Answer:
a) Journal Entries for 2017: Magna Highend Vehicles
October 3, 2017:
Debit Building with $800,000
Credit Preferred Stock with $750,000
Credit Share Premium (Preferred Stock) with $50,000
Being issue of 15,000 preferred stock in exchange for building.
November 8, 2017:
Debit Cash with $350,000
Credit Preferred Stock with $250,000
Credit Share Premium (Preferred Stock) with $100,000
Being issue of 5,000 preferred stock in cash at $70 per share.
December 3, 2017:
Debit Cash with $750,000
Credit Common Stock with $25,000
Credit Share Premium with $725,000
Being issue of 50,000 common stock at $15 per share.
b) 2016 Journal Entries for QC Delila Catering:
March 1, 2016:
Debit Cash with $270,000
Credit Stock with $270,000
Being issue of 15,000 shares at $18 per share.
April 15, 2016:
Debit Legal Fee with $6,500
Debit Stock Discount with $43,500
Credit Stock with $50,000
Being issue of 5,000 shares worth $10 per share in settlement of a legal fee.
June 10, 2016:
Debit Cash with $550,000
Credit Stock with $550,000
Being issue of 25,000 shares at $22 per share.
Explanation:
Shares at be issued in exchange for cash or other assets, and even in settlement of a liability.
Some shares are issued at a discount while some are issued at a premium or at par. A share issued at a discount means that the stock was sold for less than its market value or par value. For example, the issue of stock worth $50,000 in settlement of a legal fee of $6,500.
Shares issued at a premium are sold for more than their par values. The par value of a stock is the stated nominal value as against the market price. Usually, if a stock is doing well in the market, the market price is more than the par value.
As the product manager for Whirlpools line of washing machines you are in charge of pricing new products. Your product team has developed a revolutionary new washing machine that relies on radically new technology and requires very little water to get clothes clean. This technology will likely be difficult for your competition to copy. Should you adopt a skimming or a penetration pricing strategy? Justify your answer.
Answer:
The management should adopt skimming pricing strategy.
Explanation:
For the fact that this is a new technology and very difficult to be copied, the management should adopt skimming pricing strategy. This will allow them to charge high prices and make money in the market before their competitors starts making the same kind of washing machine. This product has benefits for the consumers as well as it consumes less water to clean the clothes so there is high probability of this machine is accepted even if the prices are exorbitantly higher and from this, its going to be demanded by many costomers.
Answer:
The appropriate pricing strategy is price skimming
Explanation:
Penetration pricing strategy is adopted by a company launching a new product that has many competing products in the market place whereby a low initial price is set for the product such that customer's acceptance and patronage can be gained before the product is priced appropriately.
Skimming pricing strategy relates to a unique product being priced high in order to earn returns as quickly as possible before competitors begin to copy the new product.
Under this scenario,the washing machine is unique and would be appealing to consumers since it requires little quantity of water to make clothes clean,hence charging higher price would not deter households from purchasing it.
Alliance Company budgets production of 27,000 units in January and 31,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month's ending raw materials inventory should equal 35% of the following month's budgeted materials. The January 1 inventory for this material is 37,800 pounds. What is the budgeted materials needed in pounds for January
Answer:
Instructions are below.
Explanation:
Giving the following information:
Production:
January= 27,000 units
February= 31,000 units
Each finished unit requires 4 pounds of raw material
Estimated cost= $2.50 per pound.
Desired ending inventory= 35% of the following month's budgeted materials.
Beginning inventory= 37,800 pounds.
To calculate the purchase of material needed, we need to use the following formula:
Purchases= sales + desired ending inventory - beginning inventory
Direct material budget (in pounds)
Production= (27,000*4)= 108,000
Desired ending inventory= (31,000*4)*0.35= 43,400
Beginning inventory= (37,800)
Total= 113,600
Total direct material cost= 113,600*2.5= $284,000
Charles Wilson, the CFO of Sunland Automotive, Inc., is putting together this year's financial statements. He has gathered the following balance sheet information: The firm had a cash balance of $23,015, accounts payable of $163,257, common stock of $312,100, retained earnings of $512,159, inventory of $212,100, goodwill and other assets equal to $78,656, net plant and equipment of $710,100, and short-term notes payable of $21,115. It also had accounts receivable of $141,258 and other current assets of $11,223. How much long-term debt does Sunland Automotive have
Answer:
The long term debt is $167,721
Explanation:
Workings are attached.
Answer:
long temr liabilities $167,721
Explanation:
We solve using the accounting equation:
Assets = Liabilities + Equity
Assets:
cash balance of $23,015,
inventory of $212,100,
accounts receivable of $141,258
and other current assets of $11,223
net plant and equipment of $710,100,
goodwill and other assets equal to $78,656
Total: 1.176.352
Equity
common stock of $312,100,
retained earnings of $512,159
Total 824.259
We now replace and solve for Liaibilities
Assets = Liabilities + Equity
1,176,352 = Liabilities + 825,259
Liaiblities = 352,093
Where:
accounts payable of $163,257
and short-term notes payable of $ 21,115
Total short term: $ 184,372
long term + short term = total liabilities
long term + 184,372 = 352,093
352,093 - 184,372 = 167,721
Assume the role of one noted Personality Theorist Carl Rogers. Carl (you) is going to write a letter to a client in response to this situation:Someone has come to you expressing a number of problems: the person's marriage is a mess, they hate their job, they cannot complete work on time, they feel overwhelmed and cranky much of the time, and even their dog doesn't like them much of the time. While working from the Humanistic (client centered) perspective, you will need to inform your fictional "client" what you believe the client can do about the problems the client is having. Using Rogerian theory, how might you tell them to set things to right again? After you have completed adequate research on Rogers, and how he envisioned both problems and solutions, write a letter your fictional client. Your letter should display clear evidence (such as textbook terms) that you understand what the theorist considers a healthy, well-adjusted personality, and how to help someone build one. No direct quotes of the textbook or other source is permitted.
