Answer:
A good use of free cash flow is to Invest in nonoperating assets
Explanation:
Free cash flow (FCF) is a measure of how much cash a business generates after accounting for capital expenditures such as buildings or equipment. This cash can be used for expansion, dividends, reducing debt, or other purposes.
If the underlying objective is to maximize shareholder wealth by increasing the firm’s value. Any use of FCF that negatively affects the firm’s value is not considered a good use of the FCF.
A good use of FCF would be to invest in nonoperating assets such as marketable securities, investments in other companies, etc.)
Final answer:
Investing in operating assets is generally a good use of free cash flow, as it can enhance a firm's productive capacity and growth. Paying off all debt may not be optimal due to the loss of tax advantages from interest payments. Firms must choose their sources of financial capital wisely, balancing growth with control and profitability.
Explanation:
When considering the best use of free cash flow (FCF), firms must evaluate options that maximize shareholder wealth by increasing the firm's value. Among the listed options, investing in operating assets is typically a good use of FCF as it can directly contribute to the firm's productive capacity and growth potential. Reinvesting profits into the business can help produce additional products, generating more sales and increased cash flow in subsequent periods. However, paying off all debt with FCF might not always be the best use of funds since deductibility of interest payments provides a tax advantage; completely eliminating debt removes this benefit. Making strategic decisions on using FCF, such as whether to borrow, issue bonds, or sell stock, also affects a firm's operations and control. Option 2 is correct among the given options .
Marr Co. sells its products in reusable containers. The customer is charged a deposit for each container delivered and receives a refund for each container returned within two years after the year of delivery.Marr accounts for the containers not returned within the time limit as being retired by sale at the deposit amount. Information for 20X5 is as follows:Container deposits at December 31, 20X4 from deliveries in:20X3 $150,00020X4 430,000 $580,000Deposits for containers delivered in 20X5 780,000Deposits for containers returned in 20X5 from deliveries in:20X3 $ 90,00020X4 250,00020X5 286,000 626,000In Marr's December 31, 20X5 balance sheet, the liability for deposits on returnable containers should beA. $494,000B. $584,000C. $674,000D. $734,000
To calculate the liability for deposits on returnable containers in Marr Co.'s balance sheet, add deposits received and subtract deposits refunded for returned containers.
Explanation:To calculate the liability for deposits on returnable containers in Marr Co.'s December 31, 20X5 balance sheet, we need to consider the deposits received from deliveries and the deposits refunded for returned containers. First, we start with the balance of deposits at the beginning of the year:
20X4 deposits: $580,000
Next, we add the deposits received in 20X5:
20X5 deposits: $780,000
Then, we subtract the deposits refunded for containers returned:
20X3 deposits refunded: $90,000
20X4 deposits refunded: $250,000
20X5 deposits refunded: $286,000
Finally, we calculate the liability for deposits on returnable containers:
Liability = (20X4 deposits + 20X5 deposits) - (20X3 deposits refunded + 20X4 deposits refunded + 20X5 deposits refunded)
Liability = ($580,000 + $780,000) - ($90,000 + $250,000 + $286,000)
Liability = $1,360,000 - $626,000
Liability = $734,000
Therefore, the liability for deposits on returnable containers in Marr Co.'s December 31, 20X5 balance sheet is $734,000 (option D).
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The liability for deposits on returnable containers for Marr Co. as of December 31, 20X5 is $734,000. This is calculated by adding the deposits at the end of 20X4 to the deposits for 20X5 deliveries and subtracting the deposits for containers returned in 20X5.
To calculate the liability for deposits on returnable containers for Marr Co. on December 31, 20X5, we need to account for the deposits received and the refunds given for containers from various years. We start with the total deposits at the end of 20X4 and add the deposits for containers delivered in 20X5. From this sum, we subtract the deposits for containers returned in 20X5.
Here is the calculation:
Deposits at December 31, 20X4: $580,000Add: Deposits for 20X5 deliveries: +$780,000Subtract: Returns from 20X3 deliveries: -$90,000Subtract: Returns from 20X4 deliveries: -$250,000Subtract: Returns from 20X5 deliveries: -$286,000The total liability for deposits on returnable containers as of December 31, 20X5 is:
$580,000 + $780,000 - $90,000 - $250,000 - $286,000 = $734,000
Therefore, the correct answer is Option D, $734,000.
Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Herold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Herold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Herold. Before title to the lot is transferred to Alice, Herold tells Alice that he no longer wants the lot. Alice tells Sarah about Herold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Herold ends up with the lot. She just wants her money. What type of principal is Herold
Answer:
Undisclosed principal
Explanation:
Am undisclosed principal in an agency relationship is one whose existence is not known to the third party. The third party believes they are making the transaction with the only agent involved in the transaction.
In this instance Sarah believed she was selling to Alice and was not aware Alice has a principal (Harold). In her mind she sold the land to Alice and no other person.
It was at the point where Harold said he no longer wanted the land that Alice told Sarah about him. At this point the contract between Harold and Alice had been terminated
Rory Company has a machine with a book value of $75,000 and a remaining five-year useful life. A new machine is available at a cost of $112,500, and Rory can also receive $60,000 for trading in its old machine. The new machine will reduce variable manufacturing costs by $12,000 per year over its five-year useful life. Calculate the incremental income.
Answer: $7,500
Explanation:
In calculating the Incremental income we will add the amount of variable Manufacturing costs Rory Company will save as well as the income they will get from selling the old machine and then subtract the cost price of the new machine.
Starting off we will calculate the amount of savings they will make by using the new machine,
= $12,000 x 5 years
= $60,000
Calculating the Incremental income therefore we have,
= 60,000 + 60,000(from selling old machine) - 112,500 (cost of new machine)
= $7,500
The incremental income of buying the new machine is $7,500.
If you need any clarification do comment.
The incremental income is $7,500.
Explanation:
The incremental income can be calculated by comparing the costs and savings associated with the old machine and the new machine.
