviors, preferences for the goods, socio economics, shopping styles, etc. This is much similarly that the age accomplices of Baby Boomers, Generation X and Generation Y have a name.
The step in the STP process that involves developing descriptions of different customer segments is the Segmentation stage. Here, the market is divided into groups based on shared characteristics and needs, which are profiled to assist with tailored marketing approaches.
Explanation:In the STP (Segmentation, Targeting, Positioning) process, the step that involves developing descriptions of the different segments to better understand customer profiles in each segment is the Segmentation stage. During Segmentation, the market is divided into distinct groups of customers based on shared characteristics, needs or behaviors that might require separate marketing strategies. Each segment is profiled in terms of demographics, psychographics, behavioral characteristics and customer needs. This allows firms to fully understand who their customers are, their needs and how best to approach them with tailored marketing strategies.
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Coronado Industries can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $80 and takes two machine hours to make and Fancy has a unit contribution margin of $93 and takes three machine hours to make. There are 2400 machine hours available to manufacture a product. What should Coronado do?
Answer:
It will be better to produce all the units of Plain we can sell, then use any remaining machine hours to produce Fancy. This is because Plain, generated more contribution per hour than Fancy.
Explanation:
We have to calculate the Contribution Margin per machine hours
This means check which product makes a better use of the scarse resourse
[tex]\frac{Plain\: CM}{Plain \: Machine \: Hours } = CM \: per \:Machine\:Hour\\\\ 80 \div 2 = 40[/tex]
[tex]\frac{Fancy\: CM}{Fancy\: Machine \: Hours } = CM \: per \:Machine\:Hour\\\\ 93 \div 3 = 31[/tex]
It will be better to produce all the units of Plain we can sell, then use any remaining machine hours to produce Fancy
It is July 1, and Eduardo wants to purchase an engagement ring for his soon-to-be fiancée. He visits several jewelry stores and finds the perfect ring. The cost of the ring is $1,800. Eduardo doesn't want to put the purchase on a credit card, so he decided to put the ring on layaway. Since he needs the ring in 6 months so that he can propose on New Year’s Eve, he agrees to pay the store $300 per month. Since Eduardo knows exactly how much money he needs to pay each month, this is a(n) __________ goal
Answer:
This an example of measured goal.
Explanation:
Eduardo wants to purchase an engagement ring. The price of the ring is $1800. It is July 1 and Eduardo needs ring after 6 months. So he keeps it on layaway. He needs to pay $300 to the store per month. Since he is aware of the amount he needs to pay every month. This will be classified as a measured goal.
Eduardo has set a SMART goal in order to purchase the engagement ring within 6 months by making monthly payments of $300, and he can track his progress, making his goal Specific, Measurable, Attainable, Relevant, and Time-bound.
Explanation:In Eduardo's case, his plan to pay for the ring over the course of 6 months is an example of a SMART goal. SMART is an acronym that stands for Specific, Measurable, Attainable, Relevant, and Time-based. Eduardo has a Specific goal, which is to buy the ring by paying $300 per month. It's Measurable because he can track his progress by the payments he makes each month. This goal is Attainable assuming Eduardo has a steady income. The goal is Relevant as he wants to buy the ring for his soon-to-be fiancée. Lastly, it is Time-based as he plans to accomplish this within 6 months.
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Coattail Corporation manufactures and sells women and children coats. This year CC donated 1000 coats to a qualified public charity. The charity distributed the coats to needy women and children throughout the region. At the time of the contribution, the fair market value of each coat was $80. Determine the amount of charitable contribution (the taxable income limitation does not apply) for the coats assuming the following: a) CC's adjusted basis in each coat was $30. I was getting that it is $55,000, but is the max not only $20000? I dont know I am a little lost on this one
Answer:
a. CC's adjusted basis in each coat was $30. In general, the deductible amount of property that is not long-term capital gain property is limited to the adjusted basis of the property. However, under 170(e)(3), if the taxpayer contributes inventory to a charitable organization for the care of the needy, the taxpayer can deduct the basis of the property plus one half of the appreciation (not to exceed twice the basis).
In this case, CC's contribution is to a qualified charity for the aid of the needy, it is allowed to deduct $55,000 which is the basis of $30,000 (1,000 x $30) + $25,000 [1,000 x 0.5 x (80 30)].
