Answer:
Patterson Company
Balance sheet as at December 31
Fixed Assets:
Equipment $50,800
Less: Accumulated Depreciation, Equipment $10,700
Buildings $119,000
Less: Accumulated Depreciation, Buildings $63,900
Total Fixed Assets $95,200
Current Assets:
Accounts Receivable $44,000
Prepaid Rent $14,700
Cash $39,900
Supplies $10,800
Total current Assets $109,400
Current Liabilities:
Accounts Payable $42,300
Salaries Payable $8,900
Total current liabilities $51,200
Total Net Assets = $153,400
Shareholders Equity:
Capital Stock $57,000
Retained earnings $96,400
Shareholders equity $153,400
Income statement.
Service Revenue 121,600
Supplies Expense 9,000
Gross Profit 112,600
Less expenses:
Depreciation Expense, Equipment 4,600
Depreciation Expense, Buildings 8,300
Rent Expense 11,000
Salaries Expense 6,100
Net income $82,600
Dividends $17,300
Transfer to retain earnings $65,300
Beginning Retained Earnings 31,100
Closing retained earnings $96,400
Early in its fiscal year ending December 31.2016. San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased for $840,000 San Antonio paid S220,000 and s*gunned a noninterest bearing note requiring the company to pay the remaining $620,000 on March 28. 2018 An interest rate of 10% properly reflects the time value of money for this type of loan agreement Title search, insurance, and other closing costs totaling $22,000 were paid at closing.
May 1 $1,500,000
July 30 1,600,000
September 1 1,020,000
October 1 1,020,000
During April, the old building was demolished at a cost of $72,000, and an additional $52,000 was paid to clear and grade the land. Construction of a new budding began on May 1 and was completed on October 29. Construction expenditures were as follows: (VODSL. Pivot(S1. FAD of $1 and PVAD of $1) (Use appropriate factors) from the tables provided.)
San Antonio borrowed $3,000,000 at 10% on May 1 to help finance construction. This loan, plus interest, will be paid in 2017. The company also had the flowing debt outstanding throughout 2016:
$2,200,000 8% long-term node payable.
$4,200,000 5% long term bonds payable.
In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $620,000. The fair values of the equipment and the furniture and fixtures were $468,000 and $252,000. respectively. In December. San Antonio paid a contractor $295,000 for the construction of parking lots and for landscaping
Required: Determine the initial values of the various assets that San Antonio acquired or constructed during 2016. The company uses the specific interest method to determine the amount of interest capitalized on the building construction.
How much interest expense will San Antonio report in its 2016 income statement?
San Antonio will report $200,000 as interest expense in its 2016 income statement related to the construction loan.
To determine the initial values of the various assets acquired or constructed during 2016, we need to consider the costs associated with each asset:
Land and Existing Building:
Purchase price: $840,000
Closing costs: $22,000
Total cost: $840,000 + $22,000 = $862,000
Building Construction:
Land clearing and grading: $52,000
Building construction expenditures: $1,500,000 (May 1) + $1,600,000 (July 30) + $1,020,000 (September 1) + $1,020,000 (October 1) = $5,140,000
Total construction cost: $52,000 + $5,140,000 = $5,192,000
Demolition of Old Building:
Cost: $72,000
Equipment and Furniture/Fixtures:
Lump-sum price: $620,000
Fair value of equipment: $468,000
Fair value of furniture/fixtures: $252,000
Now, let's determine the initial values:
Land and Existing Building: $862,000
Building Construction: $5,192,000
Demolition of Old Building: $72,000
Equipment and Furniture/Fixtures: $620,000
The total initial value of the assets acquired or constructed during 2016 is $8,746,000.
Next, let's determine the interest expense for the income statement. San Antonio borrowed $3,000,000 at 10% on May 1. The interest for the year is calculated as follows:
Interest = Principal × Rate × Time
Interest = $3,000,000 × 10% × (8/12) (May 1 to December 31)
Interest = $200,000
Therefore, San Antonio will report $200,000 as interest expense in its 2016 income statement related to the construction loan.
Perez company acquires an ore mine at a cost of 2100000. It incurs additional costs of 588000 to access the mine, which is estimated to hold 1500000 tons of ore 205000 tons of ore mined and sold the first year.
Final answer:
The question involves business calculations in mining, focusing on costs, economic profit, and resource depletion. Important considerations include the R/P ratio for the mine's life and the role of infrastructure in supporting mining operations.
Explanation:
The question pertains to the subject of business, particularly focusing on the aspects of cost calculation and asset depletion in mining operations. The scenario involves Perez company acquiring a mine and incurring additional costs to access it. Understanding the economic profit and calculating the profit after the explicit and implicit costs have to be accounted for. The consumption rate of the mining resources, their availability, and the reserves to production (R/P) ratio are pertinent in forecasting the life of the mine. Moreover, the sustainable exploitation of ore with the depleting high-grade deposits is a significant consideration in the economics of mining.