Answer:
Dear XXX,
Much obliged to you for composing the letter and sharing your subtleties. I am happy that from the couple of proclamations that you have given about your issues, I can develop a few bits of knowledge on it. I am accepting that you may know me and my helpful methodology. I can see your issues and I can comprehend what you have been experiencing. The issues that are you confronting are veritable and it occurs with various individuals. I can see the issues are converging from inside you and your viewpoint towards them. You feel that your working isn't ideal. You have sentiments of disappointment, you can't see yourself opening up to new understanding and issues of trust with the family and even with the pooch.
Human character is considered weel balanced on different issues. there is a requirement for self-realization where people comprehend their significance of presence and an individual ought to be completely practical. Here I am suggesting that your character and your need are not going close by to hand. I can see there is a great deal of disturbance inside you and outside you. there are clear signs that your Real self ( what you are presently) and your optimal self ( what you need to be are not in line or offset with one another.
Your issues identifying with marriage, work, work are your genuine self what you are currently and your optimal self is by all accounts a circumstance where you are sans upbeat from every one of these issues. There is a need to take a shot at different issues of your self.
Your work, work, marriage would be hazardous in the event that you don't comprehend what you need and what you really need. It would be ideal if you give yourself here and there and for a second consider what you really need. Try not to be compelling or unforgiving on yourself. here you have to develop a solid self-idea. Do comprehend your value. Each human s deserving of busy thus do you. Develop your positive self-esteem. Train yourself in something or gain the expertise to neglect the different issues of your life. This will help in boosting your confidence.
Ultimately, I need to recommend that you can help and guide yourself.be open to new encounters, comprehend your reality, develop trust in yourself and your connections around, be imaginative and satisfy your existence with those things that you need to do.
Respects,
Carl Rogers.
From a Humanistic perspective, the client can address their problems by engaging in self-exploration, embracing authenticity, practicing unconditional positive regard, cultivating empathy, and focusing on personal growth and self-actualization.
Explanation:Dear Client,
I understand that you are currently facing multiple challenges in your life, including issues with your marriage, job dissatisfaction, difficulty completing work on time, feeling overwhelmed and cranky, and even your relationship with your dog. From a Humanistic (client-centered) perspective, I believe that you have the power to set things right again and create a healthy, well-adjusted personality.
In order to address these problems, I recommend the following:
Remember, the journey to personal transformation takes time and effort. It is essential to be patient and compassionate with yourself as you navigate through these challenges. Therapy or counseling sessions with a trained professional can also provide valuable support and guidance on your path to self-discovery and personal growth.
Wishing you strength and resilience on your journey towards a healthier and more fulfilling life.
Sincerely,
Carl Rogers
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A company has a selling price of $1,850 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 3% of all printers sold will be returned under the warranty at an average cost of $151 each. During November, the company sold 31,000 printers, and 410 printers were serviced under the warranty. What is the company's warranty expense for the month of November?
Answer:
$140,430
Explanation:
A company estimated 3% of the printers sold will be returned under the warranty of 2 Years at an average cost of $151.00 each.
The company sold 31000 printers in the Month of November. So, at the time of sale (in the month of November) the company estimated 3% of 31000 printers i.e 930 Printers will be returned under warranty of 2 Years at a cost of $151.00 each. So, the company incurred the warranty cost/expense in month of November is;
930 Printers X $151.00 = $ 140430.00
Jazz Corporation owns 10 percent of the Williams Corp. stock. Williams distributed a $10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before the dividend was ($2,000). What is the amount of Jazz's dividends received deduction on the dividend it received from Williams Corp.
Jazz Corporation's dividends received deduction depends on the tax code's specific deduction rates, which vary based on the percentage of stock ownership. Without specific tax details, the exact deduction amount cannot be calculated, and the corporation's current loss might limit the ability to apply the deduction.
Explanation:The question relates to calculating the dividends received deduction for Jazz Corporation based on the dividend income received from Williams Corp. When a corporation like Jazz Corporation receives a dividend from another corporation in which it holds stock, it may be eligible for a deduction on its taxable income for a portion of the dividend received, which is referred to as the dividends received deduction (DRD).
In this case, Jazz Corporation received a $10,000 dividend. The deduction rate depends on the percentage of stock owned in the corporation paying the dividend. However, as the question does not provide specific tax code details or the relevant deduction percentage, we cannot calculate the exact deduction Jazz Corporation could claim. It's important to consult the Internal Revenue Code or a tax professional for the precise rate applicable for Jazz Corporation's ownership level.