Twice the basis is $60,000 ($30,000 x 2) so this limitation is not binding.
b. CC's adjusted basis in each coat was $10. In general, the deductible amount of property that is not long-term capital gain property is limited to the adjusted basis of the property. However, under 170(e)(3), if the taxpayer contributes inventory to a charitable organization for the care of the needy, the taxpayer can deduct the basis of the property plus one half of the appreciation (not to exceed twice the basis).
In this case, because CC's contribution is to a qualified charity for the aid of the needy, it is allowed to deduct $20,000 which is the lesser of
(1) $45,000 [the basis of $10,000 (1,000 x $10) + $35,000 [1,000 x .5 x (80 10)] or
(2) $20,000 which is twice the basis ($10,000 x 2). Consequently, CC's contribution is limited to $20,000.
The amount of the charitable contribution would be calculated based on the fair market value of the donated items, in this case, the coats. This total would be $80,000, which is calculated by multiplying the number of coats (1000) by the fair market value of each coat ($80). The adjusted basis of the coats doesn't affect the amount of the charitable contribution.
Explanation:The amount of the charitable contribution is generally the fair market value of the items donated, if they are tangible goods. In this case, Coattail Corporation donated 1000 coats at a fair market value of $80 each, which amounts to $80,000 ($80 * 1000).
The adjusted basis that you're referring to ($30 per coat) is what the corporation would have used to determine their gain or loss if they had sold the coats. However, for the purposes of a charitable contribution, that isn't relevant. So the total charitable contribution for the coats would be $80,000, not $20,000 or $55,000.
The limit you mentioned might refer to the limit on tax deductions for charitable contributions, but this limitation does not impact the fair market value of the donated items, which is what determines the amount of the contribution.
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Journalize the following transactions into the general journal in accordance with the rules of Journalizing, and the Double-entry accounting system. March 28 Owner withdraws $2,600 of cash for personal use. September 1 Owner deposits $49,000 in business bank account as an initial investment.
Answer:
Explanation:
Journal entry : The journal entry shows the debit and credit side of the accounts. Here, debit means the expenditures which are incurred by the company whereas credit represent the incomes or revenue.
The journal entry for both the transactions is as follows:
1. March 28 - Drawings A/c Dr $2,600
To Cash A/c 2,600
Here for personal use, the drawing account should be used.
2. September 1 - Bank Account Dr $49,000
To Cash $49,000
Here, the bank balance is increase, whereas the cash balance is decreased.
To journalize the transactions, debit the Drawings account and credit the Cash account for a withdrawal; debit Cash and credit Owner's Capital for an investment. These entries adhere to the double-entry accounting system, which ensures every debit has a corresponding credit keeping the accounts balanced.
Journalizing Transactions and the Double-entry Accounting System :
To journalize the transactions given, we need to consider the accounts that are affected and how they are affected (increased or decreased). The first transaction involves the owner withdrawing cash for personal use.
This would involve a debit to the Drawing account, which represents an owner's withdrawals, and a credit to the Cash account since the asset (cash) is decreasing.
The second transaction involves the owner making an initial investment into the business. This increases the Cash account, as more money is being put into the business, and also increases the Owner's Equity account since it's the owner's investment into the company.
Journal Entries:
March 28: Debit Drawings $2,600; Credit Cash $2,600September 1: Debit Cash $49,000; Credit Owner's Capital $49,000These transactions reflect the basic principle of double-entry accounting, where for every debit there is a corresponding credit of the same amount, ensuring the accounting equation (Assets = Liabilities + Owners' Equity) remains balanced.
When creating T-accounts for the transactions described in the practice section, one would debit the cash account for $73,500.88, then credit it by $500.88 to reflect the spent amount, and finally deposit the remaining funds into a new account with W Bank.
Under the cash basis of accounting, which most individuals use for personal finances, receipt of income increases the bank account balance and payment for expenses decreases it, recognizing financial activity as cash is received or spent.