Mining operations shifted in the late 19th century, requiring more capital and machinery, indicating the transition to more significant business investments. The historical context shows how the best deposits of minerals have already been exploited, leading to the necessity of more considerable investment for future mining. The Grand Carajás Project illustrates the economic activities tied to mining, emphasizing the importance of infrastructure such as power and transportation.
Information regarding Maxwell’s direct labor cost for the month of January follows: Direct labor hourly rate paid $ 29.90 Total standard direct labor hours for units produced this period 12,400 Direct labor hours actually worked 12,200 Direct labor rate variance $ 17,400 favorable Required: 1. Compute the standard direct labor wage rate per hour in January. (Round your answer to 2 decimal places.) 2. Compute the direct labor efficiency variance for January. Was this variance favorable (F) or unfavorable (U)? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
Answer:
A. $31.81
B.6,362 F
Explanation:
Total actual direct labor hours (DLHs) worked (given)12,400
Actual hourly rate (given)× 29.90
Total actual total direct labor cost $370,760
Plus: Favorable direct labor rate variance (given)+ 17,400
Total actual direct labor hours at standard hourly rate$388,160
Total actual direct labor hours worked (given)÷ 12,200
Standard direct labor rate per hour (to two decimal places)$31.81
2.Direct labor efficiencyvariance = actual hours at standard cost − standard labor cost for units produced
= [(AQ) × (SP)] − [(SQ) × (SP)]= [12,200 hrs. × $31.81/hour] − [12,400 hrs. × $31.81/hr.]
=388,082-394,444
= $6,362F (to the nearest whole dollar)
At the beginning of the period, the Fabricating Department budgeted direct labor of $72,000 and equipment depreciation of $18,500 for 2,400 hours of production. The department actually completed 2,350 hours of production. Determine the budget for the department, assuming that it uses flexible budgeting. $
To determine the budget for the Fabricating Department using flexible budgeting, we calculate the cost per hour using the total budgeted costs and total hours of production. Then, we multiply the cost per hour by the actual hours of production to find the budget. The budget for the department is $88,786.50.
Explanation:To determine the budget for the Fabricating Department using flexible budgeting, we need to calculate the cost of labor and equipment depreciation per hour of production. The budgeted direct labor was $72,000 and equipment depreciation was $18,500 for 2,400 hours of production. To find the cost per hour, we divide the total budgeted costs by the total budgeted hours:
Cost per hour = (Total direct labor + Total equipment depreciation) / Total hours of production
Using the given information, we have:
Cost per hour = ($72,000 + $18,500) / 2,400 = $37.71 per hour
Next, we need to calculate the budget for the department using the actual hours of production. The department completed 2,350 hours of production. To find the budget, we multiply the cost per hour by the actual hours of production:
Budget = Cost per hour * Actual hours of production
Using the calculated cost per hour of $37.71, we have:
Budget = $37.71 * 2,350 = $88,786.50
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Hillsborough Glassware Company issues $1,061,000 of its 11%, 10-year bonds at 96 on February 28, 2017. The bonds pay interest on February 28 and August 31. Assume that Hillsborough uses the straight-line method for amortization. What net amount will be reported for the bonds on the August 31, 2017 balance sheet?
Answer:
Bonds Payable $1,061,000
Discount $38,196
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 = $1,061,000 (100%- 96%) = $42,440
According to straight line amortization
Discount charged in the period = $42,440 / 10 = $4,244 per year = $2,122 per six months
Unamortized discount = $42,440 - $4,244 = $38,196
Coupon payment of interest = $1,061,000 x 11% = $116,710 per year = $58,355 per six months
Total Interest Expense = $58,355 + $2,122 = $60,477
The Bond will be reported at its face value.
By the time you retire exactly at age 70 you will have saved $700,000 into your diversified portfolio of mutual funds, bonds, and T-bills. You expect to move onto the Spirit world at exactly age 80. You do not want to have any money left over when you die. Figuratively, you want to bounce your last check! How much can you withdraw at the beginning of each month for 10 years of retirement if your annual rate of return is 6.5%
For ten years of retirement, you can withdraw $7,882 each month at an annual rate of return of 6.5%.
Data and Calculations:
Your Age Now = 70
Your Planned Retirement Age = 70
Your Life Expectancy = 80
Your Retirement Savings Today = $700,000
Annual Rate of Return = 6.5%
Thus, the amount you can withdraw monthly from 70 to 80 is $7,882.
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For an all-equity firm: (a) as earnings before interest and taxes (EBIT) increase, the earnings per share (EPS) increases by the same percentage. (b) as EBIT increases, the EPS increases by a larger percentage. (c) as EBIT increases, the EPS decreases at the same rate. (d) as EBIT increases, the EPS decreases by a larger percentage. (e) as EBIT increases, the EPS might either increase or decrease
Answer:
(a) as earnings before interest and taxes (EBIT) increase, the earnings per share (EPS) increases by the same percentage.
Explanation:
Since the firm has no debt and no preferred stocks, EBIT is just EBT (earnings before taxes). So any change in EBIT (or EBT) will change earnings per share in the same proportion.