First, calculate the net cost of the new machine:
Cost of new machine: $112,500Trade-in value of old machine: $60,000Net cost of new machine: $112,500 - $60,000 = $52,500
Next, calculate the total variable manufacturing cost savings over the five-year useful life:
Variable manufacturing cost savings per year: $12,000Useful life of new machine: 5 yearsTotal variable manufacturing cost savings: $12,000 x 5 = $60,000
Finally, calculate the incremental income:
Incremental income = Total variable manufacturing cost savings - Net cost of new machineIncremental income = $60,000 - $52,500 = $7,500
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Talks-A-Lot, Inc. sells cell phones to customers and expects that 10% of phones sold will be returned for repair under its warranty program. The average repair cost is $75 per phone. For 2021, Talks-A-Lot has sold 750 cell phones and has repaired 30 of them as of December 31, 2021. What amount of warranty liability should be reported at December 31, 2021?
Answer:
amount of warranty liability that should be reported at December 31, 2021 is $3,375
Explanation:
When the Sale was made, the Warrant Liability is recorded as follows:
Warranty Cost $5,625 (Debit)
Warranty Provision $5,625 (Credit)
Warranty Cost = 750 cell phones × $75 × 10% = $5,625
When Warranty Claims were received during the year the records are as follows :
Warranty Provision $2,250 (Debit)
Cash $2,250 (Debit)
Warranty Cost = 30 × $75 = $2,250
At December 31, 2021 the amount of warranty liability should be
Warranty Provision = $5,625 - $2,250 = $3,375
Bridgeport Company has an old factory machine that cost $43,000. The machine has accumulated depreciation of $24,080. Bridgeport has decided to sell the machine. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)(a)What entry would Bridgeport make to record the sale of the machine for $21,080 cash?(b)What entry would Bridgeport make to record the sale of the machine for $11,080 cash?
Answer:
a.
Cash $21080 Dr
Accumulated Depreciation-Machine $24080 Dr
Gain on Disposal $2160 Cr
Machine account $43000 Cr
b.
Cash $11080 Dr
Accumulated Depreciation-Machine $24080 Dr
Loss on Disposal $7840 Dr
Machine account $43000 Cr
Explanation:
The asset is being sold off by the company which will cause the business to write off the asset from the books and credit it. The accumulated depreciation is a contra asset account and it will be debited to close this account.
The carrying value of the asset = Cost - Accumulated Depreciation
Carrying value = 43000 - 24080 = $18920
If the sales proceeds is more than the carrying value there is a gain on disposal and vice versa.
a.
Gain/loss on disposal = 21080 - 18920 = $2160 gain
b.
Gain/loss on disposal = 11080 - 18920 = -$7840 loss
To record the sale of a machine, Bridgeport Company would create journal entries based on whether there is a gain or loss on the sale, compared to the machine's book value. For a sale of $21,080, a gain is recognized, and for a sale of $11,080, a loss is recognized.
The sale of an asset, such as a factory machine, requires the company to record the transaction in their accounts. In this case, Bridgeport Company needs to record the sale of a machine that cost $43,000 with accumulated depreciation of $24,080.
Scenario A: Selling the Machine for $21,080 cash
First, we calculate the book value of the machine which is the original cost ($43,000) minus the accumulated depreciation ($24,080), resulting in $18,920. When the machine is sold for $21,080 cash, which is more than the book value, a gain on sale must be recorded for the difference ($21,080 - $18,920 = $2,160).
Accounting entry:
Debit Cash $21,080
Debit Accumulated Depreciation $24,080
Credit Machine $43,000
Credit Gain on Sale of Machine $2,160
Scenario B: Selling the Machine for $11,080 cash
With the same book value of $18,920, if the machine is sold for $11,080 cash, a loss must be recorded since the sale price is less than the book value ($18,920 - $11,080 = $7,840).
Accounting entry:
Debit Cash $11,080
Debit Accumulated Depreciation $24,080
Debit Loss on Sale of Machine $7,840
Credit Machine $43,000
Pro-Am Audio is a company that is contracted to DJ private events. Due to a recent increase in bookings, Pro-Am is considering the purchase of another mobile DJ unit. Pro-Am uses the payback method to evaluate its investments. The mobile DJ unit will cost $12,000, has a useful life of 10 years, and will generate $2,000 in net cash inflows per year. The residual value of the unit is $1,000. What is the payback period for the mobile DJ unit?
Answer:
6 years
Explanation:
Payback period calculates the amount of time it takes to recover the amount invested in a project to be recovered from the cumulative cash flow.
Payback period = amount invested / cash flows
$12,000 / $2,000 = 6 years
I hope my answer helps you
The payback period for the new mobile DJ unit costing $12,000 with an annual net cash inflow of $2,000 is 6 years.
The question is about calculating the payback period for a new mobile DJ unit for a company called Pro-Am Audio. This is a financial concept often used in capital budgeting to determine the time required to recover the initial investment in a project. To calculate the payback period, we divide the initial cost of the investment by the annual net cash inflow generated by that investment.
The mobile DJ unit has a cost of $12,000 and generates $2,000 in net cash inflows per year. Since the residual value is $1,000 and is not factored into the payback period calculation for this method, we use only the annual net cash inflows for our calculation. The payback period can be computed as follows:
Payback Period = [tex]\frac{ Initial Investment}{ Annual Net Cash Inflow}[/tex]
Payback Period = $[tex]\frac{12,000}{2000}[/tex] per year
Payback Period = 6 years
Therefore, the payback period for the mobile DJ unit is 6 years.
Last Chance Mine (LCM) purchased a coal deposit for $750,000. It estimated it would extract 12,000 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1 million, $3 million, and $2 million for years 1 through 3, respectively. During years 1–3, LCM reported net income (loss) from the coal deposit activity in the amount of ($20,000), $500,000, and $450,000, respectively. In years 1–3, LCM actually extracted 13,000 tons of coal as follows: (Leave no answer blank. Enter zero if applicable. Enter your answers in dollars and not in millions of dollars.)
