Answer:
The correct is the last option,$179,000
Explanation:
The initial amortization expense=$2356000/16=$147.250
After four years additional expense was recorded for $381,000 which need to be added to the carrying value of the copyright
Carrying value=$2356000-($147.250*4)=$1,767,000.00
Plus additional qualifying expense =$381,000
Total carrying amount =$2,148,000.00
Remaining useful life =1 years
Revised amortization =$2,148,000.00/12 years=$179,000
The revised amortization from 2018 onward is $179,000
The last option is the correct answer
Current assets for two different companies at fiscal year-end are listed here. One is a manufacturer, Rayzer Skis Mfg., and the other, Sunrise Foods, is a grocery distribution company. Account Company 1 Company 2 Cash $ 11,000 $ 9,000 Raw materials inventory — 39,875 Merchandise inventory 42,875 — Work in process inventory — 29,000 Finished goods inventory — 49,000 Accounts receivable, net 56,000 75,000 Prepaid expenses 4,500 900 Required: 1. Identify which set of numbers relates to the manufacturer and which to the merchandiser. 2a. & 2b. Prepare the current asset section for each company from this information.
Answer:
Requirement 1
Relating to manufacturer
Cash
Raw materials inventory
Work in process inventory
Finished goods inventory
Accounts receivable, net
Relating to merchandiser
Cash
Merchandise inventory
Accounts receivable, net
Prepaid expenses
Requirement 2
Company Rayzer Skis Mfg Sunrise Foods
Current Asset Section:
Cash 11,000 9,000
Raw materials inventory 39,875 N/A
Merchandise inventory N/A 42,875
Work in process inventory 29,000 N/A
Finished goods inventory 49,000 N/A
Accounts receivable, net 56,000 75,000
Prepaid expenses 4,500 900
Total 189,375 127,775
Explanation:
manufacturer produces goods then sells finished goods
merchandiser purchases goods for resale
The manufacturer is represented by Rayzer Skis Mfg. and the merchandiser is represented by Sunrise Foods. Rayzer Skis Mfg.'s current assets include cash, merchandise inventory, accounts receivable, and prepaid expenses. Sunrise Foods' current assets include cash, raw materials inventory, work in process inventory, finished goods inventory, accounts receivable, and prepaid expenses.
Explanation:The set of numbers that relates to the manufacturer, Rayzer Skis Mfg., is as follows:
Cash: $11,000 Raw materials inventory: Not provided Merchandise inventory: $42,875 Work in process inventory: Not provided Finished goods inventory: Not provided Accounts receivable, net: $56,000 Prepaid expenses: $4,500
The set of numbers that relates to the merchandiser, Sunrise Foods, is as follows:
Cash: $9,000 Raw materials inventory: $39,875 Merchandise inventory: Not provided Work in process inventory: $29,000 Finished goods inventory: $49,000 Accounts receivable, net: $75,000 Prepaid expenses: $900
A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units? Use a contribution margin format. You must show how you calculated each number for credit. Use the template below for all of the remaining problems. Check: Operating income should be greater than $43,000. (3 points)Sales $Variable costs $Contribution margin $Fixed costs $Operating income $
Answer:
Calculation of Operating Income if company produces and sells 70,000 units
Sales ($96,000/60,000 units × 70,000) $112,000
Less variable costs ( $36,000/60,000×70,000) ($42,000)
Contribution $70,000
Less Period Costs
fixed costs (26,000)
Operating Income 44,000
Explanation:
First Determine the Standard Cost or Revenue
Then Flex the Budget to the new level of 70,000 units produced and sold
A contractor must choose between buying or renting a crane for the duration of a 5 year construction project. The contractor uses an MARR of 8%. At the end of the project, the crane can be sold for 21% of its initial cost. The cost to operate and maintain the crane is $210,000 per year. Renting the crane costs $330,000 per year including all operating and maintenance costs.
Determine the maximum amount the contractor should pay to purchase the crane (i.e. the breakeven initial cost of the crane).
Answer:
Renting a crane + Maintenance = $330,000
Rent duration. = 5 years
Percentage. = 8%
330,000/ 100 x 8/ 1 x 5
= $132,000
Sold Crane 21% of initial cost
Initial cost =
330,000 x 100 x 21/1
330 x 21
= $6,930 + $132,000
To purchase the crane he pays
=$138,930
7. Suppose that people expect inflation to equal 3%, but in fact, prices rise by 5%. Describe how this unexpectedly high inflation rate would help or hurt the following: 1. the government 2. a homeowner with a fixed-rate mortgage 3. a union worker in the second year of a labor contract 4. a college that has invested some of its endowment in government bonds
Answer:
The answer is:
1. Help
2. Help
3. Hurt
4. Hurt
Explanation:
1. Help. This unxpected increase in inflation will help the government because this will increase its revenue and also reduce the real value of government outstanding debts.
