Answer:
The actual price level turns out to be 90. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will remain the same, and firms that rely on catalogs will respond by increasing the quantity of output they supply.
If enough firms face high costs of adjusting prices, the unexpected decrease in the price level causes the quantity of output supplied to rise above the natural rate of output in the short run.
Explanation:
The inputs are based on the sticky-price theory, with explaination as below:
"In the short run, the quantity of output that firms supply can deviate from the natural rate of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level."
On January 1, 2017, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease.
The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000, while the expected residual value at the end of the lease is $5,000.
Equal rental payments are due on January 1 of each year, beginning in 2017.
The fair value of the equipment on January 1, 2017, is $150,000, and its cost is $120,000.
The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis.
Bensen set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown.
Collectibility of lease payments by the lessor is probable. (Both the lessor and the lessee's accounting periods end on December 31.)
(a) Discuss the nature of this lease to Bensen and Flynn.
(b) Calculate the amount of the annual rental payment.
(c) Prepare all the necessary journal entries for Bensen for 2017.
(d) Suppose the collectibility of the lease payments was not probable for Bensen. Prepare all necessary journal entries for the company in 2017.
(e) Prepare all the necessary journal entries for Flynn for 2017.
(f) Discuss the effect on the journal entry for Flynn at lease commencement, assuming initial direct costs of $2,000 are incurred by Flynn to negotiate the lease.
This lease is a capital lease for Flynn and a sales-type lease for Bensen, due to the specific conditions of the lease. The annual rental payment comes out to be $29,841 using the formula PMT = PVOA / [(1 - (1 + r) ^ -n ) / r ]. Bensen and Flynn's journal entries differ based on their respective roles and if collectibility is not probable, Bensen would account for possible bad debts.
Explanation:The nature of this lease indicates that it's a capital lease for Flynn and a sales-type lease for Bensen, since the lease term is lesser than 75% of the economic life of the equipment and Flynn has an option to purchase the equipment below its expected residual value at the end of the lease term. In this situation, Flynn is effectively financing the acquisition of the equipment, while Bensen is playing the role of a financiers.
To calculate the annual rental payment, we need to use Bensen's rate of return (5%). This would equate to the present value of an annuity formula. The present value of an annuity formula is PVOA = PMT [(1 - (1 + r) ^ -n ) / r], where PMT is the annual payment, r is the interest rate, and n is the number of periods. Rearranging to solve for PMT, we get PMT = PVOA / [(1 - (1 + r) ^ -n ) / r ]. Here, PVOA is the fair value of the equipment, which is $150,000, r is 5% or 0.05, and n is the lease term, which is 6 years. Hence, the annual rental payment comes out to be around $29,840.90.
The journal entries in 2017 for Bensen would be: 1) Debit Lease Receivable for $150,000 and Credit Equipment for $120,000 and Gain on Sale for $30,000 (to record the lease agreement) 2) Debit Cash for $29,841 and Credit Lease Receivable for $29,841 (to record the collection of the lease payment) 3) Debit Interest Receivable ($120,159*0.05) and Credit Interest Revenue for the same amount (to record the recognition of interest).
If the collectibility of the lease payments wasn't probable, Bensen would have recorded a Allowance for Doubtful Accounts and would have made additional entries to record bad debt expenses. Flynn's 2017 journal entries would be: 1) Debit Leased Equipment for $150,000 and Credit Lease Obligation for the same amount (to record the lease) 2) Debit Lease Obligation for $29,841 and Credit Cash for the same amount (to make the lease payment) 3) Debit Interest Expense for $(120,159 - 29,841)*0.06) and Credit Lease Obligation for the same amount (to record interest).
If there were initial direct costs, Flynn would have included these costs in the initial measurement of the lease liability. Therefore, the journal entry would be: Debit Leased Equipment for $152,000 and Credit Lease Obligation for the same amount.