For example:
EBIT = $200
outstanding shares = 100
taxes = 25%
EPS = ($200 x 75%) / 100 = $1.50 per share
if EBIT increases by 50% to $300
EPS = ($300 x 75%) / 100 = $2.25 per share
EBIT increased by 50% and EPS also increased by 50%
Acquired $30,000 cash from the issue of common stock. Purchased inventory for $15,000 cash. Sold inventory costing $9,000 for $20,000 cash. Paid $1,500 for advertising expense. Required a. Record the general journal entries for the preceding transactions. b. Post each of the entries to T-accounts. c. Prepare a trial balance to prove the equality of debits and credits.
Answer:
The answer is given below
Explanation:
a. Cash Dr.$30,000
Common stock Cr.$30,000
Inventory Dr.$15,000
Cash Cr.$15,000
Cash Dr.$20,000
Sales Revenue Cr.$20,000
Cost of Goods Sold Dr.$9,000
Inventory Cr.$9,000
Advertising Expense Dr.$1,500
Cash Cr.$1,500
b. Cash
Dr. Cr.
Common Stock 30,000 Inventory 15,000
Sales 20,000 Advertising Exp 1,500
C/F 33,500
Common Stocks
Dr. Cr.
C/F 30,000 Cash 30,000
Inventory
Dr. Cr.
Cash 15,000 Cost of Goods Sold 9,000
C/F 6,000
Sales
Dr. Cr.
C/F 20,000 Cash 20,000
Cost of Goods Sold
Dr. Cr.
Inventory 9,000 C/F 9,000
Advertising Expense
Dr. Cr.
Cash 1,500 C/F 1,500
c. Trail Balance
Dr. Cr.
Cash 33,500
Common Stocks 30,000
Inventory 6,000
Sales 20,000
Cost of Goods sold 9,000
Advertising Expense 1,500
Total 50,000 50,000
Final answer:
The student's question involves recording business transactions using journal entries, posting them to T-accounts, and preparing a trial balance to ensure the accuracy of the financial records. Transactions include acquiring cash, purchasing and selling inventory, and paying for advertising expenses.
Explanation:
The student's question relates to the recording of business transactions in a company's accounting records and preparing a trial balance. The subject matter involves journal entries, T-accounts, and the compilation of a trial balance sheet to ensure the accuracy of recorded financial transactions.
Journal Entries
Transaction 1: Acquired $30,000 cash from the issue of common stock.
Debit Cash $30,000
Credit Common Stock $30,000
Transaction 2: Purchased inventory for $15,000 cash.
Debit Inventory $15,000
Credit Cash $15,000
Transaction 3: Sold inventory costing $9,000 for $20,000 cash.
Debit Cash $20,000
Credit Sales Revenue $20,000
Debit Cost of Goods Sold $9,000
Credit Inventory $9,000
Transaction 4: Paid $1,500 for advertising expense.
Debit Advertising Expense $1,500
Credit Cash $1,500
T-Accounts
Posting the entries to the T-accounts involves adding the debits and credits for each account according to the transactions listed above.
Trial Balance
The trial balance is a list of all accounts and their respective debit or credit balances. To prepare it, one must list down each account from the T-accounts and make sure that the total debits equal the total credits.
During 2011, Angel Corporation had 900,000 shares of common stock and 50,000 shares of 6 percent preferred stock outstanding. The preferred stock does not have cumulative or convertible features. Angel declared and paid cash dividends of $300,000 and $150,000 to common and preferred shareholders, respectively, during 2011. On January 1, 2010, Angel issued $2,000,000 of convertible 5% bonds at face value. Each $1,000 bond is convertible into 5 common shares. Angel's net income for the year ended December 31, 2011, was $6 million. The income tax rate is 20%. What will Angel report as diluted earnings per share for 2011, rounded to the nearest cent?A. $6.25B. The correct answer isn't given.C. $6.43D. $6.22
Answer:
B. The correct answer isn't given.
Explanation:
Step 1 Calculate Basic Earning per Share
Basic Earning per Share = Earnings Attributable to Common Stock Holders / Weighted Average Number of Common Stock Holders
Earnings Attributable to Common Stock Holders :
Net income for the year ended December 31, 2011 6,000,000
Preference dividend (150,000)
Interest on Bonds ($100,000×80%) (80,000)
Earnings Attributable to Common Stock Holders 5,770,000
Basic Earning per Share = $5,770,000/900,000 shares
= $6.41
Step 2 Calculate Diluted Earnings per Share
Diluted Earning per Share = Adjusted Earnings Attributable to Common Stock Holders / Adjusted Weighted Average Number of Common Stock Holders
Adjusted Earnings Attributable to Common Stock Holders :
Earnings Attributable to Common Stock Holders 5,770,000
Add Interest on Bonds ($100,000×80%) 80,000
Earnings Attributable to Common Stock Holders 5,850,000
Adjusted Weighted Average Number of Common Stock Holders
Shares of common stock 900,000
Add Convertible Bonds (2,000,0000/1,000×5) 10,000
Weighted Average Number of Common Stock Holders 910,000
Diluted Earning per Share = 5,850,000/910,000
= $6.43
The Convertible Bonds are Anti-Dilutive on comparison with the Basic Earnings per share.