2. Help. Paying at a fixed rate that was agreed when the interest rate was 3percent will be of help with the home owners because the real interest rate he will be paying lower. The lenders lose during this period.
3. Hurt. It will hurt this worker because the contract was agreed when the interest rate was 3percent. Now that prices of goods and services have increased, purchasing power will be reduced.
4. Hurt. Because with increased inflation, interest rates will be lower. So the college is earning lower interest rate.
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $2,000. The division sales for the year were $1,049,000 and the variable costs were $859,000. The fixed costs of the division were $192,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
a. 57600 decrease
b. 132400 decrease
c. 54700 decrease
d. 190000 decrease
e. 190000 increase
Answer:
The impact on operating income for eliminating this business segment would be a decrease in profit of $132,400. The right answer is b.
Explanation:
According to the data, we have the following details:
division sales=$1,049,000
variable costs= $859,000
Hence, contribution= division sales-variable costs
=$1,049,000-$859,000
=$190,000
30% of the fixed costs allocated to that division could be eliminated
Decrease in fixed cost=$192,000×30%= $57,600
Therefore, the impact on operating income for eliminating this business segment would be $190,000-$57,600= $132,400, which means that there would a decrease in profit.
Answer:
Net decrease in operating income $132,400
Explanation:
The relevant cash flows to determine the impact of eliminating the division are:
lost contribution from shut down Savings in fixed cost from shut downPlease, note that only 30% of the fixed costs to be saved is relevant, the balance is not relevant for this decision. Simply because they would be incurred either way.
$
The impact on operating income:
Lost contribution = ( 1,049,000 - 859,000)= (190,000)
Savings in fixed cost = 30% ×192,000 = 57,600
Net decrease in operating income 132,400
Scenario 15-6 The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die-hard fans and casual fans. For a particular WaR 2 Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc.
Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $50 per ticket?
The concert promoters can earn an additional $100,000 by charging each type of fan their willingness to pay instead of a flat price of $50 per ticket.
To calculate the additional profit from charging each type of fan their willingness to pay compared to a flat price of $50 per ticket, we first consider the revenue from each pricing strategy. If die-hard fans are charged $150 and casual fans are charged $50, and assuming all tickets are sold, the total revenue would be (1,000 die-hard fans times $150) + (500 casual fans times $50) = $150,000 + $25,000 = $175,000. The cost of putting on the concert is $50,000, so the profit under this differential pricing strategy would be $175,000 - $50,000 = $125,000.
Under a flat pricing strategy where every ticket is sold for $50, with all 1,500 seats sold, the revenue would be (1,500 tickets times $50) = $75,000. The profit would then be $75,000 - $50,000 = $25,000. Therefore, the additional profit from charging each customer their willingness to pay is $125,000 - $25,000 = $100,000.
The specification limit for a product is 9 cm +/- 1 cm. A process that produces the product has a mean of 9.5 cm and a standard deviation of 0.2 cm. What is the process capability, Cpk ?
Answer:
Possible options:
A. 3.33
B. 1.67
C. 0.83
D. 2.50
E. none of the above
Answer is C. 0.83
Explanation:
Cpk is used here since the process mean isn't centered in the specification interval.
On December 31, 2018, Perry Corporation leased equipment to Admiral Company for a five-year period. The annual lease payment, excluding nonlease components, is $ 43,000. The interest rate for this lease is 12%. The payments are due on December 31 of each year. The first payment was made on December 31, 2018. The normal cash price for this type of equipment is $ 150,000 while the cost to Perry was $ 126,000. For the year ended December 31, 2018, by what amount will Perry's earnings increase due to this lease (ignore taxes)?
Answer:
The correct answer is $24,000.
Explanation:
According to the scenario, the computation of the given data are as follows:
Fair value of equipment = $150,000
Cost to Perry = $126,000
So, we can calculate the earning by using following formula:
Profit = Fair value of equipment - Cost to Perry
By putting the value in the formula, we get
Profit = $150,000 - $126,000
= $24,000
When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred, then the lowest acceptable transfer price as far as the selling division is concerned is: A. variable cost of producing a unit of product. B. the full absorption cost of producing a unit of product. C. the market price charged to outside customers, less costs saved by transferring internally. D. the amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.
Answer:
C. the market price charged to outside customers, less costs saved by transferring internally.
Explanation:
Divisional manager performance is evaluated separately from one department to another. The Selling department need a minimum price equivalent to price the items fetch in market transaction to raise performance.
However goal congruence has to be met, therefore the price must exclude savings as a result of Internal transfer for the interest of the firm as a whole.
