Answer:
$58,750
Explanation:
Paving Costs $38,750
Lighting Costs $20,000
Total cost to be included in land improvement account $58,750
Please note that cleaning agreement cost is revenue expenditure,therefore should be charged to profit and loss account not in land improvement account.
8. An oil price shock (hard): Suppose the economy is hit by an unexpected oil price shock that permanently raises oil prices by $50 per barrel. This is a temporary increase in o in the model: the shock o becomes positive for one period and then goes back to zero. (a) Using the full short-run model, explain what happens to the economy in the absence of any monetary policy action. Be sure to include graphs showing how output and inflation respond over time. (b) Suppose you are in charge of the central bank. What monetary policy action would you take and why
Answer:
An oil cost shock is an exogenous shock and it will in general move the short run total stockpile bend SRAS upwards showing an expanded expense of creation.
a. From introductory balance, value level in the economy for all time rises and this moves the economy to another balance to bring down short-run yield level.
Phillips bend, indicating the impact of swelling, climbs in period one and afterwards moves back. Fisher's condition portrays the reverse connection between genuine loan fee and expansion through ostensible financing cost. On the off chance that the national bank is failing to help controlling swelling, at that point this suggests it needs to keep up the first ostensible financing cost.
This decreases the genuine loan fee when ostensible financing cost is kept unaltered. With LM moving downwards, it animates the economy to an expanding lower level of genuine loan cost as expansion rises for all time.
b. Since an oil value stun upsets the economy through swelling channel, national bank ought to fix the financial arrangement to decrease it for one period. In spite of the fact that this damages the economy all the more however this will last just for one period. As the genuine financing cost ascend in the following time frame, swelling falls and balance in the economy is reestablished.
Both Bond A and Bond B have 9.6 percent coupons and are priced at par value. Bond A has 8 years to maturity, while Bond B has 20 years to maturity. a. If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Answer:
Change in Bond A price is -11.01%
Change in Bond B price is -16.64%
Explanation:
The starting to solving this question would be to calculate the initial prices of both bonds at 9.6% and their prices when interest rose by 2.2%
When bonds are issued at par of $1000 both yield to maturity and coupon rate are the same.invariably the bonds were issued at $1000 each
However,when yield to maturity increases by 2.2%,the new yield to maturity is 9.6%+2.2%=11.8%,the new prices can determined as follows:
The bond price can be computed by using the pv formula in excel,which is given below:
=-pv(rate,nper,pmt,fv)
Bond A
rate is now 11.8%
nper is the number of times the bond pays coupon interest over the life of the bond,which is 8
pmt is the annual coupon payable by the bond,which is $1000*9.6%=$96
fv is the face value of $1000 at which the bond would be retired.
=-pv(11.8%,8,96,1000)=$ 889.94
Change in Bond A price=($889.94-$1000)/$1000=-11.01%
Bond B
rate is now 11.8%
nper is the number of times the bond pays coupon interest over the life of the bond,which is 20
pmt is the annual coupon payable by the bond,which is $1000*9.6%=$96
fv is the face value of $1000 at which the bond would be retired.
=-pv(11.8%,20,96,1000)=$833.59
Change in Bond B price=($833.59-$1000)/$1000=-16.64%
At the end of 2020, Concord Company has accounts receivable of $784,000 and an allowance for doubtful accounts of $39,200. On January 16, 2021, Concord Company determined that its receivable from Ramirez Company of $5,880 will not be collected, and management authorized its write-off.
Prepare the journal entry for Concord Company to write off the Ramirez receivable.
Answer:
Journal Entry
Dr. Allowance for doubtful accounts $5,880
Cr. Account Receivable $5,880
Explanation:
When a receivable of the business is considered to be non-collectible from a customer, it is written off from the accounts. This event will decrease the account receivable balance and allowance for the doubtful accounts too. a Debit entry in the Allowance for doubtful account and a credit entry in accounts receivable is made to incorporate the effect of this transaction.
Naples Company produced 650,000 units and sold 500,000 units. Their unit selling price is $10. Cost of goods sold is $6 per unit. Fixed selling expenses are $10,000 and variable selling and administrative expenses are $3 per unit. Compute Naple's net income under absorption costing. $4,990,000 $500,000 $1,990,000 $490,000
Answer:
$490,000
Explanation:
The computation of the net income under absorption costing is shown below:
Sales (500,000 units × $10) $5,000,000
Less: Cost of goods sold (500,000 units × $6) -$3,000,000
Gross profit $2,000,000
Less: variable selling and administrative expenses
(500,000 units × $3) -$1,500,000
Less: Fixed selling expenses -$10,000
Net income $490,000
Under absorption costing we considered the fixed and selling expenses
A manufacturer contemplates a change in technology that would reduce fixed costs from $800,000 to $600,000, and reduce depreciation expense from $125,000 to $100,000. However, the ratio of variable costs to sales would increase from 68% to 80%. What would be the change in the break-even level of revenues?
