Answer:
Total 1,775,000
Explanation:
1.71m for 57,000 shares -->40% investment
$3 dividends per share
net income of 590,000
1.,710,000
+ 40% of net income 590,000 = 236,000
- 57,000 x $3 dividends per share = -171,000
The dividends under the equity method mean it is moving cash from one box (Harrison) to the main company (Puckett) so they decrease the Harrison valuation and increase cash, giving no effect on the assets of Puckett.
Total 1,775,000
The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed $550,000 in the common stock account and $4.7 million in the additional paid-in sur+ account. The 2015 balance sheet showed $590,000 and $5.1 million in the same two accounts, respectively. If the company paid out $505,000 in cash dividends during 2015, what was the cash flow to stockholders for the year? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Answer:
cash flow to stockholders = 65,000
Explanation:
2014
550,000 CS
4,700,000 Additional Paid-In
5,250,000 Total beginning Capital
2015
590,000 CS
5,100,000 Additional Paid-IN
5,690,000 Total ending Capital
Dividends - (Ending Capital - Beginning Capital) = cash low to stockholders
505,000 - (5,690,000 - 5,250,000) = 65,000
Milly Adams, the marketing manager for Nuance Cosmetics believes that in order for the company to succeed in international markets, it has to address the choices that is has about product attributes, distribution strategy, communication strategy, and pricing strategy in its targeted markets. What is mill adams referring to?
Answer: Marketing mix
Explanation: To achieve its objectives in the market, every company uses certain tools, the set of such tools is called marketing mix. It involves decision making in four levels product, price,place and promotion.
In the given case Milly Adams suggested the company to take decisions regarding product and distribution etc. So, from the above explanation we can conclude that she is referring to marketing mix.
Last year, Johnson Mills had annual revenue of $37,800, cost of goods sold of $23,200, and administrative expenses of $6,300. The firm paid $700 in dividends and had a tax rate of 35 percent. The firm added $2,810 to retained earnings. The firm had no long-term debt. What was the depreciation expense?
Answer:
Depreciation expense = 2,900
Explanation:
Our goal would be to construct the formula where depreciation expense is and then increase deepth until find something we can work:
[tex]$$Revenue - Expenses = Net Income[/tex]
Expanding expenses we find depreciation expense
[tex]$$Revenue - COGS - Admin Expense - Dep Expense = Income Before Taxes[/tex]
Here we don't Know Income Before taxes so we have to work that first
[tex]$$Income Before Taxes x (1-tax rate) = Net Income[/tex]
Here we don't Know Net Income taxes so we have to work that first
[tex]$$Net Income - Dividends = change in Retained Earnings[/tex]
Here we got the other component of the formula, so it is possible to solve for net income and from there achieve the answer
Net income = 2,810 + 700 = 3,510
Income before taxes = 3,510/0.65 = 5,400
37,800 - 23,200 - 6,300 - dep expense = 5,400
dep expense = 2,900
[tex]\ $Net income = 2,810 + 700 = 3,510 \\Income before taxes = 3,510/0.65 = 5,400\\37,800 - 23,200 - 6,300 - dep expense = 5,400\\dep expense = 2,900[/tex]
Fess receives wages totaling $74,500 and has net earnings from self-employment amounting to $71,300. In determining her taxable self-employment income for the OASDI tax, how much of her net self-employment earnings must Fess count? a. $74,500 b. $71,300 c. $53,900 d. $127,200 e. None of the above.
Fess wages $74500
Net self employ $51300
Fess must count $39,200 of the taxable self employment income for the OASDI tax _______
125,800 First
First $113700
(125,800)
_________
12,100
-
Correct Answer: $39,200
($113,700 - $74,500)
Final answer:
Fess has to count her entire net self-employment earnings of $71,300 for the OASDI tax, as it is part of her income subject to self-employment taxes.
Explanation:
The question involves calculating the taxable self-employment income for Fess concerning the OASDI (Social Security) tax. Fess's total wages are $74,500, and she also has net earnings from self-employment of $71,300. Since both forms of income are subject to Social Security taxes up to a certain limit, and given that for 2023, the Social Security wage base limit is $147,000, Fess would have to consider her entire self-employment earnings along with her wage earnings for the OASDI tax calculation. The correct answer is $71,300, as that is the part of her income subject to self-employment taxes in addition to her wages, without exceeding the Social Security wage base limit.
Which of the following is a characteristic of a monopoly?A.a large number of sellersB.homogeneous productsC.larger barriers to entryD.price taking firms
Answer:
The correct option here is C) larger barriers to entry.