Suppose that as a result of a housing price decline, the value of the bank's securitized assets falls by an uncertain amount, so that these assets are now worth somewhere between 25 and 45. Call the securitized assets "troubled assets." The value of the other assets remains at 50. As a result of the uncertainty about the value of the bank's assets, lenders are reluctant to provide any short-term credit to the bank.
Answer:
Recapitalization will be a better policy than buying the troubles assets because, buying troubled assets will at most case provide a bank liquidity but not necessarily a positive capital.
Explanation:
From the question, we recall the following,
The firm has three assets which are 50 of untroubled assets, 25 of troubled assets and 25 of treasury bonds
The Securitized assets will be now 50-25= 25
The value other assets will remain at= 50
The Treasury bonds will be 50-25=25
The Short term credit will remain at= 80
The Capital will be =20
Securitized assets. 25. Short term credit 80
Other assets.=50 and capital= 20
The Treasury bonds=25
Shonda owns 1,000 of the 1,500 shares outstanding in Rook Corporation (E & P of $1,000,000). Shonda paid $50 per share for the stock seven years ago. The remaining stock in Rook is owned by unrelated individuals. a. What are the tax consequences to Shonda when Rook Corporation redeems 450 shares of Shonda's stock for $225,000?
Answer:
Explanation:
1. Shonda owns 52.4% of the Rook shares outstanding after the redemption. YES
2. Shonda has $225,000 of dividend income. YES
3. Shonda's basis in the 450 shares redeemed attaches to the basis in the remaining Rook shares. YES
4. The transaction qualifies as a not essentially equivalent redemption. NO
5. Shonda has a $225,000 basis in the remaining 550 shares. NO
The tax consequences for Shonda depends on whether the redemption is treated as a sale or a dividend. A sale would result in a capital gain, while a dividend would be taxed as ordinary income.
The tax consequences for Shonda when Rook Corporation redeems 450 of her shares for $225,000 depend on whether the redemption is treated as a sale or a dividend. If the redemption qualifies as a sale, Shonda will recognize a capital gain or loss determined by the difference between the redemption amount ($225,000) and her basis in the shares redeemed. Shonda's basis for the 450 shares is $22,500 (450 shares × $50/share), and her capital gain would be $202,500 ($225,000 - $22,500). This gain would be subject to capital gains tax. If the redemption is treated as a dividend, the entire $225,000 would be treated as ordinary income to Shonda, taxable at her regular income tax rate.
Draw, label and explain the Circular Flow Model (CFM). Include the following: firms, households, product market, and factor (or resource) market. Who owns the productive resources? What are those resources?
What payment does each type of resource earn?
Explain the two markets in the CFM and explain the roles that firms and household each play in the CFM.
Answer:
Productive Resources Owners : Households
Resources : Land, Labour, Capital, Entrepreneur [paid rent, wages, interest, profit]
Explanation:
Simple (Two Sector) Circular Flow of Income : shows how receipts & payments for factor services, goods & services revolve within two sectors of economy.
Here, the two sectors are :
Households : Owners of factors of production & consumers of final goods & services Firms : Buyers of factors of production & providers (sellers) of final goods & servicesHouseholds provide firms with factors of production : Land, Labour, Capital, Entrepreneur. In return, firms pay them with respective factor payments : Rent, Wages, Interest, Profit. They produce final goods & services by utilising the productive factors.
Firms sell these final goods & services to households. In return, households pay them prices for the for their purchased goods & services, through the factor incomes they had earned from firms.
1. The CFM is a model that illustrates the interactions between individuals, organizations, and the government in the economy.
2. The productive resources are owned by households, who offer them to enterprises in exchange for money.
3. Businesses employ the inputs provided by families to manufacture goods and services that they then sell to households for remuneration.
4. The product market and the factor market are the two marketplaces that make up the CFM.
An economic model called the Circular Flow Model (CFM) shows the relationships between individuals, organizations, and the government. The model depicts the movement of products, services, and cash among various groupings. Land, labor, and other productive resources like capital and labor are owned by households. In exchange for payment, they provide these resources to companies.
Different payments are earned for various resource types:
Rental income is generated from land.
Pay comes from labor.
Interest is paid on money.
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MC Qu. 80 Flack Corporation, a merchandiser,... Flack Corporation, a merchandiser, provides the following information for its December budgeting process: The November 30 inventory was 1,720 units. Budgeted sales for December are 4,300 units. Desired December 31 inventory is 3,010 units. Budgeted purchases are:
Answer:
Budgeted purchases are 5,590 units
Explanation:
Prepare a Purchases Budget as follows :
December
Budgeted Sales 4,300
Add Budgeted Closing Inventory 3,010
Total Purchases needed 7,310
Less Budgeted Opening Inventory (1,720)
Budgeted Purchases 5,590
(1) Assume, you will receive rent payments over a time period of 44 years. For the first 22 years, you will receive a rent of $222 at the beginning of each year. For the next 22 years thereafter, you will receive $222 at the end of each year. (a) Employing the equation for identical payments over a limited time period, show how you would alter this equation applied to this problem. (b) Assuming a discount rate of 2% calculate the net present value of this income stream
Answer:
Ans: $6,534
Explanation:
The given payment cash flows are described as follows:
1st payment in the year 0 = $222
Uniform annual payments of $222 are received at the end of years 1(is the same as the start of year 2) though 21
Uniform annual payments of $222 are received at the end of years 23 through 44.