Answer:
break-even level of revenues increases from $2,890,625 to $3,500,000
Explanation:
Break even point is the level of sales at which the company makes neither a Profit nor a loss.
Break -even Sales revenue = Fixed Cost / Contribution Margin Ratio
Old Break -even Sales revenue
Break -even Sales revenue = ( $800,000 + $125,000)/(1.00-0.68)
= $925,000/ 0.32
= $2,890,625
Old Break -even Sales revenue
Break -even Sales revenue = ( $600,000 + $100,000)/(1.00-0.80)
= $700,000/ 0.20
= $3,500,000
in Louisiana, it was a crime to sell burial caskets without a funeral director's license. This law was a source of _____ for licensed funeral directors and an example of _____. A. monopoly power; a legal barrier to entry B. product differentiation; economies of scale C. monopoly power; a natural barrier to entry D. competition; decreasing average costs
Answer:
The correct option is A,monopoly power,a legal barrier to entry
Explanation:
Monopoly power is the exclusive right granted to a business or a group of professionals in order to produce a particular good or provide a service.
The fact that no one else can give the go-ahead to purchase casket except the funeral directors is a form of monopoly.
However,this arrangement has a knock-on effect ,which is the legal barrier to entry. It is a legal barrier because it was created by law.
Option C is is wrong because the barrier is legal not natural barrier,natural barriers are usually as a result of exclusive ownership of major input of production
Sandhill Inc. has the following information related to an item in its ending inventory. Packit (Product # 874) has a cost of $76, a replacement cost of $60, a net realizable value of $68, and a normal profit margin of $4. What is the final lower-of-cost-or-market inventory value for Packit? $60. $68. $64. $76.
Answer:
$64
Explanation:
The computation of final lower-of-cost-or-market inventory value is given below:-
Ceiling LCM = Estimated selling price - Cost to disposal or NRV ($68)
Floor LCM = NRV - Normal profit
= $68 - $4
= $64
Conditions: 1)When the cost of replacement is greater than the LCM ceiling then the LCM ceiling is considered the market cost.
2)If the cost of replacement is greater than floor LCM then floor LCM is considered to be the market cost
So, second condition is satisfied.
The market value is $64, cost is $76.
Lower of cost or market rate is $64
On December 31, 2021, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $54,000 and $1,050, respectively. During 2022, Larry's wrote off $1,625 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,700 at December 31, 2022. Bad debt expense for 2022 would be:
Answer:
$6,275
Explanation:
Allowance for Uncollectible-opening ($1,050)
Allowance for Uncollectible-closing $5,700
Allowance provided specially $1,625
Bad Debt Expense $6,275
What is the present value of $2,025 per year, at a discount rate of 7 percent, if the first payment is received 6 years from now and the last payment is received 23 years from now
Final answer:
The present value of a series of future payments is calculated using the present value of annuity formula, which is then discounted back to the present if the payments start in the future. This approach is analogous to calculating the present value of a bond payment stream, involving discounting future cash flows at a given rate.
Explanation:
The present value of an annuity is calculated to determine the value of a series of future payments in today's dollars, adjusted for interest over time. In this case, we want to find the present value of $2,025 received annually, starting 6 years from the present and continuing to be received for 18 years (from year 6 to year 23).
Firstly, it's important to note that the present value of an annuity (PVA) formula is used which is:
PVA = PMT [ (1 - (1 + r)-n) / r ]
Where PMT is the annual payment, r is the discount rate (expressed as a decimal), and n is the number of payments. However, since the payments begin 6 years from now, we must discount this entire annuity back to the present value by five more years (since the first payment received in year 6 is effectively the 'present' for our calculation of the annuity).
The steps involved are as follows:
Calculate the present value of the annuity of $2,025 received from year 6 to year 23 using the PVA formula at a 7 percent discount rate. Adjust the resultant value to present date by discounting it back an additional 5 years at the same 7 percent rate. Add up the two present values to find the total present value of the annuity.
To calculate the present value of a bond as explained in Table C2, you also apply a similar present value formula by adjusting future cash flows to their present value and summing them up.
On December 31, 2020, Hoosier Inc. establishes an allowance for doubtful accounts of 3% of its accounts receivable balance of $180,000. Hoosier Inc. decides on March 15, 2021, not to pursue collection of Smith’s $1,000 account. The likelihood of collection does not support further collection efforts. What is the net realizable value (NRV) of accounts receivable before and after the write-off of the Smith account?
Answer:
The answer is given below;
Explanation:
Accounts Receivable-before write off $180,000*(1-3%)=$174,600
Accounts Receivable-after write off $179,000*(1-3%)=$173,630
Accounts receivable after write off does not include smith receivable as it has been specifically provided before providing allowance for doubtful accounts.This is the major difference between both workings.
