Answer:
Option C
$28,000
Explanation:
As for the information provided,
We have,
New partner to be admitted is Erin and his share will be 1/5th
For this he brings in $38,000.
Therefore, total capital will be = [tex]38,000 \times 5 = 190,000[/tex]
But actual capital after his addition = $140,000 + $40,000 + $38,000 = $218,0000
Therefore, value of inventory written off as will reduce assets, and capital also = $218,000 - $190,000 = $28,000.
This will ultimately make the contribution of Erin equivalent to his share.
In the LMN partnership, Lynn's capital is $60,000, Marty's is $80,000, and Nancy's is $70,000. They share income in a 4:3:3 ratio, respectively. Nancy is retiring from the partnership. Each of the following questions is independent of the others.
Refer to the above information. Nancy is paid $76,000, and all implied goodwill is recorded. What is the total amount of goodwill recorded?
A. $20,000
B. $14,000
C. $6,000
D. $0
Answer:
A. $20,000
Explanation:
Lynn 60,000
Marty 80,000
Nancy 70,000
Total 210,000
The buyout for nancy consist in:
capital balance + Nancy share of unrecorded goodwill
76,000 = 70,000 + 6,000 nancy goodwill
Nnacy share income ratio is 30% so total goodwill is:
6,000/30% = 6,000 / 0.3 = 20,000
The journal entry will be:
goodwill 20,000
Nancy Account 70,000
Cash 76,000
Lynn 8,000
Marty 6,000
Kline Construction is an all-equity firm that has projected perpetual EBIT of $376,000. The current cost of equity is 13.7 percent and the tax rate is 40 percent. The company is in the process of issuing $992,000 worth of perpetual bonds with an annual coupon rate of 5.5 percent at par. What is the value of the levered firm?
Answer:
$2,043,515.33
Explanation:
EBIT = $376,000
Current cost of equity = 13.7%
Tax rate = 40%
Worth of stocks issued = $992,000
Coupon rate = 5.5%
Thus,
Amount of tax = 0.40 × EBIT
or
The amount of tax = $150,400
Therefore,
EAT = EBIT - tax
or
EAT = $376,000 - $150,400
or
EAT = $225,600
Now,
Value of unlevered firm = [tex]\frac{\textup{EAT}}{\textup{Current cost of equity}}[/tex]
or
Value of unlevered firm = [tex]\frac{\textup{225600}}{\textup{0.137}}[/tex]
or
Value of unlevered firm = $1,646,715.33
Therefore, the value of levered firm = $1,646,715 + ( $992,000 × 40% )
or
The value of levered firm = $1,646,715.33 + ( $992,000 × 40% )
or
The value of levered firm = $2,043,515.33
You have a biased coin that lands heads 10% of the time. You win $1000 every time the coin lands head and lose 50 every time the coin lands tails. You start with $0 it is possible to have ne ative balance 1 you throw the coin 100 times, what is: The maximum balance you could finish with? 2. The minimum balance you could finish with? 3. Your expected end balance? 100,000
Answer:
1. Maximum balance = $100,000
2. Minimum balance = $(-5,000)
3. Expected balance = $55
Explanation:
Data:
PW = Probability Win = 10% = 0.10
PL = Probability Lose = 100% - 10% = 90% = 0.90
WA = Winning Amount = $1,000
LA = Losing Amount = ($50)
L = Launchs = 100
Calculations:
1. Maximum balance = L x WA = 100 x $1,000 = $100,000
2. Minimum balance = L x LA = 100 x $(-50) = $(-5,000)
3. Expected balance = (PW x WA) + (PLxLA) = (0.10 x $1,000) + (0.90 x $(-50)) = $100 - $45 = $55
Hope this helps!
The following data apply to the provision of psychological testing services: Sales price per unit (1 unit = 1 test plus feedback to client) $ 320 Fixed costs (per month): Selling and administration 22,000 Production overhead (e.g., rent of testing facilities) 15,000 Variable costs (per test): Labor for oversight and feedback 160 Outsourced test analysis 21 Materials used in testing 6 Production overhead 8 Selling and administration (e.g., scheduling and billing) 10 Number of tests per month 2,000 tests Required: Calculate the amount for each of the following (one unit = one test) if the number of tests is 2,000 per month. Also calculate if the number of tests decreases to 1,250 per month. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)
Answer:
2,000 test
Revenues 2,000*$320=$640,000
Variable costs 2000*$205 ($160+$21+$6+$8+$10)=$410,000
Fixed costs=$37,000 ($22,000+$15,000)
Income =$193,000
1,250 test
Revenues 1,250*$320=$400,000
Variable costs 1,250*$205 ($160+$21+$6+$8+$10)=$256,250
Fixed costs=$37,000 ($22,000+$15,000)
Income =$106,750
Explanation:
These calculations provide the financial performance of the psychological testing services for both 2,000 and 1,250 tests per month.
