Answer:
bad debt expense 6,240 debit
allowance for uncollectible accounts 6,240 credit
Explanation:
uncolelctible accounts balance 5% of AR
ending balance 5% of 146,500 = 7,325
allowance balance credit (1.085)
Adjustment 6,240
Notice it state the estimated balance of the uncolelctibles, so the result is the desired ending balance.
Under Pick Co.'s job order costing system, manufacturing overhead is applied to Work-in-Process using a predetermined annual overhead rate. During January, Pick's transactions included the following: Direct materials issued to production $ 120,000 Indirect materials issued to production 11,000 Manufacturing overhead incurred 170,000 Manufacturing overhead applied 158,000 Direct labor costs 144,500 Pick had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs completed in January? (CPA adapted)
Answer:
Total Cost of the jobs: 434,500
Explanation:
DM 120,000
DL 144,500
MO applied 158,000
adjustment for MO to COGS 12,000
(because is a job order costing, in most cases the actual manufacturing overhead is know after the job is done)
Notice the indirect mateirals represent MO so it will be as part of that concept.
Total cost:
120,000+ 144,500 + 158,000 + 12,000 = 434,500
Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $7 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 14 percent on the company’s stock, how much will you pay for a share today?
Answer:
i will pay $80.47 or lower, to achieve 14% yield or higher.
Explanation:
We have to calcualte the present value of the dividends cash flow.
because the dividends will growth until a certain date, we cannot use the gordon model.
[tex]\left[\begin{array}{ccc}Month&Dividend&PV&Year1&13&11.40&Year2&19&14.62&Year3&25&16.874&Year4&31&18.35&Year5&37&19.21&Year6&43&19.591&Intrinsic&Value&80.47\end{array}\right][/tex]
For each dividend, we do previous year + 6
Then for Present value:
[tex]\frac{Dividends}{(1 + rate)^{time} } = PV[/tex]
for example year 3
[tex]\frac{25}{(1.14)^{3} } = 16.874[/tex]
The price you should pay for a share of Maloney, Inc.'s stock today is approximately 78.29 dollars per share.
To determine the current price of Maloney, Inc.'s stock today, we need to calculate the present value of the dividends that will be paid over the next five years, and also consider the price of the stock at the end of the fifth year when no more dividends will be paid.
Given:
- Current dividend: $7 per share
- Dividend growth rate: $6 per share per year for 5 years
- Required return (discount rate): 14%
Step 1: Calculate Dividends for Years 1 to 5
The dividends for each year are as follows:
- Year 1: $7 per share
- Year 2: $13 per share (7 + 6)
- Year 3: $19 per share (13 + 6)
- Year 4: $25 per share (19 + 6)
- Year 5: $31 per share (25 + 6)
Step 2: Calculate Present Value of Dividends
Now, calculate the present value (PV) of the dividends using the formula for the present value of a growing annuity:
[tex]PV = \frac{D_1}{(1 + r)^1} + \frac{D_2}{(1 + r)^2} + \frac{D_3}{(1 + r)^3} + \frac{D_4}{(1 + r)^4} + \frac{D_5}{(1 + r)^5}[/tex]
Where:
[tex]D_1 = $7 \\\\ D_2 = $13 \\\\ D_3 = $19 \\\\ D_4 = $25 \\\\ D_5 = $31 \\\\ r = 14% or 0.14[/tex]
Let's calculate each term:
[tex]PV = \frac{7}{(1 + 0.14)^1} + \frac{13}{(1 + 0.14)^2} + \frac{19}{(1 + 0.14)^3} + \frac{25}{(1 + 0.14)^4} + \frac{31}{(1 + 0.14)^5} \\\\ PV = \frac{7}{1.14} + \frac{13}{1.14^2} + \frac{19}{1.14^3} + \frac{25}{1.14^4} + \frac{31}{1.14^5} \\\\[/tex]
Calculating each term:
[tex]PV = \frac{7}{1.14} + \frac{13}{(1.14)^2} + \frac{19}{(1.14)^3} + \frac{25}{(1.14)^4} + \frac{31}{(1.14)^5} \\\\ PV \approx 6.14 + 10.84 + 13.90 + 15.71 + 15.60\\\\ PV \approx 62.19[/tex]
Step 3: Calculate Price of Stock Today
Finally, add the present value of the dividends to the price of the stock at the end of Year 5 (when no more dividends will be paid), discounted back to the present value:
[tex]\text{Price today} = PV + \frac{D_5}{(1 + r)^5} \\\\ \text{Price today} = 62.19 + \frac{31}{(1.14)^5}[/tex]
Calculate [tex]\frac{31}{(1.14)^5}[/tex] :
[tex]\frac{31}{(1.14)^5} \approx \frac{31}{1.925 } \approx 16.10 \\\\ \text{Price today} = 62.19 + 16.10 \\\\ \text{Price today} \approx 78.29[/tex]
Therefore, the price you should pay for a share of Maloney, Inc.'s stock today is approximately 78.29 dollars per share.
Cornhusker Company provides the following information at the end of 2018. Cash remaining $ 3,800Rent expense for the year 6,000 Land that has been purchased 20,000 Retained earnings 11,400 Utility expense for the year 3,900 Accounts receivable from customers 6,200 Service revenue earned during the year 32,000 Salary expense for the year 12,300 Accounts payable to suppliers 1,700 Dividends paid to shareholders during the year 2,200 Common stock that has been issued prior to 2018 15,000 Salaries owed at the end of the year 1,900 Insurance expense for the year 2,500No common stock is issued during 2018, and the balance of retained earnings at the beginning of 2018 equals $6,100.Required:Prepare the income statement for Cornhusker Company on December 31, 2018.