Answer:
The method used to recover costs of investment in natural resources like oil refinery, mining, timber forest is referred to as depletion.
a)
Year 1 Year 2 Year 3
Tons extracted 2,000 7,200 2,800
Depletion rate $62.50 $62.50 $62.50
Cost depletion expense $125,000 $450,000 $175,000
Note: the extract tons of coal from the deposit is limited to 12,000. So, 1,000 tons extract is deducted in the last year.
b.
Percentage depletion: This is a method of computing depletion amount based on percentage depletion rates. Percentage depletion is computed by multiplying the gross income obtained from extraction with fixed percentage depletion rates.
Calculate LC’s percentage depletion for each year.
[Find the figure in the attachment]
Note: The percentage depletion is not limited to the basis in the property.
c.
Compute LC’s actual depletion expense for each year.
[Find the figure in the attachment]
At the end of the current year, Kennedy Co. has a defined benefit obligation of $335,000 and pension plan assets with a fair value of $245,000. The amount of the vested benefits for the plan is $225,000. Kennedy has an actuarial gain of $8,300. What account and amount(s) related to its pension plan will be reported on the company’s statement of financial position?
Answer:
The account and amount(s) related to Kennedy Co.'s pension plan that will be reported on the company’s statement of financial position are pension liability and $90,00 respectively.
Explanation:
The difference between defined benefit obligation and fair value of plan assets is recorded on a balance sheet.
Defined benefit obligation is $335,000 which is higher than the fair value of plan assets of $245,000. Hence, the net result is pension liability.
Pension liability = defined benefit obligation - fair value of plan assets = $335,000 - $245,000 = $90,000.
The account and amount(s) related to Kennedy Co.'s pension plan that will be reported on the company’s statement of financial position are pension liability and $90,00 respectively.
Actuarial gain is part of pension expense. Vested benefits amount is recorded in the notes to account.
On Kennedy Co.
statement of financial position, the pension plan will report a pension liability of $90,000. This is calculated by subtracting the fair value of the pension plan assets ($245,000) from the defined benefit obligation ($335,000). The vested benefit amount and actuarial gain are relevant for disclosure but do not affect the balance on the statement of financial position.
In accounting for pension plans, companies must recognize the over- or underfunding of their plans. The defined benefit obligation reflects the present value of estimated future payments to employees, and plan assets represent the value of funds available to make these payments. When the obligation exceeds the assets, as in Kennedy Co.
's case, a pension liability is recognized. Actuarial gains and losses represent changes in pension costs due to differences in actual plan results against expectations. While such gains and losses are essential for pension accounting, they do not directly change the reported amounts on the statement of financial position, though they may be recognized in other comprehensive income and affect the pension liability in the future. The vested benefits value indicates the amount that is guaranteed to employees at that point in time, irrespective of their continued employment, and serves as important additional information for the financial statements.
The Sisyphean Company has a bond outstanding with a face value of $ 5 comma 000 $5,000 that reaches maturity in 5 5 years. The bond certificate indicates that the stated coupon rate for this bond is 9.1 9.1% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 8 8%, then the price that this bond trades for will be closest to:
Answer: $5,219.59905
the price that the bond traded for would be closest to
$5,220 (rounded to whole number)
Explanation:
Using the price of bond formula below:
Price = C × 1 - [(1+r)^-n] /r + F/ (1+r)^n
C = coupon rate = 9.1% of face values ($5,000)
F= Face value(par value) = $5,000
n = number of years to maturity; 5
r = YTM (yield to maturity) = 8% = 0.08
Price = 455 × 1 - [(1+0.08)^-5]/0.08 + 5,000/(1+0.08)^5
Price = 455 × 1 - [(1.08)^-5]/0.08 + 5,000/(1.08)^5
Price= 455 × ( 1 - 0.680583197)/0.08 + 5,000 / 1.46932808
Price= 455 × (0.319416803)/0.08 + 3,402.91598
Price = 1,816.68307 + 3,402.91598
Price= $5,219.59905
≈$5,220 to the nearest whole number.
While the risks of construction lending may be less in a number of respects than those associated with land acquisition, banks still require a premium in their lending rate as compensation for the risks involved. For construction loans, banks typically require a premium above LIBOR that ranges from
Answer: C. 150-250 basis points
Explanation:
Banks now charge between 150 to 250 basis points above the London Interbank Official Rate (LIBOR). This means that they charge a premium of between 1.5% to 2.5% over LIBOR for construction projects.
Like earlier mentioned, risks of construction lending may be less in a number of respects than those associated with land acquisition but however there are still risks. Risks such as low Tenancy when built, the potential Environmental problems and location.
This is why it is necessary to charge such a premium which is actually a very competitive rate amongst Banks.
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Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Products A B C D Direct materials $ 15.50 $ 11.40 $ 12.20 $ 11.80 Direct labor 20.60 28.60 34.80 41.60 Variable manufacturing overhead 5.50 3.90 3.80 4.40 Fixed manufacturing overhead 27.70 36.00 27.80 38.40 Unit product cost $ 69.30 $ 79.90 $ 78.60 $ 96.20 Additional data concerning these products are listed below. Products A B C D Grinding minutes per unit 5.00 6.50 5.50 4.60 Selling price per unit $ 77.30 $ 94.70 $ 88.60 $ 105.40 Variable selling cost per unit $ 3.40 $ 2.40 $ 4.50 $ 2.80 Monthly demand in units 5,200 5,200 4,200 3,200 The grinding machines are potentially the constraint in the production facility. A total of 54,800 minutes are available per month on these machines. Direct labor is a variable cost in this company. How many minutes of grinding machine time would be required to satisfy demand for all four products
Answer:
How many minutes of grinding machine time would be required to satisfy demand for all four products = 97,620 minutes.