Explanation:
A monopoly is a form of market where the number of sellers won't be much, as much of the market share is with one company, a really good example of it is Microsoft owning windows operating system.
Here the firms are price makers not price takers , as in monopoly a firm can control both supply and price of goods and service, as if a firm decides to decrease the supply it can sell products at a high cost.
It is really difficult for a new firm to enter in to market if the monopoly has been established , since there would be large initial cost to be incurred for entering and also it will be difficult for the new firm top compete with old one in taking over market share, so that it can also achieve similar low costs as of old one ( monopolist one )
Sommer, Inc., is considering a project that will result in initial aftertax cash savings of $1.79 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt-equity ratio of .85, a cost of equity of 11.9 percent, and an aftertax cost of debt of 4.7 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 2 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project?
Answer:
Maximum initial cost would be $58,116,883.12
Explanation:
1,790,000 increased at 3%
[tex]WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})[/tex]
Ke 0.119 + 0.02 = 0.139
ER 0.15
Kd(after-tax) Kd(1-t) = 0.047
DR 0.85
[tex]WACC = 0.139(0.15) + 0.047(.85)[/tex]
WACC 0.06080
Now that we have the rate, we calculate the present value using the gordon method
1,790,000 / (0.06080-0.03) = 58,116,883.12
What journal entry is made in a job-order costing system when $8,000 of materials are requisitioned for general factory use instead of for use in a particular job? (a) Work in Process $8,000 Manufacturing Overhead $8,000 (b) Work in Process $8,000 Raw Materials $8,000 (c) Manufacturing Overhead $8,000 Work in Process $8,000 (d) Manufacturing Overhead $8,000 Raw Materials $8,000
Answer:
(d) Manufacturing Overhead $8,000 Raw Materials $8,000
Explanation:
This will be an spending associate with the actual overhead.
These materials are indirect, so it should go in the factory overhead account.
They are not associate with any job in particular, so it cannot be capitalize through work in process.
A firm in a purely competitive industry has a typical cost structure. The normal rate of profit in the economy is 5 percent. This firm is earning $5.50 on every $50 invested by its founders.a. What is its percentage rate of return?b. Is the firm earning an economic profit? If so, how largec. Will this industry see entry or exit?d. What will be the rate of return earned by firms in this industry once the industry reaches long-run equilibrium?
Answer:
(A) the percentage RoR is 11%
(B) Yes, it is the earning are higher than average rate by 600 points,
(C)this industry will see in. The yield is higher than average
(D)Once it reached long run equilibrium it will be industry average of 5.5%
Explanation:
5.5/50 = .11 = 11%
11% - 5% = 6%
Answer:
a. 11%
b. Yes, economic profit is 6%
c. This industry will see more entries.
d. 5%
Explanation:
a.
The percentage rate of return is calculated as percentage of earnings over investment from founders or 5.5/50 = 11%
b.
As the firm return is 11% while normal rate of profit in the economy is only 5%, the economic earning is 6% which is calculated as 11%-5% = 6%.
c.
As there are opportunities in the industry to earn a profit level large than the normal level of the economy as a whole, investors will move more of their funds to the industry to enjoy higher return.
d.
As there are more entries, supply of the industries' products will be increased while demand remains the same. Price is lowered down and industry's profit will decrease subsequently. Once the industry's profit reaches 5% which is the normal profit level of the economy, the industry get in long-run equilibrium as there is no incentives for newcomers to enter the market.
Policy and standards often change as a result of business drivers. One such driver, known as ___________________, occurs when business shifts and new systems or processes are incorporated; these business shifts and new systems and processes may differ from what a standard or policy requires.
Answer:
Business exceptions
Explanation:
Policy and standards often change as a result of business drivers. One such driver, known as business exceptions, occurs when business shifts and new systems or processes are incorporated.
On December 31, 2011, Daggett Company issued $750,000 of ten-year, 9% bonds payable for $700,353, yielding an effective interest rate of 10%. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2012, and (c) the semiannual interest payment and discount amortization on December 31, 2012. Round amounts to the nearest dollar.
Answer:
(A)
cash 700,353
discount 49,647
bonds payable 750,000
(B)
interest expense 70035.3
cash 67,500
discount on bonds 2535.3
(C)
interest expense 70,288.83
cash 67,500
discount on bonds 2,788.83
Explanation:
(A) face value - issued amount = discount
(B)
[tex]purchase \: cost * effective \: rate = interest \: expense[/tex]
[tex]700,353 \times 0.10 = 70035.3 \: interest \: expense[/tex]
[tex]750,000 \times 0.09 = 67,500 cash \:disbursement[/tex]
Amoritization On discounts will be the diference 2535.3
(C) same procedure as (B) but now the bond value increase.