Answer:
Explanation:
The income statement shows the profit or loss of a company during a particular year. The income statement shows that how much revenue is generated and how much expenses is incurred in a year.
If the revenue is greater than expenses, than the company is earning profits otherwise it suffers a loss.
= Service revenue - Salary expense - insurance expenses - utility expense - rent expense
= 32,000 - 12,300 - 2,500 - 3,900 - 6,000
= $7,300
The Cornhusker Company has earns a net profit of $7,300 on December 31, 2018.
The table attachment is given below:
The income statement for Cornhusker Company on December 31, 2018 includes service revenue, expenses such as rent, utilities, salary, and insurance, resulting in a net income of $7,300.
The income statement for Cornhusker Company on December 31, 2018:
Service Revenue: $32,000Rent Expense: $6,000Utility Expense: $3,900Salary Expense: $12,300Insurance Expense: $2,500Net Income = Total Revenue - Total Expenses
Net Income = $32,000 - $6,000 - $3,900 - $12,300 - $2,500 = $7,300
On January 1, Puckett Company paid $1.6 million for 50,000 shares of Harrison’s voting common stock, which represents a 40 percent investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achieved by this acquisition and so Puckett applies the equity method. Harrison declared a $2 per share dividend during the year and reported net income of $560,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31
Answer:
The $1,724,000 is the investment amount which is to be recorded as of December 31.
Explanation:
For computing the investment income, the calculation is shown below:
= Paid value + net income percentage - dividend
where,
Paid value= $1.6 million
Net income percentage = Net income × percentage
= $560,000 × 40%
= $224,000
And, dividend = number of shares × per share
= 50,000 × 2
= $100,000
So, the investment amount would be
= Paid amount + net income percentage - dividend
= $1,600,000 + $224,000 - $100,000
= $1,724,000
Hence, the $1,724,000 is the investment amount which is to be recorded as of December 31.
Final answer:
The balance in the Investment in Harrison account at year-end is $1.724 million, after accounting for Puckett's share of Harrison's net income and subtracting dividends received.
Explanation:
When Puckett Company invested in Harrison's common stock, they paid $1.6 million for a 40 percent stake, which amounts to 50,000 shares. To calculate the balance in the Investment in Harrison account at year-end, we must consider the equity method, which includes any dividends received and Puckett's share of Harrison's net income.
The equity method accounting involves adjusting the investment account for Puckett's share of Harrison's earnings and dividends distributed:
Calculate Puckett's share of Harrison's net income: $560,000 (Harrison's net income)Therefore, the balance in the Investment in Harrison account at the end of the year is $1.724 million.
An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of $50 comma 000. If the economy grows at a moderate pace, the investment will result in a profit of $20 comma 000. However, if the economy goes into recession, the investment will result in a loss of $50 comma 000. You contact an economist who believes there is a 20% probability the economy will remain strong, a 60% probability the economy will grow at a moderate pace, and a 20% probability the economy will slip into recession. What is the expected profit from this investment?
Profit when economy is strong = $ 50,000
Profit when economy is at moderate pace = $ 20,000
Loss when economy is at reccession = $ 50,000
P (economy remain strong) = 20/100 = 0.2
P (economy at moderate pace) = 0.6
P (economy at reccession) = 0.2
Expected profit = Total x P (2)
= (0.2 × 50,000) + (0.6 × 20,000) - (0.2 × 50,000)
= 10,000.0 + 12,000.0 - 10,000.0
= $ 12,000
••• Expected profit = $ 12,000
Further Explanation
New profits arise in economic activities using the financial system. Profit is not obtained by chance, but thanks to the special efforts of people who use money.
Because of the relationship with money transactions, profitability specifically takes place in the context of capitalism.
Declining this view, capitalists include 3 main elements: private property institutions, the practice of profit-seeking, and competition in a free-market economic system.
Relative Advantage Profit is a benchmark to assess the health of a company or the efficiency of a company, Profit is a sign that the product or service is valued by the public, Profits are a whip to increase effort, Profit is a condition of the company's survival, Benefits offset the risks in the business.
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Class: College
Subject: Business
Keyword: probability, Opportunity, theory
The expected profit from this investment is $12,000.
Explanation:To calculate the expected profit from this investment, we will multiply the profit for each outcome by its corresponding probability and then sum up the results.
For a strong economy, the profit is $50,000 with a probability of 20%. So the expected profit for a strong economy is 50,000 × 0.20 = $10,000.
For a moderate-paced economy, the profit is $20,000 with a probability of 60%. So the expected profit for a moderate-paced economy is 20,000× 0.60 = $12,000.
For a recession, the profit is -$50,000 with a probability of 20%. Hence, the expected loss for a recession is 50,000 × 0.20 = -$10,000.
To calculate the total expected profit, we add up the expected profits and losses: $10,000 + $12,000 - $10,000 = $12,000.
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The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts:
Accounts receivable $441,000 Debit
Allowance for Doubtful Accounts 1,310 Debit
Net Sales 2,160,000 Credit
All sales are made on credit.