Accessory Industries has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 100 thousand bonds. If the common shares are selling for $22 per share, the preferred shares are selling for $10.50 per share, and the bonds are selling for 96 percent of par ($1,000), what would be the weights used in the calculation of Accessory's WACC for common stock, preferred stock, and bonds, respectively
Answer:
Equity is 0.29
Debt is 0.64
Preferred stock 0.07
Explanation:
WACC=Ke*E/V+Kd*D/V*(1-t)*Kp*P/V
However, the requirements of the question is weights of the bonds,equity and preferred stock which are E/V,D/V and P/V respectively
E is the value of equity=2,000,000*$22=$44,000,000
D is the value of debt =100,000*$1000*96%=$96,000,000
P is the value of prefered stock=1,000,000*$10.50=$10,500,000
Total firm's finance(V) $150,500,000
E/V=$44,000,0000/$150,500,000=0.29
D/V=$96,000,0000/$150,500,000=0.64
p/v=$10,500,000/$150,500,000=0.07
Answer:
Common Stock = 29.2%
Preferred Stock = 7%
Bonds = 63.8%
Explanation:
Weights used in the WACC are based on the market value of the each capital option. Market value can be calculated by multiplying the numbers of shares or bonds with respective market value of each. Dividing these market values by the total capital will result in the weight of each capital.
Market Value
Common stock = Numbers of common stock shares x market value of each share = 2,000,000 x $22 = $44,000,000
Preferred stock = Numbers of common stock shares x market value of each share =1,000,000 x $10.5 = $10,500,000
Bond = Numbers of Bonds x market value of Bond =100,000 x ( $1,000 x 96% ) = $96,000,000
Weights = Market value / Total Capital
Total Capital = $44,000,000 + $10,500,000 + $96,000,000 = $150,500,000
Common Stock = $44,000,000 / $150,500,000 = 0.292 = 29.2%
Preferred Stock = $10,500,000 / $150,500,000 = 0.07 = 7%
Bonds = $96,000,000 / $150,500,000 = 0.638 = 63.8%
Melbourne Company uses the perpetual inventory system and LIFO cost flow method. Melbourne purchased 2,300 units of inventory that cost $15.50 each. At a later date, the company purchased an additional 2,400 units of inventory that cost $16.00 each. If the company sells 2,600 units of inventory, what amount of ending inventory will appear on a balance sheet prepared immediately after the sale
Answer:
$32,550
Explanation:
LIFO means last in first out. It means that it is the last purchased inventories are the first to be sold.
Total inventory = 2,300 + 2,400 = 4,700
Ending inventory = 4700 - 2600 = 2,100
The ending inventory would be the first purchased inventory
Ending inventory = 2100 x $15.50 = $32,550
I hope my answer helps you
Final answer:
Using the LIFO cost flow method and the perpetual inventory system, the ending inventory for Melbourne Company after selling 2,600 units would be calculated as the remaining units from the initial purchase multiplied by their cost, resulting in an ending inventory value of $32,550.
Explanation:
The subject of the question is the calculation of ending inventory using the perpetual inventory system and the LIFO cost flow method in the context of accounting for a company's inventory transactions. To calculate the ending inventory after the sale of 2,600 units when Melbourne Company uses the LIFO method, we need to determine the cost of the units remaining.
Firstly, Melbourne purchased 2,300 units at $15.50 each. Then, they bought another 2,400 units at $16.00 each. After selling 2,600 units, and considering that LIFO means 'last in, first out', the most recent purchases are sold first.
Therefore, 2,400 units will be sold from the second purchase and 200 units from the first purchase, leaving the company with 2,100 units remaining from the initial purchase at $15.50 each. The calculation of the ending inventory is 2,100 units times $15.50, which equals $32,550. This will be the amount of the ending inventory appearing on the balance sheet immediately after the sale.
Terry Williams sustained physical. injuries in an accident involving, a' vehicle driven by Kellie Meagher. At the time' of the accident, Meagher was allegedly using a cellular phone furnished by Cingular Wireless. Williams later' sued: Meagher and Cingular in an Indiana court. In the portion of the complaint pertaining to Cingular, Williams alleged that Cingular was negligent in furnishing a cellular phone to Meagher when it knew, or should have known, that the phone would be used while the user operated a motor vehicle. Cingular filed a motion to dismiss for failure to state a claim on which relief could be granted. After the trial court granted Cingular's motion, Williams appealed to the Indiana Court of Appeals. Was the trial court correct in granting Cingular's motion to dismiss?
Answer:
Negligent tort is a tort which is submitted by the disappointment so as to go about as a reasonable and levelheaded individual with somebody, to whom s/he may owe an obligation, according to law in specific situations.
