Answer:
Explanation:
The journal entries are shown below:
On June 1
Treasury Stock A/c Dr $5,000 (50 shares × $100)
To Cash A/c $5,000
(Being treasure stock is purchased)
On July 1
Cash A/c Dr $2,600 (50 shares × $52)
To Treasury Stock A/c $2,500 (50 shares × $50)
To Paid in capital - Treasury stock $100
(Being treasury stock is sold at higher price and the remaining amount would be credited to the paid in capital account)
On August 1
Cash A/c Dr $2,300 (50 shares × $46)
Paid in capital - Treasury stock $100
Retained Earnings A/c Dr $100
To Treasury Stock A/c $2,500 (50 shares × $50)
(Being treasury stock is sold at lower price and the remaining amount would be debited to the retained earning account)
The journal entry for the sale of the treasury stock on July 1 includes a debit to Cash, Retained Earnings, and a credit to Treasury Stock and Additional Paid-in Capital.
Explanation:The journal entry for the sale of the treasury stock on July 1 can be completed as follows:
Debit: Cash - $2,600 ($52 x 50 shares)Debit: Retained Earnings - $500 ($5,000 cost of treasury stock - $4,500 proceeds from sale)Credit: Treasury Stock - $5,000 (cost of treasury stock)Credit: Additional Paid-in Capital - $100 (excess proceeds from sale)The debit to Cash represents the cash received from the sale of 50 shares at $52 per share. The debit to Retained Earnings accounts for the decrease in equity due to the sale, and the credit to Treasury Stock reflects the reduction in treasury stock. Finally, the credit to Additional Paid-in Capital represents any excess proceeds received from the sale.
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Hitzu Co. sold a copier (that costs $4,500) for $9,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 5% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $146 for materials taken from the repair parts inventory. These are the only repairs required in Year 2 for this copier.
1. How much warranty expense does the company report for this copier in Year 1?
Answer:
In year 1 the warranty expense reported is $450 ($9,000 x 5%)
Explanation:
The journal entries would be:
Sales journal entry - August 16 - Year 1
Account Debit Credit
Cash $9,000
Cost of goods sold $4,500
Revenue $9,000
Inventory $4,500
Accrued Warranty Expense - December 31 - Year 1
Account Debit Credit
Warranty Expense $450
Estimated Warranty
Liability $450
By the end of Year 1, the company has recognized an accrued expense (an accrued expense is recognized before cash is actually paid out) for $450.
b. Suppose that the Fed's FX reserves increase by 40 million zees as a result of the decline in demand. How many millions of dollars worth of bonds will the Fed have to sell in order to sterilize the accompanying increase in the domestic money supply
Selling $8 million worth of bonds by the Fed results in a decrease in bank reserves and money supply, with a maximal possible decrease of $40 million in the money supply if the reserve requirement is 20%.
When the Fed sells bonds, it reduces the amount of reserves that banks hold. If the Fed sells $8 million worth of bonds, the bank reserves decrease by that same amount because banks exchange their reserve balances for the bonds. Consequently, as reserves decrease, the money supply also decreases. This is because banks have less money to loan out, which reduces the total amount of money in circulation.
If the required reserve ratio is 0.2 (or 20%), the maximum possible change in the money supply can be found using the money multiplier formula, which is the reciprocal of the reserve requirement. The maximum change in the money supply is 1/0.2 times the change in reserves, so in this case, it is 5 times $8 million, which equals $40 million.
When the Fed sells bonds, bank reserves and the money supply decrease. The maximum reduction in the money supply can be calculated using the required reserve ratio.
Bank reserves change by the same amount as the bonds sold by the Fed. When the Fed sells $8 million worth of bonds, bank reserves decrease by $8 million.
The money supply will decrease when the Fed sells bonds, as selling bonds reduces the money available in the economy.
The maximum possible change in the money supply, if the required reserve ratio is 0.2, can be calculated by dividing the change in reserves by the reserve ratio. In this case, if the Fed sells $8 million worth of bonds, the maximum reduction in the money supply would be $8 million ÷ 0.2 = $40 million.
At January 1, 2016, Sheffield Corp. has beginning inventory of 3000 surfboards. Sheffield estimates it will sell 11000 units during the first quarter of 2016 with a 12% increase in sales each quarter. Sheffield’s policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2016?