It is 700,353 + 2535.3 = 702,888.3
[tex]702,888.3 \times 0.10 = 70,288.83 \: interest \: expense[/tex]
[tex]750,000 \times 0.09 = 67,500 \:cash \:disbursement[/tex]
Amoritization On discounts will be the diference 2,788.83
Final answer:
The company's journal entries for the bond issuance and interest payments involve recording the initial cash received, the bond payable, and the discount on bonds payable. Subsequent entries record the interest expense, actual interest paid, and the discount amortized using the effective interest method on semiannual interest payment dates.
Explanation:
To answer the student's question regarding the journal entries for bond issuance and interest payments using the effective interest method, we need to follow three main steps:
(a) Issuance of the bonds
The journal entry to record the issuance of the bonds payable in the company's books on December 31, 2011, would be:
Dr Cash $700,353
Cr Bonds Payable $750,000
Dr Discount on Bonds Payable $49,647
(b) Semiannual interest payment on June 30, 2012
Interest Expense for the six months would be the carrying amount of the bond ($700,353) times the effective interest rate (5% semiannually, which is half of the annual effective interest rate of 10%): Interest Expense = $700,353 x 5% = $35,018 (rounded to the nearest dollar).
Since the bond's stated interest rate is 9% per annum, the actual cash interest paid for six months is $750,000 x 4.5% = $33,750.
The discount amortization would be the Interest Expense minus the Interest Paid: $35,018 - $33,750 = $1,268. This will reduce the discount on bonds payable and increase the carrying amount of the bond.
Dr Interest Expense $35,018
Cr Cash $33,750
Cr Discount on Bonds Payable $1,268
(c) Semiannual interest payment on December 31, 2012
Before making this journal entry, we must update the carrying amount of the bond for the amortized discount ($1,268 from the previous six months). The new carrying amount is $700,353 + $1,268 = $701,621.
The Interest Expense now would be $701,621 x 5% = $35,081 (rounded to the nearest dollar).
The discount amortization for this period is $35,081 - $33,750 = $1,331, further reducing the discount and increasing the carrying amount of the bond for future interest calculations.
Dr Interest Expense $35,081
Cr Cash $33,750
Cr Discount on Bonds Payable $1,331
Devon Company uses activity-based costing to determine the costs of its two products: A and B. The total estimated cost of the purchasing function activity pool is $14,000. The cost driver for that pool equals number of purchase orders. A total of 400 purchase orders are expected to be issued for the budgeted production of Product A and 300 purchase orders are expected to be issued for the budgeted production of Product B. The activity rate for the purchasing cost pool is:
Answer:
The activity rate will be 20 per order.
For product A it will be $8,000 applied
for Product B it will be $6,000 applied
Explanation:
estimated cost / activity pool = rate
14,000 / 700 = 20
Applied cost:
activity x rate
Product A 400 x 20 = 8,000
Product B 300 x 20 = 6,000
Answer:
$20 per purchase order
Explanation:
Resources in a company are allocated to companies at the beginning of a budgeting period based on consumption estimates. Activity-based costing (ABC) is a method used to identify the activities undertaken by an organisation, assigning the cost of each activity to the goods or services produced or offered by a company based on actual consumption of the related goods or services. The ABC method may support decisions associated with pricing, outsourcing and measurement of process improvements. The method allocates overhead costs of an activity based on cost drivers to determine the activity rate. This rate is then used to allocate costs based on actual consumption.
The overhead cost for the purchasing function of Devon Company is: $14,000
The cost driver is given as the number of purchase orders: 300(A) and 400(B)
The activity rate for the purchasing pool is therefore: $14,000/700 = $20 per order
Application:
If the actual purchase orders were below the estimated amount : say the orders for A were 250 and the actual purchase orders for B were 95, then the total cost of the purchasing function for the period would be (250 * $20) +(95*$20 = $6900 which would be below the $14,000 budget. That would signal that management would need to reassess and lower the resources allocated to the purchasing function during the next budgeting period.
If the actual orders were above the estimated amounts: say the orders for A were 450 and orders for B were 310 then the total cost incurred by the purchasing function would be (450 * $20) + (310 * $20) = $15200 which is above the budget. This would signal that there could be areas for process improvement to avoid redundancies arising from duplication of orders, loss of orders among other process inefficiencies.