Individual T recorded a suit against Company C and individual K as he endured physical wounds while in a mishap with Person K. Around then, individual K was utilizing a phone, which was outfitted by Company C. Individual T asserted that C realized that the telephone could be utilized while riding an engine vehicle and was careless about it. C documented a movement for excusing the case because the offended party had neglected to express the case to which help could be allowed. A preliminary court allowed the movement recorded by C. Be that as it may, individual T claimed against that award.
According to the legitimate rules, so as to demonstrate the tort of carelessness, the offended party must demonstrate that the carelessness was the real and proximate reason for injury endured by the offended party. For this situation, the party in question was just the driver and C had no immediate or backhanded relations with the case, despite the fact that Person K was utilizing a mobile phone. There was no chance to get wherein C could determine if the telephone would wind up in a destroyed vehicle. Additionally, the risk for a mishap like this is just on the individual utilizing the telephone, not on the organization. Hence, it tends to be expressed that the preliminary court was directly in its choice of allowing C's movement to excuse the case.
Surreal Corp. has borrowed to invest in a project. The loan calls for a payment of $17,500 every month for three years. The lender quoted Surreal a rate of 8.40 percent with monthly compounding. At what rate would you discount the payments to find amount borrowed by Surreal Corp.
Answer:
The rate at which to discount the payments to find sum borrowed is 12.68%
Explanation:
The discount rate to be used in computing the sum borrowed can e derived from the effective annual rate formula below:
Effective annual rate = (1 + Quoted interest rate/m)^m - 1
quoted interest rate is 8.40
m is the number of months in a year when compounding is done which is 12
effective annual rate=(1+8.40%/12)^12-1
effective annual rate=(1+0.01)^12-1
effective annual rate=(1.01)^12-1
effective annual rate=1.12682503 -1
effective annual rate=0.12682503=12.68%
Final answer:
The discount rate used to calculate the present value of Surreal Corp's loan payments, based on a quoted interest rate of 8.40 percent with monthly compounding, is the monthly equivalent of this annual rate, which is 0.7%.
Explanation:
The question asks at what rate the payments should be discounted to find the amount borrowed by Surreal Corp. Given that the loan has a quoted rate of 8.40 percent with monthly compounding, the discount rate to find the present value of the loan payments is simply this quoted interest rate. The monthly interest rate is central to computing the present value of an annuity, which in this case, is the series of $17,500 payments made every month for three years. Using the formula for the present value of an annuity, we would use the monthly interest rate derived from the annual rate of 8.40%, which is 0.7% (0.084/12).
New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect. Maloney's, Inc. has found that its cost of common equity capital is 17 percent and its cost of debt capital is 6 percent. The firm is financed with $3,000,000 of common shares (market value) and $2,000,000 of debt. What is the after-tax weighted average cost of capital for Maloney's, if it is subject to a 40 percent marginal tax rate
Answer:
The WACC is 11.64%
Explanation:
The weighted average cost of capital or WACC is the cost to firm of raising its total capital based on its capital structure. The capital structure of the firm can contain debt, preferred stock and common stock. The WACC take the weight of each component as a proportion of total value of assets and multiply it by the rate of return or cost of each component.
WACC = wD * rD * (1-tax rate) + wE *rE
Where,
wD and wE represent the weights of debt and equity as a proportion of total assetsrD and rE are the cost of debt and cost of equityWe multiply rD by (-tax rate) because we take after tax cost of debt for WACC calculationWeight of debt = 2000000 / (2000000 + 3000000) = 2/5 or 0.4
Weight of equity is = 1 - 0.4 = 0.6
WACC = 0.4 * 0.06 * (1-0.4) + 0.6 * 0.17
WACC = 0.1164 or 11.64%
Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $150 million, $135 million, $95 million, or $80 million. These outcomes are all equally likely, and this risk is diversifiable. Gladstone will not make any payouts to investors during the year. Suppose the risk-free interest rate is 5% and assume perfect capital markets.
a) What is the initial value of Gladstone’s equity without leverage? Now suppose Gladstone has zero-coupon debt with a $100 million face value due next year.
b) What is the initial value of Gladstone’s debt?
c) What is the yield-to-maturity of the debt? What is its expected return?
d) What is the initial value of Gladstone’s equity? What is Gladstone’s total value with leverage? Suppose Gladstone has 10 million shares outstanding and no debt at the start of the year.
e) If Gladstone does not issue debt, what is its share price?
f) If Gladstone issues debt of $100 million due next year and uses the proceeds to repurchase shares, what will its share price be? Why does your answer differ from that in part e)?