When the number of tests is 2,000 per month, the following amounts are calculated:
1. Total revenue: $640,000
2. Total variable costs: $406,000
3. Contribution margin: $234,000
4. Total costs: $376,000
5. Operating income: $264,000
When the number of tests decreases to 1,250 per month, the following amounts are calculated:
1. Total revenue: $400,000
2. Total variable costs: $253,750
3. Contribution margin: $146,250
4. Total costs: $351,250
5. Operating income: $48,750
First, we calculate the amounts for 2,000 tests per month:
1. Total revenue is calculated by multiplying the sales price per unit by the number of units sold:
Total revenue = $320 [tex]\times[/tex] 2,000 = $640,000
2. Total variable costs are calculated by summing the variable costs per test and then multiplying by the number of units sold:
Total variable costs = ($160 + $21 + $6 + $8 + $10) [tex]\times[/tex] 2,000 = $205 [tex]\times[/tex] 2,000 = $406,000
3. Contribution margin is the difference between total revenue and total variable costs:
Contribution margin = Total revenue - Total variable costs = $640,000 - $406,000 = $234,000
4. Total costs are the sum of fixed costs and total variable costs:
Total costs = Fixed costs (selling and administration + production overhead) + Total variable costs
Total costs = $22,000 + $15,000 + $406,000 = $376,000
5. Operating income is the difference between contribution margin and fixed costs:
Operating income = Contribution margin - Fixed costs = $234,000 - ($22,000 + $15,000) = $264,000
Next, we calculate the amounts for 1,250 tests per month,
1. Total revenue is calculated by multiplying the sales price per unit by the new number of units sold:
Total revenue = $320 [tex]\times[/tex] 1,250 = $400,000
2. Total variable costs are calculated by summing the variable costs per test and then multiplying by the new number of units sold:
Total variable costs = ($160 + $21 + $6 + $8 + $10) [tex]\times[/tex] 1,250 = $205 [tex]\times[/tex] 1,250 = $253,750
3. Contribution margin is the difference between total revenue and total variable costs:
Contribution margin = Total revenue - Total variable costs = $400,000 - $253,750 = $146,250
4. Total costs are the sum of fixed costs and total variable costs:
Total costs = Fixed costs (selling and administration + production overhead) + Total variable costs
Total costs = $22,000 + $15,000 + $253,750 = $351,250
5. Operating income is the difference between contribution margin and fixed costs:
Operating income = Contribution margin - Fixed costs = $146,250 - ($22,000 + $15,000) = $48,750
If Dominion Bank also pays 3.25% annual interest, compounded daily. If you had the following deposits and withdrawals, calculate the amount of interst you would have earned at Dominoin bank during the month of March. (March has 31 days)DATE ACCOUNT ACTIVITY BALANCEMarch 1 beginning balance $6,500March 16 withdraw $1,500 ????March 28 deposit $700 ????
Answer:
It would have earned 15.91 dollars of interest
Explanation:
We will calcualte for compounding at each moment:
First, we will calculate for $6,500 for March 1st to March 15th:
Then, from March 16th to march 27th we calculate for $5,000 + accrued interest of the peri
and from March 28th to 31th we calcualte $5,700 + accrued interest
[tex]Principal (1 + \frac{r}{m} )^{n \times m} = Amount[/tex]
n = 15/365 days
m = 365
r = 0.0325
[tex]6,500 (1 + \frac{0.0325}{365} )^{15/365 \times 365} = Amount[/tex]
6508.69
Then we withdraw 1,500
And we calcualte for hte period marchth to March 27th for the currnet value: 5,008.69
[tex]5,008.69 (1 + \frac{0.0325}{365} )^{11/365 \times 365} = Amount[/tex]
Amount: 5,013.60
Then we deposit 700 and calcualte the rest of the month:
[tex]5,713.60 (1 + \frac{0.0325}{365} )^{11/365 \times 365} = Amount[/tex]
Amount: 5,715.64
We can now calcualtethe interest earned:
6,508.96 - 6,500 = 8.96
5,013.60 - 5,008.69 = 4.91
5,715.64 - 5,713.60 = 2.04
total interest = 15.91
Final answer:
To calculate the interest earned at Dominion Bank with a 3.25% annual interest compounded daily for various account balances in March, use the formula for daily compounding interest separately for each period: initial 15 days, following 12 days after a withdrawal, and final 3 days after a deposit.
Explanation:
The question asks to calculate the interest earned in the month of March at Dominion Bank, which pays 3.25% annual interest compounded daily, with several account activities involved. The balance changes due to withdrawals and deposits within the month, making it a situation where daily compounding interest needs to be calculated for different balance amounts over varying periods within a single month.
Calculating daily compounded interest, the formula to use is P(t) = P(0) * (1 + r/365)365t, where P(t) is the future balance, P(0) is the initial balance, r is the annual interest rate, and t is the time in years. For parts of a year, t is a fraction.
For March 1-15, the balance is $6,500 for 15 days.
After the withdrawal on March 16, the new balance is $5,000 ($6,500 - $1,500), held for 12 days until the deposit on March 28.
The final balance, after the deposit on March 28, is $5,700 ($5,000 + $700) for the remaining 3 days of March.
There are four steps in the manufacturing process of a stuffed toy: cutting, stuffing, sealing, and packaging. There are two employees each for cutting and stuffing but one each for sealing and packaging. The processing times of cutting, stuffing, sealing, and packaging are 8, 5, 3, and 2 seconds per toy. What is the capacity in toys per minute at the resource "stuffing"?
Answer:
The capacity of the resource "stuffing" is 24 toys/minute
Explanation:
We can define the capacity of any of thes process as
Capacity = (Number of workers)/(Processing time)
In the case of the resource “stuffing”, we have two workers and a processing time of 5 seconds.