Explanation:
The minutes of grinding machine required to satisfy demand for all four products -
Grinding time of Product A = Grinding minutes per unit of Product A * Monthly demand in units of Product A
= 5.0 * 5,200 = 26,000
Grinding time of Product B = Grinding minutes per unit of Product B * Monthly demand in units of Product B
= 6.50 * 5,200 = 33,800
Grinding time of Product C = Grinding minutes per unit of Product C * Monthly demand in units of Product C
= 5.50 * 4,200 = 23,100
Grinding time of Product D = Grinding minutes per unit of Product D * Monthly demand in units of Product D
= 4.60 * 3,200 = 14,720
The minutes of grinding machine required to satisfy demand for all four products =
= 26,000 + 33,800 + 23,100 + 14,720
= 97,620 minutes.
Andy derives utility from two goods, potato chips (p) and cola (c). Andy receives zero utility unless he consumes some of at least one good. The marginal utility that he receives from the two goods is given as follows:
Answer:
6
Explanation:
Marginal Utility is defined as the satisfaction that an individual gains after consuming additional units of a certain goods or services. Andy has two goods available to consume cola and potato chips. Andy will consume 6 units of potato chips to maximize his marginal utility. The cola is also consumed by Andy to satisfy his marginal utility.
The question pertains to utility in economics, particularly focusing on diminishing marginal utility and consumer choice theory. It explores how a rational consumer equates marginal utility with opportunity cost to maximize satisfaction under budget constraints.
The student's question involves the concept of utility, which relates to the satisfaction or pleasure a person derives from consuming goods and services. Specifically, the question addresses the principle of diminishing marginal utility, which is a core idea within microeconomics that concerns how additional units of a good or service provide less satisfaction compared to earlier units consumed. This topic is a part of consumer choice theory, which analyzes how consumers make decisions to allocate their limited resources across different goods and services to maximize their utility.
A rational consumer will continue to purchase more of a good only if the marginal utility of that good exceeds the opportunity cost, which is the utility of the next-best alternative foregone. The student's inquiry leads to understanding how utility and the law of diminishing marginal utility play a crucial role in consumer decision-making and resource allocation within the constraints of a budget.
Linda underpaid her taxes for the current year by $4,000 due to negligence. a. Calculate Linda's accuracy-related penalty for negligence. $ b. Assume that the underpayment of taxes by Linda was determined to be fraudulent, and calculate the total amount of Linda's fraud penalty.
Answer:
a. Linda's accuracy-related penalty for negligence is $ 800.
b. The total amount of Linda's fraud penalty is $3000.
Explanation:
a. Penalty for the negligence of Linda
= $4,000*20%
= $800
Therefore, Linda's accuracy-related penalty for negligence is $ 800.
b. Penalty for fraud of Linda
= $4000*75%
= $3000
Therefore, The total amount of Linda's fraud penalty is $3000.
There are five different ways that we can measure legal (monetary) damages: 1) compensatory, 2) consequential, 3) nominal, 4) punitive, and 5) liquidated. Each of these attempts to estimate some aspect of injury caused by the breach of contract. While compensatory and consequential damages complement each other and are sometimes collectively called actual damages. Actual damages mutually exclude the award of nominal or liquidated damages. Nominal damages like liquidated damages preclude any other type of damage award. Finally, punitive damages will not be awarded for breach of contract because it would be contrary to public policy. How would awarding punitive damages for breach of contract harm society?
Answer:
Punitive damages are those harms that surpass basic pay and are granted with an expectation to rebuff the respondent. The essential target of reformatory harm isn't to remunerate the oppressed party however to rebuff the gathering that hosts irritated or wronged the bothered get-together.
Granting punitive damages for penetrate of agreement can conceivably hurt the general public. This is on the grounds that numerous penetrates of agreement can be because of conduct of the culpable party which is neither intentional nor careless. Reformatory harms should just be restricted and material to tort cases and should just be utilized to rebuff those bad behaviors that are conscious and foolish. Anyway utilizing correctional activities to rebuff somebody who has penetrated an agreement because of specific occasions or circumstances that were not in his control will be crooked and uncalled for.
Punitive damages are semi criminal in nature and ordering and clubbing all break of agreement (despite the fact that not purposeful or not having components of dishonesty, malevolence or wanton) as semi criminal in nature will be in opposition to open arrangement and will hurt the general public.
On January 1, 2021, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 $ 316,000 September 1, 2021 $ 462,000 December 31, 2021 $ 462,000 March 31, 2022 $ 462,000 September 30, 2022 $ 316,000 Dreamworld had $5,400,000 in 14% bonds outstanding through both years. What was the final cost of Dreamworld's warehouse?
The final cost of Dreamworld's warehouse is $1554000
Explanation:
Expenditure Time period Average expenditure
January 1,2021 300000 12/12 300000
September 1,2021 450000 4/12 150000
December 31,2021 450000 0/12 0
Total 1200000 450000
Interest capitalized for 2021 54000 = 450000 into 12%
Total expenditure till Jan 1, 2022 1254000 = 1200000 + 54000
Expenditure Time period Average expenditure
Total expenditure
till Jan 1,2022 1254000 9/9 1254000
March 31,2022 450000 6/9 300000
September 30,2022 300000 0/9 0
Total 1554000
Therefore, the Option B $1,554,000 is correct final cost of Dreamworld's warehouse.
Final answer:
The final cost for Dreamworld's warehouse is calculated by summing up all construction related expenditures, which total to $2,018,000.
Explanation:
The final cost of Dreamworld's warehouse is the sum of all expenditures made over the construction period. This includes payments made on five different dates:
January 1, 2021, for $316,000September 1, 2021, for $462,000December 31, 2021, for $462,000March 31, 2022, for $462,000September 30, 2022, for $316,000To calculate the final cost of Dreamworld's warehouse, we need to add up these amounts:
$316,000 + $462,000 + $462,000 + $462,000 + $316,000 = $2,018,000.
Hence, the total expenditure for the warehouse construction is $2,018,000.