Based on past experience, the company estimates 2.5% of ending accounts receivable will be uncollectible.
What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
a. Debit Bad Debts Expense $11,025; credit Allowance for Doubtful Accounts $11,025.
b. Debit Bad Debts Expense $9,715; credit Allowance for Doubtful Accounts $9,715.
c. Debit Bad Debts Expense $12,335; credit Allowance for Doubtful Accounts $12,335.
d. Debit Bad Debts Expense $5,400; credit Allowance for Doubtful Accounts $5,400.
e. Debit Bad Debts Expense $15,400; credit Allowance for Doubtful Accounts $15,400.
Answer:
The adjusting entry at the end of the year is option c.
Debit Bad Debts Expense $12,335;
credit Allowance for Doubtful Accounts $12,335
Explanation:
Bad debt : The amount which is not received by the customer for good supplied by the company is treated as a bad debt.
In the given question,
The 2.5% of ending accounts receivable will be uncollectible so, the allowance would be equals to
= 2.5 % of Accounts receivable
= 2.5 % × $441,000
= $110,25
Now add the allowance for doubtful accounts to the allowance which is calculated above.
So,
= $110,25 + 1,310
= $12,335
The estimated bad debts expense is $12,335
Hence, the adjusting entry at the end of the year is option c.
Debit Bad Debts Expense $12,335;
credit Allowance for Doubtful Accounts $12,335
Final answer:
The correct adjusting entry to record the estimated bad debts expense, considering the percent of receivables method and the current debit balance in the Allowance for Doubtful Accounts, is to debit Bad Debts Expense and credit Allowance for Doubtful Accounts by $12,335. Option C is correct.
Explanation:
To determine the adjusting entry for bad debts expense using the percent of receivables method, we first calculate the desired ending balance in the Allowance for Doubtful Accounts. This is done by multiplying the ending accounts receivable balance by the bad debt percentage, which is 2.5% in this case. So, the calculation is $441,000 * 2.5% = $11,025.
Next, we need to adjust the current balance in the Allowance for Doubtful Accounts to reach the calculated desired balance. The existing balance is a debit of $1,310, which is unusual as this account typically has a credit balance. To correct this and achieve the desired credit balance of $11,025, we need to add both the desired ending balance and the absolute value of the current balance, resulting in an adjusting entry of $11,025 + $1,310 = $12,335.
The correct adjusting entry is therefore: Debit Bad Debts Expense $12,335; credit Allowance for Doubtful Accounts $12,335. This adjusts the Allowance for Doubtful Accounts to the proper credit balance, reflecting the estimated uncollectible receivables.
Exercise 10-7 Direct Materials Variances [LO10-1] Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 5.70 pounds $ 2.50 per pound $ 14.25 Direct labor 0.50 hours $ 7.50 per hour $ 3.75 During the most recent month, the following activity was recorded: Eleven thousand pounds of material were purchased at a cost of $2.40 per pound. The company produced only 1,100 units, using 9,900 pounds of material. (The rest of the material purchased remained in raw materials inventory.) 650 hours of direct labor time were recorded at a total labor cost of $7,800. Required: Compute the materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
Answer:
Direct Material Price Variance = $1,100 Favorable
Direct Material Quantity Variance = - $9,075 Unfavorable
Explanation:
Direct Material Price Variance = (Standard Price - Actual Price) X Actual Quantity
Provided Standard Price = $2.50
Actual Price = $2.40
Actual Quantity = 11,000 pounds
Direct Material Price Variance = ($2.5 - $2.4) X 11,000 pounds
= $1,100 Favorable
This is favorable because actual price is less than Standard Price.
Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) X Standard Price
Standard Quantity for Actual Output = 1,100 X 5.70 pounds per unit = 6,270 pounds
Actual Quantity used = 9,900 pounds
Standard Price = $2.50
Direct Material Quantity Variance = (6,270 - 9,900) X $2.5
= - $9,075 Unfavorable
This is unfavorable because as per standard norms only 6,270 pounds of raw material was needed to produce 1,100 units of Zoom.
Final Answer
Direct Material Price Variance = $1,100 Favorable
Direct Material Quantity Variance = - $9,075 Unfavorable
Final answer:
To calculate the materials price variance, subtract the standard price from the actual price and multiply by the actual quantity purchased, resulting in a favorable variance of $1,100. To calculate the materials quantity variance, subtract the standard quantity allowed from the actual quantity used and multiply by the standard price, resulting in an unfavorable variance of $9,075.
Explanation:
The student is asking how to calculate the materials price variance and the materials quantity variance for the production of a cleaning compound named Zoom. Here are the calculations:
Materials Price Variance = (Actual Price - Standard Price) × Actual Quantity Purchased
Materials Price Variance = ($2.40 - $2.50) × 11,000 pounds
Materials Price Variance = $0.10 × 11,000 pounds
Materials Price Variance = $1,100 (F)
Materials Quantity Variance = (Actual Quantity Used - Standard Quantity Allowed) × Standard Price
Materials Quantity Variance = (9,900 pounds - (1,100 units × 5.70 pounds/unit)) × $2.50/pound
Materials Quantity Variance = (9,900 pounds - 6,270 pounds) × $2.50/pound
Materials Quantity Variance = 3,630 pounds × $2.50/pound
Materials Quantity Variance = $9,075 (U)
Mary and David are partners who share profits and losses on a 3:1 basis. This means Mary receives 75% and David receives 25% of income after any allocations. Mary receives a salary allowance of $15,000. Earnings for the period total $51,000. What will be the total amount credited to Mary's Capital account when the Income Summary account is closed?