A monopolist’s inverse demand function is P = 150 – 3Q. The company produces output at two facilities; the marginal cost of producing at facility 1 is MC1(Q1) = 6Q1, and the marginal cost of producing at facility 2 is MC2(Q2) = 2Q2.a. Provide the equation for the monopolist’s marginal revenue function. (Hint: Recall that Q1 + Q2 = Q.)MR(Q) = 150 - 6 Q1 - 3 Q2b. Determine the profit-maximizing level of output for each facility.Output for facility 1: Output for facility 2: c. Determine the profit-maximizing price.$
Answer:
Given : Inverse demand function : P = 150 - 3Q
Marginal cost of producing at facility 1: MC1(Q1) = 6Q1
Marginal cost of producing at facility 2: MC2(Q2) = 2Q2
Here we will first find Total Revenue.
i.e. Total Revenue(T.R) = P*Q
T.R(Q) = (150 - 3Q)*Q = [tex]150Q - 3Q^{2}[/tex]
Where [tex]Q = Q_{1} + Q_{2}[/tex]
[tex]MR = \frac{\delta T.R}{\delta (Q_{1}+ Q_{2})}[/tex]
(a) MR = 150 - 6Q
[tex]MR = 150 - 6(Q_{1} + Q_{2})[/tex]
(b) Since we know that profit maximizing condition is given as :
MR = MC
Therefore , profit maximizing condition for facility 1 is
[tex]150 - 6(Q_{1} + Q_{2})[/tex] = [tex]6Q_{1}[/tex]
[tex]150 - 12Q_{1} - 6Q_{2}[/tex]
Similary profit maximizing condition for facility 2 is
[tex]150 - 6(Q_{1} + Q_{2})[/tex] = [tex]2Q_{2}[/tex]
[tex]150 - 6Q_{1} - 8Q_{2}[/tex]
Now, evaluating these two equations. We get ;
[tex]150 - 12Q_{1} - 6Q_{2}[/tex] - [tex]150 - 6Q_{1} - 8Q_{2}[/tex]
[tex]Q_{2} = 3Q_{1}[/tex]
Therefore, the profit maximizing level of output for facility 1 is
[tex]Q_{1} = 5[/tex]
[tex]Q_{2} = 15[/tex]
(c)The profit maximizing price is
P = 150 - 3Q
[tex]P = 150 - 3(Q_{1}+Q_{2})[/tex]
[tex]P = 150 - 3(5 + 15)[/tex]
[tex]P = 150 - 60[/tex]
P = 90
The monopolist's marginal revenue function is derived from its inverse demand function and equaled to its marginal cost functions to find the profit-maximizing levels of output. The profit-maximizing price is then determined by substituting the total quantity into the demand function.
Explanation:The inverse demand function given is P = 150 - 3Q, from which we can derive the marginal revenue (MR) function. Marginal revenue is the derivative of the total revenue (TR) with respect to quantity (Q). In the given case, TR = PQ = (150 - 3Q)*Q = 150Q - 3Q². The MR is obtained by taking the derivative of TR, resulting in MR = d(TR)/dQ = 150 - 6Q.
To find the profit-maximizing output, a monopoly must set its MR equal to its marginal cost (MC). In this case, the monopolist’s MR function and MC functions of the two facilities are known, hence MR = MC1 gives 150 - 6Q = 6Q1, and MR = MC2 gives 150 - 6Q = 2Q2. Solving these for Q1 and Q2 will provide the profit-maximizing levels of output for each facility.
Subsequently, the profit-maximizing price can be found by substituting the value of Q1 + Q2 (which is Q) into the inverse demand function. Through this procedure, the monopolist can calculate the levels of output at which profits are maximized.
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Schuepfer Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 3,500 units are planned to be sold in March. The variable selling and administrative expense is $4.00 per unit. The budgeted fixed selling and administrative expense is $35,850 per month, which includes depreciation of $5,000 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be:
Answer:
The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be $44850.
Explanation:
For computing the cash disbursement the following equation is to be used which is shown below:
= Sales units × variable selling and administrative expense per unit + Fixed selling and administrative expense - Depreciation
= 3,500 × $4 + $35,850 - $5,000
= $14,000 + $35,850 - $5,000
= $44,850
Since all information is given on month basis, so we don't need to change in year basis as we have to calculate for march monthly only.
Hence, all things is to be considered for computing cash disbursement for march month.
Thus, The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be $44850.
Wight Corporation has provided its contribution format income statement for June. The company produces and sells a single product. Sales (4,300 units) $ 150,500 Variable expenses 73,100 Contribution margin 77,400 Fixed expenses 44,600 Net operating income $ 32,800 If the company sells 4,400 units, its total contribution margin should be _____
Answer:
its total contribution margin should be 79,200
Explanation:
Our first goal:
Calculate the contribution margin per unit
[tex]77,400\div 4,300 = CM \:per \:unit\\CM \:per \:unit = 18[/tex]
Then we multiply by the sold units to get the new budgeted contribution margin.