Answer:
budget sale revenue = $2,069,760
Explanation:
given data
beginning inventory = 3000
sell = 11000 units
sales = 12% increase
ending inventory = 25%
surfboard costs = $100
sold = $150
to find out
How much is budgeted sales revenue for the third quarter of 2016
solution
first we will get here budget sales unit for quarter 3 that is
budget sales unit = ( 11000 × 112% ) 112%
budget sales unit = $13798.4
and
selling price is here $150
so
budget sale revenue for 3rd quarter sale is = budget sales unit × selling price
budget sale revenue = $13798.4 × $150
budget sale revenue = $2,069,760
If Sheffield estimates it will sell 11000 units during the first quarter of 2016 with a 12% increase in sales each quarter. The amount of the budgeted sales revenue for the third quarter of 2016 is $2,069,760
First step is to estimate first quarter sales
Estimated first quarter sales= 11,000 units + (11,000 units x 12%)
Estimated first quarter sales=11,000 units +1,320 units
Estimated second quarter sales in units=12,320 units
Second step is to estimate second quarter sales
Estimated second quarter sales= 12,320 units + (12,320 units x 12%)
Estimated second quarter sales= 12,320 units + 1,478.4 units
Estimated second quarter sales= 13,798.4 units
Third step is to calculate how much is budgeted sales revenue for the third quarter of 2016 using this formula
Budgeted Sales for Third Quarter=Estimated second quarter sales × Selling price per unit
Let plug in the formula
Budgeted Sales for Third Quarter=13,798.4 units × $150
Budgeted Sales for Third Quarter=$2,069,760
Inconclusion if Sheffield estimates it will sell 11000 units during the first quarter of 2016 with a 12% increase in sales each quarter. The amount of the budgeted sales revenue for the third quarter of 2016 is $2,069,760
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Crane Company is evaluating its Piquette division, an investment center. The division has a $66000 controllable margin and $480000 of sales. How much will Crane’s average operating assets be when its return on investment is 10%?
Answer:
$600,000
Explanation:
Data provided in the question:
Controllable margin = $66,000
Sales = $480,000
Return on investment = 10%
Now,
Return on investment = Controllable Margin ÷ Average Operating Assets
or
10% = $60,000 ÷ Average Operating Assets
or
Average Operating Assets = 60000 ÷ 10%
or
Average Operating Assets = 60000 ÷ 0.01
or
Average Operating Assets = $600,000
Suppose there are only two firms that sell smart phones, Flashfone and Pictech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones.
Pictech Pricing
High Low
Flashfone Pricing High 11, 11 2, 15
Low 15, 2 8, 8
For example, the lower, left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $15 million and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms.
If Flashfone prices high, Pictech will make more profit if it chooses a (high,low) _____ price, and if Flashfone prices low, Pictech will make more profit if it chooses a(high,low)_______ price.
If Pictech prices high, Flashfone will make more profit if it chooses a(high,low)______price, and if Pictech prices low, Flashfone will make more profit if it chooses a (high,low) ______ price.
Considering all of the information given, pricing high (is, is not) ______ a dominant strategy for both Flashfone and Pictech. (Note: A dominant strategy is a strategy that is best for a player regardless of the strategies chosen by the other players.)
If the firms do not collude, which strategy will they end up choosing?
Flashfone will choose a low price and Pictech will choose a high price.
Flashfone will choose a high price and Pictech will choose a low price.
Both Flashfone and Pictech will choose a low price.
Both Flashfone and Pictech will choose a high price.
True or False: The game between Flashfone and Pictech is an example of the prisoners' dilemma.
True
False
Answer:
The question is based on the economics theory named the game theory. Economists frequently use it to analyze the outcomes for adversary firms.
Explanation:
To solve this problem we need to pay attention to the best outcome for each firm given the choices of the other firm. So, when Pictech chooses a higher price, Flashfone should choose between a high or low price. The firms must keep choosing until they run out of options.
To have a dominant strategy, the firms should always choose a low price.
Based on the game theory:
If Flashfone prices high, Pictech will make more profit if it chooses a (high,low) __low___ price, and if Flashfone prices low, Pictech will make more profit if it chooses a(high,low)____low___ price.