The capacity is then :
Capacity = (Number of workers)/(Processing time)
Capacity = (2)/(5 s) = 0.4 toys/second = 24 toys/minute
Suppose that Italy and Germany both produce beer and cheese. Italy's opportunity cost of producing a pound of cheese is 5 barrels of beer while Germany's opportunity cost of producing a pound of cheese is 10 barrels of beer. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the production of cheese and has a comparative advantage in the production of beer. Suppose that Italy and Germany consider trading cheese and beer with each other. Italy can gain from specialization and trade as long as it receives more than of beer for each pound of cheese it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than of cheese for each barrel of beer it exports to Italy. Based on your answer to the last question, which of the following prices of trade (that is, price of cheese in terms of beer) would allow both Germany and Italy to gain from trade? Check all that apply. 8 barrels of beer per pound of cheese 3 barrels of beer per pound of cheese 9 barrels of beer per pound of cheese 1 barrel of beer per pound of cheese
Explanation:
Italy's opportunity cost of producing a pound of cheese is
= 5 barrels of beer
Germany's opportunity cost of producing a pound of cheese is
= 10 barrels of beer
Italy's opportunity cost of producing a barrel of beer is
= [tex]\frac{1}{5}[/tex]
= 0.2
Germany's opportunity cost of producing a barrel of beer is
= [tex]\frac{1}{10}[/tex]
= 0.1
A country is said to be having a comparative advantage in producing a good if it can produce it at a lower opportunity cost.
Here, Italy has a lower opportunity cost of producing cheese. So we can say that it has a comparative advantage in making cheese.
Germany has a lower opportunity cost in producing beer so it has a comparative advantage in making beer.
Italy gains from trade as long as it earns more than 5 barrels of beer for each pound of cheese, which is its opportunity cost, from trade.
Germany gains from trade as long as it gains more than 0.1 pounds of cheese for each barrel of beer.
Trade prices will be 8 barrels of beer per pound of cheese and 9 barrels of beer per pound of cheese. Since Italy will want more than 5 barrels of beer, the other two options will not be accepted.
Jane is a middle-aged woman fond of EpidermaNow's skincare products. These products are produced and marketed globally. EpidermaNow recently released a sun-screen lotion. Despite the lotion's high price and unproven effectiveness, Jane bought the lotion on the day of its release in the market. Given this information, Jane belongs to the segment of _____.
a. global citizens
b. global dreamers
c. antiglobals
d. global agnostics
Answer: Global citizens
Explanation: In simple words, an individual who have better understanding of the world operations than others are called global citizens. These individuals favor global activities with the perception that these will result in more equality around the world either directly or indirectly.
In the given case, Jane purchased a product because of its global nature despite of high prices. Therefore, she clearly is favoring globalization.
Hence, from the above we can conclude that the right option is A.
Kaplan Manufacturing Corporation purchased 2,500 shares of its own previously issued $10 par common stock for $57,500. As a result of this event,a. Kaplan's Common Stock account decreased $25,000.b. Kaplan's total stockholders' equity decreased $57,500.c. Kaplan's Paid-in Capital in Excess of Par Value account decreased $32,500.d. All of these answer choices are correct.
Answer:
b. Kaplan's total stockholders' equity decreased $57,500
Explanation:
The purchase of treasury stock is as follows:
Treasury Stock debit 57,500 (-Equity)
cash credit 57,500 (-Assets)
The company's equity decreased as well as the Assets.
The common stock and paid-in Capital in Excess of Par Value will not be modified.
This account will be decreased if the stocks are retired not at purchase
Fullerton Waste Management purchased land and a warehouse for $610,000. In addition to the purchase price, Fullerton made the following expenditures related to the acquisition: broker’s commission, $31,000; title insurance, $3,500; miscellaneous closing costs, $6,500. An independent appraisal estimates the fair values of the land and warehouse at $497,000 and $213,000, respectively.
Determine the amounts Fullerton should capitalize as the cost of the land and the building.
Capitalized cost of land = $
Capitalized cost of building = $
Answer:
Capitalized cost of land = $455,700
Capitalized cost of building = $ 195,300
Explanation:
All the costs of purchasing the land and warehouse should be capitalized so we first have to sum all the costs
Cost of land and warehouse $610,000
+
Brokers comission $31,000
+
title insurance $3,500
+
miscellaneous closing costs $6,500
------------------
Total cost to be capitalized $651,000
Then you must devide into cost of land and cost of building
For this we will use the independent appraisal estimates
Land $497,000/($497,000+$213,000)=0,7
Building $213,00/($497,000+$213,000)=0,3
Then Capitalized cost of land would be $651,000*0,7=$455,700
Capitalized cost of building would be $651,000*0,3=$195,300
The capitalized cost for Fullerton Waste Management's land acquisition is $459,138 and for the building is $191,862, calculated based on their respective fair values and the total acquisition cost.
