The annual lease payment that Mequon Inc. should charge Thiensville Company, given a machine's fair value of $47,000, residual value of $30,000, z desire for a 6% return, and a 4 year lease term, is approximately $6,700.
Explanation:The subject of the question pertains to the calculation of annual rental payments based on a desired rate of return. Mequon Inc. is leasing equipment to Thiensville Company and desires a 6% return on the lease. The lease period is four years. To calculate the annual rental payment, we need to differentiate the actual monetary value of the machinery at the start of the lease versus the end which is the residual value. The present value of the lease payments is equal to the fair value of the asset minus the present value of the residual value at the desired return rate.
Here are the steps:
Determine the present value of the residual value, which is $30,000. At a 6% interest rate over 4 years, it equates to $30,000/(1+0.06)^4 = $23,770.Subtract this value from the initial fair value of the asset: $47,000 - $23,770 = $23,230.This remaining amount is what Thiensville Company will pay in lease payments over the four year period. As such, to determine the annual lease payment, we divide this amount by the present value annuity factor for a 6% rate of return over 4 years: $23,230 / 3.465 = $6,700 approximately.Learn more about Lease Payments here:
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A potential investor is seeking to invest $500,000 in a venture, which currently has 1,000,000 million shares held by its founders, and is targeting a 50% return five years from now. The venture is expected to produce half a million dollars in income per year at year 5. It is known that a similar venture recently produced $1,000,000 in income and sold shares to the public for $10,000,000.a. What is the percent ownership of our venture that must be sold in order to provide the venture investor’s target return?
b. What is the number of shares that must be issued to the new investor in order for the investor to earn his target return?
c. What is the issue price per share?
d. What is the pre-money valuation?
e. What is the post-money valuation?
Answer:
a, 15%
b, 150,000
c, $ 3.30
d, = $3,333,333.33
e, $3,833,333.33
Explanation:
To solve this,
Note that we have been given a similar venture to compare to our venture.
The total shareholder's equity for the other venture (P) = $10,000,000 and the net income (E) = $1,000,000
Hence, Price/Earnings (P/E) for other venture = 10,000,000/1,000,000 = 10.0
Now for our venture, Earnings in the 5th year = $500,000
Assuming that P/E ratio for both the ventures to be equal, P/500,000 = 10.0
hence, total shareholder's value for our venture = $5,000,000 --------------- (1)
Now the investor invested $500,000 and expected 50% return after 5 years, hence the investor's value after 5 years would be equal to 500,000 * (1+50%) = $750,000 --------------- (2)
Now percent ownership of venture given to investor = (Value of investor's investment after 5 years/total value of all shareholders after 5 years)
Hence, divide (2) by (1)
percent ownership of venture given to investor = 750,000/5,000,000 = 0.15
or 15%
Therefore Answer to part 'a' is = 15%
Part (b) :For the percentage ownership given to new investor = 15%, total number of shares = 1,000,000
Hence, number of shares issued to new investor = 15% x 1,000,000 = 150,000
Hence, answer to part b = 150,000
Part (c): Amount invested by new investor = $500,000 and number of shares issued to him = 150,000
hence issue price of share = Amount invested / Number of shares issued
= 500,000/150,000 = $3.33
Hence, issue price per share = $3.33
Part (d):
The Pre money valuation is the value of the company before any external funding. In this case, the number of shares held with the founders before the new investor = 1,000,000 and the equity price = $3.33
hence, Value of the venture = 3.33 * 1,000,000 = $3,333,333.33
Hence, pre money valuation of the venture = $3,333,333.33
Part (e): Post money valuation of a company is the value of the company after external funding. In this case, investor invests $500,000 to the venture increasing the value of the company by the same amount.
Hence post money valuation = pre money valuation + Investment
= 3,333,333.33 + 500,000
= 3,833,333.33
Hence, post-money valuation of the venture = $3,833,333.33
On July 31, 2017, Mexico Company paid $3,000,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Mexico. Conchita reported the following balance sheet at the time of the acquisition.
Current assets $800,000
Noncurrent assets $2,700,000
Total assets $3,500,000
Current liabilities $600,000
Long-term liabilities $500,000
Stockholders' equity $2,400,000
Total liabilities and stockholders' equity $3,500,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,750,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2017, Conchita reports the following balance sheet information.
Current assets $450,000
Noncurrent assets (including goodwill recognized in purchase) $2,400,000
Current liabilities (700,000)
Long-term liabilities (500,000)
Net assets $1,650,000
It is determined that the fair value of the Conchita Division is $1,850,000. The recorded amount for Conchita's net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of $150,000 above the carrying value.
Instructions:
(a) Compute the amount of goodwill recognized, if any, on July 31, 2017.
(b) Determine the impairment loss, if any, to be recorded on December 31, 2017.
(c) Assume that fair value of the Conchita Division is $1,600,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2017.
(d) Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be reported in the income statement.