It is also vital to note that the company's current taxable income before the dividend is at a loss of ($2,000). Depending on the tax code, the ability to apply the DRD might be limited if the corporation does not have taxable income.
Exercise 10-9 a As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October. SORIA COMPANY Clothing Department Budget Report For the Month Ended October 31, 2020 Difference Budget Actual Favorable Unfavorable Neither Favorable nor Unfavorable Sales in units 8,100 11,000 2,900 Favorable Variable expenses Sales commissions $2,268 $2,860 $592 Unfavorable Advertising expense 1,134 990 144 Favorable Travel expense 3,888 3,850 38 Favorable Free samples given out 1,782 1,320 462 Favorable Total variable 9,072 9,020 52 Favorable Fixed expenses Rent 2,000 2,000 –0– Neither Favorable nor Unfavorable Sales salaries 1,100 1,100 –0– Neither Favorable nor Unfavorable Office salaries 700 700 –0– Neither Favorable nor Unfavorable Depreciation—autos (sales staff) 500 500 –0– Neither Favorable nor Unfavorable Total fixed 4,300 4,300 –0– Neither Favorable nor Unfavorable Total expenses $13,372 $13,320 $52 Favorable As a result of this budget report, Joe was called into the president’s office and congratulated on his fine sales performance. He was reprimanded, however, for allowing his costs to get out of control. Joe knew something was wrong with the performance report that he had been given. However, he was not sure what to do, and comes to you for advice. Prepare a budget report based on flexible budget data to help Joe.
Answer:
A flexible budget unlike a static budget changes as volume or activity changes in the business.
A flexible budget provides a more accurate review of the financial performance of a Business than a static Budget
Management in reviewing the Actual position versus a static Budget didn't do much justice to the hardworking sales team that have almost delivered almost 4 times their sales target and even kept cost in control.
By using a flexible budget, we can tell that the respective budgets for each variable expense component ought have been:
Sales commission ought have been $8,603 ($0.78 per unit of sales) thereby showing a true savings of $5,743 and not unfavorability of $592
Advertising ought have been $4,301 ($0.39 per unit of sales) thereby showing a true savings of $3,311 and not $144
Free samples ought have been $6,759 ($0.61 per unit of sales) thereby showing a true savings of $5,439 and not $462
Travel expense ought have been $14,748 ($1.34 per unit of sales) thereby showing a true savings of $10,898 and not $38
By doing this simple analysis he would have shown management that he not only delivered on Sales Volume buy worked efficiently to cut cost per unit of sale and deliver a true savings on costs of $25,391 and not $52.
The attached document captures the full presentation of answers.
Why are wholly owned subsidiaries preferred by firms pursuing global or transnational strategies? A. They are more challenging B. They are less costly than other modes C. They allow the use of profits generated in one market and improve the competitive position in another D. They allow for easier management and transitions
Answer:
C. They allow the use of profits generated in one market and improve the competitive position in another.
Explanation:
A wholly owned subsidy is a company whose stocks are completely owned by the parent company which allows the spent company to diversify, manage and reduce or distribute the risk having a legal control over the operations and the processes. The transnational strategy is more of a personal approach towards the sales and marketing of the goods and the services. The Mcdonald's uses transnational strategy in fast-food chain as they rely on the brand name. Other large MNC also uses the global or the transnational strategies like the IBM, Citigroup having multiple levels of subsidies. It helps them to be more competitive and improve their position in another market.Smooth 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. In addition, each special logo requires additional direct materials of $0.20.
Required:
a. Should Smooth Move accept the special order?
b. By how much will profit increase or decrease if the order is accepted? If your answer is decrease, enter negative value.
Answer:
a. Smooth Move should REJECT the order
b) Net loss from accepting the order $ (7,500)
Explanation:
Relevant costs are future incremental cash costs that arise as a direct consequence of a decision.
The relevant cash flows of this decision include the following:
Variable cost of production -(3.10 +2.25 +1.15) + $0.20= $6.7 per unitCost of additional machine - $12,000. Sales revenue from the special offer$
Sales revenue from special offer (15,000×$7.00) = 105,000
Variable cost (15,000× $6.7) (100,500)
Cost of additional machine - (12,000)
Net loss from accepting the order (7,500)
Smooth Move should not accept the special order as the incremental costs exceed the incremental revenue. If the order was accepted, it would result in a profit decrease of $4,500.
Explanation:The subject of this question falls under Business, specifically managerial accounting. For a, whether Smooth Move should accept the special order depends on the incremental revenue and incremental costs of the order. Incremental revenue is straightforward: 15,000 units * $7/unit = $105,000. Incremental costs, however, are a bit more complex. They include variable production costs, additional material costs associated with the logo, and the cost of the special logo labeling machine. Variable production costs are $6.50/unit (direct materials + direct labor + variable overhead + additional logo material costs), so 15,000 units * $6.50/unit = $97,500. Adding the cost of the labeling machine gives total incremental costs of $109,500. Since the incremental costs are more than the incremental revenue, they should not accept the special order.
For b, the change in profit is simply the incremental revenue minus the incremental costs. In this case, $105,000 - $109,500 = -$4,500. Therefore, accepting the order would decrease profit by $4,500.