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On its 2011 balance sheet, Bank of America Corporation reports marketable debt securities of $311,416 million. The footnotes disclose that these securities have an amortized cost of $306,437 million. Which of the following is true?1) These are available-for-sale securities2) These are trading securities3) There are net unrealized gains of $4,979 on these securities4) Both A and C5) Both B and C
Answer:5. Both B & C
Explanation:
This security have an unrealized gain which the company expect to realize by selling at the market price in the nearest future. The availability of the carrying amount and the recoverable price shows that it's a trading security inclusive of other information. The inherent gain will be recognized once the sales is made.
Bank of America Corporation's marketable debt securities scenario indicates that these are available-for-sale securities with net unrealized gains of $4,979 million, based on the difference between the amortized cost and market value.
The question presents a scenario involving Bank of America Corporation's marketable debt securities, featuring the data of amortized cost and market value. Based on the provided numbers, the amortized cost is $306,437 million and the market value is $311,416 million. This reveals that there are net unrealized gains of $4,979 million ($311,416 million - $306,437 million).
Securities that are reported at market value and exhibit net unrealized gains or losses typically fall into the available-for-sale category, as they are not actively traded but are also not held to maturity. Thus, the correct option is "Both A and C," indicating these are available-for-sale securities with net unrealized gains.
Which of the following taxes are paid by the employee and the employer?a. FUTAb. SUTAc. FICAd. Federal withholding taxes
Answer:
The correct answer is letter "C": FICA.
Explanation:
FICA (Federal Insurance Contributions Act) tax is a mandatory deduction taken from employees' payment to cover elder American's Social Security and Medicare. It is a 12,4% deduction financed by two parts: half of that amount is taken from the worker's paycheck and the other half is paid by the employer.
A department has budgeted monthly manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was: a) 348,000 direct labor hours b) 168,000 direct labor hours c) 528,000 direct labor hours d) Cannot be determined from the information provided
Answer:
b) 168,000 direct labor hours
Explanation:
The computation of the actual level of activity achieved is shown below:
= (Total budgeted manufacturing cost - budgeted monthly manufacturing overhead cost) ÷ (Rate per direct labor hour)
= ($1,044,000 - $540,000) ÷ ($3)
= $504,000 ÷ $3
= 168,000 direct labor hours
Simply we deduct the budgeted monthly manufacturing overhead cost from the total budgeted manufacturing cost and then divide it by the rate per direct labor hour so that the accurate direct labor hours could be computed
Sam is an experienced engineer, but he works as a draftsperson. His company has a pleasant work atmosphere. Though he is well paid, he is frustrated with his job as he does not get a sense of meaning or accomplishment. He decides to quit his job by the end of that month. In the context of Herzberg's two-factor theory, which of the following factors is missing in Sam's company
Answer:
Motivators
Explanation:
The motivating factor for Sam was an appropriate and suitable job profile for him. The other factors were covered well by the Hygiene factors and also the Extrinsic rewards were well in place. However, the motivator for him was his contents of the job profile itself which was prominently missing in Sam’s company which raised his levels of dissatisfaction.
X-Tel budgets sales of $70,000 for April, $120,000 for May, and $80,000 for June. In addition, sales commissions are 10% of sales dollars and the company pays a sales manager a salary of $7,000 per month. Sales commissions and salaries are paid in the month incurred. Prepare a selling expense budget for April, May, and June.
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
X-Tel budgets sales of $70,000 for April, $120,000 for May, and $80,000 for June. In addition, sales commissions are 10% of sales dollars and the company pays a sales manager a salary of $7,000 per month. Sales commissions and salaries are paid in the month incurred.
April:
Sales comission= 0.10*70,000= 7,000
Sales manager salary= 7,000
Total= 14,000
June:
Sales comission= 0.10*120,000= 12,000
Sales manager salary= 7,000
Total= 19,000
July:
Sales comission= 0.10*70,000= 8,000
Sales manager salary= 7,000
Total= 15,000
Listed below are certain costs or discounts incurred in the purchase or construction of new plant assets.1. Indicate whether the costs should be expensed or capitalized.2. For costs that should be included in plant assets, indicate in which category of plant assets (Equipment, Building, or Land) the related costs should be recorded on the balance sheet.1. Charges incured to train employees to use new equipment.2. Invoice cost to purchase new equipment3. Deduction for an earl payment discount taken on the puchase of new equipment.4. Real estate commissions incurred on land purchased for a new plant.5. Property taxes on land incurred after it was purchased6. Costs of tune-up for the truck used to deliver new equipment7. Costs to lay foundation for a new building8. Insurance on a new building during the construction phase.