San Ruiz Interiors provides design services to residential and commercial clients. The residential services produce a contribution margin of $450,000 and have traceable fixed operating costs of $480,000. Management is studying whether to drop the residential operation. If closed, the fixed operating costs will fall by $370,000 and San Ruiz’ income will:
Answer:
If closed the operating income will decrease by 50,000
Is a better scenario to continue with the residential sercives
Explanation:
current scenario:
contribution margin 450,000
Fixed Cost 480,000
net loss 30,000
drop scenario:
contribution margin = 0
fixed cost 450,000-370,000 = 80,000
net loss (80,000)
Boxer Company owned 16,000 shares of King Company that were purchased in 2016 for $440,000. On May 1, 2018, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that date, there were 50,000 shares of Boxer stock outstanding. The market value of the King stock was $22 per share on the date of declaration and $38 per share on the date of distribution. By how much is retained earnings reduced by the property dividend?
Answer:
By 110,000 the retained earnings reduced by the property dividend.
Explanation:
Retained Earnings: The retained earnings is that earnings which is left after all payments relating to the business expenses, shareholder dividend. The earnings which is to be retained so that it can come in use in near future.
For retained earning calculation, the stock market value is recorded when the date is declared not on distribution date.
So, the calculation is computed below:
As the 50,000 shares is given for every 10 shares. So, first we have to compute for 1 share which comes by dividing shares to number of shares i.e. 50,000 shares ÷ 10 shares = 5,000 for 1 share.
Now, multiply by market value which comes = 5,000 × $22 = $110,000.
So, by 110,000 the retained earnings reduced by the property dividend.
An investment project provides cash inflows of $705 per year for eight years. a. What is the project payback period if the initial cost is $1,450? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $3,600? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $5,800? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)
Answer: A. 2.05 B. 5.10 C. 0
Explanation: Payback period can be defined as the period under which the profits or savings in an investment can recover the initial outlay invested in that investment. In simple words we can say that it is the time required by an investment to pay for itself.
Pay back period is computed as follows :-
[tex]=\:payback\:period=\frac{\:Initial\:cash\:outlay}{cash\:inflows}[/tex]
therefore,
A. [tex]=\:payback\:period=\frac{1450}{705}[/tex]=2.05years
B.[tex]=\:payback\:period=\frac{3600}{705}[/tex]=5.10years
C.[tex]=\:payback\:period=\frac{5800}{705}[/tex]=0
The payback period for an initial cost of $1,450 is approximately 2.06 years. For an initial cost of $3,600, it is about 5.11 years. For an initial cost of $5,800, the project never pays back within the 8-year period.
Explanation:The payback period is the time it takes for a project to recover its initial investment. To calculate it, you divide the initial investment by the annual cash inflows. For the first scenario with the initial cost of $1,450, the payback period is $1450/$705 = 2.06 years. For the second scenario with the initial cost of $3,600, the payback period is $3600/$705 = 5.11 years. Lastly, for the scenario with the initial cost of $5,800, since the project only provides cash inflows for eight years and the payback period is over 8 years, the project never pays back, so the answer is 0.
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Suppose a company which sells breakfast cereal puts a coupon in each box of cereal that it sells during the month of December 2017. The coupon permits $1 off the purchase price of the next box of cereal. Customers will present the coupons to grocery stores when they wish to redeem the coupons. The manufacturer will reimburse the grocery stores $1 for each coupon that the stores send to the manufacturer. The manufacturer sells 1,000,000 boxes of cereal in December of 2017. Should the manufacturer accrue an expense in 2017 for the coupon promotion? Why or why not?
Answer: The manufacturer should accrue an expense for $1,000,000 (i.e. 1,000,000 boxes [tex]\times[/tex] $1 coupon) in December 2017.
Explanation:
The manufacturer should accrue an expense for $1,000,000 (i.e. 1,000,000 boxes [tex]\times[/tex] $1 coupon) in December 2017.
As per the matching concept, revenue should be matched with expenses that has been incurred to earn such revenue.
Hence, since the $1,000,000 is an expense incurred for the sales in Dec 2017, the same should be recognized in Dec 17, though the actual payment will be done in future.
Victory Tire Company makes a special kind of racing tire. Variable costs are $ 220 per unit, and fixed costs are $ 20 comma 000 per month. Victory sells 500 units per month at a sales price of $ 310. If the quality of the tire is upgraded, the company believes it can increase the sales price to $ 360. If so, the variable cost will increase to $ 230 per unit, and the fixed costs will remain the same. If Victory decides to upgrade, how will it affect operating income
Answer:
If Victory decides to upgrade, the operating income increase by $20,000
Explanation:
For calculating the affect of operating income between two unit levels, the computation of operating income is important.