Explanation:The capitalized costs for the land and building can be calculated by allocating the total acquisition costs based on the proportionate fair values of both the land and the building. In this case, Fullerton Waste Management has a total acquisition cost of $651,000 ($610,000 purchase price + $31,000 broker's commission + $3,500 title insurance + $6,500 closing costs). The fair value of the land is $497,000 and the total fair value of both is $710,000 ($497,000 + $213,000). Therefore, the capitalized cost for the land will be $459,138 [($497,000/$710,000)*$651,000] and for the building, it will be $191,862 [($213,000/$710,000)*$651,000].
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In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others.
Refer to the information provided above. Allen and Daniel agree that some of the inventory is obsolete. The inventory account is decreased before David is admitted. David invests $40,000 for a one-fifth interest. What are the capital balances of Allen and Daniel after David is admitted into the partnership?
Allen Daniel
A) 140000 40000
B) 125000 35000
C) 120000 36000
D) 137000 39000
A. Option A
B. Option B
C. Option C
D. Option D
Answer: Option (B) is correct.
Explanation:
Capital contribution by David = $40,000
Interest of David in partnership = [tex]\frac{1}{5}[/tex]
Total capital of the partnership after the admission of new partner:
= [tex]\frac{40,000}{\frac{1}{5} }[/tex]
= $200,000
Total capital of partnership before decreasing of obsolete inventory:
= $140,000 + $40,000 + $40,000
= $220,000
Therefore, value of decrease in inventory:
= Total capital before decrease - Total capital after decrease
= $220,000 - $200,000
= $20,000
The reduction in value of inventory will be distributed in old partners in ratio of 3:1
Hence,
Capital balance of Allen after admission of David:
= [tex]140,000 - 20,000\times\frac{3}{4}[/tex]
= $125,000
Capital balance of Daniel after admission of David:
= [tex]40,000 - 20,000\times\frac{1}{4}[/tex]
= $35,000
Gasoline prices typically rise during the summer, a time of heavy tourist traffic. A "street talk" feature on a radio station sought tourist reaction to higher gasoline prices. Here was one response: "I don’t like ‘em [the higher prices] much. I think the gas companies just use any excuse to jack up prices, and they’re doing it again now." How does this tourist’s perspective differ from that of economists who use the model of demand and supply?
The tourist views higher gasoline prices as unfair manipulation by gas companies. However, economists see it as a natural outcome of increased demand during the tourist season based on the principle of supply and demand.
Explanation:The tourist's perspective is more intuitive and emotional, based on their personal experience and judgement. They believe that gas companies are taking advantage of a situation to increase prices unfairly. However, economists using the model of supply and demand would look at this situation differently. They would argue that during the summer, the demand for gasoline increases due to increased travel. As demand increases and supply remains somewhat steady, prices naturally rise to balance the two. This reflects the basic principle of supply and demand, and is not inherently about companies intentionally raising prices.
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Hittle Company is considering two mutually exclusive projects X and Y. The cost of capital for each project is 10%. The projects’ expected net cash flows are as follows: Year Project X Project Y 0 -$10,000 -$10,000 1 4,500 3,500 2 3,000 3,500 3 3,000 3500 4 3000 3500 5 3600 3500 What are the correct NPVs of projects X and Y, respectively?
Answer:
Project X:
NPV= $3108,55
Project Y
NPV= $3267,75
Explanation:
Giving the following information, we need to find the net present values of both projects:
Project X:
i=0,10
Cash flow=
0= -$10,000
1= 4,500
2= 3,000
3= 3,000
4= 3000
5= 3600
Project Y:
i= 0,10
Cash flow=
0 = -$10,000
1=3,500
2=3,500
3=3500
4=3500
5=3500
The NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time.
The formula is:
n
NPV= ∑ [Rt/(1+i)^t]t-1
where:
R t =Net cash inflow-outflows during a single period t
i=Discount rate of return that could be earned in alternative investments
t=Number of timer periods
In this exercise:
Project X:
NPV= -10000 + (4500/1,10^1) + (3000/1,10^2) + (3000/1,10^3) + (3000/1,10^4) + (3600/1,10^5)= $3108,55
Project Y
NPV= $3267,75
An organization estimated that in a particular year the population of a country spent $10.4 trillion in personal consumption. The major categories of these expenditures are durable goods ($1.7 trillion; for example, cars, furniture, recreational equipment), nondurable goods ($2.4 trillion; for example, food, clothing, fuel), and services ($6.2 trillion; for example, health care, education, transportation). What is the approximate annual per capita spending for personal consumption? Assume a population of 310 million.
The approximate annual per capita spending for personal consumption is approximately $33,548.39. Spending per capita at constant prices accounts for both population growth and inflation.
Given,
Total personal consumption spending = $10.4 trillion
Population = 310 million
Required to calculate the approximate annual per capita spending for personal consumption =?
Per Capita Spending = Total Spending / Population
Per Capita Spending = $10.4 trillion / 310 million
Per Capita Spending = $10.4 trillion / 310 million
Per Capita Spending = $33,548.39
Therefore, the per capita spending is $33,548.39.
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Final answer:
The approximate annual per capita spending for personal consumption is $33,548.39, calculated by dividing the total personal consumption expenditures of $10.4 trillion by the population of 310 million people.
Explanation:
To determine the approximate annual per capita spending for personal consumption, we divide the total personal consumption expenditures by the population. The total expenditure is $10.4 trillion, which includes spending on durable goods ($1.7 trillion), nondurable goods ($2.4 trillion), and services ($6.2 trillion). With a population of 310 million people:
Per capita spending = Total spending / Population = $10.4 trillion / 310 million = $33,548.39 per person, approximately.