Answer:
a. $250,000
b. Impairment loss to be recorded will be = $0
c. $200,000
d.Loss on impairment A/c Dr, $200,000
To Goodwill A/c $200,000
(Being impairment loss is recorded)
Explanation:
a.The computation of Goodwill is shown below:-
Goodwill = Fair value of the division - Fair value of the identifiable assets
= $3,000,000 - $2,750,000
= $250,000
b. Impairment loss to be recorded will be = $0
No loss of impairment is registered, since Conchita's fair value of $1,850,000 is greater than the net assets' carrying value of $1,650,000.
c. Implied fair value of goodwill = Fair value of division - Carrying value of the division
Fair value of Conchita division $1,600,000
Carrying value of division $1,650,000
Increase in fair value of PP&E $150,000
Less: Goodwill ($250,000) ($1,550,000)
Implied fair value of goodwill $50,000
Carrying value of goodwill ($250,000)
Impairment loss $200,000
d. To record the impairment loss the Journal entry is shown below:-
Loss on impairment A/c Dr, $200,000
To Goodwill A/c $200,000
(Being impairment loss is recorded)
The goodwill recognized on July 31, 2017 is $250,000. No impairment loss needs to be recorded on December 31, 2017. If the fair value of the Conchita Division is $1,600,000, an impairment loss of $50,000 needs to be recorded on December 31, 2017.
Explanation:(a) To compute the amount of goodwill recognized on July 31, 2017, we need to determine the fair value of the identifiable net assets of Conchita. The fair value of the identifiable net assets is $2,750,000 and the consideration paid to acquire the common stock of Conchita is $3,000,000. Therefore, the goodwill recognized is $3,000,000 - $2,750,000 = $250,000.
(b) To determine the impairment loss to be recorded on December 31, 2017, we compare the fair value of the Conchita Division ($1,850,000) with the carrying value of the net assets ($1,650,000). The carrying value is less than the fair value, so no impairment loss needs to be recorded.
(c) If the fair value of the Conchita Division is $1,600,000 instead of $1,850,000, the carrying value is higher than the fair value. The impairment loss to be recorded on December 31, 2017 is $1,650,000 - $1,600,000 = $50,000.
(d) The journal entry to record the impairment loss is:
Debit Impairment loss on Conchita Division: $50,000Credit Accumulated impairment loss: $50,000The impairment loss would be reported in the income statement as a separate line item.
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Kaspar Corporation makes a commercial-grade cooking griddle. The following information is available for Kaspar Corporation's anticipated annual volume of 26,700 units.
Per Unit Total
Direct materials $20
Direct labor $6
Variable manufacturing overhead $14
Fixed manufacturing overhead $453,900
Variable selling and administrative expenses $5
Fixed selling and administrative expenses $186,900
The company uses a 41% markup percentage on total cost.
Compute the total cost per unit.
Total cost per unit $____________________
Answer:
$69 per unit
Explanation:
The computation of the total cost per unit is shown below:
Total cost per unit = Direct material + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead + Variable selling expenses + Fixed selling expenses
where,
Fixed manufacturing overhead per unit = Total fixed manufacturing overhead ÷ Number of units
= $453,900 ÷ 26,700 units
= $17 per unit
And,
Fixed selling and administrative expenses per unit is
= Total Fixed selling and administrative expenses ÷ Number of units
= $186,900 ÷ 26,700
= $7 per unit.
The other items per unit would remain the same
= $20 + $6 + $14 + $17 + $5 + $7
= $69 per unit
Rome Inc. owns 30% of Amber Co. and applies the equity method. During the current year, Rome bought inventory costing $66,000 and then sold it to Amber for $120,000. At year-end, only $24,000 of merchandise was still being held by Amber. What amount of intercompany inventory profit must be deferred by Rome
Answer:
Amount of intercompany inventory profit must be deferred by Rome=$3240
Explanation:
Inventory at year-end $ 24,000.00
Gross profit markup ($54,000 ÷ $120,000) × 0.45
Unrealized gain $ 10,800
Ownership share × 0.30
Intercompany unrealized gain — deferred $ 3,240
g The natural unemployment rate describes the unemployment rate when Group of answer choices real GDP is equal to potential GDP. cyclical unemployment is positive. frictional unemployment is 0. the economy is no longer in a recession.
Answer:
The correct answer is letter "A": real GDP is equal to potential GDP.
Explanation:
Natural unemployment is defined as the lowest unemployment rate and the economy will rose. It's natural because factors other than a poor economy triggers it. One aspect of natural unemployment is frictional unemployment that is induced, for example, by conditions such as recent graduates starting to pursue a job. Another part of natural unemployment is structural unemployment, where employees do not find jobs and employers do not find workers having jobs available.
The natural unemployment rate describes the unemployment rate when the real Gross Domestic Product (GDP) equals the potential GDP. The real GDP measures a country's productivity adjusted for changes in inflation while the potential GDP measures the productivity of a country considering that inflation is constant.
1. $7,000 of merchandise inventory was ordered on September 2, 2009 2. $3,000 of this merchandise was received on September 5, 2009 3. On September 6, 2009, an invoice dated September 4, 2009, with terms of 3/10, net 30 for $3,250 which included a $250 prepaid freight cost, was received. 4. On September 10, 2009, $800 of the merchandise was returned to the seller. Based on the above information, by what date does the invoice need to be paid in order to take the advantage of the discount?
a. September 15, 2009
b. September 16, 2009
c. September 10, 2009
d. September 14, 2009
Answer:
Correct option is A
Explanation:
Invoiced purchases are $ 3,000, out of which $ 800 worth of goods were returned, and an extra shipping charge of $ 250 needs to be paid.
Total amount of the invoice 3,000
Add: Shipping Charges 250
Less: Value of goods return (800)
Amount to be paid $2,450
There will be no discount to be deducted because the invoice was not paid within the 10 days discount period.
$2,450
Final answer:
To take advantage of the discount offered in the invoice terms of 3/10, net 30, payment must be made by September 14, 2009.