Round Hammer is comparing two different capital structures: An all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 180,000 shares of stock outstanding. Under Plan II, there would be 130,000 shares of stock outstanding and $2.6 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. a. If EBIT is $575,000, what is the EPS for each plan
Answer:
EPS of Plan I = $3.19
EPS of Plan II = $2.82
Explanation:
Under Plan I:
Plan I's Earning per share (EPS) = EBIT ÷ Number of shares = $575,000 ÷ 180,000 = $3.19
Under Plan II:
Interest = $2,600,000 × 8% = $208,000
Earning after Interest = EBIT - Interest = $575,000 - $208,000 = $367,000
Plan II's EPS = $367,000 ÷ 130,000 = $2.82
Carlos Naturals manufactures bulk quantities of cleaning fluids. The company currently sells 700 containers a month at a sales price of $ 28 per unit. The addition of a new disinfectant will result in a sales price of $ 30 per unit for the improved product. It would cost a total of $ 4 comma 400 per month to make the alteration. Operating income would
Answer:
Operating income would be $ 16,600
Explanation:
Consider the new circumstance addition of a new disinfectant.
Incremental Costs and Revenues - addition of a new disinfectant
Sales (700× $ 30) 21,000
Alteration Cost 4,400 (4,400)
Net Income 16,600
Therefore Operating income would be 16,600
Based on the information given Operating income would decrease by $3,000
Operating income:
Sales $21,000
(700× $ 30)
Sales Addition ($19,600)
(700× $28)
Alteration Cost ($4,400)
Operating Income -$3,000
Inconclusion the Operating income would decrease by $3,000.
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Multiple Choice Question 119 Crane Company developed the following data for the current year: Beginning work in process inventory $ 206000 Direct materials used 208000 Actual overhead 176000 Overhead applied 184000 Cost of goods manufactured 960000 Total manufacturing costs 916000 How much is Crane Company's ending work in process inventory for the year
Answer:
$162,000
Explanation:
As we know that
Cost of goods manufactured = Opening work in process inventory + Total Manufacturing cost - ending work in process inventory
$960,000 = $206,000 + $916,000 - ending work in process inventory
$960,000 = $1,122,000- ending work in process
So the ending work in process inventory is
= $1,122,000 - $960,000
= $162,000
We simply applied the above formula
The ending work in process inventory for Crane Company for the current year is -$186,000.
Explanation:To find the ending work in process inventory for Crane Company, we need to use certain data provided and apply the formula: Beginning work in process inventory + Total manufacturing costs - Cost of goods manufactured.
The Total manufacturing costs include: Direct materials used + Actual overhead + Applied overhead. So, Total manufacturing costs = $208,000 (Direct materials) + $176,000 (Actual overhead) + $184,000 (Applied overhead) = $568,000.
Then, we substitute these values into the formula:
Ending work in process inventory = $206,000 (Beginning work in process inventory) + $568,000 (Total manufacturing costs) - $960,000 (Cost of goods manufactured) = -$186,000.
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A U.S.-based MNC that frequently imports raw materials from Canada. It is typically invoiced for these goods in Canadian dollars and is concerned that the Canadian dollar will appreciate in the near future.
1. Which of the following is an appropriate hedging technique under these circumstances?
A. sell Canadian dollars forward.
B. purchase Canadian dollar futures contracts.
C. buy Canadian dollar put options.
D. sell Canadian dollar call options.
Answer:
B. purchase Canadian dollar futures contracts.
Explanation:
when the company is concerned about the appreciation of the Canadian dollar than it should buy a futures contract to buy the Canadian dollar in the future so that the Canadian dollar appreciates the hedge due to the futures contract.so that here correct option is B. purchase Canadian dollar futures contracts.
RBS Company’s top selling item is a Pen Set. RBS Company expects to sell 100 Pen Sets per month for the next 12 months. RBS Company purchases the Pen Sets from a supplier for $25 dollars each, and incurs a cost of $50 dollars for each order that they place. RBS Company estimates that their inventory carrying cost is 20% annually. what is RBS Company’s EOQ for pen set?
Answer:
EOQ = 155 units
Explanation:
Economic order quantity is the quantity at which business incur minimum cost. This is the level of order where the holding cost equals to the ordering cost of the business.
As per given data
Annual Demand = 100 per week x 12 weeks in a year = 1,200 bolts
Ordering cost = $50
Carrying cost = $25 x 20% = $5
EOQ = [tex]\sqrt{\frac{2 X S X D}{H} }[/tex]
EOQ = [tex]\sqrt{\frac{2 X 50 X 1,200}{5} }[/tex]
EOQ = 154.92 units = 155 units
If RBS Company’s top selling item is a Pen Set. RBS Company expects to sell 100 Pen Sets per month for the next 12 months. what will be RBS Company’s EOQ for pen set is 155
Using this formula
EOQ=√[2(Ordering costs)(Demand )] ÷Holding costs
Where:
Ordering costs=50
Demand=(100×12)=1200
Holding costs=0.20×25=5
Let plug in the formula
EOQ=√[2 x 50x 1200] ÷0.20x25
EOQ= √120,000/5
EOQ= √24,000
EOQ= 154.91
EOQ= 155 (Approximately)
Inconclusion if RBS Company’s top selling item is a Pen Set. RBS Company expects to sell 100 Pen Sets per month for the next 12 months. what will be RBS Company’s EOQ for pen set is 155.
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Current assets for two different companies at fiscal year-end are listed here. One is a manufacturer, Rayzer Skis Mfg., and the other, Sunrise Foods, is a grocery distribution company. Account Company 1 Company 2 Cash $ 11,000 $ 9,000 Raw materials inventory — 39,875 Merchandise inventory 42,875 — Work in process inventory — 29,000 Finished goods inventory — 49,000 Accounts receivable, net 56,000 75,000 Prepaid expenses 4,500 900 Required: 1. Identify which set of numbers relates to the manufacturer and which to the merchandiser. 2a. & 2b. Prepare the current asset section for each company from this information.