This figure indicates how much each person, on average, would have spent on goods and services in that year.
Regarding the direct and indirect methods of preparing the statement of cash flows, which of the following statements is true? A. The indirect method and the direct method will produce a different amount of net cash provided by investing activities. B. The indirect method starts with net income and adjusts it to net cash provided by (used for) operating activities. C. The direct and indirect methods include different types of cash flows in the investing activities section. D. The indirect method includes all non-cash activities, whereas the direct method includes only the cash activities
Answer:
B. The indirect method starts with net income and adjusts it to net cash provided by (used for) operating activities.
Explanation:
The cash flow statement shows the entire cash flow for the period in consideration, generally a financial year.
This statement is divided in three parts: Operating, Investing and Financing.
There are two methods to prepare the cash flow statement: Direct Method and Indirect Method.
There is no difference in reporting investing and financing activity, whereas the operating activities are reported in different manners.
Under indirect method, the net income is adjusted to calculate the operating cash flow, all the transactions which are non cash or do not relate to operating activities.
Thus, statement B is correct.
The following information is from the Income Statement of the Swifty Laundry Service:
Revenues
Service Revenues $4940
Expenses
Salaries and wages expense $ 1860
Advertising expense 380
Rent expense 230
Supplies expense 150
Insurance expense 80
Total expenses 2700
Net income $2240
The entry to close the Laundry Service Revenue account includes a:
Answer:
Explanation:
The journal entry for closing the laundry service revenue is shown below:
Laundry service revenue A/c Dr $4,940
To Income summary $4,940
(Being service revenue account closed)
We credit the income summary account because the service revenue is added while preparing the income statement. If there is a net income, so the revenue is excess than its expenses and if there is a net loss, so the expenses are excess than its income.
The entry to close the Laundry Service Revenue account for Swifty Laundry Service involves debiting the Service Revenues account and crediting the Income Summary account with $4940 to zero out the revenue for the period.
The entry to close the Laundry Service Revenue account includes a debit to the Service Revenues account and a credit to the Income Summary account. This is done to zero out the revenue account and transfer its balance to the Income Summary for the period.
At the end of the accounting period, Swifty Laundry Service would make the following journal entry:
Debit Service Revenues: $4940Credit Income Summary: $4940This entry reflects the closure of the revenue account, which moves the year's earnings into the Income Summary, preparing the company's books for the new accounting period.
5. On December 5, CWM paid the $230 telephone bill accrued for November. 6. On December 11, CWM purchased two computers from Dell Inc. for $4,900 each. CWM paid $400 down with a check; the remaining balance is due in 30 days (n/30). Each computer has an estimated life of two years and a salvage value of $50 each. What are the correct journal entries for these transactions?
Answer:
utilities payable 230
cash 230
to record payment of November bill
Computer 9,800
Cash 400
Account payable 9,400
to record purchase of computers
Explanation:
we will credit cash for the amount paid to cancel the tlephone invoice.
We will write-off the payable recognize in Novemeber when the invoice was received.
We will debit the acquired assets (computer)
credit the amount of cash given
and then credit the remainder to recognize the obligation to pay these computers in the near future.
Baker Industries’ net income is $24,000, its interest expense is $5,000, and its tax rate is 25%. Its notes payable equals $24,000, long-term debt equals $80,000, and common equity equals $260,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm’s ROE and ROIC? Do not round intermediate calculations. Round your answers to two decimal places.
Answer:
ROE = 9.23%
ROIC = 7.62%
Explanation:
Data:
Net Income NI = $24,000
Interest Expense IE = $5,000
Tax Rate T = 25% = 0.25
Notes Payable NP = $24,000
Long-term debt LTD = $80,000
Common Equity CE = $260,000
Return On Equity ROE = ?
Retrun On Invested Capital ROIC = ?
Earnings Before Taxes EBT = ?
Invested Capital IC = ?
Earnings Before Taxes and Interest EBIT = ?
Calculations:
[tex]ROE = \frac{NI}{CE}= \frac{24,000}{260,000}=0.0923 = 9.23[/tex]%
[tex]EBT = \frac{NI}{1-T} = \frac{24,000}{1-0.25} = \frac{24,000}{0.75} = 32,000[/tex]
[tex]EBIT = EBT+IE=32,000 + 5,000=37,000[/tex]
[tex]IC =NP+LTD+CE=24,000+80,000+260,000=364,000[/tex]
[tex]ROIC = \frac{EBIT*(1-T)}{IC} = \frac{37,000*(1-0.25)}{364,000}= \frac{37,000*(0.75)}{364,000}= \frac{27,750}{364,000}= 0.0762=7.62[/tex]%
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Baker Industries has a Return on Equity (ROE) of 9.23% and a Return on Invested Capital (ROIC) of 7.69%, indicating its efficiency in generating profits from shareholder equity and overall capital.
Explanation:The question involves calculating Return on Equity (ROE) and Return on Invested Capital (ROIC) for Baker Industries. ROE measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROIC measures how well a company is using its money to generate returns. Comparing these ratios helps understand Baker Industries' efficiency in generating profits from its equity and overall capital.