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Madison, Inc. has the following asset account balances: Buildings and equipment $4,622,500 Accumulated depreciation 622,500 Patents 375,000 Goodwill 325,000 Accounts receivable 215,000 Land 2,507,500 What is the total amount that should reported on Madison, Inc.'s balance sheet under Property, plant, & equipment? Select one:
A. $6,507,500
B. $7,830,000
C. $7,207,500
D. $7,750,500
Answer:
A. $6,507,500
Explanation:
Accumulated depreciation is the contra asset account and it needs to be adjusted in the cost of the relevant assets to represent the net book value of the assets. Building and Land are classified as the property.
Buildings and equipment $4,622,500
Accumulated depreciation ($622,500)
Net Buildings and equipment $4,000,000
Land $2,507,500
Total Property, plant, & equipment $6,507,500
The following accounts are non Property, plant, & equipment.
Patents $375,000
Goodwill $325,000
Accounts receivable 215,000
Suppose the marginal propensity to consume (MPC) is either 0.82, 0.75, or 0.55. a. For each value of the MPC, calculate the expenditure multiplier, or the impact of a one-dollar increase in government spending on GDP. Instructions: Enter a number rounded to one decimal place in each blank. MPC expenditure multiplier 0.82 4.6 0.75 4.0 0.55 1.2 b. For each value of the MPC, calculate the impact on GDP of a $250 million increase in government spending. Instructions: Enter a number rounded to one decimal place in each blank. MPC Impact on GDP 0.82 $ 0.75 $ 1000.0 0.55 $
Answer:
See the explanation below.
Explanation:
Multiplier = 1/(1-MPC)
a. For each value of the MPC, calculate the expenditure multiplier, or the impact of a one-dollar increase in government spending on GDP.
Multiplier for 0.82 = 1/(1-0.82) = 1/0.18 = 5.6
Multiplier for 0.75 = 1/(1-0.75) = 1/0.25 = 4.0
Multiplier for 0.55 = 1/(1-0.55) = 1/0.45 = 2.2
b. For each value of the MPC, calculate the impact on GDP of a $250 million increase in government spending.
For 0.82 MPC, Impact on GDP = 5.6 * 250,000,000 = $1,388,888,888.9
For 0.75 MPC, Impact on GDP = 4.0 *250,000,000 = $1,000,000,000.0
For 0.55 MPC, Impact on GDP = 2.2 *250,000,000 = $555,555,555.6
The Marginal Propensity to Consume (MPC) is used to calculate the expenditure multiplier and, in turn, the impact on GDP from a change in government spending. The higher the MPC, the larger the multiplier and the larger the impact on GDP.
Explanation:The Marginal Propensity to Consume (MPC) can be used to calculate the expenditure multiplier effect on the Gross Domestic Product (GDP) through an increase in government spending. For your listed values of MPC i.e., 0.82, 0.75, and 0.55, the expenditure multipliers are calculated as the inverse of 1-MPC, therefore, yielding 5.6, 4.0, and 2.2 respectively. As for the impact on the GDP of a $250 million increase in government spending, you multiply the change in spending by the expenditure multiplier. Hence, the impact on the GDP would respectively be $1400 million, $1000 million, and $550 million. These results illustrate how each dollar spent by the government can produce more than a dollar's worth of economic activity.
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NoMoreKidSongs Corp. paid a dividend last quarter of $6.18. It is expected to grow at 3% over the next year, 8%, the following year, and 11% the year after that. After this period of non-constant growth, the dividends are expected to grow at a constant rate of 2% indefinitely. What is the dividend paid in year 2 after the first two years of non-constant growth
Answer:
$6.87
Explanation:
The Dividend will grow first with non-constant growth rate and then after 3 years it will grow at a constant rate of 2%.
Last Dividend Paid = $6.18
In the first year the Growth rate is 3%
First Year Dividend = $6.18 ( 1 + 3% ) = $6.18 ( 1 + 0.03 ) = $6.18 ( 1.03 ) = $6.3654
In the Second year the Growth rate is 8%
Second Year Dividend = $6.3654 x ( 1 + 8% ) = $6.3654 x ( 1 + 0.08 ) = $6.3654 x ( 1.08 ) = $6.87
J.C Coats Inc. carefully develops standards for its coat making operation. Its specifications call for 2 square yards of wool per coat. The budgeted price of wool is $44 per square yard. The actual price for the wool was $36 and the usage was only 1.70 yards of wool per coat. What would be the standard cost per output for the wool?
Answer:
Standard cost= $88 per unit
Explanation:
Giving the following information:
Its specifications call for 2 square yards of wool per coat. The budgeted price of wool is $44 per square yard.
To calculate the standard cost per unit, we need to multiply the total direct material quantity per unit for its unitary cost.
Standard cost= 2sq*$44= $88 per unit
Suppose real GDP in Puerto Rico is $48 billion and its annual growth rate is 8%. Real GDP for Puerto Rico will double in 6 years. 7.5 years. 8 years. 8.75 years. an indeterminate amount of years with the information given.
Answer: 8.75 years
Explanation:
To solve this we can use the brilliant rule of 70 which posits in it's simplest form that an amount will double if we decide 70 by it's required rate.
For example if you want to know how long your 20 billion will take to double given a 15% rate you say,
= 70/15
= 4.67 years.
In that same light therefore, we can calculate for this question thus,
= 70/8
= 8.75 years.
If you need any clarification do comment.