Answer:
$53,250
Explanation:
In case of profit sharing ratio 3:1
Mary will receive 75% of profits, provided after any allocations made.
Therefore total share of Mary = Salary + Share in profit.
= $15,000.00 + ($51,000.00 X 75%) = $15,000.00 + $38,250.00 = $53,250.00
Note: Salary will also be credited to Mary's capital account, although in some cases firms also open partner's current account in that case salary will be credited to current account and not the capital account. But generally only one capital account is being operated.
Therefore amount credited to Mary's Capital Account = $53,250.00
Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, traveling 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,000, depreciation on delivery equipment $7,000, and insurance on delivery equipment $1,000. Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for the year ending December 31, 2017
Answer:
[tex]\left[\begin{array}{ccccc}Sales&170,000&180,000&190,000&200,000\\sales \: commissions&10,200&10,800&11,400&12,000\\advertizing&6,800&7,200&7,600&8,000&traveling&5,100&5,400&5,700&6,000&Total \: Variable&22,100&23,400&24,700&26,000&Fixed&43,000&43,000&43,000&43,000&Total \: Selling \: expense&65,100&66,400&67,700&69,000&\end{array}\right][/tex]
Explanation:
First
we apply the percent rate to each sales level
for example
advertizing for sales 200,000 x 4% = 8,000
Second,
we add them to get total variable
Third,
we add all the fixed cost together
Forth,
and last, we calculate the total cost.
Leilani enters into a contract with Metro Taxi Company to work as a cabdriver. Under the plain meaning rule, if the contract’s writing is clear and unequivocal, the meaning of the terms must be determined from a. any relevant extrinsic evidence. b. only evidence not contained in the document. c. the later testimony of the parties. d. only the face of the instrument.
Answer:
The correct option is d) only the face of the instrument
Explanation:
Here when Leilani is entering in to a contract with Metro taxi company to work as a cabdriver, the contract made by the Metro taxi company has clearly stated the terms of condition for the job of cabdriver and it is told in the question that the terms of contract were unequivocal which means all the terms and condition were clearly stated and there was no confusion regarding any of the detail.
So when under the plain meaning rule, the meaning of the terms would be determined only the basis of what is written in the contract not on any extrinsic evidence or something which is not there but only on the face of the instrument.
Video Planet (“VP”) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer’s home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $2,040, sells the remote separately for $120, and offers the installation service separately for $240. The entire package sells for $2,300. Required: How much revenue would be allocated to the TV, the remote, and the installation service?
Answer:
TV 1,955
REMOTE 115
INSTALLATION 230
Explanation:
We are going to calculate the total sum of the element of the offer and then cross-multiply
[tex]\left[\begin{array}{ccc}$TV&2040&a\\$Remote&120&b\\$Installation&240&c\\$Total&2400&2300\\\end{array}\right][/tex]
[tex]a = \frac{2040}{2400 } * 2300 = 1,955[/tex]
[tex]b = \frac{120}{2400 } * 2300 = 115[/tex]
[tex]c = \frac{240}{2400 } * 2300 = 230[/tex]
To allocate the revenue to the TV, remote, and installation service, we use the relative standalone selling price method. The allocation for the TV is $1,950, for the remote is $115, and for the installation service is $235.
Explanation:To allocate the revenue to the TV, remote, and installation service, we need to determine the standalone selling prices of each component. The standalone selling prices are the prices at which each component is sold separately. According to the information given, the standalone selling price of the TV is $2,040, the standalone selling price of the remote is $120, and the standalone selling price of the installation service is $240.
To calculate the allocation of revenue, we can use the relative standalone selling price method. This method allocates revenue based on the proportionate value of each component in relation to the total standalone selling price of all components.
The total standalone selling price is $2,400 ($2,040 + $120 + $240). To calculate the allocation for the TV, we divide the standalone selling price of the TV by the total standalone selling price and multiply it by the total package price.
Allocation for TV = ($2,040 / $2,400) * $2,300 = $1,950
Similarly, we can calculate the allocations for the remote and installation service.
Allocation for remote = ($120 / $2,400) * $2,300 = $115
Allocation for installation service = ($240 / $2,400) * $2,300 = $235
Which of the following is an essential characteristic of enduringly great companies? They undergo continuous change. They are solely driven by incremental improvements. They focus on beating the competition. They oppose experimentation. They are risk averse.
Answer:
The answer is (A) They undergo continuous change.
Explanation:
To remain competitive in today’s world, a company must be willing to continue changing according to what the market currently needs and will need in the future. When a company remains stagnant, it would be outpaced by its competitors. Most of the household names that we commonly encounter maintains a spirit of continuous improvement – and we can encounter this from the innovative product they choose to make, better customer experience, or improvement in internal business process.
he following information applies to the questions displayed below:Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. (Ignore income taxes.)Requirements:1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes?Total annual cash inflows $ 2. Find the internal rate of return promised by the new machine. (Round your answer to two decimal places.)Internal rate of return %3. In addition to the data given previously, assume that the machine will have a $4,125 salvage value at the end of six years. Under these conditions, compute the internal rate of return. (Round your answer to two decimal places.)Internal rate of return %
Final answer:
The total annual cash inflows associated with the new donut-making machine for Wendell's Donut Shoppe are $5,000. To find the internal rate of return, both with and without including salvage value, a financial calculator or specialized software would be required due to the complexity of the IRR calculation.