Answer
The answer and procedures of the exercise are attached in a the following image.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
The costs that should be expensed or capitalized are indicated as follows:
1. The cost of training employees so that they can use new equipment should be expensed.
2. The cost of purchasing new equipment should be capitalized as Equipment.
3. The early payment discount received for the purchase of new equipment should be capitalized (reducing the cost of Equipment).
4. The real estate commissions incurred on land purchased for a new plant should be capitalized as Land.
5. Property taxes on Land incurred after the land purchase should be expensed, not capitalized.
6. The costs of tune-up for the truck used to deliver new equipment should be expensed because it was not wholly incurred for the new equipment.
7. The costs to lay the foundation for a new building should be capitalized as Building.
8. The insurance expense on a new building during the construction phase should be capitalized as Building.
Thus, the costs that should be expensed do not add to the costs of the plant assets.
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All Kiwi Ltd (a New Zealand-based company) has a wholly-owned subsidiary in Malaysia whose manager is being evaluated on the basis of the variance between actual profit and budgeted profit in New Zealand dollars (NZD). Relevant information in Malaysian ringgit (MYR) for the current year is as follows: Budget Actual Revenues MYR 12,000,000 MYR 11,000,000 Expenses 9,000,000 9,000,000 Current year actual and projected exchange rates between the New Zealand dollar (NZD) and the Malaysian ringgit (MYR) are as follows: Actual at time of budget preparation NZD 0.312 per MYR 1 Projected ending at time of budget preparation NZD 0.340 per MYR 1 Actual at end of budget period NZD 0.357 per MYR 1
Required: Calculate the total budget variance for the current year using the exchange rate that exists at the time the budget is prepared.
Required: Calculate the total budget variance for the current year using the exchange rate that exists at the end of the budget period. Required: Calculate the total budget variance for the current year using a projected exchange rate (projected at the time the budget is prepared).
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
On July 1, 2013, Farm Fresh Industries purchased a specialized delivery truck for $126,000. At the time, Farm Fresh estimated the truck to have a useful life of eight years and a residual value of $30,000.
On March 1, 2018, the truck was sold for $58,000.
Farm Fresh uses the straight-line depreciation method for all of its plant and equipment.
Partial-year depreciation is calculated based on the number of months the asset is in service.
Required:
1. Prepare the journal entry to update depreciation in 2018.
2. Prepare the journal entry to record the sale of the truck.
3. Assuming that the truck was sold for $80,000, prepare the journal entry to record the sale.
Answer:
I think last option
Answer:
1.
Debit Depreciation Expense $2,000
Credit Accumulated depreciation $2,000
2.
Debit Cash $58,000
Debit Accumulated depreciation account $56,000
Debit Loss on asset disposal $12,000
Credit Delivery truck asset $126,000
3.
Debit Cash $80,000
Debit Accumulated depreciation account $56,000
Credit Gain on asset disposal $10,000
Credit Delivery truck asset $126,000
Explanation:
Farm Fresh uses straight-line depreciation, Depreciation Expense each year is calculated by following formula:
Annual Depreciation Expense = (Cost of asset − Residual Value )/Useful Life = ($126,000-$30,000)/8 = $12,000
Depreciation Expense in 2013 = ($12,000/12)x6 = $6,000
1. From January 1, 2018 to March 1, 2018, the truck was in service for 2 months
Depreciation Expense in 2018 = ($12,000/12)x2 = $2,000
The entry:
Debit Depreciation Expense $2,000
Credit Accumulated depreciation $2,000
2.