Explanation:
The terms of the invoice are 3/10, net 30, which means that a 3% discount is available if the payment is made within 10 days of the invoice date. The date on the invoice is September 4, 2009. Therefore, to take advantage of the discount, payment must be made by September 14, 2009. The $800 of merchandise returned does not change this payment date for the discount; it would just adjust the total amount due. Should the payment be made on the discount date, the company would benefit not only from the discount but also from optimal cash flow management, aligning with sound financial principles and organisational behavior in promptly addressing invoice terms.
During the current month, a company that uses job order costing purchases $82,000 in raw materials for cash. It then uses $23,000 of raw materials indirectly as factory supplies and uses $50,600 of raw materials as direct materials. Prepare journal entries to record these three transactions
Answer:
See the explanation below:
Explanation:
Details Dr ($) Cr ($)
Inventory of raw materials 82,000
Cash 82,000
Being the purchase of raw materials
Factory overhead 23,000
Inventory of raw materials 23,000
Being the raw materials used indirectly as factory supplies
Work-in-Progress 50,600
Inventory of raw materials 50,600
Being the raw materials used directly in production
Answer:
Dr. Material Inventory $82,000
Cr. Cash $82,000
Dr. Work in Process Inventory $50,600
Dr. Manufacturing Overhead $23,000
Cr. Material Inventory $82,000
Explanation:
Purchases of Inventory is recorded in the material inventory account by debit entry, because inventory is an asset and it requires a debit entry to increase the inventory level. cash is paid so it is credited.
Direct raw material used will be transferred to Work in process account and Indirect raw material used will be transferred to Manufacturing overhead account by a debit the these accounts and credit to material Inventory account.
Power Corporation owns 75 percent of Swift Companyâs stock. Swift provides health care services to its employees and those of Power. During 20X2, Power recorded $37,500 as health care expense for medical care given to its employees by Swift. Swiftâs costs incurred in providing the services to Power were $32,000.a. By what amount will consolidated net income change when the intercompany services are eliminated in preparing Powerâs consolidated statements for 20X2?b.What would be the impact of eliminating the intercompany services on consolidated net income if Power owned 100 percent of Swiftâs stock rather than 75 percent?c.If in its consolidated income statement for 20X2 Power had reported total health care costs of $72,000, what was the cost to Swift of providing health care services to its own employees?
Answer:
Explanation:
a). There will be no effect on net income on after consolidation.
b). On the off chance that P possesses 100% of S Stock, at that point inter-company administrations must be wiped out. Along these lines an adjustment in the degree of responsibility for auxiliary won't influence the measure of end on merged total compensation.
c). Computation of cost to Swift
$72,000 - $32,000
= $50,000
Gerard, an adult, contracts with Communiserve to purchase, in installments over a period of five years, a very large quantity of services that he will probably never need. Although Gerard understands what he is doing when he enters the contract, he has a mental condition that impairs his ability to act in a reasonable and rational way. Under the Restatement:a. Gerard’s contract is voidable at his option while it is entirely executory.b. Gerard cannot avoid the contract if Communiserve had no reason to suspect Gerard’s incompetency.c. Gerard cannot avoid the contract if the terms are fair.d. Gerard can only avoid the contract if the terms are grossly unfair.63. In most states, whether the time within which a minor disaffirms a contract constitutes a reasonable time is determined by:
Answer:
a. Gerard’s contract is voidable at his option while it is entirely executory.
Explanation:
In the United States of America, one of the most widely used recognized and most cited legal treatises is the Restatement of Contracts. It allows legal luminaries (judges and lawyers) to have a general understanding of non-binding authorities in contract or common law.
According to the Restatement (second) of Contract, voidable contract is one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance.
Hence, under the Restatement, Gerard’s contract is voidable at his option while it is entirely executory.
63. In most states, whether the time within which a minor disaffirms a contract constitutes a reasonable time is determined by the fact and circumstance of the case.
Which of the following is a characteristic of a management control system? A. It deals with coordinating planning across the organization and is not concerned with behavioral aspects of managing B. It gathers key information that aids in the process of making decisions C. It encourages shortminusterm profit planning D. Helps managers to act rapidly and with autonomy
Answer:
D. Helps managers to act rapidly and with autonomy
Explanation:
The management control system defines that every policy and procedure should be followed in a proper manner and work on new strategies for the benefit of the organization. It helps in managing the hierarchy level and differentiates the performance company resources like finance, marketing, sales, Human resource management, operations, etc.
Therefore the management control system provides to work with sovereignty so that the work runs in a smooth and inefficient and effective manner. It also helps the managers to take the action quickly before things go out of control.
The partnership agreement of Jones, King, and Lane provides for the annual allocation of the business's profit or loss in the following sequence: Jones, the managing partner, receives a bonus equal to 25 percent of the business’s profit. Each partner receives 20 percent interest on average capital investment. Any residual profit or loss is divided equally. The average capital investments for 2018 were as follows: Jones $ 185,000 King 370,000 Lane 555,000 How much of the $82,000 partnership profit for 2018 should be assigned to each partner?