Explanation:
To calculate the total annual cash inflows associated with the new donut-making machine for Wendell's Donut Shoppe, we need to consider two factors: the cost savings from reduced part-time help and the additional revenue from the sale of the new donut style.
Cost Savings: $3,800 per year.Additional Revenue: 1,000 dozen donuts * $1.20 per dozen = $1,200 per year.Add these together to get the total annual cash inflows: $3,800 + $1,200 = $5,000 per year.
To find the internal rate of return (IRR) for the new machine without considering the salvage value, we would use the IRR formula that considers the initial outlay, annual cash inflows, and the life of the machine. The calculation would require either financial calculator or specialized software due to the complexity of the formula.
When incorporating a salvage value of $4,125 at the end of six years, the IRR calculation would change to include this end-of-period cash inflow. The calculation would become more complex, and again, a financial calculator or specialized software will be needed.
Suppose that an particular economy has a real GDP of 24.0 trillion in 2004. It grows to 30.0 trillion in 2005. Meanwhile, the national debt was 16.0 trillion in 2004. In 2005 the federal government ran a budget deficit of 1.6 trillion, which was totally financed by borrowing. Given this set of circumstances the national debt as a percentage of real GDP has A. decreased. B. increased. C. remained constant. D. doubled.
Answer:
A. decreased
Explanation:
Debt / GDP ratio is one of the indicators of the health of an economy. It is the amount of a country's public debt as a percentage of its Gross Domestic Product (GDP).
For 2004 figures, in the economy in question, the ratio was 16 trillion / 24 trillion = 0.66
In 2005 GDP jumped to 30 trillion and debt increased to 17.6 trillion. Thus, the ratio was 17.6 rail / 30 rail = 0.58
The economy's debt-to-GDP ratio has declined, a good indication that the economy produces a large number of goods and services and that it probably has profits that are high enough to repay its debts.
The national debt as a percentage of real GDP has increased. So, option B is correct.
The national debt as a percentage of real GDP has increased.
To determine this, we calculate the debt/GDP ratio for both years. In 2004, the debt/GDP ratio was 16.0/24.0 = 0.67 or 67%. In 2005, it was 17.6/30.0 = 0.587 or 58.7%. Since 58.7% is less than 67%, the debt/GDP ratio has increased.
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. The value of a perpetuity cannot be determined. The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.
Answer:
The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.
Explanation:
The perpetuities can becalculate as follow
C/rate = Perpetuities
the reasoning behind this formula:
[tex]C * \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
If we calculate limit whe ntime is infite,
because at more time 1 + r gets closer and closer to 0
we get on the dividend
1 - 0
So we have C x 1/i = C/i
Next part would be why the first cash flow is more relevant than the subsequent cash flow:
[tex]\frac{Principal}{(1 + rate)^{time} } = PV[/tex]
Here if time increases, then the divisor get closer to ∞ so we have
P ( a constant) /∞ = 0
So the first cashflow is more relevant than the more distant cash flow
Final answer:
Perpetuities are financial instruments with indefinite cash flows, and their value can be calculated by discounting those cash flows to present value, with near-term cash flows having a stronger impact on its value than distant ones.
Explanation:
Perpetuities are financial instruments that provide a stream of cash flows indefinitely. One of the key characteristics of a perpetuity is that its value can indeed be determined using a formula that discounts its cash flows back to their present value. Furthermore, due to the nature of discounting, the current value of a perpetuity is indeed affected more by the discounted value of its nearer cash flows compared to those that are more distant in the future. This is because as time goes on, the present value of the future payments becomes less significant due to the higher discount rate applied over a longer period.
2018 2019 Beginning inventory $ 21,000 $ 32,500 Cost of goods purchased 151,500 187,500 Cost of goods available for sale 172,500 220,000 Ending inventory 32,500 35,500 Cost of goods sold $140,000 $184,500 Bramble’s made two errors: (1) 2018 ending inventory was overstated $3,150, and (2) 2019 ending inventory was understated $6,250. Compute the correct cost of goods sold for each year.
Answer:
Real COGS 143,150 178,250
Explanation:
[tex]\left[\begin{array}{ccc}-&2018&2019\\Beg.Inv&21,000&29,350\\Purchase&151,500&187,500\\Available&172,500&216,850\\End.Inv&32,500&35,500\\COGS&140,000&184,500\\Adj.End.Inv&-3,150&6,250\\Real COGS&143,150&178,250\\Real End-Inv&29,350&41,750\\\end{array}\right][/tex]
When overstated, it means an inventory with a book value of 100 is really 95
When understated, it means an inventory with a book value of 100 is really 105
This makes the COGS lower than it should in the first case
and higher than it should in the second
Notice:
Because of 2018 adjustment, beginning and availalbe good must be recalculate for 2019
August, Inc. had the following transactions in 2018, its first year of operations:
• Issued 29,000 shares of common stock. The stock has par value of $2.00 per share and was issued at $14.00 per share.
• Issued ,500 shares of $200.00 par value preferred stock at par.
• Earned net income of $39,000. bullet• Paid no dividends.