1. Peter's Audio Shop has a before-tax cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter's Audio Shop?
Answer:
9.14%
Explanation:
The computation of the weighted average cost of capital is shown below:-
Debt = $500,000 × 1.02
= $0.51 m
Preferred = 40,000 × $34
= $1.36 m
Common = 104,000 × $20
= $2.08 m
Total = $0.51 m + $1.36 m + $2.08 m
= $3.95 m
So, Weighted average cost of capital = ($2.08 ÷ $3.95 m × 0.11) + ($1.36 m ÷ $3.95 m × 0.08) + (($0.51 m ÷ 3.95 m × 0.07 × (1 - 0.34))
= 0.057924 + 0.027544 + 0.005965
= 0.091433
or 9.14%
Therefore for computing the weighted average cost of capital we simply applied the above equation.
A company issues $24900000, 5.8%, 20-year bonds to yield 6% on January 1, 2020. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24324441. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2020 balance sheet
Answer:
$24,353,219
Explanation:
The bond is issued on discount when the bond issuance proceeds are less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.
Discount on the bond = Face value - cash proceeds = $24,900,000 - $24,324,441 = $575,559
According to straight line amortization
Discount charged in the period = $575,559 / 20 = $28,778 per year = $14,389 per six months
Cash payment of interest = $24,900,000 x 5.8% = $1,444,200 per year = $722,100 per six months
As on December 31, 2020, one year has passed since the bond is issued. We will calculate annual interest expense
Total Interest Expense = $1,444,200 + $28,778 = $1,472,978
Bond Carrying value will be the net of bond book value and un-adjusted discount balance.
Carrying value of Bond = 24,900,000 - (575,559 - 28,778) = $24,353,219
Final answer:
Using the effective-interest amortization method, the carrying value of the company's bonds on the December 31, 2020 balance sheet will be $24,341,850. The original discount is amortized over the interest payment periods based on the market rate of 6%.
Explanation:
Since the company issued bonds at a discount (the bonds were sold for less than their face value), the discount on bonds payable needs to be amortized over the life of the bonds. On January 1, 2020, the bonds are issued for $24,900,000, with a stated interest rate of 5.8% when the market rate is 6%. The bonds are sold for $24,324,441, indicating a discount of $575,559. Over the course of each interest payment period, part of this discount is amortized as additional interest expense. For the first interest payment on June 30, 2020, the interest expense will be calculated using the market interest rate (6%) times the carrying amount of the bonds at the beginning of the period: 6% * $24,324,441 = $729,733. The actual cash paid for interest, calculated with the stated interest rate (5.8%) on the face value, will be $24,900,000 * 5.8% / 2 = $721,650 (interest is paid semi-annually). The difference between the interest expense and the interest paid ($8,083) is the amount of discount amortized. After recording this, the revised carrying amount of the bonds becomes $24,332,524 ($24,324,441 + $8,083). For the second payment on December 31, 2020, the same process is followed. The new interest expense will be calculated on the updated carrying amount: 6% * $24,332,524 / 2 = $730,976. The interest paid remains the same at $721,650. The additional amortization of the discount is $9,326 ($730,976 - $721,650), bringing the carrying value of the bonds on the December 31, 2020 balance sheet to $24,341,850 ($24,332,524 + $9,326).
Cara, who is 42 years old, had some unexpected medical expenses during the year. To pay for these expenses (which were claimed as itemized deductions on her tax return), she received a $10,000 distribution from her traditional IRA (she has only made deductible contributions to the IRA). Assuming her marginal ordinary income tax rate is 22%, what amount of taxes and/or early distribution penalties will Cara be required to pay on this distribution
Answer:
Answer is given below;
Explanation:
Distribution received from IRA $10,000
Marginal income tax rate 22%
Income Tax $10,000*22% $2,200
She will have to pay $2,200 as income tax on her receipt of traditional IRA distribution.There shall be no penalty as she has only made deductible contributions to IRA.
The industry-low, industry-average, and industry-high cost benchmarks on p. 6 of each issue of the Footwear Industry Report are of considerable value to the managers of companies considering building additional facility space and/or adding more footwear-making equipment to boost production capabilities. are worth careful scrutiny by the managers of all companies because they help managers determine the degree to which their company's costs for the benchmarked cost categories are competitive with those of rival companies. are sometimes historically interesting but are of little or no value to managers when it comes to making decisions in the upcoming decision round. only have value to the managers of companies whose costs are below the industry averages. are of little value to company managers in making decisions to improve company performance in the upcoming decision round, unless a company is losing money and its managers do not understand why.
Answer:
only have value to the managers of companies whose costs are below the industry averages.
Explanation:
It provides help for the manager to the manage and to control the problem of high cost in the organization. It also helps to the manager to tackle the problem of low cost.
The industry benchmarks from the Footwear Industry Report help managers evaluate if their company's costs are competitive. They provide insights for strategic planning and decision-making, particularly when considering the expansion of production capabilities. An understanding of cost components like fixed, marginal, and variable costs is essential for optimizing operations and controlling costs.