The only missing payment in the uniform annual series is at the end of year 22.
a) PW of the given cash flow = $222 + $222(P/A, 2%, 44) - $222(P/F, 2%, 22)
b) (P/A, 2%, 44) = [(1+0.02)^44 - 1]/[0.02*(0.02+1)^44] = 29.080
(P/F, 2%, 22) = 1/(1+0.02)^22 = 1/1.02^22 = 0.6468
PW = $222 + $222*29.080 - $222*0.6468 = $6,534
Ans: $6,534
Answer:
PW = $222 + $222(P/A, 2%, 44) - $222(P/F, 2%, 22)$6534Explanation:
Note : Rent received at the end of the year is equal to rent received at the beginning of a new year
1st payment received at the beginning of the 44 years period is termed payment received at year 0 = $222
so for the payments received at the end of year 1 in the second part of payment it is equivalent to rent received at the start of year 2 in the first part of payments and this through until the 21st year.
Identical payments are also received from year 23 to year 44 based on previous assumptions made BUT THERE IS NO IDENTICAL PAYMENT IN YEAR 22
A) applying equation for identical payments ( altered equation )
PW = $222 + $222(P/A, 2%, 44) - $222(P/F, 2%, 22)
PW of cash flow = identical cash flow per year + identical cash flow per year ( P/A, 2% , 44 ) - identical cash flow per year (P/F , 2% , 22 )
B) The net present value of the income system
(P/A ,2% ,44) = [tex]\frac{(1+0.02)^{44} - 1}{0.02*(0.02 + 1)^{44} }[/tex] = 29.080
( P/F , 2%,22 ) = [tex]\frac{1}{(1 +0.02)^{22} }[/tex] = 0.6468
back to the alerted equation
PW = $222 + $222* 29.080 - $222( 0.6468 )
= $6534
The following monthly data are available for Fortner Industries which produces only one product which it sells for $18 each. Its unit variable costs are $8, and its total fixed expenses are $17,000. Actual sales for the month of May totaled 2,000 units. Compute the margin of safety in dollars for the company for May.
Answer:
Margin of safety= $5,400
Explanation:
Giving the following information:
Selling price= $18 per unit.
Unit variable costs= $8
Total fixed expenses are $17,000
Actual sales for May totaled 2,000 units.
First, we need to calculate the break-even point in dollars for May.
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 17,000 / [(18 - 8)/18]
Break-even point (dollars)= $30,600
Now, we can calculate the margin of safety in dollars:
Margin of safety= (current sales level - break-even point)
Margin of safety= (2,000*18) - 30,600
Margin of safety= $5,400
Vijay Inc. purchased a three-acre tract of land for a building site for $250,000. On the land was a building with an appraised value of $122,000. The company demolished the old building at a cost of $12,600, but was able to sell scrap from the building for $1,690. The cost of title insurance was $960 and attorney fees for reviewing the contract were $540. Property taxes paid were $3,800, of which $320 covered the period subsequent to the purchase date.
The capitalized cost of the land is:
Answer:
$264,930
Explanation:
Land is an asset, an item of property plant and equipment (fixed asset). As such it is recorded at historical cost which includes the cost of the land as well as other cost incurred in making the land available for use net of the income generated in the process of making the asset available for use. Other cost may have been incurred in the process of purchasing the land but only the cost necessary to make the land available for use are capitalized.
Hence, the capitalized cost of the land is:
= $250,000 + $12,600 - $1,690 + $540 + $3,800 - $320
= $264,930
The cost of insurance will be expensed.
Swinnerton Clothing Company's balance sheet showed total current assets of $2,250, all of which were required in operations. Its current liabilities consisted of $575 of accounts payable, $300 of 6% short-term notes payable to the bank, and $145 of accrued wages and taxes. What was its net operating working capital that was financed by investors?
Answer: $1,530
Explanation:
It's net working capital that was financed by investors include the following figures,
Total current Assets.
Accounts Payables and Accrued wages need to be deducted because they came about as a result of operations and are neither of debt or equity financing so are considered free.
So, in calculating we have,
= 2,250 - 575 - 145
= $1,530
Swinnerton Clothing Company's net operating working capital that was financed by investors is $1,530
Answer:
$1,530
Explanation:
This can be calculated as follows:
Details Amount ($)
Total current assets 2,250
Accounts payable (575)
Accrued wages and taxes (145)
Net operating working capital financed by investors 1,530
Therefore, Swinnerton Clothing Company's net operating working capital that was financed by investors is $1,530.
Kurt’s Interiors is considering a project with a sales price of $11, variable cost per unit of $8.50, and fixed costs of $134,500. The tax rate is 35 percent and the applicable discount rate is 14 percent. The project requires $224,000 of fixed assets that will be worthless at the end of the 4-year project. What is the present value break-even point in units per year?