Steps given for calculating the operating income is given below:
Step 1 : First we have to compute contribution to arrive net operating income .
So, contribution = Sales revenue - variable cost.
Step 2 : Now, the computation of operating income is easy.
Because the operating income is an amount which is come from subtracting fixed cost from contribution.
So, Operating income = Contribution margin - Fixed cost
The computation of both levels is given in the attachment sheet.
Thus, If Victory decides to upgrade, the operating income increase by $20,000
g How much do you need when you retire to provide a $2,500 monthly check that will last for 25 years? Assume that your savings can earn 0.5% a month. $402,766.67 $414,008.24 $388,017.16 $361,526.14
Answer:
The correct answer is $388,017.16
Explanation:
The assumption is that you have to save x money, that generates 0.5% a month, and that provide $2,500 monthly. The savings at second month will be (x-2500) * 1.005. At third month, the saving will be (((x - 2500) * 1.005)-2500)* 1.005. This continues until the twelfth month of the twenty fifth year. The short form of this calculations is [tex]C * (1-(1+i)x^{-t})/ i[/tex], where C is the monthly provision (2500), i is the interest (0.5%) and t is the time (12 months per year, 25 years, 300 months). The result is [tex]2,500 * (1-(1.005)x^{-300} )/0.005 = $388,017.16[/tex].
The amount you need at retirement to provide a $2,500 monthly check that will last for 25 years, with an interest rate of 0.5% per month, is approximately $388,017.16.
To calculate the amount you need at retirement to provide a $2,500 monthly check for 25 years with an interest rate of 0.5% per month, you can use the formula for the present value of an annuity. The formula is:
[tex]PV=\frac{(PMT)(1-(1+r)^{-n} }{r}[/tex]
Where:
PV is the present value of the annuity (the amount you need when you retire).
PMT is the monthly payment ($2,500).
r is the monthly interest rate (0.5%, or 0.005 as a decimal).
n is the total number of payments (25 years × 12 months/year = 300 months).
Let's calculate it:
[tex]PV=\frac{(2500)(1-(1+0.005)^{-300} }{0.005}[/tex]
[tex]PV=388,017.16[/tex]
The amount you need at retirement to provide a $2,500 monthly check for 25 years, assuming your savings can earn 0.5% a month, is approximately $388,017.16. This matches one of the provided options, confirming the calculation.
a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. b. A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Answer:
NPV of Project A = $1,023,425 +$5,640 - $520,000 = $509,065
NPV of Project B= $560,175 + $9,320 - $380,000 = $189,495
Explanation:
Net Present Value = Present value of cash inflows - Present value of cash outflow
For project A
Annual cash inflow = After tax income + Depreciation
= $150,000 + ($520,000 - $10,000)/6 = $150,000 + $85,000 = $235,000
Present value of out flow = $520,000
Present value of inflows = PVAF 10%, 6 years = 4.355 X $235,000 = $1,023,425
Present value of Salvage = PVIF 10%, 6th year = 0.564 X $10,000 = $5,640
NPV of Project A = $1,023,425 +$5,640 - $520,000 = $509,065
For project B
Annual cash inflow = After tax income + Depreciation
= $60,000 + ($380,000 - $20,000)/8 = $60,000 + $45,000 = $105,000
Present value of out flow = $380,000
Present value of inflows = PVAF 10%, 8 years = 5.335 X $105,000 =$560,175
Present value of Salvage = PVIF 10%, 8 = 0.466 X $20,000 = $9,320
NPV of Project B= $560,175 + $9,320 - $380,000 = $189,495
NPV of Project A = $1,023,425 +$5,640 - $520,000 = $509,065
NPV of Project B= $560,175 + $9,320 - $380,000 = $189,495
Orange Corporation manufactures custom-made wallets. The following data pertains to Job GH7: Direct materials placed into production $5,000 Direct labor hours worked 75 hours Direct labor rate per hour $35 Machine hours worked 200 hours Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $100,000 for the year, and the direct labor hours were estimated to be 25,000. Job GH7 consists of 60 units. What is overhead cost assigned to Job GH7
Answer: Overhead cost assigned to Job GH7 is $300.