Explanation:The benchmark costs provided in the Footwear Industry Report, such as industry-low, industry-average, and industry-high are crucial tools for managers. These benchmarks help managers assess the competitiveness of their company's costs in critical categories compared to their rivals. This comparison is essential for strategic decision-making especially when considering investments in facility expansions or new equipment to increase production capabilities.
Understanding the different components of costs, namely fixed cost, marginal cost, average total cost, and average variable cost, is fundamental because it provides detailed insights into the firm’s financial health and operational efficiency. Firms can have different cost structures, with some having high fixed costs and low marginal costs, while others operate under the opposite pattern. Managers can use these insights to optimize production levels and control costs effectively.
Finally, the pattern of costs can vary across industries and firms, making it vital for managers to not only rely on general measures but also to consider the unique aspects of their own firm when making decisions. A keen understanding of the cost of production is as much an art as a science and is indispensable for improving company performance in upcoming decision rounds and for financial planning.
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In 2021, the controller of Sytec Corporation discovered that $62,000 of inventory purchases were incorrectly charged to advertising expense in 2020. In addition, the 2020 year-end inventory count failed to include $40,000 of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year-end inventory count was correct. The amounts of the errors are deemed to be material. Required: 1. Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors.
Answer:
Reduction is retained earnings by $40,000
The correcting journal entries:
Dr merchandise inventory $40,000
Cr Retained earnings $40,000
Explanation:
The impact of the omitted consigned inventory and the inventory purchases debited to advertising expenses are shown below
increase in purchases $62,000
omitted closing inventory ($40,000)
increase in cost of goods sold $22,000
Reduction in advertising expenses $62,000
Increase in retained earnings $40,000
The implication of this is that the closing inventory was lower by $40,000 and retained earning was lower by the same amount
The correcting journal entries:
Dr merchandise inventory $40,000
Cr Retained earnings $40,000
It is noteworthy that a lower closing inventory means a higher cost of goods ,as a result a lower operating profit and retained earnings
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $142,104. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows would increase by $41,800. Compute the cash payback period.
Answer:
3.72 years
Explanation:
The cash payback period of this investment is the initial investment of $142,104 divided by net increase in cash in cash flow per period.
Cash Payback Period = Initial Investment /Net increase Cash Flow per Period
Net increase in cash flow per period=$80,000-$41,800=$38,200
Cash payback period=$142,104/$38,200=3.72 years
It would take 3 years 9 months(0.72*12 months) for the project to pay back its initial investment of $142,104
The following information is available for Birch Company at December 31: Money market fund balance $ 2,880 Certificate of deposit maturing June 30 of next year $ 15,900 Postdated checks from customers $ 1,700 Cash in bank account $ 23,331 NSF checks from customers returned by bank $ 740 Cash in petty cash fund $ 290 Inventory of postage stamps $ 27 U.S. Treasury bill purchased on December 15 and maturing on February 28 of following year $ 10,900 Based on this information, Birch Company should report Cash and Cash Equivalents on December 31 of: Multiple Choice $42,428 $39,841 $53,301 $37,401 $38,361
Answer:
$37,401
Explanation:
The computation of the Cash and Cash Equivalents is shown below:
= Money market fund balance + cash in bank account + cash in petty cash fund account + U.S treasury bill account
= $2,880 + $23,331 + $290 + $10,900
= $37,401
We simply applied the above formula to determine the cash and cash equivalent
Therefore, we ignored all other information mentioned in the question
Last Chance Mine (LCM) purchased a coal deposit for $750,000. It estimated it would extract 12,000 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1 million, $3 million, and $2 million for years 1 through 3, respectively. During years 1–3, LCM reported net income (loss) from the coal deposit activity in the amount of ($20,000), $500,000, and $450,000, respectively. In years 1–3, LCM actually extracted 13,000 tons of coal as follows: (Leave no answer blank. Enter zero if applicable. Enter your answers in dollars and not in millions of dollars.)
Answer:
The method used to recover costs of investment in natural resources like oil refinery, mining, timber forest is referred to as depletion.
a)
Year 1 Year 2 Year 3
Tons extracted 2,000 7,200 2,800
Depletion rate $62.50 $62.50 $62.50
Cost depletion expense $125,000 $450,000 $175,000
Note: the extract tons of coal from the deposit is limited to 12,000. So, 1,000 tons extract is deducted in the last year.
b.
Percentage depletion: This is a method of computing depletion amount based on percentage depletion rates. Percentage depletion is computed by multiplying the gross income obtained from extraction with fixed percentage depletion rates.
Calculate LC’s percentage depletion for each year.
[Find the figure in the attachment]
Note: The percentage depletion is not limited to the basis in the property.
c.
Compute LC’s actual depletion expense for each year.