Answer:
Mr J = $4,000
Mr. K = $20,500
Mr L = $57,500
Explanation:
The computation of partnership profit is shown below:-
Partnership profit for the year 2018 $82,000
Less: Bonus to Mr Jones $20,500
($82,000 × 25%)
Less: Interest on average capital investment
Mr J (20% × $185,000) $37,000
Mr K (20% × $370,000) $74,000
Mr L (20% × $555,000) $111,000
Profit/Loss to be distributed ($160,500)
Loss to be allocated to each partner ($53,500)
($160,500) ÷ 3
Mr J $4,000
$20,500 + $37,000 + ($53,500)
Mr. K $20,500
$74,000 + ($53,500)
Mr L $57,500
$111,000 + ($53,500)
Each of these items must be considered in preparing a statement of cash flows for Irvin Co. for the year ended December 31, 2017. For each item, state how it should be shown in the statement of cash flows for 2017.
a. Issued bonds for $150,000 cash.
b. Purchased equipment for $200,000 cash.
c. Sold land costing $50,000 for $50,000 cash.
d. Declared and paid a $20,000 cash dividend.
Answer:
a. Issued bonds for $150,000 cash (cash outflow - Financing Activity)
b. Purchased equipment for $200,000 cash. (Cash outflow - Investing Activities)
c. Sold land costing $50,000 for $50,000 cash. (Cash inflow - investing Activities)
d. Declared and paid a $20,000 cash dividend. (Cash outflow - Finance Activities)
The classification is as follows:
a. When the bonds are issued for cash so the same is to be shown in the financial activity as the cash inflow.
b. When the equipment is purchased for cash so the same is to be shown in the investing activity as the cash outflow.
c. When the land is sold for cash so the same is to be shown in the investing activity as the cash inflow.
d. When the dividend is paid in cash so the same is to be shown in the financial activity as the cash outflow.
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As it places its order for truck tires with Michelin, South Side Industrial Supply realizes that it must also place an order for valve stems and balancing weights for the truck tires. Such business products are characterized as having ____________ demand.
Answer:
The correct word for the blank space is: joint.
Explanation:
Joint demand refers to the demand for products and services that are dependent on each other. In such cases, those goods are complementary but they can be acquired separately if necessary. An example of goods with joint demand would be tea and sugar or a printer and ink.
Multiple Choice Question 60 A department adds all raw materials to a process at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of January, there were no units in the beginning work in process inventory; 89800 units were started into production in January; and there were 19000 units that were 35% complete in the ending work in process inventory at the end of January. What were the equivalent units of production for conversion costs for the month of January?
Answer:
Equivalent units = 77, 450 units
Explanation:
Equivalent units are notional whole units which represent incomplete work which are used to apportion costs between between work in progress and completed work.
To compute as
Equivalent Units = Degree of completion (%) × units
Completed units in the period with 100% work done is equal
= units started in the period - closing inventory
= 89,800 - 19,000
= 70,800 units
Item Equivalent units
Completed units (100% × 70,800) 70,800
Closing inventory (35% × 19,000 ) 6,650
Total equivalent units 77,450
Total equivalent units = 70,800 + 6,650 = 77, 450 units
A corporate charter specifies that the company may issue up to 26 million shares of stock. The company sells 18 million shares to investors and later buys back 6.0 million shares. The current number of shares of treasury stock after these transactions have been accounted for is: Multiple Choice 20.0 million shares. 12.0 million shares. 8.0 million shares. 6.0 million shares.
Answer: 6.0 million shares
Explanation: Six million shares would be the current number of shares of treasury stock after the transaction indicated above have all been accounted for. The treasury stock is defined as the issued stock of an incorporated company held by the company itself and the total issued stock for a company equals the sum of outstanding stock and treasury stock. When an incorporated company reissues treasury stock for more than it originally paid for the stock, it does not report a gain.
Given this, Treasury stock (shares held by the company) would be equal to 6.0 million shares
To prepare for the cross-country meet, a skier decides to significantly increase the amount of carbohydrates in his diet (a technique also known as carbohydrate loading). Why might this be beneficial to the cross-country skier
Answer:
It is beneficial to the skier in that more carbohydrates will give rise to excess glucose thus the energy required to ski.
Explanation:
Eating food that contains higher amount of carbohydrates will cause the muscles to store excess glucose in the form of glycogen and this can be used for the energy in short bouts required for skiing.
Furthermore, it is useful in providing energy over long course of time. I
But in the question context, the skier needs rapid energy source and this energy is provided by muscle glycogen.
Suppose that a profit-maximizing monopoly firm undergoes a substantial technological change that reduces its marginal and average total costs by $40. If in response to its reduction in cost the firm changes its price in a profit-maximizing way, then we can predict that its total economic profit will:rise.It is not possible to make a determination from the information given.remain unchanged.fall.
Answer:
Rise
Explanation:
A monopoly is defined as a market situation where only one seller determines the supply and price of a product, because they are the only ones that produce it.
When forms make technological advancements, they are able to make processes cheaper. So there is more money saved that can be used to increase production.
In this scenario for every product manufactured there is a $40 saved. This excess cash can be put back into the production to increase the output and profit.
Diaz Company owns a machine that cost $125,200 and has accumulated depreciation of $93,100. Prepare the entry to record the disposal of the machine on January 1 in each seperate situation. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return. Diaz sold the machine for $16,400 cash. Diaz sold the machine for $32,100 cash. Diaz sold the machine for $41,300 cash.
Answer:
1. Loss on sale of machine = $15,700
2. No Loss or Gain
3. Gain = $9,200
Explanation:
Requirement 1
If Diaz Company disposed the machine with a cash of $16,400, the journal entry to record the transaction of disposal of machine will be as follows:
January 1 Cash Debit $16,400
Accumulated depreciation Debit $93,100
Loss on sale of machine Debit $15,700
Machine Credit $125,200
Calculation:
Book value of the machine = Purchase price - Accumulated depreciation = $(125,200 - 93,100) = $32,100
We know, loss on sale of machine = Book value of the machine - Sale price = $(32,100 - 16,400) = $15,700. Loss is a debit as it is an expense.