If Pictech prices high, Flashfone will make more profit if it chooses a(high,low)_____low_price, and if Pictech prices low, Flashfone will make more profit if it chooses a (high,low) ___low___ price.
Considering all of the information given, pricing high (is, is not) __is not____ a dominant strategy for both Flashfone and Pictech.
They will end up choosing the low price strategy. Both Flashfone and Pictech will choose a low price.
The answer is true, because the prisioner's dilema is a game were both parties know that the outcome can be worse for both. So they rather play in a way that is better for their interests. In the firms' case, they could have choose higher prices, but they didn't because each of them intented to charge a lower price and outsell the other firm. Meaning that, the one with the lower price, would sell more smartphones.
)Investors in international finance are moving funds from Country X to other countries. This depreciation is causing even more disenchantment with Country X's currency. Describe the affects will this have on the supply and demand curves for this currency on the foreign exchange markets.
The movement of funds away from Country X leads to a shift in the supply and demand curves for its currency in the foreign exchange markets, increasing supply and decreasing demand. This shift results in the depreciation of Country X's currency.
When investors in international finance move funds from Country X to other countries, this behavior influences the foreign exchange markets. As there is a depreciation of Country X's currency, a negative sentiment is cultivated among investors, leading to a further decline in demand for the currency. Consequently, the demand curve for Country X's currency will shift to the left (a decrease in demand) on the foreign exchange market graphs.
At the same time, an increase in the supply of Country X's currency will occur because investors are selling it off. This action shifts the supply curve to the right (an increase in supply). Since the supply of the currency is rising while the demand for it is falling, there will be a downward pressure on the currency's value, causing it to depreciate relative to other currencies.
Ein consequence of this depreciation may be that the rate of return on foreign assets decreases. If investors anticipated the depreciation and adjusted their expectations, they might find their investments less attractive, thus further reducing the demand for the depreciating currency. This is a detrimental cycle that can lead to a persistent decline in the currency's value, prompting capital flight and potential economic instability within Country X.
96) XYZ inc. sends out a free razor to encourage switching. This is an example of using ________ as the sales promotion approach. A) coupons B) premiums C) product sampling D) advertising E) product placements
Answer:
C) product sampling
Explanation:
Product Sampling is the technique of marketing the product, by providing a small sample of the product for free, so that the customer uses the product and satisfy themselves.
This is one of the most expensive methods of marketing the product, as distributing the product for free, would cost the company, but as this proves the quality of the product, it creates belief among the consumers and customers.
Distribution of free razors is a product sampling method.
Conundrum Mining is expected to generate the above free cash flows over the next four years,after which they are expected to grow at a rate of 6% per year. If the weighted average cost ofcapital is 12% and Conundrum has cash of $80 million, debt of $60 million, and 30 millionshares outstanding, what is Conundrumʹs expected terminal enterprise value?A) $413.4 millionB) $459.3 millionC) $505.3 millionD) $528.2 million
Answer:
B. 459.3 million
Explanation:
FCF5 = $26 million * (1 + 0.06) = 27.6 million
and to continue
V4 = $27.6 million / (0.12 - 0.06) = 459.3 million
The terminal enterprise value cannot be accurately calculated with the provided data because the free cash flow in the final projected year is missing, which is critical for calculating the terminal value in the Gordon Growth Model.
Explanation:The student is asking for the expected terminal enterprise value of Conundrum Mining. First, we calculate the present value of the free cash flows using the given discount rate of 12%. Given the free cash flows are $15 million, $20 million, and $25 million for the present, first, and second year respectively, we discount these by the weighted average cost of capital. The present values then become: $15 million, $20 million/(1+0.12) = $17.86 million, and $25 million/(1+0.12)² = $19.88 million. This gives a total present value of $52.74 million.
Next, we calculate the terminal value which is the present value of all future cash flows growing at a constant rate. This can be calculated using the formula: Terminal Value = (Cash Flow in Final Year * (1 + growth rate)) / (discount rate - growth rate). However, an important piece of information, the free cash flow in the last projected year, is missing in the question. Therefore, it's impossible to accurately calculate the terminal enterprise value with the provided data.
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You have been hired by the No Hassle Collection Agency to provide economic advice. The owner of the agency tells you that No Hassle's only variable input is the number of collection agents. The hourly wage for collection agents is $40.00. The marginal revenue product curve for collection agents reaches its maximum at five workers with a marginal revenue product of $34.00. What advice would you give this firm?