Answer:
Requirement 1
Relating to manufacturer
Cash
Raw materials inventory
Work in process inventory
Finished goods inventory
Accounts receivable, net
Relating to merchandiser
Cash
Merchandise inventory
Accounts receivable, net
Prepaid expenses
Requirement 2
Company Rayzer Skis Mfg Sunrise Foods
Current Asset Section:
Cash 11,000 9,000
Raw materials inventory 39,875 N/A
Merchandise inventory N/A 42,875
Work in process inventory 29,000 N/A
Finished goods inventory 49,000 N/A
Accounts receivable, net 56,000 75,000
Prepaid expenses 4,500 900
Total 189,375 127,775
Explanation:
manufacturer produces goods then sells finished goods
merchandiser purchases goods for resale
The manufacturer is represented by Rayzer Skis Mfg. and the merchandiser is represented by Sunrise Foods. Rayzer Skis Mfg.'s current assets include cash, merchandise inventory, accounts receivable, and prepaid expenses. Sunrise Foods' current assets include cash, raw materials inventory, work in process inventory, finished goods inventory, accounts receivable, and prepaid expenses.
Explanation:The set of numbers that relates to the manufacturer, Rayzer Skis Mfg., is as follows:
Cash: $11,000 Raw materials inventory: Not provided Merchandise inventory: $42,875 Work in process inventory: Not provided Finished goods inventory: Not provided Accounts receivable, net: $56,000 Prepaid expenses: $4,500
The set of numbers that relates to the merchandiser, Sunrise Foods, is as follows:
Cash: $9,000 Raw materials inventory: $39,875 Merchandise inventory: Not provided Work in process inventory: $29,000 Finished goods inventory: $49,000 Accounts receivable, net: $75,000 Prepaid expenses: $900
A contractor must choose between buying or renting a crane for the duration of a 5 year construction project. The contractor uses an MARR of 8%. At the end of the project, the crane can be sold for 21% of its initial cost. The cost to operate and maintain the crane is $210,000 per year. Renting the crane costs $330,000 per year including all operating and maintenance costs.
Determine the maximum amount the contractor should pay to purchase the crane (i.e. the breakeven initial cost of the crane).
Answer:
Renting a crane + Maintenance = $330,000
Rent duration. = 5 years
Percentage. = 8%
330,000/ 100 x 8/ 1 x 5
= $132,000
Sold Crane 21% of initial cost
Initial cost =
330,000 x 100 x 21/1
330 x 21
= $6,930 + $132,000
To purchase the crane he pays
=$138,930
You are a loan officer at a bank. Two years ago your bank loaned Westwood Solar $100,000 to start a company selling solar panels to commercial and residential customers. The loan has an acceleration clause that permits the bank to immediately demand all payments plus the interest owed to date if Westwood Solar fails to pay an installment in any given month. Westwood Solar has made its loan payments for the past two years. However, you know that the company has slipped into financial distress as sales of solar panels have proved more difficult than expected. The CEO of Westwood Solar, anticipating your concern, has informed you that a new state bill proceeding through the legislature proposes to give residents substantial tax breaks for buying solar panels. The CEO has also asked for a two month extension for the next payment in order to prepare for the new tax law. Evaluate whether you should exercise the acceleration clause against Westwood Solar.
Answer:
As a person I will give some time to that organization for pay the instalment, on the grounds that such huge numbers of individuals legitimately or by implication associated with that organization.
According to financial perspective additionally I should give some an opportunity to re pay the instalment. Turned out to be presently a days joblessness is one significant issue. Also this kind of organizations will help to nation to improve economy by spreading business in different nations. What's more, this organization additionally help to diminish the portion of outside organizations in own nation.
We realize that step by step the interest of non-traditional energies is expanding. Among all the non-customary energies sun based vitality assumes a significant job. Presently a days government additionally begins to offer dies down to this sorts of organizations to stop the cheapening of natural conditions by the utilization of ordinary vitality sources.
The decision to trigger the acceleration clause against Westwood Solar must balance the company's history of regular payments and the prospect of improved sales due to the proposed tax breaks with the bank's financial interests.
Explanation:The question involves evaluating whether to exercise the acceleration clause against Westwood Solar that has recently slipped into financial distress. Considering the potential impact of the new state bill that could provide tax breaks and boost solar panel sales, the decision to demand immediate payment must be weighed against the company's past record of consistent payments and the prospects of recovery with the pending legislation. An acceleration clause allows a bank to demand all payments if the borrower fails to make an installment, similar to the way credit card companies cover losses from delinquent payments. However, enforcing such a clause should be a measured decision.
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The planning budget for October was based on serving 23 customers, but a total of 19 customers were actually served during October. The activity variance for total expenses for October would have been closest to: $6,400 F $6,400 U $7,900 U $7,900 F
Answer:
$6400 F
Explanation:
Note that, The Fixed expense remains constant irrespective of the no. customers served.
Therefore it is irrelevant and won't be used in the calculation of activity variance.
Again an activity variance occurs to the difference between actual level of used flexible budget and assumed in planning budget.
Therefore, calculating activity variance in the given case, it will be following:
Actual expense - Estimated Expense
= (Employee, salary and wages + Travel expenses) per customer X [Planned no. of customers served - Actual no. of customers served]
=$(1100+500) X [23-19]
=$6400 F.
Polar Industries makes refrigerators. Polars management wants to market refrigerators to students in dorm rooms and small apartments by making a compact refrigerator. The competition, led by Walmart, prices small refrigerators at $76 each. The production manager at Polar Industries estimates that the small refrigerator could be produced for the following manufacturing costs.
Direct materials $24
Direct labor 10
Manufacturing overhead 8
Total $42
Polar's management wants to make an operating margin of 10 percent (operating margin equals revenues minus manufacturing costs).
Suppose Polar uses cost-plus pricing, setting the price to manufacturing costs plus 10 percent of manufacturing costs, What price should it charge for the refrigerator?