Answer: SEE EXPLANATION
Explanation:
Given the following ;
Values depending on Success
$150M, $135M, $95M, $80M
Risk free rate = 5% = 0.05
Pervebtage to be lost in case of bankruptcy = 25% = 0.25
A.) 0.25 × [( 150 + 135 + 95 + 80) ÷ 1.05] = $109.52 million
Assume a zero-coupon debt with a $100million face value
B.) 0.25 × [( 100 + 100 + (95×0.75) + (80×0.75)) ÷ 1.05] = $78.87 million
C.) Yield to maturity (YTM)
(100M÷78.87M) - 1
1.2679 - 1 = 0.2679 = 26.79%
Expected return = 5%
D.) Equity value
0.25 × [( 150 + 135 + (95×0.75) + (80×0.75)) ÷ 1.05] = $99.11 million
E.) share if no debt is issued
109.52 ÷ 10 = 10.95 per share
F.) Share price if debt of $100M is issued
99.11 ÷ 10 = 9.91 per share
The price differs because bankruptcy cost will Lower the share price.
Final answer:
The initial value of Gladstone Corporation's equity without leverage is $109.52 million, and the initial value of its debt with leverage is $95.24 million. With leverage, the initial equity value is $14.28 million, and the total value of the firm with leverage remains unchanged. Share price differs when debt is issued and used to repurchase shares due to the changed equity structure.
Explanation:
Calculating the Value of Gladstone Corporation's Equity and Debt
To calculate the initial value of Gladstone’s equity without leverage, we need to consider the expected value of the corporation next year, which is the average of the four possible values. Since all outcomes are equally likely, we find the average: (150 + 135 + 95 + 80) million / 4 = $115 million. To find the present value, we discount this at the risk-free rate of 5%, giving us an initial equity value of $115 million / (1 + 0.05) = $109.52 million.
With zero-coupon debt of $100 million face value due next year, the value of the debt is the present value of the face value, discounted at the risk-free rate. Hence, the initial value of the debt is $100 million / (1 + 0.05) = $95.24 million. The yield-to-maturity (YTM) of the debt would be the rate at which this present value grows to $100 million in one year, which is 5%. However, because the risk is diversifiable and there is a possibility that the firm value falls below the debt value (in two out of four scenarios), the expected return will also factor in the probability of default, which would be different from the YTM.
The initial value of Gladstone’s equity with the leverage is the total firm value minus the value of debt, so it’s $109.52 million - $95.24 million = $14.28 million. The total value with leverage remains the same because leveraging doesn't change the total value of the firm, just how it is divided between debt and equity. With 10 million shares outstanding, the share price without issuing debt is $109.52 million / 10 million = $10.95 per share.
If debt is issued and proceeds are used to repurchase shares, the shares' price will adjust to reflect the new equity value, which is now $14.28 million. If all $100 million is used to buy back shares, the number of shares will decrease. The new share price will be higher than before because there are fewer shares that now represent the equity value of $14.28 million. The price differs from part e) because of the change in equity structure due to the debt issue and share repurchase.
Yields on short-term bonds tend to be more volatile than yields on long-term bonds. Suppose that you have estimated that the yield on 20-year bonds changes by 10 basis points for every 15-basis-point move in the yield on 5-year bonds. You hold a $1 million portfolio of 5-year maturity bonds with modified duration 4 years and desire to hedge your interest rate exposure with T-bond futures (20 year maturity), which currently have modified duration 9 years and sell at F0 = $95. How many futures contracts should you sell?
To hedge the interest rate risk, one needs to sell around 4444 futures contracts. This is so that the change in the bond portfolio's value when interest rates move is offset by the change in the futures contracts' value.
Explanation:To hedge interest rate exposure, one needs to make sure the change in the value of the bond portfolio is offset by the change in the value of the short positions in the bond futures. This can be achieved through duration matching. The modified duration of a bond is a measure of the percentage change in the bond price for a unit change in yield. You hold a portfolio of 5 year bonds with a face value of $1 million and a modified duration of 4 years. Hence, a 1% increase in yield would result in about a $40,000 decrease in value. On the other hand, you are considering shorting T-bond futures which have a modified duration of 9 years. So a 1% increase in yield would lead to a $9 change in the price of each future contract. Number of futures contracts to sell can be calculated by dividing the change in the value of the bond portfolio by change in price of one future contract. Therefore you should sell approximately 4444 futures contracts to hedge your interest rate risk.
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Hancock Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $88,500 of revenue on account during 2016. During 2016, Hancock collected $70,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, 2016 balance sheet would be:
Answer:
$17,615
Explanation:
Hancock Medical Supply Co net realizable value of receivables on the December 31, 2016 balance sheet
Beginning accounts receivable $0
Add revenue on account $88,500
Less collected cash $70,000
Ending account receivable $18,500
Beginning allowance balance $0
Add uncollectible account expenses
($88,500×1%) $885
Ending Allowance balance $885
Net Realizable value of Receivables =
$18,500-$885
=$17,615
Therefore Hancock Medical Supply Co net realizable value of receivables on the December 31, 2016 balance sheet will be $17,615
Synergy Inc. produces plastic grocery bags. Synergy has developed a static budget for the month of July based on 10,000 direct labor hours. During the quarter, the actual activity was 12,000 direct labor hours. Data for July are summarized as follows: Static budget (10,000 hours) Actual costs (13,000 hours) Direct materials cost $ 86,000 $108,000 Power 30,000 37,000 Salary of plant supervisor 7,000 7,000 Total $123,000 $152,000 Direct materials cost and power are variable costs. Salary of plant supervisor is a fixed cost. What is the flexible budget amount for July?