Answer:
The marginal revenue product has a property known as diminishing marginal return.
The property of diminishing marginal return tells us that theres an amount of input that maximizes revenue, and after this point is reached, additional units of input less addional revenue until diminishing it.
In this example, the Collection Agency is way past the maximum revenue point (located at $34.00 per worker). It needs to lay off employees until it goes from the current $40.00 marginal revenue product, until $34.00 marginal revenue product.
Lily Tucker (single) owns and operates a bike shop as a sole proprietorship. This year, she sells the following long-term assets used in her business:Asset Sales Price Cost Accumulated Depreciation Building $230,000 $200,000 $52,000 Equipment 80,000 148,000 23,000 Lily's taxable income before these transactions is $160,500.What are Lily's taxable income and tax liability for the year? Use Tax Rate Schedule for reference. (Do not round intermediate calculations.
Answer:
Taxable income = $ 197500
Total liability = $ 47650
Explanation:
Please see attachment
Sole proprietorship is known to be as the enterprise which is basically owned by a given one natural person and Lily taxable income is given as $160,500.
What is Accumulated Depreciation ?The Accumulated depreciation is known to be as the depreciation which is the total value of a given asset actually been Depreciated into a single point which is recorded in the Contra asset account side.
Hence the Lily taxable income is $227500 and the taxable liability is $51225 The image to the Lily Taxable income and Tax liability is attached below.
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In order to avoid shortsightedness, today marketers are moving toward viewing communications as managing the ________.
A) organizational culture
B) nonpersonal communication channels
C) word-of-mouth influence
D) ongoing customer relationships with the company
E) product life cycle
Answer: (D) Ongoing customer relationships with the company
Explanation:
In an organization, the ongoing customer relationship are important as they help in improve the business relation of the company.
They manage all the process of interaction with the customers for improving the productivity and also improve the profitability of the company.
The customer satisfaction is one of the main factor for the organization in the customer relation management process. Today, the marketers are moving ahead by manage the communication of the customer relationship with the organization or company.
Therefore, Option (D) is correct.
You currently don't have a car, but rent a car that's parked just outside your house whenever you need one. Your annual expenditure on rental cars is $2,200.
You've now considering purchasing a car that would give you the same level of convenience as your current life style. The car costs $23,000 and can be sold for $5,000 after 10 years. You'd purchase the car with money from your savings account which always earns an interest rate of 6%.
Assume that all cash flows occur at the end of each year (maybe because you drive much more around Thanksgiving and Christmas).
Part 1) What is the present value of the benefits of owning that car, ie., saving on rental expenses and selling the car?
Part 2) Should you buy the car? O No O Yes
To calculate the present value of car ownership benefits, we use the rental savings and future sale value, adjusted for a 6% interest rate. If the total present value is less than the cost of buying the car, it is financially advisable to purchase the car.
Explanation:Part 1: Present Value of Car Ownership Benefits
To calculate the present value (PV) of the benefits of owning the car, we need to consider the savings on rental expenses and the future sale of the car. We have annual rental expenses of $2,200 and a future sale value of $5,000 after 10 years. Using the given interest rate of 6%, the formula for the present value of an annuity can be used to find the present value of the rental savings, and the formula for the present value of a lump sum can be used for the sale price of the car.
The formula for the present value of an annuity is PV = PMT * [(1 - (1 + r)^-n) / r], where PMT is the annual payment, r is the interest rate, and n is the number of periods. In this case, PMT = $2,200, r = 0.06, and n = 10. The present value of the car's resale value is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value.
Part 2: Should You Buy the Car?
To determine if the student should buy the car, we compare the present value of buying and owning the car to the present value of continuing to rent. If the present value of ownership is less than or equal to the present value of renting, then buying the car is a financially sound decision. Based on the calculation from Part 1, if the PV of ownership is less than $23,000, then the main answer would be yes, they should buy the car.
Sommer, Inc., is considering a project that will result in initial aftertax cash savings of $1.9 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. The firm has a target debt-equity ratio of .75, a cost of equity of 13 percent, and an aftertax cost of debt of 5.8 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 2 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
Answer:
Please see attachment .
Explanation:
Please see attachment .