Explanation:
Given that,
Direct materials placed into production = $5000
Direct labor hours worked = 75 hours
Direct labor rate per hour = $35
Machine hours worked = 200 hours
Factory overhead was budgeted = 100000
direct labor hours were estimated = 25000
Job GH7 consists = 60 units
Predetermined rate = [tex]\frac{Factory\ Overhead\ Budgeted}{Direct\ Labor\ hours\ estimated}[/tex]
= [tex]\frac{100000}{25000}[/tex]
=$4
Hence,
overhead cost assigned to Job GH7 = Direct labor hours worked × Predetermined rate
= 75 × 4
=$300
The overhead cost assigned to Job GH7 is $300, which was determined by calculating the plant-wide overhead rate of $4 per direct labor hour and multiplying it by the direct labor hours worked for Job GH7.
Explanation:To calculate the overhead cost assigned to Job GH7, we need to determine the plant-wide overhead rate using the given factory overhead and estimated direct labor hours. The plant-wide overhead rate is calculated as follows:
Plant-wide overhead rate = Total budgeted factory overhead / Total estimated direct labor hours
Plant-wide overhead rate = $100,000 / 25,000 hours = $4 per direct labor hour
Now, we can apply the overhead to Job GH7 based on the actual direct labor hours worked:
Overhead cost assigned to Job GH7 = Plant-wide overhead rate * Direct labor hours worked for Job GH7
Overhead cost assigned to Job GH7 = $4 * 75 hours = $300
Active Alarm is replacing its old device manufacturing machine with a new one. The old machine is being sold for $200,000 and it has a book value of $50,000. The tax rate for Active Alarm is 40%. How much cash will Active Alarm net from the sale of the old machine?
Answer:
The sale of the machine will generate an after-tax income of 90,000
Explanation:
The company will be paying a tax income for the diference between the sales price and the book value at a rate of 40%
200,000 - 50,000 = 150,000 x 40% = 60,000 tax income
150,000 gross profit - 60,000 tax income = 90,000 net gain from sale of machine
Salvage value refers to the estimated residual worth of an asset at the end of its useful life. It represents the amount that can be obtained by selling or disposing of the asset after it has been fully depreciated. Hence after-tax value Net Realized Cash is $ 140,000.
Salvage value of plant
book value on date of sale
Gain on disposal
tax on the gain on disposal
After-tax salvage value =
$200,000.00
$50,000.00
$150,000.00
$60,000.00
$140,000
[ 150000 x 0.4]
[ 200000-60000]
It is the residual value of an asset after it has been fully depreciated for tax purposes. The Net Realized Cash is used to calculate the taxable gain or loss when disposing of an asset. This value helps businesses recoup a portion of their investment and can impact their tax liability.
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Determine the discounted payback period (in years) for a project that costs $1,000 and would yield after-tax cash flows of $525 the first year, $485 the second year, $445 the third year, and $405 for the fourth year. The firm's cost of capital is 11%.
Answer:
During the 3rd year:
It will be in the 5th month of the Third year
Explanation:
We have to discount each year cash flow at present day using the firm's cost of capital of 11%
[tex]\left[\begin{array}{ccc}\\$Year&$Cash Flow&$Discounted Cash Flow \\\\1&525&472.97 \\2&485&393.63\\3&445&325.38\\4&405&266.78\end{array}\right] \\[/tex]
Adding the discounted cash flow we got that the firm will achieve the payback during the third year.
Now in the attempt of being more precise:
At the end of the 2nd year, we are 133.40 away from payback
By the end of the third year, the company receive 325.38
So in 12 months, we generate 325.38
In how many months do we manage to generate 133.40 and payback the investment?
133.40*12/325.38 = 4.91
So in the 5th month of the Third year, the firm will achieve the payback.
Final answer:
The discounted payback period for the project is approximately 2.416 years. It is obtained by discounting the future cash flows at the firm's cost of capital of 11%, and then calculating the time at which the cumulative discounted cash flows exceed the initial investment of $1,000.
Explanation:
Determining the Discounted Payback Period
To calculate the discounted payback period for a project, we need to discount the projected after-tax cash flows by the firm's cost of capital and compare them to the initial outlay. The cost of capital in this case is 11%, and the project costs $1,000. The future cash flows are $525 in the first year, $485 in the second year, $445 in the third year, and $405 in the fourth year.
To find out when the payback period occurs, we calculate the discounted cash flow for each year using the formula:
Discounted Cash Flow = Actual Cash Flow / (1 + r)^t
where r is the discount rate (0.11 in this case), and t is the time period.