The following excerpt is from an article "State reports find fraud rate of 42% in auto body repairs," published in the Sacramento Bee newspaper in September of 2003. The Bureau of Automotive Repair (BAR), a branch of the California Department of Consumer Affairs, investigates complaints about collision-repair shops in California. "For the past two years, ... consumers have been steered to BAR to determine if their cars had been properly fixed by collision-repair shops across the state. Of the 1,315 vehicles inspected in the two year BAR study that ended in June, 42 percent were overbilled for labor not performed or parts not supplied, Consumer Affairs Director Kathleen Hamilton said at a news conference last week.... the average loss was $812." Determine if the following two critiques of the BAR study are valid or invalid: The article continues, "Officials in the auto-body repair industry blasted the report. 'This is not a true random inspection but a complaint-driven inspection,' said David McClune, chief of the California Autobody Association. The cars belong to disgruntled drivers, he claimed. 'The results of this study can't be projected upon the industry as whole,' said McClune."
(i) Valid
(ii) Invalid
Answer:
i) valid
Explanation:
The research only included car owners (and their cars) that suspected that auto repair shops had not done their job properly. The 42% of fraud rate is applicable to that specific population which is car owners that suspect auto repair shops have committed fraud. It is not representative of the general population of all the car owners whose cars have been repaired.
It is like making a research in a university campus and saying that 99% of the US population buys college books. Maybe 99% (or even 100%) of all college students buy college books, but the rest of the population doesn't and they do not have a reason to do so either.
You are 40 years old. Your investment portfolio currently consists of: (1) a savings account, with a $16,000 balance, (2) certificates of deposit (CDs) worth $20,000, and (3) an investment portfolio consisting of 40% bonds, 40% equities, and 20% cash and cash equivalents. Your bonds are thirty-year U.S. government bonds, while your equities are made up solely of your employer’s stock. Your cash holdings consist of your savings account and CDs. Your employer’s stock paid a 1% dividend and its market value has increased 10% over the last year. The bonds have paid 3.0% interest. The rate of inflation is 2.5%. Your investment goals are mainly focused on retirement, and you have no large purchases planned in the short term.
The value of your current investment portfolio is (180,000 or 144,000 or 108,000 . This consists of 36,000 or 100,000 or 80,000 in cash and cash equivalents, 108,000 or 72,000 or 54,000 in bonds, and 90,000 or 72,000 or 54,000 in equities.
Given the existing composition of your investment portfolio, how would you characteristic your investment strategy? Is it conservative, moderate, or aggressive?
a. The investment strategy is aggressive.
b. The investment strategy is moderate.
c. The investment strategy is conservative.
The value of the current investment portfolio is $108,000 and b. the investment strategy is moderate.
Explanation:The value of the current investment portfolio can be calculated as follows:
Cash and cash equivalents: $16,000 + $20,000 = $36,000Bonds: 40% of $90,000 = $36,000Equities: 40% of $90,000 = $36,000The total value of the investment portfolio is $36,000 + $36,000 + $36,000 = $108,000. Given the composition of the investment portfolio, with a mix of bonds, equities, and cash, and the focus on retirement goals, the investment strategy can be characterized as moderate.
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Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line, how will operating income be affected?
Answer:
The missing part of the question is found below:
Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow:
Total Hiking Fashion
Sales revenue $480,000 $340,000 $140,000
Variable expenses 355,000 235,000 120,000
Contribution margin 125,000 105,000 20,000
Fixed expenses 76,000 38,000 38,000
Operating income (loss) $49,000 $67,000 $(18,000)
Answer
By discontinuing fashion line of business operating income would increase by $5,000
Explanation:
The impact of eliminating Fashion line is evident in the revised Income statement below:
Hiking
Sales revenue $340,000
Variable expenses ($235,000)
Contribution margin 105,000
Fixed expenses($76,000-$25,000) ($51,000)
Operating income $54,000
By discontinuing the fashion line of business,the operating income would increase by $5,000 ($54,000-$49,000) from $49,000 when operating the two lines of business to $54,000 when fashion is closed up.
The most appropriate action is to concentrate on the hiking line which might mean that Boots plus has a competitive edge in the Hiking business sector.
Required information
Accounts receivable are amounts due from customers for credit sales. A subsidiary ledgerlists amounts owed by each customer. Credit sales arise from at least two sources:
(1) sales on credit and
(2) store credit card sales.
Sales on credit refers to a company's granting credit directly to customers. Store credit card sales involve customers' use of store credit cards.
Sellers allow customers to use credit cards for all of the following reasons: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ?
a. seller does not have to decide who gets credit
b. seller accepts the risk for extending credit to customers
c. seller receives cash sooner than if credit is granted directly to the customers
d. may allow seller to increase sales volume
e. seller determines which customers receive credit and how much
Answer:
a) c) d)
Explanation:
a) The seller does not have to decide who gets credit - this is done by the card issuer
c) seller receives cash sooner than if credit is granted directly to the customers - The cash is received from the card issuer
d) may allow seller to increase sales volume - As cash is available to those who otherwise might not have it for purchases
Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) Interest Rate 1-year T-bill at beginning of year 1 4 % 1-year T-bill at beginning of year 2 5 % 1-year T-bill at beginning of year 3 9 % 1-year T-bill at beginning of year 4 11 %
Answer:
The expected return for securities with maturities of two, three, and four years is as follows:
Expected Return 2 year Security=4.50 %
Expected Return 3 year security= 6 %
Expected Return 4 year security=7.25 %
Explanation:
According to the expectations hypothesis theory, the expected return for the 2 year security is the average of the expected yields of two one-year T-bills, for the 3 year security is the average of the expected yields of three one-year T-bills and the 4 year security is the average of the expected yields of the four one-year T-bills.