Trendy T's Corporation manufactures t- shirts, which is its only product. The standards for t -shirts are as follows: Standard direct labor cost per hour Standard direct labor hours per t-shirt $19.00 0.4 During the month of January, the company produced 1,400 t- shirts. Related production data for the month follows: Actual direct labor hours Actual direct labor cost incurred 680 $10,880 What is the direct labor eficiency variance for the month? O A. $2,040 unfavorable B. $2,040 favorable O C. $2,280 favorable O D. $2,280 unfavorable
Answer:
Option (D) is correct.
Explanation:
Given that,
Standard direct labor cost per hour, SR = $19 per hour
Standard direct labor hours per t-shirt = 0.4 hours
Actual direct labor hours, AH = 680
Actual output = 1,400 t-shirts
Standard hours for actual output, SH:
= Standard direct labor hours per t-shirt × T-shirts produced
= 0.4 hours × 1,400
= 560
Therefore,
Direct labor efficiency variance for the month:
= (SH - AH) × SR
= (560 - 680) × $19
= $2,280 Unfavorable
Which of the following are ways that a firm could attempt to demonstrate product differentiation? Select all that apply:
through advertisement about its product's notable features
pricing the product differently for different customers
offering a warranty that is more generous than most competitors
running a sale on its product
Answer:
through advertisement about its product's notable features
offering a warranty that is more generous than most competitors
Explanation:
Product differentiation is basically aimed to make a product that is different from other products.
That the characteristics and features of the product are different from that are already present in the market.
Displaying notable features in the advertisement provides for product differentiation in the consumers.
Also providing extra warranty is a feature which will add to the product differentiation.
Final answer:
A firm can demonstrate product differentiation by advertising its product's notable features, using different pricing strategies, and offering a more generous warranty than competitors. These strategies make the product appear unique and enhance the perception of its value. Running a sale is not a typical method of differentiation, as it does not indicate the product is distinct, but rather offers a temporary price incentive.
Explanation:
The firm can demonstrate product differentiation by advertising the notable features of its product, pricing the product differently for different customers, and offering a more generous warranty than competitors. These approaches are designed to make the firm's product stand out in the marketplace and create a perception of uniqueness among consumers.
Advertising can help shape the intangible aspects of a product and influence consumer preferences by highlighting the unique features and benefits of the product. Offering a generous warranty is also an intangible aspect that not only adds value but also reinforces the product's quality and reliability, distinguishing it from competitors. Different pricing strategies can also signal to different customer segments that the firm's product has special qualities or offers unique value.
Furthermore, running a sale can often attract consumer attention and suggest a good deal, but it is not typically a method of product differentiation as it does not necessarily imply that the product is different; rather, it indicates a temporary price reduction. Therefore, running a sale is not as much about differentiation but more about pricing tactics to boost sales volume.
Your neighbor offers you an investment opportunity, which will pay a single lump sum of S2,000 five years from today. The investment requires a single payment of The return on the investment is % A. 4.195 B. 4.729 C. 5.361 D. 5.922 E. 6.961
Answer:
This question has a missing information. I have found the complete version and pasted it down below;
"Your neighbor offers you an investment opportunity, which will pay a single lump sum of S2,000 five years from today. The investment requires a single payment of $1,500 today. The return on the investment is % A. 4.195 B. 4.729 C. 5.361 D. 5.922 E. 6.961 "
Explanation:
This question requires you to find that discount rate given a single future cashflow. $2,000 is expected 5 years from today, hence the future value. $1,500 payment today is the dollar value today, hence the Present value.
Using a financial calculator, you will key in the following inputs;
Total duration; N = 5
Present value; PV = -1,500 (it's a cash outflow hence negative)
Recurring payment; PMT = 0
Future value; FV = 2,000
then find the rate by keying in CPT I/Y = 5.922%
Therefore, the return on the investment is 5.92%
Final answer:
Stocks have the potential for higher average returns over time compared to bonds and savings accounts. The return on the investment is D. 5.922
Explanation:
The question is asking which investment (stocks, bonds, or a savings account) has a higher average return over time. Each investment option has its own level of risk and potential return.