[tex]Unit \: Sold \times CM \:per \:unit = CM_{total}\\4,400 \times 18 = 79,200[/tex]
Final answer:
To calculate the total contribution margin for 4,400 units, first find the per unit contribution margin from the existing data, which is $18 per unit. Then, multiply this per unit contribution margin by the increase in units sold (100 units) to determine the increase in contribution margin ($1,800). Adding this to the original contribution margin gives a new total of $79,200.
Explanation:
The subject of this question is the calculation of the total contribution margin when Wight Corporation sells an additional 100 units, raising their total sales from 4,300 units to 4,400 units. We know from the information provided that Wight Corporation has a contribution margin of $77,400 when they sell 4,300 units. To find the total contribution margin at 4,400 units, we need to calculate the contribution margin per unit and then multiply it by the number of units sold.
The contribution margin per unit is found by dividing the total contribution margin by the number of units sold. In this case, it's $77,400 divided by 4,300 units, which equals approximately $18 per unit.
If we sell 100 more units, with a contribution margin per unit of $18, the increase in total contribution margin is 100 units x $18/unit, which equals $1,800. Therefore, the new total contribution margin when selling 4,400 units would be $77,400 + $1,800 = $79,200.
A customer sells short 100 shares of ABC at $35 and buys 1 ABC Jul 35 Call @ $3. The stock falls to $30 and the customer closes the option contract at $1 and buys the stock at the current market price. The customer has a:A. $200 lossB. $300 lossC. $200 gainD. $300 gain
Answer:
The answer is $300 gain.
Explanation:
Operations:
Short 100 shares of ABC at $35 each= 100 * 35 = + $3,500Buy 1 ABC Jul 35 Call @ $3 (one call equals to 100 shares)= 100 * (3) = $(300), accumulated = + 3,500 - 300 = + 3,200Closes the option contract at $1 = 100 * 1 = + $100, accumulated = + 3,200 + 100 = + 3,300Buys the stock at the current market price (buys 100 stock @ $30 each)= 100 * (30) = $(3,000), accumulated = + 3,300 - 3,000 = + $300.An audit plan of substantive procedures for cash would not includeA. request a cutoff bank statement be mailed to the client. B. request client to prepare bank reconciliations. C. prepare a schedule of interbank transfers for a period of ten business days before and after year-end date.D. obtain a written client representation concerning compensating balance agreements.
Answer:
The correct answer is option A.
Explanation:
Substantive is a type of auditing procedure. It involves the process of examining financial statements and other related documents to check for error.
These tests are conducted to ensure that the financial records are complete and correct.
These procedures are conducted by an auditor and include examining journal entering, testing account balances and transactions.
Though it does not include requesting a cut off bank statement to be mailed to the client.
Suppose your rich uncle gave you $50,000, which you plan to use for graduate school. You will make the investment now, you expect to earn an annual return of 6%, and you will make 4 equal annual withdrawals, beginning 1 year from today. Under these conditions, how large would each withdrawal be so there would be no funds remaining in the account after the 4th withdraw?
Answer:
C = $14,429.57 You can withdraw up to this amount.
Explanation:
we have to calculate the cuota of the annuity for present value
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
Where:
rate = 0.06
time = 4 years
PV 50,000 your uncle gift you.
[tex]C \times \frac{1-(1+0.06)^{-4} }{0.06} = 50,000\\[/tex]
C = $14,429.57
Making 4 withdrawals for this amount, you will earn an annual return of 6%
Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Puget Sound Divers Planning Budget For the Month Ended May 31 Budgeted diving-hours (q) 350 Revenue ($450.00q) $ 157,500 Expenses: Wages and salaries ($11,500 + $124.00q) 54,900 Supplies ($4.00q) 1,400 Equipment rental ($2,500 + $23.00q) 10,550 Insurance ($3,800) 3,800 Miscellaneous ($510 + $1.46q) 1,021 Total expense 71,671 Net operating income $ 85,829 During May, the company’s actual activity was 340 diving-hours. Required: Prepare a flexible budget for May
Answer:
Flexible Budget for May Value Percentage of sales
Sales Revenue 340 hours 450 X 340 = $153,000
Wages and salaries $11,500 + ($124 X 340) = $53,660 35.07%
Supplies $4 X 340 = $1,360 0.88%
Equipment rental $2,500 + ($23 X 340) = $10,320 6.745%
Insurance $3,800 = $3,800 2.48%
Miscellaneous $510 + (1.46 X 340) = $1,006.4 0.657%
Total Expense = $70,146.4 45.85%
Net Operating Income = $82,853.6 54.153
In a flexible budget all items are shown as a percentage of total revenue (Sales). Further the budget is adjusted based on sales level, where all variable expenses are proportionate to sales.