From July 1, 2013 to March 1, 2018, the truck was in service for 4years and 8 months
Accumulated depreciation = $6,000 + $12,000 x 4 + $2,000 = $56,000
Carrying amount of the asset = Cost of asset - Accumulated depreciation = $126,000 - $56,000 = $70,000
Sale price - Carrying amount of the asset = $58,000-$70,000 = -$12,000
The company recognized loss on the sale $12,000.
The entry:
Debit Cash $58,000
Debit Accumulated depreciation account $56,000
Debit Loss on asset disposal $12,000
Credit Delivery truck asset $126,000
3.
Sale price - Carrying amount of the asset = $80,000-$70,000 = $10,000
The company recognized gain on the sale $10,000
The entry:
Debit Cash $80,000
Debit Accumulated depreciation account $56,000
Credit Gain on asset disposal $10,000
Credit Delivery truck asset $126,000
: Management of ProCor, a biotech firm, forecasted the following growth rates for the next three years: 35 percent, 28 percent, and 22 percent. Management then expects the company to grow at a constant rate of 9 percent forever. The company paid a dividend of $1.75 last week. If the required rate of return is 20 percent, what is the value of this stock?
The stock value is calculated using the Gordon Growth Model that incorporates forecasted growth rates, recent dividends, and the required rate of return. It includes calculating dividends for the first three years, discounting these dividends to the present, calculating a terminal price from Year 3 onwards reflecting a constant growth rate, discounting this terminal price to the present, and adding up these value for the current stock price.
Explanation:The value of a stock can be calculated using the Gordon Growth Model, which takes into account future dividends and growth rates. The model considers the company's growth rates for the first three years (35%, 28%, and 22%, respectively), an indefinite growth rate of 9%, and a dividend of $1.75 paid last week. Using these figures, calculate the dividends for each of the first three years by growing the most recent dividend by each year's growth rate. Once you have the dividends for each of the first three years, discount them by dividing each by (1+the required rate of return)the year. Keep in mind the required rate of return is 20%. After the 3rd year, the dividend grows at a constant rate of 9% indefinitely. The present value of these future dividends is called the terminal price. Find this by taking the Year 3 dividends and multiplying by 1+the constant growth rate, then dividing by the required rate of return minus the constant growth rate. Discount this back to the present by dividing by (1+the required rate of return)3. The current stock price is the sum of the discounted dividends and the discounted terminal price.
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The master budget of Vaughn Manufacturing shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:
Indirect labor $810000
Machine supplies 130000
Indirect materials 300000
Depreciation on factory building 140000
Total manufacturing overhead
$1380000
A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of
Entry field with correct answer
$1628000.
$1656000.
$1516000.
$1380000.
Answer:
$1,628,000
Explanation:
The computation of the total manufacturing overhead costs is shown below:
= (Indirect labor + machine supplies + Indirect materials) ÷ planned activity level × flexible activity level + depreciation on factory building
= ($810,000 + $130,000 + $300,000) ÷ 50,000 machine hours × 60,000 machine hours + $140,000
= ($1,240,000) ÷ 50,000 machine hours × 60,000 machine hours + $140,000
= $1,488,000 + $140,000
= $1,628,000
For the past 50 days, daily sales of a specialty product in a large grocery store have been recorded:Units Sold Number of Times10 820 1830 1040 850 61.What is the average number of units sold?2.What is the standard deviation?3.What is a 68.26% confidence interval? Please interpret.4.Suppose that the following random numbers were obtained:.86 .23 .73 .40 .95 Use these random numbers to simulate 5 days of sales.a.What is the average number of units sold?b.Can we conclude that the sales are random? Discuss.
Answer:
(A) what is the average number of units sold for 50 days: 820, 1830, 1040, 850, 6
(B) what is the standard deviation
(C) what is the average number of units sold for 5 days: 86, 23, 73, 40, 95
(D) can we conclude that the sales are random?