Answer:
The present value break-even point is 89,048 units
Explanation:
In order to calculate the present value break-even point in units per year we have to calculate first the annual cash flows using the following formula:
Annual cash flows, C = [(Sale Price per unit - Variable cost per unit) x Quantity - Fixed costs - Depreciation] x (1 - Tax rate) + Depreciation = [(11 - 8.50) x Q - 134,500 - 224,000 / 4] x (1 - 35%) + 224,000 / 4 = 1.625Q -67,825
This annual cash flow will occur as annuity over n = 4 years.
The Discount rate, r = 14%
Hence, PV of annual cash flows = C / r x [1 - (1 + r)-n] = Initial investment for cash flow break even
Hence, (1.625Q - 67,825) / 14% x [1 - (1 + 14%)-4] = 224,000
Or. (1.625Q - 67,825) x 2.9137 = 224,000
Hence, 1.625Q = 224,000 / 2.9137 + 67,825 = 144,702.87
Hence, Q = 144,702.87 / 1.625 = 89,048
Hence, the break even quantity is Q = 89,048
Pricing objectives refer to :A. reconciling the prices charged by an organization to the values set forth in its business mission. B. specific steps taken to capitalize on an organization's internal strengths as they apply to price. C. specific steps taken to compensate for an organization's weaknesses as they apply to price. D. specifying the role of price in an organization's marketing and strategic plans. E. setting specific numeric values to all products and services within an organization.
Answer:
Specifying the role of price in an organization's marketing and strategic plans.
Explanation:
Pricing objectives can be described as the goals which puts an organization through on ways to place the prices of their products to potential customers. It makes the products more appealing to the customers. Pricing objectives involves determing the appropriate price for a particular good or service.
Pricing objectives helps companies in improving their market shares this is achieved by cutting down the cost of their products to drive customers to purchase them thereby giving the business a high competitive edge in the market.
Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. The budgeted variable manufacturing overhead is $2 per direct labor-hour and the budgeted fixed manufacturing overhead is $480,000 per year. The standard quantity of materials is 3 pounds per unit and the standard cost is $7 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12 per hour. The company planned to operate at a denominator activity level of 60,000 direct labor-hours and to produce 40,000 units of product during the most recent year. Actual activity and costs for the year were as follows: Actual number of units produced 42,000 Actual direct labor-hours worked 65,000 Actual variable manufacturing overhead cost incurred $ 123,500 Actual fixed manufacturing overhead cost incurred $ 483,000 Required: 1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.
Answer:
$8 per direct labor hours and $2 per direct labor hours
Explanation:
The computation of the predetermined overhead rate is shown below:
Predetermined overhead rate = Budgeted fixed manufacturing overhead ÷ planned activity level
= $480,000 ÷ 60,000 direct labor hours
= $8 per direct labor hours
And, the budgeted variable manufacturing overhead is $2 per direct labor hours
We simply divide the budgeted fixed manufacturing overhead by the planned activity level
mooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Smooth Move’s other customers, and existing sales will not be affected. Smooth Move normally produces 82,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows Direct materials $3.10 Direct labor 2.25 Variable overhead 1.15 Fixed overhead 1.80 Total $8.30 Suppose a customer wants to have its company logo affixed to each paperweight using a label. Smooth Move would have to purchase a special logo labeling machine that will cost $12,000. The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. How much will profit increase or decrease if the order is accepted?
Answer:
Net operating loss from the special order $(4500)
Explanation:
The accept or reject decision would be evaluated using the following the following cash flows as follows:
$
Sales revenue from the order = ( $7.00 × 15,000) = 105000
Variable cost from the order - (3.10+2.25 + 1.15) × 15,000 (97500)
Cost of label logo machine ( 12,000)
Net operating loss from the the order (4500)
The special order will decrease Smooth Move profit by ($4500)
Break-Even Units, Contribution Margin Ratio, Multiple-Product Breakeven, Margin of Safety, Degree of Operating Leverage Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows: Total Sales $ 12,150,000 Total variable cost 6,925,500 Contribution margin $ 5,224,500 Total fixed cost 3,242,673 Operating income $ 1,981,827 Required: 1(a). Compute variable cost per unit. Enter your answer to the nearest cent. $ per unit 1(b). Compute contribution margin per unit. Enter your answer to the nearest cent. $ per unit 1(c). Compute contribution margin ratio. % 1(d). Compute break-even point in units. units 1(e). Compute break-even point in sales dollars. $ 2. How many units must be sold to earn operating income of $426,087
Answer:
Instructions are below.
Explanation:
Giving the following information:
Units sold= 450,000
Total Sales= $12,150,000
Total variable cost= $6,925,500
Total fixed cost= $3,242,673
First, we need to calculate the unitary selling price and variable cost. Then, we calculate the contribution margin.