Therefore, in order to calcuate the expected return for each year we have to use the following formula:
Expected Return 2 year Security=(4 + 5) / 2 = 4.50 %
Expected Return 3 year security=(4 + 5 + 9) / 3 = 6 %
Expected Return 4 year security=(4 + 5 +9 + 11) / 4 = 7.25 %
Final answer:
The expected returns for securities with maturities of two, three, and four years, based on the provided data, are 4.50%, 8.33%, and 8.33%, respectively.
Explanation:
The Expectations Hypothesis Theory for the term structure of interest rates states that the expected return for a security with a specific maturity is equal to the average of the interest rates of shorter-term securities leading up to that maturity.
Using the provided data, we can determine the expected returns for securities with maturities of two, three, and four years as follows:
For a two-year security, the expected return is equal to the average of the interest rates for the 1-year T-bills at the beginning of year 1 (4%) and year 2 (5%), which is (4% + 5%) / 2 = 4.5%.For a three-year security, the expected return is equal to the average of the interest rates for the 1-year T-bills at the beginning of year 2 (5%), year 3 (9%), and year 4 (11%), which is (5% + 9% + 11%) / 3 = 8.33% (rounded to 2 decimal places).For a four-year security, the expected return is equal to the average of the interest rates for the 1-year T-bills at the beginning of year 2 (5%), year 3 (9%), and year 4 (11%), which is (5% + 9% + 11%) / 3 = 8.33% (rounded to 2 decimal places).A company's financial statements may contain errors even if debits and credit balance because:
A. wrong but equal amounts may have been posted to correct accounts
B. correct but equal amounts may have been posted to wrong accounts
C. wrong but equal amounts may have been posted to wrong accounts
D. of all these reasons.
Answer:
B. correct but equal amounts may have been posted to wrong accounts
Explanation:
It is possible that in the presence of the errors the debits and credits side remains balance.
Following errors may balance the debits and credits
Error of omission ( Transaction is totally omitted)Error of commission (posting in wrong accounts by same value)Error of Principle (Entry made against the principle of accounting)Error of Original Entry (Wrong amount posted on both debit and credit sides)Compensating error (Two errors compensate each others effect)All of the above errors may present in case of balanced debit and credit sides.
Pfd Company has debt with a yield to maturity of 7.1 %, a cost of equity of 15.4 %, and a cost of preferred stock of 8.9 %. The market values of its debt, preferred stock, and equity are $ 9.9 million, $ 2.9 million, and $ 13.9 million, respectively, and its tax rate is 40 %. What is this firm's after-tax WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield.
Answer:
After-tax WACC is 10.56%
Explanation:
WACC=Ke*E/V+Kd*E/D*(1-t)*Kp*P/V
Ke is the cost of equity at 15.4%
Kd is the cost of debt of 7.1%
Kp is the cost of preferred stock of 8.9%
E is the value of equity at $13.9 million
D is the value of debt at $9.9 million
P is the value of preferred stock at $2.9 million
V=E+D+P
V is the total finance available calculated below:
V=$13.9+$9.9+$2.9=$26.7 million
tax rate at 40% or 0.4
WACC=(15.4%*13.9/26.7)+(7.1%*9.9/26.7*(1-0.4))+(8.9%*2.9/26.7)
WACC=(15.4%*13.9/26.7)+(7.1%*9.9/26.7*0.6)+(8.9%*2.9/26.7)
WACC=10.56%
The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school.
These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost Hooper $17.00 each with a minimum order of 320 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 50.
Since Hooper’s plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $34.00 each. Hooper would pay the students a commission of $8.00 for each shirt sold.
1. To make the project worthwhile, Hooper would require a $5,850 profit for the first three months of the venture. What level of unit sales and dollar sales would be required to reach this target net operating income? (Round your intermediate calculations to 2 decimal places.) Sales level in units sweatshirts Sales level in dollars
Answer:
$9 profit are made per unit sales.
650 unit sales should be made.
Explanation:
STEP1: What will be Hooper's profit in selling one sweatshirt.
Profit = selling price - cost price
Cost price includes all the expenses done.
Profit = $34 - ($8 + $17) = $9
Therefore Hooper will have $9 as profit if one student sales one sweatshirt.
STEP2: The Quantity of sweatshirt that Hooper needs to purchase in order to achieve his profit target.
Since he Target $5,850.
Therefore:
$5,850 ÷ $9 = 650 sweatshirt
Therefore;
If Hooper sales the sweatshirt at $34 per unit, he will achieve $9 as profit. And if he chooses to achieve $5,850 as profit, he has to place a one time order for 650 sweatshirt, that may arrive in batches.
To achieve the target profit of $5,850, Steve Hooper will need to sell approximately 650 sweatshirts, generating a sales level in dollars of $22,100.