Explanation:
(A)
(820×10) + (1830×10) + (1040×10) + (850×10) + (6×10) = 45,460
45,460÷50 = 909.2units
(B)
(909.2-820)^2 × 10 = total squared mean deviation of the first 10 sales or 10days - sales of 820 per day
Doing same for the other 4 values, the total of squared mean deviation for the 5 days is
16922128÷50 = 338442.56 = Variance of the set of sales values
Standard Deviation is the square root of Variance so it is 581.758
(C) Mean of random units sold in 5 days: 317÷5 = 63.4
(D) for 50 days, mean sale was 909.2 units
For 5 days, random mean sale was 63.4
50÷5=10
909.2÷63.4=14.34
Yes, we can conclude that the sales are random
Firm A manufactures brake pads, a component of a braking system, and sells them to Firm B, who sells braking systems used in vehicles. Firm A is best described as a:
(A) Tier 2 supplier
(B) Tier 1 supplier
(C) manufacturer
(D) retailer
(E) distributor
Answer:
Letter B is correct. Tier 1 supplier.
Explanation:
A tier 1 supplier is one whose manufacturer usually markets its products to a large distributor who can operate both wholesale and retail, where the products are sold directly to the end consumer.
This is what happens in this issue, where company 1 manufactures and sells brake pads for company 2 to produce brake systems that are used in vehicles.
Final answer:
Firm A, which manufactures brake pads for Firm B, is best described as a Tier 2 supplier because they provide components to a firm that then supplies the completed product to the OEM. The term Tier 2 highlights the firm's position in the supply chain hierarchy.
Explanation:
Firm A manufactures brake pads and sells them to Firm B, which assembles them into braking systems for vehicles. In the hierarchy of supply chain management, Firm A would be considered a Tier 2 supplier, because they provide a component to a firm (Firm B) that would then be considered a Tier 1 supplier, since they directly supply the finished product to the original equipment manufacturer (OEM).
Firm A could indeed be described as a manufacturer, but within the context of the question that specifically refers to the supply chain positioning, Tier 2 supplier is the most accurate description. Such supply chains often include long-term agreements to ensure reliable exchanges, such as being exclusive suppliers or buyers, or setting conditions for product distribution to protect the interests of both upstream and downstream firms. The location can also be a competitive advantage for suppliers, especially when proximity enhances the efficiency of supply to the customer.
Tsypkin Company's budgeted sales quantity was 80,000 units of product. The company's accountant, using regression analysis, applied the following cost formula to estimate costs at the master budget level for this year: Total cost = $500,000 + ($5.20 × units produced and sold). The product had a budgeted selling price of $15.20 each. During the year, the actual sales were 82,000 units and selling price was $15.15 per unit. The actual variable costs were $418,200 and the fixed costs were $500,000. What was Tsypkin's sales price variance? a. $4,100 favorable b. $6,300 favorable c. $4,100 unfavorable d. None of these.
Answer:
c. $4,100 unfavorable
Explanation:
The computation of the sales price variance is shown below:
= (Budgeted selling price - actual selling price) × actual quantity
= ($15.20 - $15.15) × 82,000 units
= 4,100 unfavorable
We simply apply the sales price variance formula so the correct amount can come
All other information which is given is not relevant. Hence, ignored it
=
The Cats and Dogs League was organized as a nongovernmental not-for-profit organization. The League received a pledge of $10,000 to be used to build an addition to the kennel. This donation will not be received for three years. How should this pledge be recorded?
Answer:It should be only be disclose in their financial statement.
Explanation:
This is the case of a contingent asset in which it's probable that a presently determined future benefits will be available to a firm as a result of the occurrence or non occurence of certain future actions which are beyond the control of the firm.
The duty to donate is not binding on the donor though the amount is specified and neither is with whiting the power of league to command donation but it's only probable they will get the donation.
Compared with a competitive market, a cartel as a whole will produce: more output in order to increase prices. less output in order to increase prices. less output in order to decrease prices. more output in order to decrease prices.
Answer:
less output in order to increase prices.
Explanation:
A cartel is basically formed by a group of independent market people, who usually supply the same type of goods, in order to dominate the market.
They usually aim to find the point where they can maximize the profit.