[Find the figure in the attachment]
In an effort to reduce pipe breakage, water hammer, and product agitation, a French chemical company plans to install several chemically resistant pulsation dampeners. The cost of the dampeners today is €125,000, but the chemical company has to wait until a permit is approved for its bidirectional port-to-plant product pipeline. The permit approval process will take at least 2 years because of the time required for preparation of an environmental impact statement. Because of intense foreign competition, the manufacturer plans to increase the price only by the inflation rate of 4% each year. Determine the cost of the dampeners in 5 years in terms of (a) then-current euros and (b) constant-value euros?
The cost of dampeners in terms of then-current euros is_________ € .
The cost of dampeners in terms of constant-value euros is______ € .
Answer:
a) €152081.6128
b) €125000
Explanation:
a) The cost of dampners in terms of then-current euros :
current cost x(1 + inflation rate)ⁿ where n is the number of years.
Since the price of dampners is expected to increase only by 4% per year from the current price of €125,000 in 5 years:
We calculate : 125000 (1+0.04)⁵ = €152081.6128
The cost of dampeners in terms of then-current euros is €152081.6128
b) The cost of dampners in terms of constant value will remain as at today's current price if the value of Euros remains constant . Therefore, The cost of dampeners in terms of constant-value euros is €125,000.
Alkyl Fliers Company produces model airplanes. During the month of November, it produced 3,000 planes. The actual labor hours were 5 hours per plane. Its standard labor hours are 10 hours per plane. The standard labor rate is $8 per hour. At the end of November, Alkyl Fliers found that it had a favorable labor rate variance of $12,000. What was Alkyl Fliers' actual cost per labor hour
Answer:
$108,000
Explanation:
Favorable rate variance arises when the actual cost is lower than the implied cost. Implied cost can be calculated by multiplying standard rate with actual hours.
Labor rate variance = Actual Labor cost - Implied Labour cost
Favorable Labor rate variance = Implied Labour cost - Actual Labor cost
Favorable Labor rate variance = (Standard rate x Actual hours) - Actual Labor cost
$12,000 = ($8 x (5 x 3000)) - Actual Labor cost
$12,000 = ($8 x 15,000) - Actual Labor cost
$12,000 = $120,000 - Actual Labor cost
Actual Labor Cost = $120,000 - $12,000 = $108,000
On January 3, 2014, Trusty Delivery Service purchased a truck at a cost of $90,000. Before placing the truck in service, Trusty spent $3,000 painting it, $1,500 replacing tires, and $4,500 overhauling the engine. The truck should remain in service for five years and have a residual value of $9,000. The truck's annual mileage is expected to be 22,500 miles in each of the first four years and 10,000 miles in the fifth year - 100,000 miles in total.
In deciding which depreciation method to use, Mikail Johnson, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance).
Answer:
Accumulated depreciation for Years 1 - 5 under:
the Straight-line method is $90,000.the Units-of-production method is $90,000.the Double-declining-balance method is $86,170.Explanation:
The total cost of the asset is $90,000 + $3,000 + $1,500 + $4,500 = $99,000, since all the other costs were directly attributable cost and were necessary to bring the asset to usable form.
The painting is capitalized because it is the first time Trust Delivery would be using the asset, otherwise it would have been expendedOverhauling cost can be regarded as a separate asset, if we were provided with different useful lives - componentization.Under straight-line method, depreciation expense is (cost - residual value) / No of years = ($99,000 - $9,000) / 5 years = $18,000 yearly depreciation expense.
Accumulated depreciation for Years 1 to 5 is $18,000 x 5 years $90,000.
The unit-of-production method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
At Year 1, depreciation expense (DE) is: ($99,000 - $9,000) / 100,000 miles x 22,500 miles = $20,250/year
Accumulated depreciation for the first four years is $20,250 x 4 years = $81,000.
At Year 5, depreciation = $90,000 / 100,000 miles x 10,000 miles = $9,000
Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in Years 1 - 4.
Accumulated depreciation expense for Years 1 to 5, under this method, is $90,000 (addition of first four years and the Year 5).
The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/5years = 20%, then 20% multiplied by 2 to give 40%
At Year 1, 40% X $99,000 = $39,600
At Year 2, 40% X $59,400 ($99,000 - $39,600) = $23,760
At Year 3, 40% X $35,640 ($59,400 - $23,760) = $14,256
At Year 4, 40% X $21,384 ($35,640 - $14,256) = $8,554 approximately (the depreciation expense would stop at this stage since the amount falls below the residual value).
Accumulated depreciation expense for Years 1 to 4, under this method, is $86,170 (addition of all the yearly depreciation).
You are a loan officer at a bank. Two years ago your bank loaned Westwood Solar $100,000 to start a company selling solar panels to commercial and residential customers. The loan has an acceleration clause that permits the bank to immediately demand all payments plus the interest owed to date if Westwood Solar fails to pay an installment in any given month. Westwood Solar has made its loan payments for the past two years. However, you know that the company has slipped into financial distress as sales of solar panels have proved more difficult than expected. The CEO of Westwood Solar, anticipating your concern, has informed you that a new state bill proceeding through the legislature proposes to give residents substantial tax breaks for buying solar panels. The CEO has also asked for a two month extension for the next payment in order to prepare for the new tax law. Evaluate whether you should exercise the acceleration clause against Westwood Solar.