Answer:
$146,200
Explanation:
Synergy Inc
Flexible budget amount for July:
Direct materials cost [($86,000 / 10,000 hours) × 12,000 hours] $103,200
Power [($30,000 / 10,000 hours) × 12,000 hours] $36,000
Salary of plant supervisor
$7,000
Total flexible budget amount $146,200
Therefore the flexible budget amount for July is $146,200
Javier is retiring from the JKL Partnership. In January of the current year, he has a $100,000 basis in his partnership interest when he receives a $10,000 cash distribution. The partnership plans to distribute $10,000 each month this year, and Javier will cease to be a partner after the December payment. Is the January payment to Javier a current distribution or a liquidating distribution?
Answer:
The payments are all part of a LIQUIDATING DISTRIBUTION
Explanation:
The payments are all part of a LIQUIDATING DISTRIBUTION and not current distribution because a liquidation distribution can said to be a single distribution or one of a planned series of distributions that terminates a partner's entire interest in the partnership while Current distributions can be said to be all other distributions thay include those that reduce or decrease a partner's interest in the partnership.
Therefore in accordance with the liquidation, distribution laws Javier would have to recognize a gain or profit of $20,000 at the end of the year so to the fact that he only had $100,000 basis but is receiving $120,000 (12*10000).
Thus the partnership will not have to recognize a gain or a loss according to the information provided.
Answer: Liquidating distribution
Explanation:
A Liquidating distribution refers to when a company completely terminates the partnership of one of its partners by issuing a distribution that covers the basis of the Partners Capital. In other words, the entire amount of the Shareholders equity is distributed.
Javier was paid the liquidating Distribution knowing that he would leave the company after the last payment.
It is worthy of note that if the Distribution exceeds the amount of the partner's basis which in this case is $100,000, that constitutes a gain on their part. Javier therefore is making a gain.
How would a catering sales manager handle a mother and daughter making arrangements for the daughter’s wedding differently from a meeting planner from a major corporation wishing to get a quote on a regional sales meeting, which he or she has already done in five other cities?
Answer: By being more Affable
Explanation:
A wedding is a very personal experience that a lot of people look forward to and don't want to be disappointed. In this light, the Catering Sales Manager would probably be very personal with them. Very good natured and affable to ensure that the experience is a good one for the bride to be.
They'll likely pay more attention to detail and make suggestions that they think would work best to ensure a great day. As earlier mentioned, weddings are deeply personal. And so they require a personal touch.
The Sales Manager however will not be as personal with the meeting planner. Not necessarily out of disrespect but because the person already knows what they are looking for and so they will probably engage in a formal tone. There is also the fact that such people might be remarkably busy and would not like to waste time in personal conversation.
Which of the following is true about the equilibrium federal funds rate? A. The equilibrium federal funds rate is constant because of structural forces. B. The Fed can increase the equilibrium federal funds rate by decreasing reserve demand. C. The Fed can increase the equilibrium federal funds rate by decreasing the supply of reserves. D. The equilibrium federal funds rate is determined at the point where money demand exceeds money supply.
Answer:
C) The Fed can increase the equilibrium federal funds rate by decreasing the supply of reserves.
Explanation:
The Federal fund rate is the interest rate at which the banks use to lend money to each other overnight. It can simply be called the interest rate for interbank reserve loans. It can also be the interest rate which is used to conduct monetary policies.
Here, money demanded is equal to the amount of money supplied. The Fed can change the equilibrum funds rate by decreasing the money supplied to the banks, which in turn, makes the federal fund demand increase and the federal also fund rate increases.
Revenue expenditures
a. Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.
b. Are known as balance sheet expenditures because they relate to plant assets.
c. Extend the asset's useful life. Substantially benefit future periods.
d. Are debited to asset accounts when incurred.
Answer:
Answer A
Explanation:
Revenue expenditures are the expenditures during period in which the asset has been put into its usage. They are often discussed in the context of fixed assets. For instance if a company installs new equipment and has monthly costs of its maintenance, these costs are revenue expenditures. Therefore, they only present additional costs that do not necessarily increase asset's life.
Pets Inc. makes 2 products, dog collars and cat collars. Each passes through the cutting machine, which is the binding constraint. Dog collars take 6 minutes on the cutting machine and have a contribution margin per unit of $10. Cat collars take 4 minutes on the cutting machine and have a contribution margin per unit of $8.Assume that there are 2,000 hours available on the cutting machine and that the demand for each product is 15,000 units. How many of each product should be made
Answer:
Dog Collar 10,000 units
Cat Collar 15,000 units
Explanation:
We have only constraint of 2,000 hours on the cutting machine.