Calculation of ROE
ROE = (Net Income / Shareholder's Equity) * 100
Given Net Income = $24,000 and Shareholder's Equity = Common Equity = $260,000,
ROE = ($24,000 / $260,000) * 100 = 9.23%
Calculation of ROIC
ROIC = (Net Income + Interest Expense * (1 - Tax Rate)) / (Debt + Equity)
Given that Interest Expense = $5,000, Tax Rate = 25%, Total Debt = Notes Payable + Long-term Debt = $24,000 + $80,000, and Total Equity = $260,000,
ROIC = ($24,000 + $5,000 * (1 - 0.25)) / ($24,000 + $80,000 + $260,000) * 100 = 7.69%
If potential output equals 3,000 and short-run equilibrium output equals 3,500, there is a(n) ______ gap and the Federal Reserve must _____ real interest rates in order to close the gap.
A. recessionary; raise B. recessionary; lower C. recessionary; not change D. expansionary; raise
Answer:
D. expansionary; raise
Explanation:
In order to maintain the equilibrium, in this case,
The Federal Reserve will opt for expansionary monetary policies, under which the real interest rates will be increased by the Federal Reserve.
As the output is less than the equilibrium output, by increasing the real interest rates, the equilibrium can be achieved.
In the markets for factors of production, ____
(A) the government provides firms with inputs for the production process.
(B) households provide firms with labor, land, and capital.
(C) firms provide households with goods and services.
(D) households provide firms with savings for investment.
Answer: In the markets for factors of production, "(B) households provide firms with labor, land, and capital.".
Explanation: Companies and households interact between 2 markets.
The market of goods and services: is one in which companies sell products and services to homes.
The market of productive factors: it is one in which households sell productive factors to companies so that they can produce goods and services.
Answer:
"(B) households provide firms with labor, land, and capital.".
Explanation:
Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $15,000 and at that price, Thad estimates 300 units would be sold each year. The variable cost to produce and sell the cycles would be $11,250 per unit. The annual fixed
cost would be $1,012,500.
What is the break-even in unit sales?
What is the margin of safety in dollars (Omit the "$" sign in your response.)
Answer:
Instructions are listed below
Explanation:
Giving the following information:
Price= $15000
Q=300
The variable cost to produce and sell the cycles would be $11,250 per unit.
The annual fixed cost would be $1,012,500.
A)break-even point in units=fixed costs/contribution margin= 1012500/(15000-11250)= 270 units
B) margin of safety= budgeted sales - break-even sales
Margin of safety= 4500000-4050000= $450000
Thad Morgan's break-even point in unit sales for Western Hombre brand of cycle is 270 units. The margin of safety in dollars is $450,000.
Explanation:First, let's determine the break-even point in unit sales. The break-even point is reached when total cost equals total revenue. To calculate the break-even point, we need to divide the fixed costs by the contribution margin per unit. The contribution margin per unit is calculated as the selling price per unit minus the variable cost per unit. In this case, the selling price per unit is $15,000 and the variable cost per unit is $11,250. Thus, the contribution margin per unit is $15,000 - $11,250 = $3,750. The fixed costs are $1,012,500. So, the break-even point in unit sales is $1,012,500 / $3,750 = 270 units.
Second, let's calculate the margin of safety in dollars. The margin of safety measures the difference between the actual or projected sales and the sales at the break-even point. In this case, Thad estimates 300 units would be sold each year. Therefore, the projected sales in dollars are 300 units * $15,000/unit = $4,500,000. The sales at the break-even point would be 270 units * $15,000/unit = $4,050,000. Thus, the margin of safety in dollars is $4,500,000 - $4,050,000 = $450,000.
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Borrowed $60,000 from First American Bank and Trust by issuing a two-year note payable (Doc. No. 14) with a stated annual interest rate of 5%. Check No. 545 (Doc. No. 8) for $60,000 was received from the bank and deposited. Reviewed the terms and conditions of the note and signed it (Ray Kramer) as the borrower.
Ray Kramer's borrowing $60,000 from the bank reflects how banks operate. These loans become assets for the banks, as they generate interest income. This process contributes to the rise in bank deposits and allows further lending thus expanding the money supply in the economy.
Explanation:Ram Kramer borrowed $60,000 from First American Bank and Trust by issuing a two-year note payable with a 5% annual interest rate. This is similar to the example of Singleton Bank lending $9 million to Hank's Auto Supply. In both cases, the loans become assets for the banks as they will generate interest income. Based on this model, First National Bank's deposits would rise by the amount of the loan and the bank would likely have to hold a portion of these deposits as required reserves. The rest of the money could be loaned out again, increasing the money supply in the economy. This process is a key part of how banks operate and contribute to the economy.
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Assume it is August of 2008. After much deliberation, TV (television) stations nationwide choose to stop broadcasting their programs in analog starting in June of 2009 and instead broadcast in pure digital television. Hence, there is less than one year left of analog broadcasting. This decision affects companies that produce TVs, but also affects people that own and wish to purchase TVs. Please shift the supply and demand curves appropriately as a result of this news in consideration of the long run (in this case, for example, the year 2010) for analog TV sets.
Answer:
Explanation:
The analog TV sets demand will be affected because consumers will no longer buy analog TV sets because of the new decision. If there are no consumers to buy this good the demand curve will shift to the left.