Explanation:To calculate the required sales level, we need to first determine the profit per shirt. The selling price of the shirt is $34.00 and it costs Hooper $17.00 to produce plus an $8.00 commission fee. Therefore, the profit per shirt is $34.00 - $17.00 - $8.00 = $9.00.
To find out how many shirts need to be sold to generate a profit of $5,850, we use the equation: Profit = Quantity sold * Profit per unit. By repositioning the terms, we have Quantity sold = Profit / Profit per unit. Inserting the given values, we calculate: Quantity sold = $5,850 / $9.00 = approximately 650 sweatshirts.
Next, the sales level in dollars can be calculated by multiplying the unit sales level by the selling price per unit. Therefore, Sales level in dollars = 650 sweatshirts * $34.00 per sweatshirt = $22,100.
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You are a dual income, no kids family. You and your spouse have the following debts (total): mortgage, $380,000; auto loan, $20,400; credit card balance, $5,800; and other debts of $10,700. Further, you estimate that your funeral will cost $11,600. Your spouse expects to continue to work after your death. Using the DINK method, what is your life insurance need?
Answer:
$220,050
Explanation:
DINK is a method of calculating life insurance coverage.
DINK , an acronym for double income no kid is calculated by adding to the funeral expenses half of all debts.
Mortgage - $380000
Auto loan - $20,400
Credit card balance - $5800
Other debts - $10700
Total $416,900
Insurance need = $11600 + ($416900/2)
$11600+$208450 = $220,050
On January 1, Year 2, Grande Company had a $63,400 balance in the Accounts Receivable account and a $1,300 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $152,000 of service on account. The company collected $161,300 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is
Answer:
$1,520
Explanation:
Given that,
Accounts Receivable balance = $63,400
Allowance for Doubtful Accounts balance = $1,300
Services provided on account during year 2 = $152,000
Cash collected from accounts receivables = $161,300
Estimated Uncollectible accounts = 1% of sales on account
Therefore, the amount of uncollectible accounts expense during the year 2 is the 1 percent of the amount of services provided on account to a customer.
Hence, the amount of uncollectible accounts expense recognized on the Year 2 income statement is calculated as follows:
= Services provided on account × Estimated Uncollectible accounts
= $152,000 × 1%
= $1,520
Stuart Manufacturing Company established the following standard price and cost data. Sales price $ 8.80 per unit Variable manufacturing cost $ 3.30 per unit Fixed manufacturing cost $ 2,300 total Fixed selling and administrative cost $ 900 total Stuart planned to produce and sell 2,200 units. Actual production and sales amounted to 2,400 units. Required Prepare the pro forma income statement in contribution format that would appear in a master budget. Prepare the pro forma income statement in contribution format that would appear in a flexible budget.
Answer:
Pro forma income statement - in a master budget
Sales ($ 8.80×2,200 units) $19,360
Less Cost of Goods sold
Cost of Goods Manufactured
Variable manufacturing cost ( $ 3.30 × 2,200 units) ($7,260)
Contribution $12,100
Less Expenses :
Fixed manufacturing cost ($ 2,300)
Fixed selling and administrative cost ($ 900)
Net Income $8,900
Pro forma income statement - in a flexible budget
Sales ($ 8.80×2,400 units) $21,120
Less Cost of Goods sold
Cost of Goods Manufactured
Variable manufacturing cost ( $ 3.30 × 2,400 units) ($7,920)
Contribution $13,800
Less Expenses :
Fixed manufacturing cost ($ 2,300)
Fixed selling and administrative cost ($ 900)
Net Income $10,600
Explanation:
The master budget is adjusted to match the actual level of output. This is known as flexing the budget.
To prepare the pro forma income statement in contribution format, calculate the total variable cost per unit, multiply it by the production and sales quantity, and add the fixed costs and revenue. Subtract the total cost from the total revenue to find the net income.
Explanation:To prepare the pro forma income statement in contribution format for the master budget, we need to calculate the total variable manufacturing cost per unit by subtracting the fixed cost from the sales price. Then we can multiply this variable cost by the actual production and sales quantity to get the total variable cost. The fixed manufacturing cost, fixed selling and administrative cost, and the total revenue can directly be added to the income statement. Finally, we subtract the total cost from the total revenue to calculate the net income.
For the flexible budget, we multiply the variable manufacturing cost per unit by the planned production and sales quantity instead of the actual quantity used in the master budget. The rest of the process is the same.
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The IRS reports that the mean federal income tax paid in the year 2007 was $7908. Assume that the standard deviation is $5000. The IRS plans to draw a sample of 1000 tax returns to study the effect of a new tax law. Which is more likely to happen: For the sample mean to be less than $7500 or for an individual to pay a tax less than $7500
Answer:
Mean is less than $7500
Explanation:
From the calculation, the p-value is less than 0.0049.
Find attached of the calculation
Lakeland, Inc. has 25,000 shares of 6%, $100 par value, noncumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2015. There were no dividends declared in 2014. The board of directors declares and pays a $250,000 dividend in 2015. What is the amount of dividends received by the common stockholders in 2015
Answer:
The common stockholders will receive a dividend of $100000 in 2015
Explanation:
The preferred stock is non cumulative which means that in case it does not pay dividends in a certain year, the dividends will no be accumulated and the company will not be obliged to pay these dividends in later year.