Answer:
Selling price = $46.2
Explanation:
Cost plus pricing determines the price of the product by adding a given percentage of the cost to the manufacturing cost to arrive at the price.
Selling Price = Manufacturing Cost + (mark-up(%)× manufacturing cost)
Selling price :
= 42 + (10%× 42)
= $46.2
Selling price = $46.2
To achieve an operating margin of 10%, Polar Industries should price each compact refrigerator at $46.2 by using the cost-plus pricing strategy.
Explanation:Polar Industries is using a cost-plus pricing strategy, in which a set margin is added to the manufacturing costs to determine the sale price of a product. In this case, Polar's manufacturing costs for the small refrigerators total to $42 and they aim for an operating margin of 10 percent.
Therefore, the operating margin, which is the profit, would be 10% of $42, which is $4.2. Adding the manufacturing costs and the desired profit together, $42 + $4.2, gives us $46.2. Therefore, Polar should set its price at $46.2 per compact refrigerator to achieve their intended operating margin.
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Assume a company's Income Statement for Year 12 is as follows: Income Statement Data Year 12 (in 000s) Net Revenues from Footwear Sales $ 580,000 Cost of Pairs Sold 350,000 Warehouse Expenses 45,000 Marketing Expenses 90,000 Administrative Expenses 15,000 Operating Profit (Loss) 80,000 Interest Income (Expense) (20,000) Pre-tax Profit (Loss) 60,000 Income Taxes 18,000 Net Profit (Loss) $ 42,000 Based on the above income statement data and assuming the company has 20 million shares of common stock outstanding , the company's operating profit margin and EPS were 6.67% and $2.10.7.24% and $2.20.9.7% and $2.10. 10.34% and $3.20. 13.79% and $2.10.
Answer:
13.79% and $2.10
Explanation:
Operating Profit Margin= ( Operating Profit/Sales)*100
=(80,000/580,000)*100=13.79%
EPS= Net income/Shares outstanding
=42,000/20,000=$2.10
Please note that amounts have been taken as $ in '000'
The company's operating profit margin is 13.79%, and its Earnings Per Share (EPS) is $2.10. The company's operating profit margin and EPS can be calculated using the given data.
Explanation:In this case, the company's Operating Profit Margin is calculated by dividing Operating Profit (80,000 in 000s) by Net Revenues from Sales (580,000 in 000s) which gives 0.1379 or 13.79% when expressed as a percentage, indicating the correct option is 13.79%.
The company's Earnings Per Share (EPS) is calculated by dividing the Net Profit (42,000 in 000s) by the number of shares outstanding (20 million). This gives us $2.10 per share. So, the correct EPS is $2.10. Hence, the detailed calculations affirmatively answer that the company's operating profit margin and EPS were 13.79% and $2.10 respectively.
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A company issues $24900000, 5.8%, 20-year bonds to yield 6% on January 1, 2020. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24324441. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2020 balance sheet
Answer:
$24,353,219
Explanation:
The bond is issued on discount when the bond issuance proceeds are less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.
Discount on the bond = Face value - cash proceeds = $24,900,000 - $24,324,441 = $575,559
According to straight line amortization
Discount charged in the period = $575,559 / 20 = $28,778 per year = $14,389 per six months
Cash payment of interest = $24,900,000 x 5.8% = $1,444,200 per year = $722,100 per six months
As on December 31, 2020, one year has passed since the bond is issued. We will calculate annual interest expense
Total Interest Expense = $1,444,200 + $28,778 = $1,472,978
Bond Carrying value will be the net of bond book value and un-adjusted discount balance.
Carrying value of Bond = 24,900,000 - (575,559 - 28,778) = $24,353,219
Final answer:
Using the effective-interest amortization method, the carrying value of the company's bonds on the December 31, 2020 balance sheet will be $24,341,850. The original discount is amortized over the interest payment periods based on the market rate of 6%.
Explanation:
Since the company issued bonds at a discount (the bonds were sold for less than their face value), the discount on bonds payable needs to be amortized over the life of the bonds. On January 1, 2020, the bonds are issued for $24,900,000, with a stated interest rate of 5.8% when the market rate is 6%. The bonds are sold for $24,324,441, indicating a discount of $575,559. Over the course of each interest payment period, part of this discount is amortized as additional interest expense. For the first interest payment on June 30, 2020, the interest expense will be calculated using the market interest rate (6%) times the carrying amount of the bonds at the beginning of the period: 6% * $24,324,441 = $729,733. The actual cash paid for interest, calculated with the stated interest rate (5.8%) on the face value, will be $24,900,000 * 5.8% / 2 = $721,650 (interest is paid semi-annually). The difference between the interest expense and the interest paid ($8,083) is the amount of discount amortized. After recording this, the revised carrying amount of the bonds becomes $24,332,524 ($24,324,441 + $8,083). For the second payment on December 31, 2020, the same process is followed. The new interest expense will be calculated on the updated carrying amount: 6% * $24,332,524 / 2 = $730,976. The interest paid remains the same at $721,650. The additional amortization of the discount is $9,326 ($730,976 - $721,650), bringing the carrying value of the bonds on the December 31, 2020 balance sheet to $24,341,850 ($24,332,524 + $9,326).
Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $47,600, terms n/30. The cost of the goods sold is $28,600. Showcase Co. issues a credit memo for $9,500 for merchandise returned prior to Balboa Co. paying the original invoice. The cost of the merchandise returned is $5,700. a. Journalize Showcase Co.'s entries for (1) the sale, including (2) the cost of the goods sold. If an amount box does not require an entry, leave it blank. (1) (2) b. Journalize Showcase Co.'s entries for (1) the credit memo, including (2) the cost of the returned merchandise. If an amount box does not require an entry, leave it blank. (1) (2) c. Journalize Showcase Co.'s entry for the receipt of the check for the amount due from Balboa Co. If an amount box does not require an entry, leave it blank.