At the end of 2018, what is total stockholders' equity?
Answer:
Total 545,000
Explanation:
29,000 x 2 = 58,000 common stock
29,000 x 12 = 348,000 additional paid-in capital
500 x 200 = 100,000 preferred stock
Net income 39,000
Dividends none
Total 545,000
You have one semester left to graduate and you have the finances to do a maximum of four courses. Three of the courses are required courses. The last course slot belongs to an elective. You have narrowed down your choices to three electives, all of which are very popular and very useful courses that you are very interested in. Decide on the course you want to take. Then using at least two economic decision-making principles, explain why you are making this choice.
As a rational economic agent, out of the three electives I have selected, I will choose the one that will maximize my expected utility. This discipline, therefore, will be chosen according to my preference and with the marginal benefit that will add me.
Principle 1: Economic agents are rational
Principle 2: Economic agents think on the sidelines - this means that consumers make choices that add benefits to their utility functions.
Scarlett Corp. uses no debt. The weighted average cost of capital is 6.4 percent. The current market value of the equity is $27 million and the corporate tax rate is 35 percent. What is EBIT? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)
Answer:
EBIT = 2,658,461.54
Explanation:
Assuming the Company fullfil his expected return
Equity x WACC = Net Income
27,000,000 x 0.064 = 1,728,000 Net Income
Net income x (1-tax-rate) + interest = EBIT
1,728,000 x (1-.35) + 0 = EBIT
EBIT = 2,658,461.54
If Scarlett Corp uses no debt, then thre are no interest.
Which of the following elements are used in calculating revenue in a flexible budget? A) budgeted selling price and actual quantity of outputB) actual selling price and budgeted quantity of outputC) budgeted selling price and budgeted quantity of outputD) actual selling price and actual quantity of output
Answer:
The correct answer is A) budgeted selling price and actual quantity of output.
Explanation:
We call a flexible budget to a budget that is adjusted or flexed with some changes in activity or volume. It is noticeable that a flexible budget tends to be more sophisticated and useful than a statistic budget. And to calculate revenue in a flexible budget, it is necessary a budgeted selling price and actual quantity of output.
Revenue in a flexible budget is calculated using the budgeted selling price and the actual quantity of output.
Explanation:In a flexible budget, the elements used to calculate revenue are the budgeted selling price and the actual quantity of output. Hence, the correct answer to the question is: A) budgeted selling price and actual quantity of output. Flexible budgets adjust to different levels of activity and provide a more accurate tool for comparing budgeted performance at different levels of activity. They consider what revenues and costs should have been, given the actual level of output during the period.
Financial Markets and Institutions. True or false? (LO2-1) a) Financing for public corporations must flow through financial markets. b) Financing for private corporations must flow through financial intermediaries. c) Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London. d) Derivative markets are a major source of finance for many corporations. e) The opportunity cost of capital is the capital outlay required to undertake a real investment opportunity. f) The cost of capital is the interest rate paid on borrowing from a bank or other financial institution.
Answer:
The following statement is False.
(a). Financing for public corporations must flow through financial markets.
Reason: Financing for public corporations can be done through various sources of finance like financial markets, financial institutes and internal funds. It is not compulsion to finance the capital of public companies through financial markets.
The following statement is False.
(b). Financing for private corporations must flow through financial intermediaries.
Reason: Financing for private corporations does not necessarily need to flow through financial intermediaries. This can be done either directly or indirectly, i.e. with or without intermediaries.
The following statement is False.
(c). Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London.
Reason: Not necessarily, there are several FOREX exchanges around the world where foreign exchange trading occurs.
The following statement is False.
(d). Derivative markets are a major source of finance for many corporations.
Reason: Derivative markets are not necessarily a major source of finance for many corporations, since there are other financial institutions such as banks etc.
The following statement is False.
(e). The opportunity cost of capital is the capital outlay required to undertake a real investment opportunity.
Reason: The opportunity cost of capital is defined as the incremental return on investment that a firm foregoes when it decides to use funds for a project, rather than investing cash in a marketable security.
The following statement is False.
(f). The cost of capital is the interest rate paid on borrowing from a bank or other financial institution.
Reason:Cost of capital is the required return necessary to make a capital budgeting project.
Financial markets and intermediaries aid various businesses in raising capital. Foreign exchange is not solely bound by physical exchange floors and derivative markets do provide indirect finance benefits to corporations. The opportunity cost of capital relates to foregone investments, while cost of capital corresponds to interest on borrowed funds.
Explanation:The subject of the question pertains to financial markets and their role in the capital structure of corporations, both public and private. Fundamentally, whether public or private, businesses raise capital through financial markets or intermediaries. Foreign exchange trading, while also occurring on the floor of the FOREX in New York and London, happens digitally as well, often in more vast amounts. Derivative markets, though not directly a source of capital, are used by corporations for hedging risk and speculation. Opportunity cost of capital refers to the return that could have been earned on the best-forgone investment, not the initial capital outlay. The cost of capital indeed refers to the interest corporations pay on borrowed finances.