First Year: $525 / 1.11 = $473.42
Second Year: $485 / (1.11)^2 = $393.78
Third Year: $445 / (1.11)^3 = $319.61
Fourth Year: $405 / (1.11)^4 = $260.79
Now, we sum these discounted cash flows until the cumulative amount exceeds the initial investment of $1,000. The payback period occurs during the third year, as the total discounted cash flows after the second year is $867.20, which is less than $1,000. By adding the discounted cash flow of the third year ($319.61), the total becomes $1,186.81, exceeding the initial investment. Therefore, the discounted payback period is somewhere in the third year.
To be more precise, we need to calculate how much into the third year the payback occurs. For this, we take the remaining amount to be recovered after the second year ($1,000 - $867.20 = $132.80) and divide it by the discounted cash flow of the third year: $132.80 / $319.61 = 0.416 (approximately 41.6% of the year). Hence, the discounted payback period is approximately 2.416 years.
Suppose you know that a company’s stock currently sells for $65 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Final answer:
The current dividend per share is $6.50.
Explanation:
To find the current dividend per share, we need to determine the growth rate in dividends. Since the total return on the stock is evenly divided between the capital gains yield and the dividend yield, we can assume that the growth rate in dividends is the same as the growth rate in stock price. The capital gains yield is the difference between the required return and the dividend yield:
Capital gains yield = Required return - Dividend yield
In this case, the required return is 15% and the stock price is $65 per share. Let's assume the dividend yield is x:
Capital gains yield = 0.15 - x
We know that the dividend yield is equal to the dividend per share divided by the stock price:
Dividend yield = Dividend per share / Stock price
Substituting the values, we can solve for the dividend per share:
x = (Dividend per share) / 65
Capital gains yield = 0.15 - (Dividend per share) / 65
Since the total return is evenly divided between the capital gains yield and the dividend yield, the growth rate in dividends is equal to half of the total return:
Growth rate in dividends = (Capital gains yield) / 2
Growth rate in dividends = (0.15 - (Dividend per share) / 65) / 2
Now we can set up an equation to solve for the dividend per share:
Dividend per share = $65 * (0.15 - (Dividend per share) / 65) / 2
Simplifying the equation:
Dividend per share = $65 * (0.15 - (Dividend per share) / 65) / 2
Dividend per share = $9.75 - (Dividend per share) / 2
Dividend per share + (Dividend per share) / 2 = $9.75
3/2 * Dividend per share = $9.75
Dividend per share = ($9.75 * 2) / 3
Dividend per share = $6.50
Osborn Manufacturing uses a predetermined overhead rate of $20.10 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $279,390 of total manufacturing overhead for an estimated activity level of 13,900 direct labor-hours. The company actually incurred $277,000 of manufacturing overhead and 13,400 direct labor-hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin
Answer:
1. Amount of overapplied manufacturing overhead = $7,660
2. Company's gross margin will decrease by $7,660
Explanation:
Provided overhead predetermined rate = $20.10
Provided actual hours = 13,400
Therefore overhead cost based on predetermined rate = 13,400 X $20.10
= $269,340
Whereas actual incurred overheads = $277,000
Amount of overapplied manufacturing overhead = $277,000 - $269,340 = $7,660
Now since the cost is increased of goods sold, company's gross margin will decrease with the same amount = $7,660
1. Amount of overapplied manufacturing overhead = $7,660
2. Company's gross margin will decrease by $7,660
Underapplied overhead= $3,900 underapplied
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A term describing a firm's normal range of operating activities is: (a) Relevant range of operations. (b) Break-even level of operations. (c) Margin of safety of operations.
Answer:
A firm's normal range of operating activities is relevant range of operations.
Explanation:
Relevant range of operations can be described simply as a firm or company's expected range of activities without any extreme economic conditions. It is the range where the firm operates in normal conditions. Within this range the firm's operations run smoothly. Outside this range revenue and expenditure may fluctuate from what was expected.
Jill invests $1,000.00 to buy ten shares of Good Corporation. The corporation goes bankrupt having no assets and $1 million in liabilities. The most Jill can lose is the $1,000.00 she invested. This is an example of the corporate characteristic of: A. Limited liability. B. Free transferability of shares. C. Perpetual existence. D. Centralized management.
Answer:
A. Limited liability.
Explanation:
The limited Liabilities company's protects their members and managers.
It protects their personal assets from the business liabilities.
The laiblities of the business will be settle with the busieness assets. IF there are no more assets, then debts defaults and become uncollectible.
Which of the following statements is CORRECT? a. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantages of incorporation. b. There is a tax disadvantage to incorporation, and there is no way any corporation can escape this disadvantage, even if it is very small. c. It is usually easier to transfer ownership in a corporation than in a partnership. d. Corporate shareholders are exposed to unlimited liability. e. Corporations generally face fewer regulations than proprietorships.