Final answer:
To journalize Showcase Co.'s entries, debit Accounts Receivable and credit Sales for the sale, debit Cost of Goods Sold and credit Inventory for the cost of goods sold, debit Sales Returns and Allowances and credit Accounts Receivable for the credit memo, debit Inventory and credit Cost of Goods Sold for the cost of returned merchandise, and debit Cash and credit Accounts Receivable for the receipt of the check.
Explanation:
To journalize Showcase Co.'s entries for the sale and cost of goods sold:
Debit Accounts Receivable and credit Sales for the amount of the sale ($47,600).Debit Cost of Goods Sold and credit Inventory for the cost of the goods sold ($28,600).To journalize Showcase Co.'s entries for the credit memo and cost of returned merchandise:
Debit Sales Returns and Allowances and credit Accounts Receivable for the amount of the credit memo ($9,500).Debit Inventory and credit Cost of Goods Sold for the cost of the returned merchandise ($5,700).To journalize Showcase Co.'s entry for the receipt of the check from Balboa Co.:
Debit Cash and credit Accounts Receivable for the amount of the check received.The final entry for the receipt of the check is:
[Debit]. Cash for $38,100
[Credit]. Accounts Receivable: Balboa Co. for $38,100
a. The journal entries for Showcase Co.'s sale and cost of goods sold are as follows:
1) Sale on account:
[Debit]. Accounts Receivable: Balboa Co. for $47,600
[Credit]. Sales Revenue for $47,600
2) Cost of goods sold:
[Debit]. Cost of Goods Sold for $28,600
[Credit]. Inventory for $28,600
b. The journal entries for Showcase Co.'s credit memo and cost of the returned merchandise are as follows:
1) Credit memo issued:
[Debit]. Sales Returns and Allowances for $9,500
[Credit]. Accounts Receivable: Balboa Co. for $9,500
2) Cost of returned merchandise:
[Debit]. Inventory for $5,700
[Credit]. Cost of Goods Sold for $5,700
c. The journal entry for the receipt of the check from Balboa Co. is as follows:
[Debit]. Cash for the amount due after adjusting for the credit memo
[Credit]. Accounts Receivable: Balboa Co. for the original invoice amount minus the credit memo amount
a. When Showcase Co. sells merchandise on account to Balboa Co., it records the sale by debiting Accounts Receivable and crediting Sales Revenue for the full amount of $47,600. Simultaneously, it records the cost of the goods sold by debiting Cost of Goods Sold and crediting Inventory for $28,600, which is the cost to Showcase Co. of the merchandise sold.
b. When merchandise is returned by Balboa Co. before payment, Showcase Co. issues a credit memo. This is recorded by debiting Sales Returns and Allowances and crediting Accounts Receivable for $9,500, which is the amount of the credit memo. The cost of the returned merchandise is then adjusted by debiting Inventory and crediting Cost of Goods Sold for $5,700, which is the cost of the merchandise that was returned.
c. When Balboa Co. pays the amount due, Showcase Co. records the receipt of cash. The amount due is the original invoice amount minus the credit memo amount. Therefore, the entry involves debiting Cash for the net amount received and crediting Accounts Receivable for the same net amount. This reflects the reduction in the accounts receivable balance due to the credit memo and the receipt of cash.
To calculate the net amount due from Balboa Co., we subtract the credit memo amount from the original invoice amount:
Net amount due = Original invoice amount - Credit memo amount
Net amount due = [tex]$47,600 - $9,500[/tex]
Net amount due = [tex]$38,100[/tex]
Thus, the final entry for the receipt of the check is:
[Debit]. Cash for $38,100
[Credit]. Accounts Receivable: Balboa Co. for $38,100
This completes the journal entries required for the transactions described.
A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Purchase cost of the equipment $ 412,500 Annual cost savings that will be provided by the equipment $ 75,000 Life of the equipment 10 years
Complete question:
piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Purchase cost of the equipment $ 412,500 Annual cost savings that will be provided by the equipment $ 75,000 Life of the equipment 10 years.
a) compute the payback period for the equipment.
b)If the company requires a payback period of four years or less, woud the equipment be purchased?
Yes or No
2a)Compute the simple return rate on the equipment. Use staight-line depreciation based on the equipment's useful life.
2b) Would the equipment be purchased if the company's required rate of return is 13%?
Yes or No
Answer:
1a) 5.5 years
1b) No
2a) 9.8%
2b) No
Explanation:
Given:
•Purchase cost of equipment = $412,500
• Annual cost of savings that will be provided by the equipment = $75,000
• Life of equipment= 10 years
a) To find payback period, we use:
[tex] \frac{cost of equipment}{annual savings cost}[/tex]
= $412,500/$75,000
= 5.5 years => 5 years and 6months
b) If the company requires a payback period of four years, the equipment should not be purchased, because the required payback period (4 years), is lesser than the actual payback period(5.5 years).
2a) Annual depreciation =
Cost of equipment/months per year
= $412,500/12
= $34,375
Net income =
Annual savings cost - annual depreciation
= $75,000-$34,375 = $40,625
Simple rate of return will be:
Net income/ cost
= $40,625/$412,500
= 0.098
= 9.8%
2b) No, the equipment should not be purchased because required rate of return is higher than actual return
Fuchsia, Inc. provides automobile repair services in the local community. The company provides the following information for the month of March: Building Rent Expense $5,200 Depreciation Expenselong dashEquipment 1,600 Supplies Expense 8,000 Utilities Expense 2,350 Fuchsia provided services to 1,600 clients in the month of March and generated $23,500 as revenue. How much is the cost per service?
Answer:
Cost per service = $10.72
Explanation:
Total cost = Building Rent Expense + Depreciation Expense on Equipment + Supplies Expense + Utilities Expense = $5,200 + $1,600 + $8,000 + $2,350 = $17,150
Number of services provided = 1,600
Cost per service = Total cost ÷ Number services provided = $17,150 ÷ 1,600 = $10.72