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ark each of the items in the following list with letters to indicate whether it would be listed as an Asset, Liability or Equity item on the balance sheet or Revenue or Expense item on the income statement.a.Accounts Receivableb. Sales c.Equipmentd. Supplies Expensee. Cashf.Accounts Payableg.Retained Earningsh. Revenuei.Contributed Capitalj.Cost of Goods Soldk.Notes Payablel.Selling and Administrative Expenses
Answer: These could be categorized as follows :-
Explanation:
a. Accounts receivable = Asset in balance sheet
b. Sales = Revenue in income statement
c. Equipment = Asset in balance sheet
d. Supplies expense = Expense in income statement
e. Cash = Asset in balance sheet
f. Accounts payable = Liability in balance sheet
g. Retained Earnings = Equity in balance sheet
h. Revenue = Revenue in income statement
i. Contributed Capital = Equity in balance sheet
j. .Cost of Goods Sold = Expense in income statement
k. Notes Payable = Liability in balance sheet
l. Selling and Administrative Expenses = Expense in income statement
Activity-based costing systems: Multiple Choice
use a single, volume-based cost driver.
assign overhead to products based on the products' relative usage of direct labor.
often reveal products that were under- or over-costed by traditional costing systems.
typically use fewer cost drivers than more traditional costing systems.
have a tendency to distort product costs.
Answer:
Assign overhead to products based on the products´ relative usage of direct labor.
Explanation:
It is an accounting method. Recognizes the relationship between costs, overhead activities, and manufactured products. By doing this relation the assignation of indirect costs is less arbitrarily than traditional methods. It is very used in the manufacturing sector.
I hope this answer helps you.
Baker Oats had an asset turnover of 1.6 times per year. a. If the return on total assets (investment) was 12 percent, what was Baker’s profit margin? (Input your answer as a percent rounded to 1 decimal place.) b. The following year, on the same level of assets, Baker’s assets turnover declined to 2 times and its profit margin was 6 percent. How did the return on total assets change from that of the previous year?
Answer:
a) Baker's profit margin = 7.5%
b) No change on return on total assets
Explanation:
a) Assets Turnover = [tex]\frac{Net Sales}{Average Total Assets}[/tex] = 1.6 times
Return on total assets = [tex]\frac{Net profit}{Average Total assets}[/tex] = 12%
Then we have profit margin on sales = [tex]\frac{Return on total assets}{Asset turnover ratio}[/tex] = [tex]\frac{12}{1.6}[/tex] = 7.5%
b) In case asset turnover declined to 2 times with profit margin of 6% then Return on total assets = Asset turnover ratio X Profit Margin
= 2 X 6% = 12%
Thus there is no change in that case on return on total investments.
a) Baker's profit margin = 7.5%
b) Thus there is no change in that case on return on total investments.
Final answer:
Baker Oats' profit margin is calculated as 7.5%. Its return on total assets remained at 12% despite changes in asset turnover and profit margin in the following year. The firm's accounting profit in the self-check question was $50,000.
Explanation:
To calculate Baker Oats's profit margin, we use the formula for Return on Total Assets (ROTA):
ROTA = Asset Turnover × Profit Margin
Given that ROTA is 12% and Asset Turnover is 1.6 times per year, the profit margin (PM) can be calculated as:
ROTA / Asset Turnover = PM
12% / 1.6 = PM
PM = 7.5%
For part b, to find how the return on total assets changed when the assets turnover went up to 2 times and profit margin decreased to 6%, we calculate:
New ROTA = New Asset Turnover × New Profit Margin
New ROTA = 2 × 6%
New ROTA = 12%
Even though the profit margin decreased, the increase in asset turnover kept the ROTA the same year-over-year.
As for the self-check question provided: The accounting profit is calculated by subtracting explicit costs from total revenues.
Accounting Profit = Total Revenue - (Labor Costs + Capital Costs + Material Costs)
Accounting Profit = $1,000,000 - ($600,000 + $150,000 + $200,000)
Accounting Profit = $1,000,000 - $950,000
Accounting Profit = $50,000
The price of a cup of coffee is $2.00 and the price of a cookie is $1.00. Mary has $8 a day to spend on coffee and cookies. Draw Mary's budget line. Label it. The budget line marks the boundary between ______. A. what Mary can afford and what she cannot afford B. what Mary would like to buy and what she would not like to buy C. what Mary wants and what Mary needs D. what is essential and what is a luxury good for Mary
Answer:
A. what Mary can afford and what she cannot afford
Explanation:
The line will be the combination between Cookies and coffees she can afford with his daily income of 8
She can afford to purchase any combination on the line or below the line
for example,
She can buy either 4 coffees = 8
3 coffees 2 cookies = 8
2 coffee 4 cookies = 8
1 coffe 6 cookies = 8
8 cookies = 8
or just 1 coffe = 2
She cannot afford above the line
4 coffe and 3 cookies = 4*2 + 3 *1 = 11
For a certain product, the cost function is linear with fixed costs of $480. If the product will sell for $25 per unit and the break even quantity is 80 units, find the marginal cost and marginal profit for the product.
Answer:
Marginal Cost = $19
Marginal Profit = $6
Explanation:
Break even quantity = [tex]\frac{fixed cost}{contribution per unit}[/tex]
80 = [tex]\frac{480}{contribution}[/tex]
Contribution = [tex]\frac{480}{80}[/tex] = 6 per unit
Contribution = Sales - Variable cost = $25 - VC = $6
$25 - $6 = VC = $19
Marginal cost is cost incurred for every additional unit produced, i.e. variable cost = $19, as fixed cost remains constant.