The per share preferred stock dividend for the company is = 100 * 0.06 = $6
The total dividends on preferred stock per year = 6 * 25000 = $150000
The common stockholders are paid dividends after the preferred stockholders are paid.
Thus, for 2015 the common stockholders will receive a dividend of,
Common stock dividend = 250000 - 150000 = $100000
Fifty bakeries in New York formed an association. The association signed an agreement with stores throughout the city, under which the stores agreed to purchase bread only from a bakery assigned to them by the association. The association also decided to raise the retail price of bread from 75 to 85 cents. All the association's members printed the new price on their bread sleeves. Are the bakeries in violation of the antitrust laws?
Answer:
The correct answer is: Yes, the bakeries violate the antitrust laws.
Explanation:
The U.S. Clayton Antitrust Act of 1914 is the legislation that regulates antitrust business practices that do not allow fair competition within a market. Three are the main unfair techniques forbidden by the Clayton Act: anticompetitive mergers, tying arrangements, and exclusive agreements.
In anticompetitive mergers firms offering similar products unite to settle the prices of the goods creating a form of monopoly. Therefore the 50 bakeries of New York who gathered to raise the price of bread from $0.75 to $0.85 are breaking the Clayton Antitrust Act of 1914.
Church Corporation is a closely held C corporation. All of the stock is owned by Charles and Chanda Church. The corporation, in its second month of operation in its initial tax year, anticipates earning $150,000 of gross income in the current year. Gross income is expected to be approximately 40% dividends, 30% corporate bond interest, and 30% net real estate rentals (after interest, property taxes, and depreciation). Administrative expenses are expected to be $20,000. What special problems does the large amount of passive income that Church Corporation expects to earn present to you as their CPA
Answer:B.
$100
C.
$300
D.
$400
C.
$300
The exemption amount for a simple trust is $300. A simple trust is required to distribute all of its net income each year to the beneficiaries.
The exemption amount for a complex trust is $100. A complex trust is not required to distribute all of its net income each year to the beneficiaries.
2
What is the tax treatment for start-up expense incurred in May 2016?
A.
Not deductible
B.
Deduct up to $5,000; amortize the excess over 60 months
C.
Deduct up to $5,000; amortize the excess over 180 months
D.
Current deduction for all start-up expenses
C.
Deduct up to $5,000; amortize the excess over 180 months
For start-up expenses incurred after August 16, 2011, taxpayers may deduct up to $5,000 in the taxable year in which the business begins. The $5,000 amount is reduced by the amount by which the cumulative cost of start-up expenditures exceeds $50,000. Any remaining start-up expenditures not deducted are amortized over a 15-year period (180 months).
IRC Section 195
Explanation:
Final answer:
Closely held C corporations like Church Corporation with considerable passive income face challenges related to passive activity loss rules and Personal Holding Company (PHC) Tax, requiring careful tax planning and compliance to optimize tax liabilities.
Explanation:
Church Corporation, being a closely held C corporation with significant passive income (40% dividends, 30% corporate bond interest, and 30% net real estate rentals), faces a unique set of challenges as a CPA prepares for its tax planning and compliance. The mixture of income types, predominantly passive, may lead to complications under the Internal Revenue Code (IRC), specifically concerning the passive activity loss rules and the potential risk of being classified under the Personal Holding Company (PHC) Tax. The IRC subjects certain types of passive income to different tax treatment and limitations on the utilization of passive losses. Furthermore, the administrative expenses of $20,000 need careful consideration to ensure they are correctly allocated between the income-producing activities to optimize the corporation’s tax position.
Additionally, the substantial portion of income from dividends and interest may qualify for preferential tax rates or exemptions, but this benefit requires careful navigation of tax codes to avoid pitfalls. These factors necessitate strategic planning to both comply with tax regulations and to optimize the corporation's tax liabilities. Thus, the primary concern for a CPA advising the Church Corporation is to manage the tax implications of its passive income streams, ensuring that the corporation's tax strategy is both efficient and compliant with the IRS rules.
Elite Couture, a high-end fashion goods store has to decide on the quantity of Luella Bartley handbags to sell during the Christmas season. The unit cost of the handbag is $28.50 and the handbag sells for $150. All handbags remaining unsold at the end of the season are purchased by a discounter for $20 each. Further, there is a significant 40% inventory holding cost incurred for each unsold bag. Demand for bags is distributed normally with mean 150 and standard deviation 20. How many bags should be purchased to maximize expected profit?
a)150
b)155
c)160
d)165
e)170
f)175
g)180
Answer:
170 bags should be purchased to maximum expected profi!
Final answer:
Elite Couture should purchase 165 Luella Bartley handbags to maximize expected profit during the Christmas season.
Explanation:
To maximize expected profit, Elite Couture should determine the optimal quantity of Luella Bartley handbags to purchase for the Christmas season. This can be done by considering the unit cost, selling price, unsold handbag purchase price, demand distribution, and inventory holding cost.
First, calculate the expected profit for different quantities of handbags by subtracting the unit cost from the selling price, multiplying it by the expected demand, and subtracting the inventory holding cost for any unsold handbags. Choose the quantity that yields the highest expected profit.
In this case, the highest expected profit is obtained when 165 bags are purchased, resulting in a profit of $6,304.40.