Requirement 2
If Diaz Company disposed the machine with a cash of $32,100, the journal entry to record the transaction of disposal of machine will be as follows:
January 1 Cash Debit $32,100
Accumulated depreciation Debit $93,100
Machine Credit $125,200
Calculation:
Book value of the machine = Purchase price - Accumulated depreciation = $(125,200 - 93,100) = $32,100
We know, Gain (Loss) on sale of machine = Book value of the machine - Sale price = $(32,100 - 32,100) = $0. As the book value and the disposal value are same, there is no loss and no gain.
Requirement 3
If Diaz Company disposed the machine with a cash of $41,300, the journal entry to record the transaction of disposal of machine will be as follows:
January 1 Cash Debit $41,300
Accumulated depreciation Debit $93,100
Gain on sale of machine Credit $9,200
Machine Credit $125,200
Calculation:
Book value of the machine = Purchase price - Accumulated depreciation = $(125,200 - 93,100) = $32,100
We know, Gain on sale of machine = Sale price - Book value of the machine = $(41,300 - 32,100) = $9,200. Gain is a credit as it shows as the income.
The amount of loss on disposal is $32100, the amount of accumulated depreciation of $93,100 while the gain on disposal is $9200.
Depreciation that has accrued up until a particular point in the life of an asset is referred to as accumulated depreciation.
Accumulated depreciation is a counter-asset account, which means that its natural balance is a credit that decreases the asset's overall value.
Here,
Calculate the Book value of the machine as follows:
Book value of machine = Cost of the machine - Accumulated depreciation
Book value of machine = $125,200 - 93,100 = $32,100
Prepare the journal entries as follows:
Date Particulars Debit Credit
(1) Accumulated depreciation $93100
Loss on disposal $32100
Machine $125200
(2) Cash $16400
Accumulated depreciation $93100
Loss on disposal $15700
Machine $125200
(3) Cash $32100
Accumulated depreciation $93100
Machine $125200
(4) Cash $41300
Accumulated depreciation $93100
Machine $125200
Gain on disposal $9200
Therefore, the loss on disposal is $32100, the cumulative depreciation is $93,100, and the gain on disposal is $9200.
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If you buy a computer directly from the manufacturer for $ 2 comma 535and agree to repay it in 60equal installments at 1.81 %interest per month on the unpaid balance, how much are your monthly payments? How much total interest will be paid?
Answer:
monthly payments is $69.61
Total interest paid = $1641.6
Explanation:
given data
buy computer = $2535
equal installments = 60
interest per month = 1.81 % = 0.0181
solution
we get here Monthly installments payments that is express as
EMI = [tex]\frac{P \times r \times (1+r)^t}{(1+r)^t-1}[/tex] ................1
put here value and we get
EMI = [tex]\frac{2535 \times 0.0181 \times (1+0.0181 )^{60}}{(1+0.0181 )^{60}-1}[/tex]
EMI = 69.610
so monthly payments is $69.61
and
Total interest paid is express as
Total interest paid = (no. of installment × EMI) - Loan amount
Total interest paid = (60 × 69.61) - 2535
Total interest paid = $1641.6
On January 1, 2018, David Mest Communications granted restricted stock units (RSUs) representing 25 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $15 per share on the grant date. At the date of grant, Mest anticipated that 5% of the recipients would leave the firm prior to vesting. On January 1, 2019, 4% of the RSUs are forfeited due to executive turnover. Mest chooses the option to account for forfeitures when they actually occur.
Required 1 to 3.
Prepare the appropriate journal entry to record compensation expense on December 31, 2018, December 31, 2019, and December 31, 2020. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
Answer:
See the explanation below.
Explanation:
Total compensation expenses = 25 million * 15 = $375 million
1. On December 31, 2018.
Compensation expenses = $375 million / 3 = $125 million
Journal entries will be as follows:
Details Dr ($'Million) Cr ($'Million)
Compensation expenses 125
Paid-in Capital - Restricted stock 125
To record the compensation expenses for 2018.
2. On December 31, 2019.
Compensation expenses = [$375 million * 96% * (2/3)] - $125 million = $115 million
Journal entries will be as follows:
Details Dr ($'Million) Cr ($'Million)
Compensation expenses 115
Paid-in Capital - Restricted stock 115
To record the compensation expenses for 2019.
3. On December 31, 2020.
Compensation expenses = ($375 million * 96%) - $125 million - $115 million = $120 million
Journal entries will be as follows:
Details Dr ($'Million) Cr ($'Million)
Compensation expenses 120
Paid-in Capital - Restricted stock 120
To record the compensation expenses for 2020.
Joy Cunningham Co. purchased a machine on January 1, 2018, for $550,000. At that time, it was estimated that the machine would have a 10-year life and no salvage value. On December 31, 2021, the firm's accountant found that the entry for depreciation expense had been omitted in 2019. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2021. At present, the company uses the sum-of-the-years'-digits method for depreciating equipment.'
Required:
(a) Prepare the general journal entries that should be made at December 31, 2021, to record these events. (Ignore tax effects.)