For this the performers of market, in order to price it more and earn more profit, increase the price, and decrease the quantity to be produced.
This results in no choice left with the buyers or consumers other than buying at higher prices.
This then results in profit for the participants forming the cartel.
On January 1, Eagle, Inc., issued $800,000 of ten percent, 20-year bonds for $958,342, yielding an effective interest rate of eight percent. Semiannual interest is payable on June 30 and December 31 each year. The firm uses the effective interest method to amortize the premium. Required
Prepare an amortization schedule showing the necessary information for the first two interest periods. Round amounts to the nearest dollar.
Answer
The answer and procedures of the exercise are attached in the two images below.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in 2 single sheets with the formulas indications.
Suppose a gift shop in Myrtle Beach has an annual demand for 15,000 units for a souvenir kitchen magnet that it buys for $0.50 per unit. Assume it costs $10 to place an order and the inventory carrying cost is 25% of the item's unit cost. Use Solver to determine the optimal order quantity if the company wants to minimize the total cost of procuring this item.
a. What is the optimal order quantity? If necessary, round your answer to a whole number.
Answer:
1,549 units
Explanation:
a. The computation of the economic order quantity is shown below:
= [tex]\sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
where,
Annual demand is 15,000 units
Ordering cost is $10 per unit
And, the carrying cost = $0.50 per unit × 25% = 0.125
= [tex]\sqrt{\frac{2\times \text{15,000}\times \text{\$10}}{\text{\$0.125}}}[/tex]
= 1,549 units
We considered all the things i.e annual demand, ordering cost and the carrying cost so that the correct quantity can come.
A city's Enterprise Fund issued revenue bonds with a face value of $10,000,000. The bonds were issued with a 2% premium and the issuance costs totaled $150,000. When the bonds are issued, the Enterprise Fund will report total other financing sources in the amount of $0. $9,850,000. $10,000,000. $10,200,000.
Answer:
The correct answer is $9,850,000
Explanation:
The Enterprise fund which will be reported, total other financing sources of the amount is computed as:
= Face Value - Cost of issuance
where
Face Value is $10,000,000
Cost of issuance is $150,000
Putting the values above:
= $10,000,000 - $150,000
= $9,850,000
Note: Premium will not be considered as it is asked for when the bonds are issued.
The total other financing sources reported by the Enterprise Fund would be $9,850,000.
Explanation:The correct answer is $9,850,000.
When the city's Enterprise Fund issued revenue bonds with a face value of $10,000,000, it added a 2% premium to the face value. The premium is calculated by multiplying the face value by the premium rate, which is 2% in this case. So, the premium amount is $10,000,000 * 2% = $200,000.
The issuance costs are additional expenses incurred in the process of issuing the bonds. In this case, the issuance costs totaled $150,000.
Therefore, the total other financing sources reported by the Enterprise Fund would be $10,000,000 - $200,000 - $150,000 = $9,850,000.
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Which of the following is a disadvantage of establishing a wholly owned subsidiary?
a. Establishing a wholly owned subsidiary is generally the most costly method.
b. Firms will typically lose control over any technological competence.
c. A firm engaging in this strategy will have little control over operations in the foreign country.
d. Firms will face difficulties in building a certain organizational culture in greenfield ventures.
Answer:
The answer is letter A
Explanation:
Establishing a wholly owned subsidiary is generally the most costly method.
The Delta Co. owns retail stores that market home building supplies. Largo, Inc. builds single family homes in residential developments. Delta has a beta of 1.22 and Largo has a beta of 1.34. The riskminus free rate of return is 4 percent and the market risk premium is 6.5 percent. What should Delta use as their cost of equity if they decide to purchase some land and create a new residential community?
Answer:
12.71%
Explanation:
In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 4% + 1.34 × 6.5%
= 4% + 8.71%
= 12.71%
The (Market rate of return - Risk-free rate of return) is also called market risk premium and the same is used in the computation part. We ignored the bets of Delta
Final answer:
The cost of equity for Delta Co., calculated using the Capital Asset Pricing Model (CAPM), should be 11.93% for their new residential community project.