Marginal revenue is additional revenue on sale of every unit = contribution per unit = $6
Marginal cost = $19
Marginal Profit = $6
On January 2, 2016, Alpha Corporation issued 15,000 shares of $10 par value common stock for $15 per share. On March 1, 2016, Alpha reacquired 1,000 of these shares when they were trading $20 each. September 1, 2016, when the market was soaring, Alpha reissued 500 shares of treasury stock at the going market rate of $25 per share. Use this information to prepare the General Journal entry (without explanation) for September 1.
Answer:
Given:
On January 2, 2016:
Issued 15,000 shares of $10 par value
Common stock for $15 per share
On March 1, 2016: Alpha reacquired 1,000 of these shares when they were trading $20 each.
On September 1, 2016: Alpha reissued 500 shares of treasury stock at the going market rate of $25 per share.
The general journal entry for reissuing 500 shares of treasury stock at $25 per share involves debiting Cash for $12,500, crediting Treasury Stock for $10,000, and crediting Paid-in Capital from Treasury Stock for $2,500.
Explanation:The general journal entry for Alpha Corporation on September 1, 2016, when it reissued 500 shares of treasury stock at a market rate of $25 per share, would be as follows:
Cash (500 shares * $25) = $12,500Treasury Stock (500 shares * $20, the cost when Alpha reacquired the stock) = $10,000Paid-in Capital from Treasury Stock (The excess $2,500 ($12,500 - $10,000)) = $2,500This entry assumes that the Alpha Corporation uses the cost method to account for treasury stocks, whereby the treasury stock account is debited for the reacquisition cost, and then credited for the same cost when the stock is reissued. Any excess proceeds from reissuance would be credited to additional paid-in capital.
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If someone offered to give you a $500,000 noninterest-bearing note that was due 5 years from today. (you will receive only one $500,000 payment three years from today) How much would you loan them if you wanted to earn an 6% annual interest rate that is compounded semiannually?
Answer:
We can accept the note giving 418,742.13 or less.
Explanation:
There is a note due in 5 year.
When someone offered this note, it was 3 years from maturity. Is asking you to purchase the note for cash.
The idea is that we receive 500,000 in the future.
For how much are we willing to accept the note?
We are going to discount the 500,000 in three years using our 6% rate compound semiannually.
[tex]Principal * (1+ \frac{r}{n} )^{time* n} = Ammount[/tex]
Where n is the times the rate compounds within a year.
semiannual rate, capitalize 2 times per year.
We post our givens and solve:
[tex]Principal * (1+ \frac{0.06}{2} )^{3* 2} = 500,000[/tex]
[tex]\frac{500,000}{(1 + 0.03)^{6}} = PV [/tex]
PV = 418742.1283
PV = 418,742.13
We can accept the note giving 418,742.13 or less.
Dalton Industries makes all purchases on account, subject to the following payment pattern: Paid in the month of purchase: 25% Paid in the first month following purchase: 55% Paid in the second month following purchase: 20% If purchases for January, February, and March were $210,000, $190,000, and $240,000, respectively, what were the firm's budgeted payments in March?
Answer:
The firm's budgeted payments in March is $206,500
Explanation:
The purchase pattern is categorized into three percentage : 25%, 55% , and 20%
Here, following month is considered to be a month which is before than actual month.
The firm's budgeted payments in March is computed below:
= 25% of march month + 55% of February month + 20% of January month
= 25% × $240,000 + 55% × $190,000 + 20% × $210,000
= $60,000 + $104,500 + $42,000
= $206,500
Thus, the firm's budgeted payments in March is $206,500
Mauro Products distributes a single product, a woven basket whose selling price is $16 per unit and whose variable expense is $12 per unit. The company’s monthly fixed expense is $10,000. Required: 1. Calculate the company’s break-even point in unit sales. 2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)
Answer:
1. 2,500 units
2. $40,000
3. Revised Unit Sales - 2,650 units & Revised dollar sales - $42,400
Explanation:
Break even Point : The break even point is that point in which the firm has no profit or no loss or we can say that total revenue is equal to total expenditure.
1. Computation of break-even point in unit sales:
Break even point in unit sales = Fixed cost ÷ (Sales per unit - variable cost per unit)
= $10,000 ÷ ($16 - $12)
= 2,500 units
where, contribution = Sales per unit - variable cost per unit
Thus, the break-even point in unit sales is 2,500 units.
2. Calculation of break-even point in dollar sales :
The formula is shown below:
= Fixed cost ÷ Profit volume ratio
where, Profit volume ratio = (Contribution ÷ Sales) × 100
= ($4 ÷ $16) × 100
= 25%
So, Break even point in dollar sales = $10,000 ÷ 25%
= $40,000
Thus, the Break even point in dollar sales is $40,000
3. Calculation of new break-even point in unit sales is shown below:
Revised Fixed cost = $10,000 +$600 = $10,600
And, contribution is same.
So, new break-even point in unit sales = Fixed cost ÷ Contribution per unit
= $10,600 ÷ $4
= 2,650 units
Thus, new break-even point in unit sales is 2,650 units.
By applying the formula, the calculation of new break-even point in dollar sales is shown below:
New break-even point (BEP) in dollar sales = Fixed cost ÷ Profit volume ratio
Since, the Profit volume ratio remains same.
So, break-even point (BEP) in dollar sales = $10600 ÷ 25%
= $42,400
Hence, New break-even point (BEP) in dollar sales is $42,400