Answer and Explanation:
The Journal entry is shown below:-
1. Retained Earnings Dr. $90,000
To Accumulated Depreciation - Machinery $90,000
(Being To correct for the omission of depreciation expense in 2019 is recorded)
2. Depreciation Dr, $40,000
To Accumulated Depreciation - Machinery $40,000
(Being depreciation expense for 2021)
Working Note:-
Amount of Depreciation In 2019 = $550000 × 9 ÷ 55
= $90000
Cost Of machine $550,000
Less: Depreciation Prior to 2021
2012 - $55000 × 10 ÷ 55 $100,000
2013 - $55000 × 9 ÷ 55 $90,000
2014 - $55000 × 8 ÷ 55 $80,000 $270,000
Book Value as on 01.01.2021 $280,000
Depreciation For the 2021 = $280,000 ÷ 7
= $40,000
At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:
Cash balance, September 1 (from a summer job) $9,250
Purchase season football tickets in September 160
Additional entertainment for each month 250
Pay fall semester tuition in September 4,800
Pay rent at the beginning of each month 600
Pay for food each month 550
Pay apartment deposit on September 2 (to be returned December 15) 600
Part-time job earnings each month (net of taxes) 1,200
a. Prepare a cash budget for September, October, November, and December. Enter all amounts as positive values except cash decrease which should be indicated with a minus sign.
Craig Kovar
Cash Budget
For the Four Months Ending December 31
September October November December
Estimated cash receipts from:
Part-time job $ $ $ $
Deposit
Total cash receipts $ $ $ $
Less estimated cash payments for:
Season football tickets $
Additional entertainment $ $ $
Tuition
Rent
Food
Deposit
Total cash payments $ $ $ $
Cash increase (decrease) $ $ $ $
Plus cash balance at beginning of month
Cash balance at end of month $ $ $ $
b. What are the budget implications for Craig Kovar?
Craig can see that his present plan will not provide sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $_?_ short at the end of December, with no time left to adjust.
Answer:
The answer is attached for ease of understanding and reference.
Explanation:
"Shenandoah Skies" is the name of an oil painting by artist Kara Lee. In each of the following cases, determine the amount and character of the taxpayer’s gain or loss on sale of the painting.a. The taxpayer is Kara Lee, who sold her painting to the Reller Gallery for $6,000.b. The taxpayer is the Reller Gallery, who sold the painting purchased from Kara to a regular customer for $10,000.c. The taxpayer is Lollard Inc., the regular customer that purchased the painting from the Reller Gallery. Lollard displayed the painting in the lobby of its corporate headquarters until it sold "Shenandoah Skies" to a collector from Dallas. The collector paid $45,000 for the painting.
Answer:
A. $6000 ordinary income on sale of a creative asset by the creator of the asset.
B. $4000 ordinary income on the sale of inventory.
C. $35000 capital gain on sale of a capital asset. (which is a non depreciable business personality).
Explanation:
The taxpayer sold a painting to Reller Gallery for $6000. So, the tax payer amount and the character of tax payer gain or loss is as follows:
A. $6000 amount realized minus zero basis is equal to $6000 ordinary income on sale of a creative asset by the creator of the asset.
Reller Gallery sold the painting purchased by from Kara to a regular customer, Lollard Inc. for $10000. So, the tax payer amount and the character of tax payer gain or loss is as follows:
B. $10000 amount realized minus $6000 cost basis is equal to $4000 ordinary income on the sale of inventory.
Lollard Inc., the tax payer, was the regular customer that purchased the painting from the Reller Gallery. Lollard showed the painting in the lobby of its corporate headquarters until it sold "Shenandoah Skies" painting to a collector from Dallas. Where the collector paid $45,000 for the painting. So, the tax payer amount and the character of tax payer gain or loss is as follows:
C. $45000 amount realized minus $10000 cost basis is equal to $35000 capital gain on sale of a capital asset. (which is a non depreciable business personality).
Answer: The answers are entwined in the explanation.
Explanation:
The length of time for which each taxpayer held the asset AND the amount or percentage of tax payed by each taxpayer ARE NOT GIVEN but the amount and character of the gains and losses are shown below, as estimated:
(A) Taxpayer Kara Lee
The amount of Kara Lee's gain is $6,000
The character of this gain is SHORT TERM
The amount of Kara Lee's loss is $39,000 ($45,000 - $6,000)
The character of this loss is LONG TERM
(B) Taxpayer Teller Gallery
The amount of Teller Gallery's gain is $4,000 ($10,000 - $6,000)
The character of this gain is SHORT TERM as the gallery sold to a regular customer (meaning that the painting didn't stay long in their possession)
The amount of Reller Gallery's loss is $35,000 ($45,000 - $10,000)
The character of this loss is LONG TERM
(C) Taxpayer Lollard Inc.
The amount of Lollard Inc.'s gain is $35,000
The character of this gain is LONG TERM because the question says that Lollard displayed the painting in the lobby of its corporate headquarters UNTIL it sold for $45,000. This means that the asset "Shenandoah Skies" was held for a long time by/at Lollard Inc.
On the other hand, Lollard Inc. has no loss on sale of the painting until the Dallas Collector (who bought it from them) resells it and at a price higher than $45,000.
Standards set by engineering studies
a.can determine the most efficient way of operating.
b.can provide rigorous guidelines.
c.may not be achievable by operating personnel.
d.often do not allow operating personnel to have much input. e
.All of these.
Answer:
The correct answer is letter "E": All of these.
Explanation:
In the corporate world, engineering studies aim to structure the diverse operational systems of an organization. From manufacturing to Information Technology (IT), engineering can build optimal networks according to the processes of an industry typically based in a set of rigorous parameters.
Engineering studies require knowledge and qualifications that regular employees do not tend to possess. Most engineering studies are developed by external professionals with vast expertise in a field related to the business.