Selling price= 12,150,000/450,000= $27
Unitary variable cost= 6,925,500/450,000= $15.39
Contribution margin per unit= 27 - 15.39= $11.61
To calculate the contribution margin ratio, we need to use the following formula:
Contribution margin ratio= contribution margin/ selling price
Contribution margin ratio= 11.61/27
Contribution margin ratio= 0.43
To calculate the break-even point both in units and dollars, we need to use the following formulas:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 3,242,673 / 11.61= 279,300 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 3,242,673/0.43= $7,541,100
Finally, we need to incorporate the desired profit to the break-even point formula:
Break-even point in units= (3,242,673 + 426,087) / 11.61
Break-even point in units= 316,000 units
holds huge reserves of oil. Assume that at the end of 2017, South Shore Petroleum's cost of oil reserves totaled $ 252 comma 000 comma 000, representing 180 comma 000 comma 000 barrels of oil. Suppose South Shore Petroleum removed and sold 12 comma 000 comma 000 barrels of oil during 2018. Journalize depletion expense for 2018.
Answer:
Depletion expense is $16,800,000
Explanation:
2018 depletion expense=total oil reserves cost*quantity removed/total reserves
total oil reserves cost is $252,000,000
quantity removed in 2018 12,000,000 barrels
total oil reserves is 180,000,000 barrels
2018 depletion expense =$252,000,0000*12,000,0000/180,000,000
=$16,800,000
The depletion expense to charge against revenue in 2018 in order to arrive at net income is $16,800,000
Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $ 500,000 comprised of $ 200,000 of variable costs and $ 300,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.
During the current year, Byrd produced 70,000 putters, worked 80,000 direct labor hours, and incurred variable overhead costs of $ 70,000 and fixed overhead costs of $ 300,000 .
Required:
1. Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
Answer:
Fixed OAR= $3 per hour
Variable OAR = $2 per hour
Explanation:
Predetermined overhead absorption rate is used to charged overheads to cost unit.
The rate is computed as follows
Overhead absorption rate (OAR) =Budgeted Overheads / Buffeted labour hours
Budgeted labour hours = Standard hour/unit × budgeted units/(normal capacity)
Fixed OAR
= $300,000/(1 × 100,000) hours
= $3 per hour
Variable OAR
= $200,000/(1× 100,000) hours
= $2 per hour
Romboski, LLC, has identified the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0 $ 57,000 $ 57,000
1 33,000 20,300
2 27,000 24,300
3 19,500 29,000
4 13,400 25,300
a. Over what range of discount rates would you choose Project A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. Over what range of discount rates would you choose Project B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c. At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
a. We choose Project A if discount rate is above 27.46%
b. We choose Project A if discount rate is between 25% and 27.46%
c. There would you be indifferent between these two projects if discount rate is below 25%
Explanation:
We can use excel to find the internal rate of return (IRR) as file attached
IRR of project A is 27.46%
IRR of project B is 25.00%
Assume that salaried employees of Mayer, Inc., earn 2 weeks of vacation per year. The salaried employees earn a total of $160 each pay period. Mayer's first payroll of the year is on January 7. Prepare the January 7 journal entry for Mayer by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.
Answer:
Jan .7 Dr Vacation Benefits Expense $ 160
Cr To Vacation Benefits Payable $160
Explanation:
Journal entry for Mayer
Date Account Name Debit Credit
Jan .7
Dr Vacation Benefits Expense $ 160
Cr To Vacation Benefits Payable $160
( to record vacation pay expense.)
Answer:
Dr. Salaried and Wages Expense $160
Cr. Vocational benefit Payable $160
Explanation:
The vocational pay is an expense for Mayer, Inc., to record this expense we have debited the Salaried and Wages Expense account by $160, because expenses have debit nature and need a debit entry to Increase.
O the other hand a liability will be created for vocational benefit payable, which needs a credit entry to Vocational benefit Payable account.
Yardstick report on supplemental green house lighting
Answer:
One of the most convenient greenhouse method is Lexan.
Explanation:
Greenhouses are environments that are using natural and artificial lightning and that are very productive. The same principles are applied for them and garden rooms, although heat and light intensity can be different. Artificial light is most often used during non-day light hours. Supplementary light has greatest effect on younger plants. Best greenhouse coverage is produced with ultraviolet resistant lights, that can transmit plenty of light. One of the best greenhouse plastics on the market is Lexan, which can last for years and transmits as much light as glass, while retaining greenhouse heat.
A yardstick report on supplemental greenhouse lighting involves studying additional light sources used in a greenhouse to promote plant growth. This includes evaluating various types of lighting options like LED, HPS and MH, and their impacts on plant health.
Explanation:A yardstick report on supplemental greenhouse lighting would involve the study of the additional light resources utilized to enhance the growth and productivity of plants in a greenhouse environment. Supplemental lighting in greenhouses is commonly used to extend daily light hours, increase light intensity, and supplement the spectrum of light from the sun. For instance, during shorter daylight periods or in climates with less sunlight, supplemental lighting can be used to mimic the effects of natural sunlight. This would likely involve evaluating different types of lighting options, such as LED, HPS (High Pressure Sodium) or MH (Metal Halide). The report would assess their effectiveness in different conditions, and their impact on plant growth and health.