The analog TV sets producers will know that consumers are not longer interested in this good and they will reduce the quantities they produce because if they remain with the same production quantities it is possible that no one buys a portion of them.
Also, it is possible that the people that owns an analog TV set will sell them because they know that in the future TV stations will stop broadcasting their programs in analog. If we sum both effects, the total supply will be reduced but not in the same proportion, the shift magnitude will be less but still the supply will shift to the left.
The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas, TX based restaurants to compare the sales of these restaurants to the ones with no new flavors. She decides to run a difference in difference approach. Which of the following is true?
(A) The first difference would be the difference in the sales of the Dallas stores before and after the introduction
(B) The second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor
(C) The second difference would be the difference between the post introduction sales in the Dallas stores and the control group
(D) Only A&B
Answer:
(D) Only A&B
Explanation:
As with the introduction of new flavors, there will be an impact on sales, it might increase or it might decrease.
The impact would not only affect the store itself but would also impact on nearby stores.
Therefore, there will be difference in the sales count in value as well as units in current and previous months.
There will also be difference in between, the sales of stores nearby in previous month and current month after the launch of new flavor.
Final answer:
The correct answer to the question is that the first difference is the change in sales in the Dallas stores before and after the new ice-cream flavor introduction, and the second difference is between the post-introduction sales of the Dallas stores and a control group that did not introduce the flavor.
Explanation:
When the manager of an ice-cream parlor in Dallas, TX decides to use a difference in difference approach to compare sales, there are two key differences they will analyze:
The first difference would be the change in the sales of the Dallas stores before and after the introduction of the new flavor. This is captured by option (A).
The second difference, contrary to option (B), would actually be the difference in sales between the Dallas stores post-introduction of the new flavor and a comparison group/control group that did not introduce the new flavor, as stated in option (C).
Therefore, the correct answer would include options (A) and (C), as they describe the two steps in the difference in differences approach.
Assume that you are the manager of a firm. You are concerned about a potential increase in interestrates because it would reduce the demand for your products. Currently, economic growth is high, butannual inflation has increased from 3 percent to 5 percent within the last six months. The unemployment rate is very low and cannot go higher. The Federal Reserve (Fed) is meeting next week to assess economic conditions and set monetary policy.
(a) Given the current economic situation, should the Fed adjust or not adjust economic policy? If so, how? If not, why?
(b) Recently, the Fed has allowed the money supply to expand beyond its long-term target range. Does this affect your expectation of what the Fed will decide at its upcoming meeting?
(A) Concern about rising interest rates makes perfect sense, as the economy described is in a situation of overheating: high inflation, low unemployment and high economic growth. Rising inflation is a risk that requires the Fed to act to cool economic activity. This should be done through restrictive monetary policy instruments: raising interest rates and decreasing the monetary base, through the sale of government bonds and / or by increasing the banks' compulsory deposit with the Fed.
(B) This affects the credibility of the Fed, which is very bad. Economic agents base their expectations on Fed signals. If the money supply is higher than expected, real inflation will be higher than projected inflation. So expectations anchored in Fed forecasts will be dashed. This makes economic agents distrust future Fed projections.
All-Star Automotive Company experienced the following accounting events during 2018: Performed services for $25,000 cash. Purchased land for $6,000 cash. Hired an accountant to keep the books. Received $50,000 cash from the issue of common stock. Borrowed $5,000 cash from State Bank. Paid $14,000 cash for salary expense. Sold land for $9,000 cash. Paid $10,000 cash on the loan from State Bank. Paid $2,800 cash for utilities expense. Paid a cash dividend of $5,000 to the stockholders. Required Indicate how each of the events would be classified on the statement of cash flows as operating activities (OA), investing activities (IA), financing activities (FA), or not applicable (NA). Prepare a statement of cash flows for 2018. Assume All-Star Automotive Company had a beginning cash balance of $9,000 on January 1, 2018.
Answer & Explanation:
Operating Activities
services collected 25,000
salaries paid (14,000)
utilities paid (2,800)
cash generated from operating activities 8,200
Investing activities
proceeds from land 9,000
purchase of land (6,000)
cash generated from investing activities 3,000
Financing Activities
issuance of stocks 50,000
bank loan 5,000
payment on loan (10,000)
dividends paid (5,000)
cash generated from financing activities 40,000
Total cash generated for the year ended December 31th, 2018 51,200
beginning balance 9,200
ending balance 60,400
Notes: Activities related to the daily operation wil lbe operating activities.
The transaction involving long-term assets will be investing activities
The stocks, dividends and loan, loan payment are financing activities for the company.
The mentioned accounting events are classified under either Operating Activities, Investing Activities, or Financing Activities in the statement of cash flows. Non-cash events such as hiring an accountant are not included. To prepare the statement of cash flows, begin by determining the net amount provided by or used in each category and adjust the beginning cash balance accordingly.