The flexible budget for Puget Sound Divers for May, considering 340 hours of actual diving activity, shows total revenue of $153,000, total expenses of $70,144, and a net operating income of $82,856.
Explanation:The flexible budget is a budget that adjusts or flexes for changes in the volume of activity. With 340 hours of actual diving activity in May, the flexible budget changes. Let's break down the flexible budget calculation by each component:
Revenue: The rate is $450 per diving hour. Therefore, Revenue would be $450 * 340 = $153,000. Wages and salaries: The fixed component is $11,500. The variable component is $124 per diving hour. Therefore, Wages and Salaries would be $11,500 + ($124 * 340) = $53,260. Supplies: This is a variable cost at $4 per diving hour. Therefore, Supplies would be $4 * 340 = $1,360. Equipment rental: The fixed component is $2,500. The variable component is $23 per diving hour. Therefore, Equipment rental would be $2,500 + ($23 * 340) = $10,220. Insurance: This is a fixed cost of $3,800. Miscellaneous: The fixed component is $510. The variable component is $1.46 per diving hour. Therefore, Miscellaneous expenses would be $510 + ($1.46 * 340) = $1,004.
Adding all these costs, the total expense is $70,144. Subtracting this from the revenue, the net operating income is $153,000 - $70,144 = $82,856.
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Makers Corp. had additions to retained earnings for the year just ended of $248,000. The firm paid out $187,000 in cash dividends, and it has ending total equity of $4.92 million. The company currently has 150,000 shares of common stock outstanding. a. What are earnings per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What are dividends per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the book value per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. If the stock currently sells for $80 per share, what is the market-to-book ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. What is the price-earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) f. If the company had sales of $4.74 million, what is the price-sales ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
(a.) Earning per share = [tex]\frac{Retained earning + dividend paid out }{common stock}[/tex]
Earning per share = [tex]\frac{248000 + 187000 }{150000}[/tex]
Earning per share = $2.90 per share
(b.) Dividend per share = [tex]\frac{Dividend paid out }{common stock}[/tex]
Dividend per share = [tex]\frac{187000}{150000}[/tex]
Dividend per share = $ 1.25 per share
(c.) Book value per share = [tex]\frac{Book value of equity }{common stock}[/tex]
Book value per share = [tex]\frac{4920000 }{150000}[/tex]
Book value per share = $32.80 per share
(d.) Market to book ratio = [tex]\frac{Market price per share }{Book value per share}[/tex]
Market to book ratio = [tex]\frac{80}{32.80}[/tex]
Market to book ratio = $2.44 per share
(e.) Price - earning ratio = [tex]\frac{Market price per share }{Earning per share}[/tex]
Price - earning ratio = [tex]\frac{80}{2.90}[/tex] = 27.59 times
(f.) Price sales ratio = [tex]\frac{Market price per share }{sales per share}[/tex]
Price sales ratio = [tex]\frac{80}{\frac{4740000}{150000} }[/tex] = [tex]\frac{80}{31.60}[/tex] = 2.53 times
A company produces 100 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures the circuits inminushouse but is considering outsourcing the circuits at a contract cost of $ 28 each. Currently, the cost of producing circuits inminushouse includes variable costs of $ 26 per circuit and fixed costs of $ 13 comma 000 per month. Assume the company could cut fixed costs in half by outsourcing and that there is no alternative use for the facilities presently being used to make circuits. If the company outsources, operating income will ________
Answer:
Operating Income will increase by $6,300
Explanation:
In case of outsourcing total cost will be $28 per circuit i.e. $28 X 100 circuits = $2,800.
Also there will be fixed cost up to the extent of 50% of normal fixed cost = $13,000 X 50 % = $6,500
Total cost in Outsourcing = $2,800 + $6,500 = $9,300
In case of in house production
Variable Cost = $26 X 100 units = $2,600
Fixed Cost = $13,000
Total costs = $15,600
Thus, in case of outsourcing the operating income will increase by $15,600 - $9,300 = $6,300
If the company outsources the circuits, the operating income would be -$2,800.