Using a financial calculator, you will key in the following inputs;
Total duration; N = 5
Present value; PV = -1,500 (it's a cash outflow hence negative)
Recurring payment; PMT = 0
Future value; FV = 2,000
then find the rate by keying in CPT I/Y = 5.922%
Therefore, the return on the investment is 5.92%
2017, one article in the Wall Street Journal had the headline: "Federal Reserve Expected to Deliver Rate Increase." Source: David Harrison, "Federal Reserve Expected to Deliver Rate," Wall Street Journal , June 14, 2017. What rate was the headline likely referring to?
(A) Federal funds rate.
(B) Commercial rate.
(C) Discount rate.
(D) Treasury rate.
Answer:
The correct option is A that is federal funds rate
Explanation:
Federal funds rate is the rate of interest which is charged by the banks on other banks in order to lend or give them the money from the balance of reserve on an overnight ground . And in accordance with the law, the banks need to preserve or keep a reserve, that is equal to a particular % (percentage) of the deposits in the account at a Federal Reserve bank.
The headline is likely to address the federal funds rate in the journal.
Brussels Enterprises issues bonds at par dated January 1, 2019, that have a $3,200,000 par value, mature in four years, and pay 9% interest semiannually on June 30 and December 31.
1. Record the entry for the issuance of bonds for cash on January 1.
2. Record the entry for the first semiannual interest payment and the second semiannual interest payment.
3. Record the entry for the maturity of the bonds on December 31, 2022 (assume semiannual interest is already recorded).
The accounting entries for the issuance of bonds, semi-annual interest payments, and maturity of the bonds are outlined. They consist of debiting and crediting the Cash, Bonds Payable, and Interest Expense accounts accordingly.
Explanation:The situations presented in this question relate to accounting for bond transactions. Below are the requested entries:
January 1, 2019 - Issuance of bonds: Cash $3,200,000, Bonds Payable $3,200,000 June 30, 2019 - First semi-annual interest payment: Interest Expense $144,000, Cash $144,000. (This is gotten by calculating 9% of $3,200,000 and dividing by 2 for semiannual payments). December 31, 2019 - Second semiannual interest payment: Repeat the entry for June 30. December 31, 2022 - Maturity of bonds: Bonds Payable $3,200,000, Cash $3,200,000
Please note that the interest payment recordings are repeated every six months until the bond maturity date when the Bonds Payable is cleared.
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The issuance of bonds is recorded as a debit to Cash and a credit to Bonds Payable. Semiannual interest payments are entered as a debit to Interest Expense and a credit to Cash. The maturity of the bonds is recorded as a debit to Bonds Payable and a credit to Cash.
Explanation:1. Record the entry for the issuance of bonds for cash on January 1, 2019:
Debit Cash for $3,200,000 (Inflow of cash)
Credit Bonds Payable for $3,200,000 (Record the liability of the bonds)
2. Record the entry for the first semiannual interest payment on June 30 and the second semiannual interest payment on December 31:
Debit Interest Expense for $144,000 (9% of $3,200,000 / 2)
Credit Cash for $144,000.
Repeat the same entries for the second interest payment.
3. Record the entry for the maturity of the bonds on December 31, 2022 (assuming semiannual interest has already been recorded):
Debit Bonds Payable for $3,200,000
Credit Cash for $3,200,000.
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ART has come out with a new and improved product. As a result, the firm projects an ROE of 21%, and it will maintain a plowback ratio of 0.40.
Its earnings this year will be $2.0 per share. Investors expect a 13% rate of return on the stock.
What price do you expect ART shares to sell for in 4 years?
Answer:
$36.012
Explanation:
Data provided in the question:
ROE = 21%
Plowback ratio, b = 0.40
Earnings, E1 = $2.0 per share
Required rate of return on the stock, r = 13%
Now,
Growth rate, g = ROE × b
= 21% × 0.40
= 8.4%
D1 = E1 × (1-b)
= $2.0 × ( 1 - 0.40 )
= $1.2
[tex]V0^{Growth}[/tex] = [tex]\frac{D1}{(r - g)}[/tex]
= [tex]\frac{\$1.2}{(0.13 - 0.084)}[/tex]
= $26.087
V4 = [tex]\frac{D5}{(r - g)}[/tex]
= [tex]\frac{D1\times(1 + g)^4}{(r - g)}[/tex]
= V0 × (1 + g)⁴
= $26.087 × (1 + 0.084)⁴
= 36.019 ≈ $36.012
Kareem owns a pickup truck that he uses exclusively in his business. The adjusted basis is $22,000, and the fair market value is $14,000. In March 2019, Kareem exchanges the truck for another truck (worth $14,000) that he will use exclusively in his business.