Answer:
As a person I will give some time to that organization for pay the instalment, on the grounds that such huge numbers of individuals legitimately or by implication associated with that organization.
According to financial perspective additionally I should give some an opportunity to re pay the instalment. Turned out to be presently a days joblessness is one significant issue. Also this kind of organizations will help to nation to improve economy by spreading business in different nations. What's more, this organization additionally help to diminish the portion of outside organizations in own nation.
We realize that step by step the interest of non-traditional energies is expanding. Among all the non-customary energies sun based vitality assumes a significant job. Presently a days government additionally begins to offer dies down to this sorts of organizations to stop the cheapening of natural conditions by the utilization of ordinary vitality sources.
The decision to trigger the acceleration clause against Westwood Solar must balance the company's history of regular payments and the prospect of improved sales due to the proposed tax breaks with the bank's financial interests.
Explanation:The question involves evaluating whether to exercise the acceleration clause against Westwood Solar that has recently slipped into financial distress. Considering the potential impact of the new state bill that could provide tax breaks and boost solar panel sales, the decision to demand immediate payment must be weighed against the company's past record of consistent payments and the prospects of recovery with the pending legislation. An acceleration clause allows a bank to demand all payments if the borrower fails to make an installment, similar to the way credit card companies cover losses from delinquent payments. However, enforcing such a clause should be a measured decision.
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Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of 3.9 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price? What will the price be in three years? In 15 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Answer: a) $40.76
b) $45.72
c) $72.36
Explanation:
We shall use the dividend discount model of stock valuation to solve for this with the following formula,
P0 = D1 / (Ke - g)
Where,
P0 = Current Price
D1 = Expected Div AFTER 1 YEAR
Ke = Cost of Equity
g = Growth Rate
We have only the current dividend so we will apply the growth rate to find the next one.
a) Current Price
PO = D(1+g) / Ke - g
PO = 2.55(1+0.039) / 0.104 - 0.039
PO = $40.76
b) In 3 years. So we would need to use the dividend, 4 years from now to be able to calculate
P3 = D(1+g)^4 / Ke - g
P3 = 2.55(1+0.039) ^4 / 0.104 - 0.039
P3 = $45.72
c) In 15 years. So we would need to use the dividend, 16 years from now to be able to calculate,
P15 = D(1+g)^16 / Ke - g
P15 = 2.55(1+0.039) ^16 / 0.104 - 0.039
P15 = $72.36
If you need any and I mean any clarification, do comment. Cheers.
To find the current price of the stock, we can use the Gordon Growth Model (also known as the Dividend Discount Model), which is a method used to calculate the value of a stock that assumes that dividends will increase at a constant growth rate indefinitely. The formula for the model is:
P0 = D1 / (r - g),
where:
- P0 = Current price of the stock
- D1 = Dividend expected next year
- r = Required rate of return (or discount rate)
- g = Growth rate of dividends
Given that the last dividend (D0) was $2.55 and it is expected to grow at a rate of g = 3.9% per year, we first need to calculate the dividend expected next year (D1):
D1 = D0 * (1 + g) = $2.55 * (1 + 0.039) = $2.55 * 1.039 = $2.64945.
Now we can calculate the current stock price (P0) using the required rate of return r = 10.4%:
P0 = D1 / (r - g) = $2.64945 / (0.104 - 0.039) = $2.64945 / 0.065 = $40.76.
To find the price of the stock in three years, we need to understand that the price at that time will be based on the dividends expected in the fourth year, as stock value is based on future dividends. So we need to calculate the dividend in the fourth year (D4) and then discount it back to the price in the third year using the constant growth rate.
Let's calculate D4:
D4 = D0 * (1 + g)^4 = $2.55 * (1 + 0.039)^4 = $2.55 * (1.039)^4.
This result gives us the expected dividend in the fourth year. Now we use the Gordon Growth Model again to find the price (P3) at the end of year three:
P3 = D4 / (r - g).
We then calculate the expected dividend in the 16th year (D16) to find out the price in fifteen years, bearing in mind that the stock value in year 15 (P15) will be based on the dividend expected in year 16:
D16 = D0 * (1 + g)^16 = $2.55 * (1 + 0.039)^16.
Then, again, use the model:
P15 = D16 / (r - g).
Let's compute the actual numbers. First, calculate D4:
D4 = $2.55 * (1.039)^4 = $2.55 * 1.169858 = $2.98314.
Now calculate P3:
P3 = D4 / (r - g) = $2.98314 / 0.065 = $45.90.