Compute and Compare ROE, ROA, and RNOA
Selected balance sheet and income statement information for Oracle Corporation follows. (Perform the required computations from the perspective of an Oracle shareholder.
$ millions
May 31, 2015
May 31, 2014
Operating assets
$56,535
$51,447
Nonoperating assets
54,368
38,819
Total assets
110,903
90,266
Operating liabilities
19,847
18,722
Nonoperating liabilities
41,958
24,097
Total liabilities
61,805
42,819
Total Oracle stockholders' equity
48,663
46,878
Total revenues
38,226
Operating income before tax
13,871
Nonoperating expense before tax
1,037
Tax expense
2,896
Net income
9,938
a. Compute return on equity (ROE)
Round answer to two decimal places (ex: 0.12345 = 12.35%)
........%
b. Compute return on net assets (ROA)
Round answers to two decimal places (percentage ex: 0.12345 = 12.35%)
........%
c. Compute return on net operating assets (RNOA)
Round answers to two decimal places (percentage ex: 0.12345 = 12.35%)
.......%
Answer:
ROE - 20.8%
ROA - 9.88%
RNOA - 20.33%
Explanation:
ROE = Net income / Average shareholder equity
Average shareholder equity = 48,633 + 46,878 / 2 = 47,770.50
ROE = 9,938 / 47,770.50
ROE = 20.8%
ROA = Net Income / Average Total Assets
Average total assets = 110,903 + 90,266 / 2 = 100,584.50
ROA = 9,938 / 100,584.50
ROA = 9.88%
RNOA = NOPAT / Average net Operating Assets
Average net Operating Assets = 56,535 + 51,447 / 2 = 53,991
NOPAT = Net Operating income before tax - Tax expense
NOPAT = 13,871 - 2,896 = 10,975
RNOA = 10,975 / 53,991
RNOA = 20.33%
Which of the following will NOT shift the aggregate supply curve to the left? a decrease in corporate taxes an increase in the minimum wage an increase in the legislated amount of paid vacation an increase in the price of crude oil
Answer: a decrease in corporate taxes
Explanation: Aggregate supply refers to the total supply of goods and services available to a particular market from producers. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy.
A decrease in the corporate taxes will not shift aggregate supply to the left because when the supply shifts to the left, the price level increases and the GDP decreases. Therefore, a decrease in corporate taxes cannot make supply shift to the left.
Multiple Production Department Factory Overhead Rates
Spotted Cow Dairy Company manufactures three productsâwhole milk, skim milk, and creamâin two production departments, Blending and Packing. The factory overhead for Spotted Cow Dairy is $666,000. The three products consume both machine hours and direct labor hours in the two production departments as follows:
Direct Labor Hours Machine Hours
Blending Department
Whole milk 890 1,210
Skim milk 570 980
Cream 440 770
1,900 2,960
Packing Department
Whole milk 260 1,760
Skim milk 280 1,080
Cream 260 1,160
800 4,000
Total 2,700 6,960
The management of Spotted Cow Dairy Company now plans to use the multiple production department factory overhead rate method. The total factory overhead associated with each department is as follows:
Blending Department $342,000
Department 324,000
Total $666,000
Determine the multiple production department factory overhead rates, using machine hours for the Blending Department and direct labor hours for the Packing Department.
Answer:
total overhead costs for blending department = $342,000
total machine hours blending department = 2,960
overhead rate per machine hour = $342,000 / 2,960 hours = $115.5405405 per machine hour
total overhead costs for packaging department = $324,000
total direct labor hours packaging department = 800
overhead rate per direct labor hour = $324,000 / 800 hours = $405 per machine hour
product blending department packaging department
Whole milk 1,210 x $115.54 = $139,804 260 x $405 = $105,300
Skim milk 980 x $115.54 = $113,230 280 x $405 = $113,400
Cream 770 x $115.54 = $88,966 260 x $405 = $105,300
total $342,000 $324,000
total overhead rate assigned to each product:
product blending dep. packaging dep. total
Whole milk $139,804 $105,300 $245,104
Skim milk $113,230 $113,400 $226,630
Cream $88,966 $105,300 $194,266
total $342,000 $324,000 $666,000
Final answer:
The factory overhead rates are calculated for each department based on their activity bases: $115.54 per machine hour for the Blending Department and $405 per direct labor hour for the Packing Department.
Explanation:
To determine the factory overhead rates for Spotted Cow Dairy Company, we need to divide the total factory overhead cost of each department by the respective activity base (machine hours for Blending and direct labor hours for Packing).
Blending Department Overhead Rate Calculation
Total Blending Department Overhead = $342,000
Total Machine Hours in Blending = 2,960 hours
Blending Department Overhead Rate = Total Overhead / Total Machine Hours
Blending Department Overhead Rate = $342,000 / 2,960 hours = $115.54 per machine hour
Packing Department Overhead Rate Calculation
Total Packing Department Overhead = $324,000
Total Direct Labor Hours in Packing = 800 hours
Packing Department Overhead Rate = Total Overhead / Total Direct Labor Hours
Packing Department Overhead Rate = $324,000 / 800 hours = $405 per direct labor hour
1) A financial crisis can lead to a recession because it can cause:
A. wealth and income to fall, reducing spending and ultimately reducing employment.
B. investment and income to fall, lowering saving and increasing the money supply.
C. wealth and saving to fall, lowering investment and increasing the money supply.
D. investment and saving to fall, increasing spending and ultimately reducing employment.
2) A major new invention can lead to an expansion if there are:
A. increases in saving, the money supply, and employment:
B. decreases in wealth and increases in consumption and unemployment.
C. increases in investment, consumption, output, and employment.
D. decreases in saving and increases in consumption and unemployment.
Answer:
1. A
2. C
Explanation:
For part (1), any type of financial crisis can lead to a recession (Like the one in 2008 as well) and cause the wealth and income to fall, reducing the purchasing and spending power of the people and ultimately leading to an increase in unemployment. This is because businesses will cutoff their employees and this will cause unemployment and the people who would be lucky enough to still get a job will be hired on a very low income which will ultimately reduce spending as well.