1. What are Kareem’s realized and recognized gain or loss?
Answer:
The "Kareem" realized loss on the exchange is $8000.
Explanation:
The adjusted basis is = $22000
"Fair market value" is = $14000
"Kareem" exchanges the truck for another truck = worth $14000
"Realized gain" or "Realized loss = basis in the truck - exchange value
Realized gain or loss = $22000 - $14000
Realized gain or loss = $8000
Kareem's loss on the exchange is $8000.
There is no "recognized gain" or "recognized loss" because the exchange is like a kind exchange which is not documented.
The effectiveness of controls is not generally tested by:A. Inspection of documents and reports.B. Performance of analytical procedures.C. Observation of the application of accounting policies and procedures.D. Inquiries of appropriate client personnel
Answer:
Letter B is correct. Performance of analytical procedures.
Explanation:
The effectiveness of internal control in an organization occurs when the procedures and policies developed by managers are maintained to protect assets through an expected degree of confidence.
Performance of analytical procedures are used as a risk assessment instrument, ie they are used near the end of each audit to assist and direct the auditor in determining conclusions about the financial statements.
At December 31, 2019, Sharon Lee Corporation reported current assets of $343,980 and current liabilities of $196,600. The following items may have been recorded incorrectly. 1. Goods purchased costing $20,440 were shipped f.o.b. shipping point by a supplier on December 28. Lee received and recorded the invoice on December 29, 2019, but the goods were not included in Lee's physical count of inventory because they were not received until January 4, 2020. 2. Goods purchased costing $15,950 were shipped f.o.b. destination by a supplier on December 26. Lee received and recorded the invoice on December 31, but the goods were not included in Lee's 2019 physical count of inventory because they were not received until January 2, 2020. 3. Goods held on consignment from Claudia Kishi Company were included in Lee's December 31, 2019, physical count of inventory at $11,890. 4. Freight-in of $3,040 was debited to advertising expense on December 28, 2019.
Recompute the current ratio after corrections are made. (Round ratio to 2 decimal places, e.g. 2.31:1.) The current ratio 1.88 :1
Answer:
1.97 times
Explanation:
The formula to compute the current ratio is shown below:
Current ratio = Total Current assets ÷ total current liabilities
Current ratio before any adjustment is shown below:
So, current ratio = $343,980 ÷ 196,600 = 1.75 times
Current ratio after adjustments are shown below:
Current assets = Before adjustment balance + goods purchased costing - physical count of inventory + freight-in charges
= $343,980 + $20,440 - 11,890 + 3,040
= $355,570
Current liabilities = Before adjustment balance - goods not received
= $196,600 - $15,950
= $180,650
So, the current ratio would be
= $355,570 ÷ $180,650
= 1.97 times
Final answer:
After adjusting for incorrectly recorded items involving inventory and freight-in costs, the corrected current ratio for Sharon Lee Corporation is 1.81:1.
Explanation:
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It is calculated by dividing current assets by current liabilities. Initially, Sharon Lee Corporation’s current ratio is calculated as $343,980 (current assets) divided by $196,600 (current liabilities), which is 1.75:1. However, several items have been recorded incorrectly and this will affect the current ratio after adjustments.
Item 1: Goods in transit purchased f.o.b. shipping point should be included in inventory and thus increase current assets by $20,440.Item 2: Goods in transit purchased f.o.b. destination should not be included until received; therefore, no adjustment is needed as they are not yet included in current assets.Item 3: Goods held on consignment should not be included in inventory as they do not belong to Lee; current assets should decrease by $11,890.Item 4: Freight-in costs should be included in inventory rather than advertising expense, thus increasing current assets by $3,040.After correcting these items, the adjusted current assets would be:
$343,980 - $11,890 (consignment goods) + $20,440 (f.o.b. shipping point goods) + $3,040 (freight-in) = $355,570.
The current liabilities remain unchanged at $196,600. Thus, the corrected current ratio is $355,570 divided by $196,600, which is 1.81:1 when rounded to two decimal places.