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Willy’s only source of wealth is his chocolate factory. He has the utility function p(cf)1/2 + (1 − p)(cnf)1/2,where p is the probability of a flood, 1 − p is the probability of no flood, and cf and cnf are his wealth contingent on a flood and on no flood, respectively. The probability of a flood is p = 1/6. The value of Willy’s factory is $500,000 if there is no flood and $0 if there is a flood. Willy can buy insurance where if he buys $x worth of insurance, he must pay the insurance company $2x/17 whether there is a flood or not but he gets back $x from the company if there is a flood. Willy should buy:
a) no insurance since the cost per dollar of insurance exceeds the probability of a flood
b) enough insurance so that if there is a flood, after he collects his insurance, his wealth will be 1/4 of what it would be if there were no flood
c) enough insurance so that if there is a flood, after he collects his insurance, his wealth will be the same whether there was a flood or not
d) enough insurance so that if there is a flood, after he collects his insurance, his wealth will be 1/3 of what it would be if there were no flood
e) enough insurance so that if there is a flood, after he collects his insurance, his wealth will be 1/5 of what it would be if there were no flood
Willy should buy(a) no insurance since the cost per dollar of insurance exceeds the probability of a flood
Explanation:
Willy's only source of wealth is his chocolate factory. He has the utility function p(cf)1/2 + (1 − p)(cnf)1/2,, where p is the probability of a flood, 1 - p is the probability of no flood, and cf and in are his wealth contingent on a flood and on no flood, respectively. The probability of a flood is p = 1/6. The value of Willy's factory is $500,000 if there is no flood and $0 if there is a flood. Willy can buy insurance where if he buys $x worth of insurance, he must pay the insurance company $2x/17 whether there is a flood or not but he gets back $x from the company if there is a flood. Willy should buy
The answer for the above statement is option ( A.) no insurance since the cost per dollar of insurance exceeds the probability of a flood .
It is because the probability of flood as given in the question is only 1/6, whereas the chances of no flood are 5/6. So that means that he should not buy the insurance because the probability of the flood is comparatively less than the amount Willy has to pay to the insurance company and the amount paid back to willy by the insurance company is $ x worth of insurance
Final answer:
Willy should opt for enough insurance to equalize his wealth, after insurance collection, whether there is a flood or not. This aligns his wealth with his provided utility function and creates indifference between flood and no flood scenarios.
Explanation:
The student is asking about the optimal level of insurance that Willy should purchase for his chocolate factory given the utility function, the probability of a flood, and the terms of the insurance policy. According to the information provided, the probability of a flood (p) is 1/6 and the value of Willy's factory without flood (cnf) is $500,000. The cost of the insurance is $2x/17 for every $x purchased, and in the event of a flood, the insurance pays back $x.
The optimal insurance choice is c) enough insurance so that if there is a flood, after he collects his insurance, his wealth will be the same whether there was a flood or not. This would fully insure Willy against the risk of a flood, allowing him to reach indifference in terms of utility regardless of the flood occurrence.
Suppose you sell surfboards for a living, and you expect the price of surfboards to increase at the same rate as inflation; you adjust your prices accordingly. If this does not occur, then it must be true that:
Answer:
the relative price of surfboards is changing.
Explanation:
Suppose you sell surfboards for a living, and you expect the price of surfboards to increase at the same rate as inflation; you adjust your prices accordingly. If this does not occur, then it must be true that: the relative price of surfboards is changing.
Relative-price changes arise in market economies as individual prices adjust to the flow of the supply and demand for various goods. Relative-price movements say alot about the scarcity of particular goods and services
1.One employee is in charge of the following activities at a drive-through of a bank:
Activity Activity Time per Customer
Greet customer 2 Seconds
Take order 3 Seconds
Process order 2 minutes
Print receipt 10 seconds
a. What is the processing time (in seconds) of the drive-through process at the bank?
b. What is the capacity (in customers per hour) of the employee?
c. If demand is 30 customers per hour, what is the bank’s flow rate (in customers per minute)?
Answer:
1. 135seconds
2. 27 customers per hour
3. 0.015 customers per hour
Explanation:
See attached file
The total processing time for a customer at the bank's drive-through is 135 seconds. The capacity of the employee is approximately 26.67 customers per hour. The bank flow rate is 0.5 customer per minute, assuming a demand of 30 customers per hour.
Explanation:The total processing time for the drive-through process at the bank involves adding up the time each activity takes. The activities are greeting the customer, taking the order, processing the order, and printing the receipt. Converting all times to the same unit (seconds) we get:
Greet customer: 2 seconds Take order: 3 seconds Process order: 2 minutes = 120 seconds Print receipt: 10 seconds
Adding these together gives us a total of 135 seconds. The capacity (in customers per hour) of the employee can be calculated by taking the number of seconds in an hour (3600 seconds) and dividing by the process time. This gives us approximately 26.67 customers per hour. The bank's flow rate (in customers per minute), given a demand of 30 customers per hour, will be the lower of the demand rate and capacity, which is 30 customers per hour = 0.5 customers per minute.
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