Explanation:
The student is asking about the cost of equity for Delta Co. in case it decides to venture into a new residential community project. To calculate the cost of equity, the Capital Asset Pricing Model (CAPM) is used, which is represented by the formula: Cost of Equity = Risk-Free Rate + (Beta x Market Risk Premium). Given Delta's beta is 1.22, the risk-free rate is 4 percent, and the market risk premium is 6.5 percent, Delta's cost of equity would be calculated as follows:
Cost of Equity = 4% + (1.22 x 6.5%)
Cost of Equity = 4% + 7.93%
Cost of Equity = 11.93%
Therefore, Delta should use 11.93% as their cost of equity for the new residential community project.
As the price level rises, the cost of borrowing money will , causing the quantity of output demanded to . This phenomenon is known as the effect. Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore , and the number of foreign products purchased by domestic consumers and fir
Answer:
Increase; decrease; interest rate effect; increase; decline; rise.
Explanation:
As the price level increases, the purchasing power of money declines. People will need more money to make transactions. As a result, the demand for money increases.
This increase in demand for money will cause the interest rate to increase. This implies that the cost of borrowing is rising. They will cause a decrease in investment and thus output level.
This phenomenon of fall in output level because of the rise in the cost of borrowing as a result of inflation is called the interest-rate effect.
The higher interest rate will attract capital from abroad. This inflow of capital will cause the demand for the domestic currency to increase. As a result, the value of the domestic currency in the foreign exchange market will increase.
This appreciation in the value of the domestic currency will make exports expensive and imports cheaper. This will cause the export demand to fall and imports to increase. Consequently, net exports will decrease.
When it is easy for competitors to enter the market, ________ will increase. In the _______ run, as more competitors enter the market, it ________ be possible for existing companies to earn economic profit. This means that the price charged must be equal to _______.
Answer:
Supply
Long
Will not
Marginal Cost
Explanation:
In a market where there are low barriers to entry, in the long run firms would enter into an industry where existing firms earn an economic profit. This would lead to an increase in supply.
When firms enter into the industry, the economic profit earned by existing firms would fall to zero and firms would set price at price equal to marginal cost
Mary, Inc. uses straight-line depreciation for all of its depreciable assets. Mary sold a used piece of machinery on December 31, 2015, that it purchased on January 1, 2014, for $15,000.
The asset had a five-year life, zero residual value, and $3,000 accumulated depreciation as of December 31, 2014.
If the sales price of the used machine was $9,500, the resulting gain or loss upon the sale was which of the following amounts?
A. Loss of $500
B. Gain of $500
C. Loss of $3,000
D. Gain of $3,000
E. No gain or loss upon the sale
Mary, Inc. had a gain of $500 on the sale of the machinery, calculated by subtracting the book value just before the sale from the sales price. The correct option is B. Gain of $500.
Mary, Inc. purchased machinery for $15,000 on January 1, 2014, with a five-year life and zero residual value. As of December 31, 2014, it had $3,000 accumulated depreciation. To calculate the annual depreciation, we use the formula: (Cost - Residual Value) / Useful Life. In this case, it's ($15,000 - $0) / 5 = $3,000 per year.
By the end of 2015, two years of depreciation have accumulated, which is 2 * $3,000 = $6,000. The book value of the machinery just before the sale is then $15,000 - $6,000 = $9,000. Mary, Inc. sold the machinery for $9,500, resulting in a gain of $9,500 - $9,000 = $500. The correct option is B. Gain of $500.
Dmitri manages a grocery store in a country experiencing a high rate of inflation. To keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. His employees regularly deal with customer annoyance over the frequent price changes. This is an example of the __________? of inflation.
a. menu costs
b. shoe-leather costs
c. unit-of-account costs
Answer:
Option (a) is correct.
Explanation:
Menu costs of inflation.