Now calculate D16:
D16 = $2.55 * (1.039)^16 = $2.55 * 1.816892 = $4.63307.
Finally, calculate P15:
P15 = D16 / (r - g) = $4.63307 / 0.065 = $71.28.
Therefore, the current price of the stock is $40.76, the price in three years will be $45.90, and the price in fifteen years will be $71.28. These prices are based on the given growth rates and required return, using the Gordon Growth Model. Remember that the results may vary slightly due to rounding differences in the intermediate calculations. Rounded to two decimal places, your final prices may read:
- Current price: $40.76
- Price in three years: $45.90
- Price in fifteen years: $71.28
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Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Herold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Herold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Herold. Before title to the lot is transferred to Alice, Herold tells Alice that he no longer wants the lot. Alice tells Sarah about Herold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Herold ends up with the lot. She just wants her money. What type of principal is Herold
Answer:
Undisclosed principal
Explanation:
Am undisclosed principal in an agency relationship is one whose existence is not known to the third party. The third party believes they are making the transaction with the only agent involved in the transaction.
In this instance Sarah believed she was selling to Alice and was not aware Alice has a principal (Harold). In her mind she sold the land to Alice and no other person.
It was at the point where Harold said he no longer wanted the land that Alice told Sarah about him. At this point the contract between Harold and Alice had been terminated
Indigo Corporation significantly reduced its requirements for credit sales. As a result, sales during the current year increased dramatically. It had receivables at the beginning of the year of $35,100 and ending receivables of $196,800. Credit sales were $361,800.
(a) Determine cash collections during the period.
(b) Cash collections during the period $
Answer:
(a) $200,100
(b) $200,100
Explanation:
The movement in the accounts receivable balance at the start and end of an accounting period is due to cash payments, additional credit sales, and any amount written off during the period.
This may be expressed mathematically as
opening balance + sales - cash collected - amount written off = closing balance
$35,100 + $361,800 - cash collected = $196,800
Cash collected = $35,100 + $361,800 - $196,800
= $200,100
Marvin Gaye's song "Gotta Give It Up" was protected by ___________ .
a
not selected option a collective mark
b
not selected option b utility parent
c
not selected option c trademark
d
not selected option d copyright
e
not selected option e design patent
Answer:
d. not selected option d copyright
Shao Airlines is considering two alternative planes. Plane A has an expected life of 5 years, will cost $100 million and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million and will produce net cash flows of $27 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares is expected to be zero, and the company's cost of capital is 11%.By how much would the value of the company increase if it accepted the better project (plane)? What is the equivalent annual annuity for reach plane?
Answer:
1. If this is accepted the value of the company will increase by $27.0084 million.
2. The equivalent annual annuity for each plane:
Plane A = $2.973 million
Plane B = $4.586 million
Explanation:
1. Let's calculate Net Present Value (NPV) for Plane A:
Initial investment = $100 million
Annual cash flows = $30 million per year
Cost of capital = 11%
n = 5 years
NPV = (Annual cash flows × PVIFA (Cost of capital, n) - Initial investment
where PVIFa is Present Value Interest Factor
NPV = (30 million ×PVIFA (11%, 5) - 100 million
NPV = (30 million × 3.659) - 100 million
NPV = $10.877 million
Let's calculate Net Present Value (NPV) for Plane B:
Initial investment = $132 million
Annual cash flows = $27 million per year
Cost of capital = 11%
n = 10 years
NPV = (Annual cash flows × PVIFA (Cost of capital, n) - Initial investment
where PVIFa is Present Value Interest Factor
NPV = ($27 million ×PVIFA (11%, 10) - $132 million
NPV = ($27 million × 5.8892) - $132 million
NPV = $27.0084 million
In conclusion, the better project is Plane B as it has a higher net present value. If this is accepted the value of the company will increase by $27.0084 million.
2. equivalent annual annuity = NPV/ Present Value Annuity Factor
For Plane A:
equivalent annual annuity = NPV/ Present Value Annuity Factor ( 11%, 5)
equivalent annual annuity = $10.877 million/ 3.659
equivalent annual annuity = $2.973 million
The equivalent annual annuity for plane A is $2.973 million
For Plane B:
equivalent annual annuity = NPV/ Present Value Annuity Factor ( 11%, 10)
equivalent annual annuity = $27.0084 million/5.8892
equivalent annual annuity = $4.586 million
The equivalent annual annuity for plane B is $4.586 million
Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 14 comma 700 units. Southeastern estimates its annual holding cost for this item to be $24 per unit. The cost to place and process an order from the supplier is $76. The company operates 300 days per year, and the lead time to receive an order from the supplier is 3 working days. a) What is the economic order quantity? nothing units (round your response to the nearest whole number).