Explanation:The accounting events would be classified as follows in the statement of cash flows:
Performed services for $25,000 cash - Operating Activities (OA).Purchased land for $6,000 cash - Investing Activities (IA).Hired an accountant to keep the books - Not Applicable (NA).Received $50,000 cash from the issue of common stock - Financing Activities (FA).Borrowed $5,000 cash from State Bank - Financing Activities (FA).Paid $14,000 cash for salary expense - Operating Activities (OA).Sold land for $9,000 cash - Investing Activities (IA).Paid $10,000 cash on the loan from State Bank - Financing Activities (FA).Paid $2,800 cash for utilities expense - Operating Activities (OA).Paid a cash dividend of $5,000 to the stockholders - Financing Activities (FA).To prepare the statement of cash flows for 2018, you will need to calculate the net cash provided by or used in each of the categories (Operating, Investing, and Financing) and then ensure that the ending cash balance equals the beginning cash balance plus or minus these net amounts.
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When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the
a. market value of the services received.
b. par value of the shares issued.
c. market value of the shares issued.
d. Any of these provides an appropriate basis for recording the transaction.
Answer:
B.) Par value of the share issued
Explanation:
This transaction just have to follow the rules of issuing stocks for non-cash assets. The rule is to record on the basis of MARKET VALUE of the services received or the MARKET VALUE of the shares issued whichever can be objectively determined.
The least appropriate basis would be the Par Value of the shares issued since the par value are usually significantly lower than its market value.
Par value are determined from the creation of the company and the company grows and increases its value.
Cheryl Alder operates her own catering service. Summary financial data for March are presented in the following equation form. Each line, designated by a number, indicates the effect of a transaction on the balance sheet. Each increase and decrease in retained earnings, except transaction (4), affects net income. Cash + Land = Liabilities + Common Stock + Retained EarningsBal. 40,000 100,000 16,000 24,000 100,000 (1) 28,000 28,000 (2) (20,000) 20,000(3) (18,000) (18,000)(4) (1,000) (1,000)Bal. 29,000 120,000 16,000 24,000 109,000(a) Enter the amount for each transaction described below.(1) Provided catering services for cash $ _____(2) Purchase of land for cash $____(3) Payment of expenses $ ____(4) Payment of cash dividends $ ____
Answer:
1. $28,000
2. $20,000
3. $18,000
4. $1,000
Explanation:
(1) Provided catering services for cash $28,000
It affects the cash balance negatively while affecting the retained earning balance positively.
(2) Purchase of land for cash $20,000
It affects the cash balance negatively while affecting the land balance positively.
(3) Payment of expenses $18,000
It affects the cash balance negatively while affecting the retained earning balance positively.
(4) Payment of cash dividends $1,000
It affects the cash balance negatively while affecting the retained earning balance positively.
Final answer:
The financial transactions are identified through changes in the balance sheet, resulting in $28,000 for catering services provided, $20,000 for purchase of land, $18,000 for payment of expenses, and $1,000 for cash dividends paid.
Explanation:
The student's question is asking for the amounts for each financial transaction which affected Cheryl Alder's catering service balance sheet for March. To analyze these transactions, we begin with the original balance of assets, liabilities, and equity and apply each transaction to derive the new balance.
Provided catering services for cash: This amount is equal to the increase in cash due to services provided. Since cash increased by $28,000 and there are no other effects on liabilities or stock, the full amount of $28,000 was for catering services.
Purchase of land for cash: This is seen as a decrease in cash and an increase in land by the same amount, thus the purchase of land for cash is $20,000.
Payment of expenses: The payment of expenses reduced cash by $18,000. This transaction reflects an expense that reduces retained earnings, thereby affecting net income which is seen in the balance of retained earnings.
Payment of cash dividends: Cash dividends resulted in a reduction of cash and retained earnings by $1,000, indicating that the cash dividend paid was $1,000.
Suppose that the total expenditures for a typical household in 2000 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2005 was $6,875. If 2000 is the base year, the CPI for the year 2005 equals:
A. 0.80
B. 1.00
C. 1.20
D. 1.25
Answer:
d. 1.25
Explanation:
The consumer price index is a ratio that expresses the increase or decrease of the price of a good or service. Is obtained by the division of the most recent year. between the base year.
Household 2000 --> 5.500
Household 2005 ---> 6.875
CPI = 6875/5500 = 1.25
Final answer:
The CPI for the year 2005, using 2000 as the base year, is calculated as 125, reflecting a 25% increase in price levels over this time period.
Explanation:
The question concerns the calculation of the Consumer Price Index (CPI) for the year 2005 using 2000 as the base year. The formula to find the CPI in a given year is the current cost of the basket of goods and services divided by the base-period cost of that same basket. In this case, the base-period (year 2000) cost is $5,500 and the year 2005 cost is $6,875. Applying this to the formula gives us:
CPI for 2005 = ($6,875 / $5,500) × 100 = 1.25 × 100 = 125.
Therefore, the CPI for the year 2005 is 125 when using 2000 as the base year, which indicates a 25% increase in the price level since the base year. The correct answer is option D: 1.25.
Assume the demand for watermelons is downward sloping. A decrease in price from $3 per pound to $2 per pound
(A) could have been caused by an increase in supply.
(B) will cause an increase in supply.
(C) will cause a smaller quantity of watermelons to be demanded.
(D) will cause demand to decrease.
(E) will cause demand to increase.
Answer:
(E) will cause demand to increase.
Explanation:
The demand has a downward sloping, so it decrease as more price.
Therefore if the price is lower, the demand will increase, not decrease.
More persons will demand watermelons as the price decrease. That's because at lower price more people can afford watermelons.