Menu costs refers to the cost that is incurred by the company or firms to change the price lists, price tags on the products or uses the medium of newspaper for updating prices. For instance, we are taking an example of clothes shop. If the owner the shop wants to change the prices of the product then he have to change the price tags of the clothes, change the prices on the price list and if he is selling his product online then the cost incurred for changing prices.
So, the menu cost further increases the price of the product which results in inflation.
5. Percentage of Sales Models. Percentage of sales models usually assume that costs, fixed assets, and working capital all increase at the same rate as sales. When do you think these assumptions do not make sense? Would you feel happier using a percentage of sales model for short-term or long-term planning?
Answer:
Consider the following analisis.
Explanation:
Short-term planning considers specific and detailed cash needs for short-period only. It cannot get accurate cash needs from the percentage sales model. Therefore, the percentages sales model is not appropiate for short-term planning.
Long term planning can have a bigger picture of the company's details and needs. Therefore, the percentage sales model is appropiate for long term planning.
The percentage of Sales Models' assumptions may not hold for long-term planning due to cost and sales variability, making short-term planning more suitable.
The time horizon is a crucial aspect that affects these relationships. For example, certain costs may be fixed in the short term but variable in the long term. When dealing with the Heckscher-Ohlin Model, assumptions of fixed versus variable proportions similarly affect the applicability of models based on time frame and economic dynamics.
For short-term planning, using a percentage of sales model could be more suitable because many costs are indeed fixed or predictable shortly.
Which of the following statements is true of the promotional mix?
a. The promotional mix of a company is the same for all its products.
b. It is designed to meet the needs of the target market and fulfill an organization's goals.
c. All elements of the promotional mix entail direct, two-way communication.
d. All elements of the promotional mix have the same effect on the target audience.
Answer:B. It's designed to meet the needs of the the target market and fulfill an organization goals.
Explanation:
Promotional mix involves direct and indirect efforts of selling a company products. It evolves round advertising, sales promotion,direct marketing, personal selling and public relations.
The promotional mix varies from products to products, they do not all involves a direct two way communication e.g advertising is a one way communication and they have different effects on the target audience.
Everly Corporation acquires a coal mine at a cost of $479,200. Intangible development costs total $119,800. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $95,840), after which it can be sold for $191,680. Everly estimates that 4,792 tons of coal can be extracted. If 839 tons are extracted the first year, prepare the journal entry to record depletion.
Required:
a. Restoration costs Inventory Accumulated depletion Development costs.
b. Restoration costs Development costs Accumulated depletion Inventory
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Dextra Computing sells merchandise for $17,000 cash on September 30 (cost of merchandise is $11,900). Dextra collects 3% sales tax. Record the entry for the $17,000 sale and its sales tax. Also record the entry that shows Dextra sending the sales tax on this sale to the government on October 15.
A. Record the cash sales and 3% sales tax.
B. record the cost of sept. 30th sales.
C. record the entry that shows the remittance of the 3% tax on this sale to the state government on october 15.
D. please show the calculations as well.
Answer:
Explanation:
The journal entries are shown below:
A. On September 30
Cash A/c Dr $17,510
To Sales $17,000
To Sales tax payable $510 ($17,000 × 3%)
(Being goods are sold on credit with sales tax)
B. On September 30
Cost of goods sold A/c Dr $11,600
To Inventory A/c $11,600
(Being goods are sold at cost)
C. On October 15
Sales tax payable $510
To Cash A/c
(Being sale tax is recorded)
When Nintendo sets a relatively low price on game units to stimulate more demand for its game cartridges, it is using
A) complementary product pricing.
B) product-bundle pricing.
C) price lining.
D) bait pricing.
E) cost-plus pricing.
Answer:
Letter A is correct. Complementary product pricing.
Explanation:
Organizations use the strategy of adopting a complementary product pricing to increase the total profit of a product group.
This strategy is used when the company sells products that are complementary, ie the use of one is complemented by the use of the other, so the company substantially decreases the price of a product, usually just to cover costs, and guarantees gains from a product with a high price and very high profit margin.
The benefits added to the complementary price of a product are market gain, competitors' entry barriers and retention and attraction of new consumers.