First we will calculate the Contribution margin per hour
Contribution margin per hour = Contribution margin per unit / Numbers of hours required per unit
Dog Collar = $10 / (6/60)hours = 10 / 0.1 = $100 per hour
Cat Collar = $8 / (4/60) hours = $120 per hour
Pets Inc. will make Cat collar more than dog
Hours required for 15,000 unit of Cat Collar = 15000 x 4 / 60 = 1,000 hours
Hours for Dog Collars = 2,000 - 1000 = 1000 hour
Unit of Dog Collar = 1000 hours / (6/60) = 10,000 units
Whatever, Inc., has a bond outstanding with a coupon rate of 5.73 percent and semiannual payments. The yield to maturity is 6.7 percent and the bond matures in 23 years. What is the market price if the bond has a par value of $1,000?
a)889.56
b)904.76
c)887.02
d)887.80
e)888.39
Answer:
The market price if the bond has a par value of $1,000 is $887.02 . The right answer is c.
Explanation:
In order to calculate the market price if the bond has a par value of $1,000, we need first to make the following calculations according to given data:
Coupon Rate = 5.73/2 = 2.865%
Interest = 1000 * 2.865% = $ 28.65
YTM = 6.7/2 = 3.35%
Time = 23*2 = 46 periods
Therefore, the market price would be calculated using the following formula:
Price of Bond = Interest * PVIFA(3.35%,46) + Par Value * PVIF(3.35%,46)
= $28.65 * 23.2942 + 1000 * 0.2196
= $667.38 + $219.64
Hence, Price of Bond = $887.02
The market price if the bond has a par value of $1,000 is $887.02
Archer Industries sells three different sets of sportswear. Sleek sells for $30 and has variable costs of $18; Smooth sells for $50 and has variable costs of $30; Potent sells for $70 and has variable costs of $45. The sales mix of the three sets is: Sleek, 50%; Smooth, 30%; and Potent, 20%.
What is the weighted-average unit contribution margin?
Answer:
Weighted average unit contributIoN = $17
Explanation:
Weighted average contribution margin is applicable where a business sells more than one product in a constant mix or proportion. It gives an idea of how much is made on the average as contribution from th sale of a unit.
It is determined as follows
Step 1
Contribution per unit
Contribution per unit = selling price - unit variable cost
Sleek Smooth Potent
Selling price 30 50 70
Variable cost (18) (30) (45)
Contribution ($) 12 20 25
step 2
weighted average unit contribution
= (50%×12) + (30%×20) + (20%×25)
= $17
How does the planning and control of variable manufacturing overhead costs differ from the planning and control of fixed manufacturing overhead costs? Planning and control of ▼ manufacturing overhead costs has both a long-run and a short-run focus. The long-run focus involves Revolutions planning to ▼ and for the short-run focus to ▼ manage the cost drivers of value-added overhead activities undertake only value-added overhead activities in the most efficient way. Planning and control of ▼ fixed variable manufacturing overhead costs have primarily a long-run focus. It involves ▼ managing the cost drivers of value-added fixed overhead activities undertaking only value-added fixed-overhead activities for a budgeted level of output. Revolutions makes ▼ none most of the key decisions that determine the level of overhead costs at the start of the accounting period.
Answer and Explanation:
The variable manufacturing overhead costs are indirect manufacturing costs of an organization that change as the level of production or sales change such as factory power. Fixed manufacturing overhead costs differ from the former as they are indirect but do not change with change in production level or sales
Planning and control of variable manufacturing overhead costs encompasses both long-run and short-run focus. It involves solutions planning for overhead activities that add value which takes the long-run view while managing the cost drivers of those activities efficiently is the short run aspect of planning and control of variable manufacturing overhead costs. On the other hand planning and control of fixed manufacturing overhead costs have primarily a long-run focus.
Variable manufacturing overhead costs, which include variable factors like raw materials and energy costs, can be managed in both the short and long run, focusing on production levels and efficiency. Fixed manufacturing overhead costs, such as management salaries and lease payments, are static in the short run but become variable in the long run where all costs can be adjusted with strategic planning. The time horizon is crucial in determining the treatment and control of these costs.
The planning and control of variable manufacturing overhead costs take into account the costs directly tied to production levels, such as raw materials, salaries of production workers, and utility costs. These costs fluctuate with the number of units produced and can be managed in the short run by controlling cost drivers and focusing on efficiency in value-added activities.
Fixed manufacturing overhead costs, on the other hand, include expenses like management salaries and lease payments, which are contractually set for a period and are independent of the production volume. These costs are considered fixed in the short run but can become variable in the long run as contracts can be renegotiated, and operational changes can be implemented. In the long run, the firm can plan for these changes, turning fixed costs into variable as production factors and structure of costs can be altered.