Answer:
305 units
Explanation:
The calculation of the economic order quantity is given below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
where,
Annual demand is 14,700 units
Ordering cost is $76 per order
And, the holding cost or carrying cost is $24 per unit
So the economic order quantity is
[tex]= \sqrt{\frac{2\times \text{14,700}\times \text{\$76}}{\text{\$24}}}[/tex]
= 305 units
We simply applied the above formula to determine the economic order quantity
Imagine your employer asks you to assist in determining whether their DC plan meets several of the criteria to be considered a qualified plan. For each of the following plan features, please indicate whether or not the plan meets the requirements. If so, explain why. If not, please explain how the plan can be changed to ensure that the plan complies. (Do not worry about plan qualification requirements that are not listed.)
a. The plan requires individuals to wait 6 months before becoming eligible to participate.
b. The employer has 250 employees, 40 of whom are considered highly compensated. 38 of the highly compensated employees are covered by the plan. 145 of the non-highly compensated employees are also covered by plan.
c. Employer contributions vest according to the following schedule:
After this many years of service Employee is vested in this % of employer contributions
1 15
2 30
3 45
4 60
5 80
6 100
Answer:
a) meets the requirements. It sets eligibiity criteria for the plan.
b) doesn't meet the requirements. This feature doesn't give out details of the employees as to why or why they aren't covered by the plan. The details of highly compensated employees covered or not covered by plan must be listed.The details of non-highly compensated employees must also be listed.
c) meets the requirements. The employees who have spent greater number of years with the companies must get larger contribution from the employer in the plan. This feature meets this requirement
Explanation:
Every defined contribution plan or DC plan must have an eligibility criteria. It must have complete records and details of employees who are going to be covered or not covered by the plan. It must also have the details of amount of benefit that will be received by employees and the details of contribution made by the employer. The plan must also differentiate the amount of benefit received by different groups of employees.
Marr Co. sells its products in reusable containers. The customer is charged a deposit for each container delivered and receives a refund for each container returned within two years after the year of delivery.Marr accounts for the containers not returned within the time limit as being retired by sale at the deposit amount. Information for 20X5 is as follows:Container deposits at December 31, 20X4 from deliveries in:20X3 $150,00020X4 430,000 $580,000Deposits for containers delivered in 20X5 780,000Deposits for containers returned in 20X5 from deliveries in:20X3 $ 90,00020X4 250,00020X5 286,000 626,000In Marr's December 31, 20X5 balance sheet, the liability for deposits on returnable containers should beA. $494,000B. $584,000C. $674,000D. $734,000
To calculate the liability for deposits on returnable containers in Marr Co.'s balance sheet, add deposits received and subtract deposits refunded for returned containers.
Explanation:To calculate the liability for deposits on returnable containers in Marr Co.'s December 31, 20X5 balance sheet, we need to consider the deposits received from deliveries and the deposits refunded for returned containers. First, we start with the balance of deposits at the beginning of the year:
20X4 deposits: $580,000
Next, we add the deposits received in 20X5:
20X5 deposits: $780,000
Then, we subtract the deposits refunded for containers returned:
20X3 deposits refunded: $90,000
20X4 deposits refunded: $250,000
20X5 deposits refunded: $286,000
Finally, we calculate the liability for deposits on returnable containers:
Liability = (20X4 deposits + 20X5 deposits) - (20X3 deposits refunded + 20X4 deposits refunded + 20X5 deposits refunded)
Liability = ($580,000 + $780,000) - ($90,000 + $250,000 + $286,000)
Liability = $1,360,000 - $626,000
Liability = $734,000
Therefore, the liability for deposits on returnable containers in Marr Co.'s December 31, 20X5 balance sheet is $734,000 (option D).
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The liability for deposits on returnable containers for Marr Co. as of December 31, 20X5 is $734,000. This is calculated by adding the deposits at the end of 20X4 to the deposits for 20X5 deliveries and subtracting the deposits for containers returned in 20X5.
To calculate the liability for deposits on returnable containers for Marr Co. on December 31, 20X5, we need to account for the deposits received and the refunds given for containers from various years. We start with the total deposits at the end of 20X4 and add the deposits for containers delivered in 20X5. From this sum, we subtract the deposits for containers returned in 20X5.
Here is the calculation:
Deposits at December 31, 20X4: $580,000Add: Deposits for 20X5 deliveries: +$780,000Subtract: Returns from 20X3 deliveries: -$90,000Subtract: Returns from 20X4 deliveries: -$250,000Subtract: Returns from 20X5 deliveries: -$286,000The total liability for deposits on returnable containers as of December 31, 20X5 is:
$580,000 + $780,000 - $90,000 - $250,000 - $286,000 = $734,000
Therefore, the correct answer is Option D, $734,000.
A company purchased an asset for $3,400,000 that will be used in a 3-year project. The asset is in the 3-year MACRS class. The depreciation percentage each year is 33.33 percent, 44.45 percent, and 14.81 percent, respectively. What is the book value of the equipment at the end of the project?