Answer:
c. It is usually easier to transfer ownership in a corporation than in a partnership
Explanation:
(A) (D) Shareholders has limited liability. It is the partnership members which has unlimited liability.
(E) Corporations, because manage large sum of capital are more regulated.
(B) Corporation can lobby to get tax exemption, also the income tax scales with income, not with business legal form. There is no tax disadvantage
(C) In a Corporation you can sale your shares (right of ownership) any time in open market. While in a partnership there are restrictions from you leaving right away.
Job 397 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $ 46,000 Direct labor-hours 630 DLHs Direct labor wage rate $ 12 per DLH Number of units completed 4,000 units The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $11 per direct labor-hour. Required: Compute the unit product cost that would appear on the job cost sheet for this job. (Round your answer to 2 decimal places.)
Answer:
Cost per unit for Job 397 = $15.12
Explanation:
Provided overhead predetermined rate = $11 based on Direct Labor Hours,
Therefore overheads will be charged on such predetermined rate.
Cost of direct material = $46,000
Cost of Direct Labor = $12 X 630 = $7,560
Cost of Overhead = $11 X 630 = $6,930
Total cost of units produced = $60,490
Total number of units produced of the Job 397 = 4,000 units
Cost per unit for Job 397 = $60,490/4,000 = $15.12
Columbus Company provides the following ABC costing information: Activities Total Costs Activity dash cost drivers Labor $ 480 comma 000 10 comma 000 hours Gas $ 32 comma 000 4 comma 000 gallons Invoices $ 110 comma 000 5 comma 500 invoices Total costs $ 622 comma 000 The above activities used by their three departments are: Lawn Department Bush Department Plowing Department Labor 3 comma 000 hours 1 comma 200 hours 5 comma 800 hours Gas 1 comma 700 gallons 900 gallons 1 comma 400 gallons Invoices 1 comma 500 invoices 400 invoices 3 comma 600 invoices If labor hours are used to allocate the nonminuslabor, overhead costs, what is the overhead allocation rate
Answer:
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Explanation:
Provided
Activity Total costs Cost Driver
Labor $480,000 10,000 hours
Gas $32,000 4,000 gallons
Invoices $110,000 5,500 invoices
Total costs $622,000
Used as follows
Particulars Lawn Dept. Bush dept. Plowing Dept.
Labor 3,000 hours 1,200 hours 5,800 hours
Gas 1,700 gallons 900 gallons 1,400 gallons
Invoices 1,500 invoices 400 invoices 3,600 invoices
If labor hours are used even for non labor activities then
Overhead costs will be allocated in ratio of labor hours i.e. 3000:1200:5800
= 15:6:29 (Total = 50)
Total overheads = $622,000
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Lawn Department = $62.2 [tex]\times[/tex] 3,000 hours = $186,600
Bush Department = $62.2 [tex]\times[/tex] 1,200 hours = $74,640
Plowing Department = $62.2 [tex]\times[/tex] 5,800 hours = $360,760
Allocation rate = $622,000 / 10,000 hours = $62.2 per hour
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $321,400 Number of purchase orders Scheduling $209,300 Number of production orders Materials handling $471,600 Number of moves Product development $797,200 Number of engineering changes Production $1,463,600 Machine hours Number of Purchase Orders Number of Production Orders Number of Moves Number of Engineering Changes Machine Hours Number of Units Disk drives 3,810 430 1,380 15 1,900 2,000 Tape drives 2,100 175 650 7 9,300 3,800 Wire drives 11,500 990 4,500 20 11,700 2,700 Determine the activity rate for procurement per purchase order.
Answer:
803.5 Activity rate
Explanation:
Determine the activity rate for procurement per purchase order.
321,400 Procurement cost
430 Number of purchase order
Any other data is irrelevant, we only need procurement cost and the number of purchase order.
[tex]cost\div driver = rate[/tex]
321,400 / 430 = 803.5
803.5 Activity rate
If you deposit $6,100 at the end of each of the next 15 years into an account paying 11.3 percent interest, how much money will you have in the account in 15 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Answer:
$214.972,22
Explanation:
The future value of an annuity of $6100 for 15 years at an 11,3% rate.
[tex]\frac{(1+0.113)^{15}-1 }{0.113} * 6,100 = 214,972.22[/tex]
Let's remember that an annuity is when a person deposits the same amount of cash for several periods. When trying to calculate the money at the end of the annuity, we are doing future value. If you are trying to get the value fo the annuity today, it will be the present value.