The planning and control of variable and fixed manufacturing overhead costs involve different management practices due to the inherent nature of these costs over different time horizons. While variable costs can be managed both in the short and long run, fixed costs are often primarily a consideration for the long-term planning process as their variability comes into play over extended periods.
Khaling Company sold 26,900 units last year at $16.50 each. Variable cost was $11.60, and total fixed cost was $136,710. Required: 1. Prepare an income statement for Khaling for last year. 2. Calculate the break-even point in units. 3. Calculate the units that Khaling must sell to earn operating income of $15,680 this year.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Khaling Company sold 26,900 units last year at $16.50 each. The variable cost was $11.60, and the total fixed cost was $136,710.
1) Income statement:
Sales= 26,900*16.5= 443,850
Variable costs= 26,900*11.6= (312,040)
Contribution margin= 131,810
Fixed costs= (136,710)
Net operating income= (4,900)
2) To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 136,710 / (16.5 - 11.6)
Break-even point in units= 27,900units
3) Now, we need to include the desired profit to the break-even point formula:
Break-even point in units= (136,710 + 15,680) / 4.9
Break-even point in units= 31,100 units
Planners for a company that makes several models of skateboards are about to prepare the aggregate plan that will cover six periods. They have assembled the following information:Period 1 2 3 4 5 6 totalForecast 200 200 300 400 500 200 1800CostsOutput Regular Time = $2 per skateboardovertime = $3 per skateboardsubcontract = $6 per skateboardInventory = $3 per skateboardBack orders = $5 per skateboard per periodThey now want to evaluate a plan that calls for a steady rate of regular-time output, mainly using inventory to absorb the uneven demand but allowing some backlog. Overtime and subcontracting are not used because they want steady output. They intend to start with zero inventory on hand in the first period. Assume a level output rate of 300 units (skateboards) per period with regular time (i.e., 1,800/6 = 300). Note that the planned ending inventory is zero. There are 15 workers, and each can produce 20 skateboards per period.The president of the firm has decided to shut down the plant for vacation and installation of new equipment in period 4. After installation, the cost per unit will remain the same, but the output rate for regular time will be 450. Regular output is the same for periods 1, 2, and 3; 0 for period 4; and 450 for each of the remaining periods. Note, though, that the forecast of 400 units in period 4 must be dealt with.Prepare the aggregate plan, and compute its total cost. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Answer:
Total costs = $4,850.
Please refer to the attached for the answered table.
Steady/fixed Production planning with the objective of saving on overtime and subcontract costs is a form of aggregate planning that organizations pursue in managing its total costs of production.
As a result of this model of planning, we will have inventory on hand in some periods and we will run partially or completely out of stock in others. But because the production unit is aware of their production targets , overtime will be zero and there will be no need for subcontracting.
However delayed order fulfillment will be made up for at additional costs as in the example we are solving. This provisions must be made for such eventualities.
You were hired as a consultant to restructure operating capital. The recommended goal is for the firm to have a capital structure is 33% debt, 8% preferred, and 59% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 11.25%, and the tax rate is 28%. The firm will not be issuing any new stock. The firm's projected WACC is ______%
Answer:
The WACC is 8.66%
Explanation:
The WACC or weighted average cost of capital is the cost to firm of its capital structure which can have 3 components namely debt, preferred stock and common stock. We take the weighted average of these components and their respective costs to calculate WACC. Furthermore, we take the after tax cost of debt for WACC calculation and that is why we multiply the cost of debt by (1-tax rate).
WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE
WACC = 0.33 * 0.065 * (1-0.28) + 0.08 * 0.06 + 0.59 * 0.1125
WACC = 0.086619 or 8.86619% rounded off to 8.66%
The firm's projected Weighted Average Cost of Capital (WACC), calculated based on the given capital structure, costs of debt, preferred equity, retained earnings, and tax rate, is 8.15%.
The question involves calculating the Weighted Average Cost of Capital (WACC) for a firm with a specific capital structure. The firm's goal is to have a structure of 33% debt, 8% preferred equity, and 59% common equity. Given the interest rates and costs associated with each type of capital and the firm's tax rate, we can calculate the WACC. The cost of debt will be adjusted for taxes, as interest is tax-deductible, leading to an after-tax cost of debt.
To compute the WACC, use the formula: WACC = (% of debt * after-tax cost of debt) + (% of preferred equity * cost of preferred equity) + (% of common equity * cost of common equity). Therefore, after-tax cost of debt = 6.50% * (1 - 0.28) = 4.68%. Using the data provided:
Weight of debt = 33%After-tax cost of debt = 4.68%Weight of preferred equity = 8%Cost of preferred equity = 6.00%Weight of common equity = 59%Cost of retained earnings (common equity) = 11.25%WACC = (0.33 * 4.68%) + (0.08 * 6.00%) + (0.59 * 11.25%) = 8.15%.
Therefore, the firm's projected WACC is 8.15%%.