Explanation:If the company outsources the production of the circuits, it would reduce its fixed costs to $6,500 per month. The variable cost per circuit remains the same at $26. Therefore, the new total cost per circuit would be $26 + $28 = $54.
The company produces 100 microwave ovens per month, so the total cost of producing the circuits in-house is 100 circuits x $26 = $2,600. If the company outsources, the total cost of the circuits would be 100 circuits x $54 = $5,400. So, the operating income would be $2,600 - $5,400 = -$2,800. Therefore, if the company outsources the circuits, the operating income would be -$2,800.
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A company’s balance sheets show a total of $30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11 percent, and the debt has a total current market value of $25 million. The balance sheets also show that that the company has 10 million shares of stock; the total of common stock and retained earnings is $30 million. The current stock price is $7.5 per share. The current return required by stockholders, rS, is 12 percent. The company has a target capital structure of 40 percent debt and 60 percent equity. The tax rate is 40%. What weighted average cost of capital should you use to evaluate potential projects
Answer:
The weighted average cost of capital should you use to evaluate potential projects is 9.87%
Explanation:
Weighted average cost of capital (WACC) : The WACC shows the total proportion towards debt and equity.
The debt should always be calculated after considering tax.
The computation of weight-age average cost of capital is shown below:
For debt = Yield to maturity × (1 - tax rate )
= 11.11% × (1-0.40)
= 6.67%
For equity it is given in the question i.e = 12%
As, the capital structure is give, 40% is for debt and 60% is for equity. After considering these capital structure, the computation can be made.
= Cost of equity × weighted of equity + cost of debt × weight-age of debt
= 12% × 60% + 6.67% × 40%
= 7.2% + 2.67%
= 9.87%
Thus, the weighted average cost of capital should you use to evaluate potential projects is 9.87% .
Several years ago, Regis Corporation, a very large hair styling salon company, purchased 60 "Your Father's Mustache" salons. Although this was initially an acquisition, the merging of these two businesses was a(n) __________. Regis went on to purchase several hair care product companies. Joining forces with hair care product companies would represent a ___________.
Answer:
The correct answers for the first blank is horizontal merger and for the second blank is vertical merger
Explanation:
When Regis corporation merged with the your father's mustache salons, this type of merger is know as horizontal merger , which is a type of merger where two corporations or firms who are in same industry and are competing with each other for the same market , comes together and merge with each other that merger is called horizontal merger.
But when Regis corporation went on to merge with the hair product corporations that would mean that it is a vertical merger , which is that type of merger where two corporations joins their forces together at a different production stages related to business. An example of this merger can be like a manufacturer of goods merging with supplier of his goods.
Regis Corporation's purchase of 'Your Father's Mustache' salons was a corporate merger, while its acquisition of hair care product companies is considered vertical integration.
When Regis Corporation, a large hair styling salon company, purchased 60 'Your Father's Mustache' salons, although this was an acquisition, the merging of these two businesses was a corporate merger. This process involved combining both companies into a single firm. Later, when Regis went on to purchase several hair care product companies, joining forces with hair care product companies would represent a form of vertical integration, because it combined companies from different stages of production and distribution within the same industry.
You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: splishy splashies, flopsicles, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of splishy splashies decreases by 1%, the quantity of flopsicles sold decreases by 18% and the quantity of cannies sold increases by 3%. Your job is to use the cross-price elasticity between splishy splashies and the other goods to determine which goods your marketing firm should advertise together.
Using the concept of cross-price elasticity, one can infer that cannies are a substitute good for splishy splashies and that flopsicles and splishy splashies are complementary goods. Based on this, splishy splashies and flopsicles should be promoted together.
Explanation:To determine which products are either substitutes or complements, we look at the provided cross-price elasticity data. Substitute goods have positive cross-price elasticities of demand. When the price of one good decreases, the quantity of the substitute good sold increases. This is demonstrated in the increase of cannies sales when the price of splishy splashies decreases. Thus, cannies could be a substitute for splishy splashies.
Complement goods, on the other hand, have negative cross-price elasticities. This means that when the price of one good decreases, the quantity sold of the complement good also decreases. In this case, when the price of splishy splashies decreases, the quantity of flopsicles sold decreases. Therefore, flopsicles and splishy splashies could be considered complementary goods.
Considering this, your firm should promote splishy splashies and flopsicles together, as consumers are likely to consume these two products together.
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