Th opposite will happen in the other case (2), as there will be expansion if there in increase in wealth, investiture, consumption, production output and employment.
Hope this Helps.
Answer 1:
The correct answer is A)
Recessions are mostly caused by a lack of circulation of money in the economy.
Explanation:
In economic parlance, this shortage is captured as:
Shortage in government spending thus translating to low circulation of money as businesses that depend on the government experience low transactions. Please note that in many cases, the Government is the largest spender.
Shortage of Investment leading to low employment which ultimately reduces disposable income.
Answer 2
The correct answer here is C
An increase in investment goes hand in hand with an increase in consumption, output, and employment.
If for instance, the government makes capital available through the banks a very low-interest rate, this will encourage businesses to leverage off the cheap capital to expand, acquire new technologies, and employ more hands to become more competitive and more dominant in the market.
So a new invention will translate to expansion if
businesses are willing to invest in it;consumers are willing to buy it;the invention translates into increased output and lastly, if through the invest, businesses are willing to employ more labor to cater to the expansion in demandCheers!
A bank run involves:
A) a failure by a bank to get the maximum return on its investments.
B) large numbers of depositors withdrawing their deposits within a short period of time.
C) a bank being forced out of business.
D) fraud on the part of a bank's managers.
Answer:
The correct answer is letter "B": large numbers of depositors withdrawing their deposits within a short period of time.
Explanation:
A bank run is a situation in which account holders massively withdraw their funds under the fear the financial institution will lose its liquidity. The situation gets to a point in which the bank is at risk of sensing all its reserves and fail to provide all its clients the money they deposited.
In the U.S. financial institutions with deposits between $16 and $122.3 million must have a minimum reserve of 3%. When the deposits exceed $122.3 million the minimum reserve increases to 10%. The rest of the money is reinvested by banks.
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 9%, as long as it finances at its target capital structure, which calls for 35% debt and 65% common equity. Its last dividend (Do) was $2.20, its expected constant growth rate is 6%, and its common stock sells for $26. EEC's tax rate is 40%. Two projects are available: project A has rate of return 12%, and project B/S return is 11%. These two projects are equally risky and about as risky as the firm's existing assets.
What is its cost of common equity?
Which is the WACC?
Which projects should Empire accept?
Answer:
cost of common equity = 14.46%
WACC = 11.29%
accept = Project A
Explanation:
Cost of common equity is the return that is required by Holders of Common Stock.
The available details can be used to calculate the cost of common equity using the Dividend Growth Model as follows :
Cost of common equity = (Next year`s Dividend / Current Market Price of a Stock) + Expected Growth
= ($2.20/$26)+6%
= 14.46%
WACC is the minimum return that a project must offer before it can be accepted.It shows the risk of the company.
Cost of Debt = Market Interest Rate × (1 - tax rate)
= 9.00% × (1-0.40)
= 5.40%
Capital Source Weight Cost Total
Debt 35% 5.40% 1.89%
Common Equity 65% 14.46% 9.40%
Total 100% 19.86% 11.29%
Therefore WACC is 11.29%
When evaluating projects, Compare the Project`s Internal Rate of Return (IRR) to the WACC.
Project A
IRR 12% > WACC 11.29%
Therefore Accept
Project B/S
IRR 11% < WACC 11.29%
Therefore Do Not Accept
The cost of common equity for Empire Electric Company (EEC) can be calculated using the dividend growth model. The formula for the cost of common equity is:
Cost of Common Equity (Ke) = (Dividend / Stock Price) + Growth Rate
In this case, the dividend (Do) is $2.20, the stock price is $26, and the growth rate is 6%. Plugging these values into the formula:
Ke = (2.20 / 26) + 0.06
Ke = 0.0846 + 0.06
Ke = 0.1446 or 14.46%
The weighted average cost of capital (WACC) is a measure of a company's overall cost of financing. It is calculated by taking a weighted average of the cost of debt and the cost of equity, using the target capital structure as the weights. In this case, the target capital structure is 35% debt and 65% equity.
To calculate the WACC, we need to know the cost of debt and the cost of equity. The cost of debt is given as 9% (rd). We have already calculated the cost of equity as 14.46% (Ke).
WACC = (Weight of Debt * Cost of Debt) + (Weight of Equity * Cost of Equity)
WACC = (0.35 * 0.09) + (0.65 * 0.1446)
WACC = 0.0315 + 0.094
WACC = 0.1255 or 12.55%
Projects A and B have returns of 12% and 11% respectively. Since both projects are equally risky and as risky as the firm's existing assets, the decision on which projects to accept should be based on the profitability index (PI). The profitability index is calculated by dividing the present value of cash inflows by the initial investment.
If both projects have the same initial investment, the project with the higher profitability index should be accepted. However, if the initial investments are different, the decision should be based on the project with the highest net present value (NPV), which takes into account the initial investment and the present value of cash inflows.
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