Suppose that a labor economist finds that one of her research subjects has earned significantly higher wages throughout his lifetime than would be predicted by standard measured variables. The economist also notes that each of the subject's positions was found through connections at his family's exclusive country club.
Which one of the following most likely explains this person's unusually high earnings?
(A) Chance
(B) Compensating differentials
(C) Effort
(D) Efficiency
Answer:
(A) Chance
Explanation:
Please see attachment .
Mike has $235,000 he wishes to invest in two rental properties. One yields 10% and the other yields 12%. For safety he wants to split his investment between the two properties instead of investing all of his money in the higher yielding rental property. If his goal is to achieve a total income earned of $25,000 a year from these two properties, how much money should he invest in each property. You must show your work illustrating how you calculated your answer in order to get credit for this problem.
Answer:
Mike spends $160,000 on A and $75,000 on B
Explanation:
Lets call the rental properties as A and B.
A yields 10% anb B yields 12%.
Total investment=$235,000
Expected income=$25,000
Let the amount he invests in A be x.
Then amount spent in B=$(235,000-x)
Income from A=x × 0.1 ----------------(1)
Income from B=(235,000-x)× 0.12 ---------------(2)
Sum of incomes =$25,000
Taking sum of both equations,
x × 0.1 +(235,000-x)× 0.12 =25,000
235,000×0.12 -0.02×x =25,000
28,200 -0.02×x =25,000
0.02×x =3,200
x=[tex]\frac{3,200}{0.02}[/tex]
x =$160,000
The S&P 500 index delivered a return of 10%, 15%, 15%, and -30% over four successive years.
What is the arithmetic average annual return for four years?
A) 3.00%
B) 3.50%
C) 2.25%
D) 2.50%
Answer:
D) 2.50%
Explanation:
The arithmetic average return is simply the mean of all given return rates. There are four return rates and their values are, 10%, 15%, 15%, and -30%
[tex]AAR = \frac{10+15 +15-10}{4}\\AAR= 2.5\%[/tex]
S&P 500 index delivered an arithmetic average annual return of 2.5% for four years
The arithmetic average annual return for four years is 10%.
Explanation:To calculate the arithmetic average annual return for four years, you need to find the average of the annual returns. The annual returns given are 10%, 15%, 15%, and -30%. To find the average, you add up all the returns and divide by the number of returns.
(10% + 15% + 15% + (-30%)) / 4 = 10%
The arithmetic average annual return for four years is 10%.
You are the manager of a firm that manufactures front and rear windshields for the automobile industry. Due to economies of scale in the industry, entry by new firms is not profitable. Toyota has asked your company and your only rival to simultaneously submit a price quote for supplying 100,000 front and rear windshields for its newest version of the Highlander. If both you and your rival submit a low price, each firm supplies 50,000 front and rear windshields and earns a zero profit. If one firm quotes a low price and the other a high price, the low-price firm supplies 100,000 front and rear windshields and earns a profit of $11 million and the high-price firm supplies no windshields and loses $2 million. If both firms quote a high price, each firm supplies 50,000 front and rear windshields and earns a $6 million profit.
Determine your optimal pricing strategy if you and your rival believe that the new Highlander is a "special edition" that will be sold only for one year.
To maximize profit in this scenario, the optimal pricing strategy for your company is to quote a low price and supply the full 100,000 windshields, earning a profit of $11 million.
Explanation:To determine the optimal pricing strategy in this scenario, you need to analyze the potential outcomes for each pricing decision. If both you and your rival submit a low price, each firm supplies 50,000 front and rear windshields and earns no profit, so this is not an attractive option. If you quote a low price and your rival quotes a high price, you will supply 100,000 windshields and earn a profit of $11 million, while your rival will lose $2 million.
If both firms quote a high price, each firm supplies 50,000 windshields and earns a profit of $6 million. Based on these outcomes, the optimal pricing strategy for your company would be to quote a low price in order to supply the full 100,000 windshields and earn a profit of $11 million. This strategy assumes that your rival will quote a high price.
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Theresa Corporation, which manufactures baskets, is developing direct labor standards. The basic direct labor rate is $21.00 per hour. Payroll taxes are 9% of the basic direct labor rate, while fringe benefits such as vacation and health care insurance, are $4.00 per hour. What is the standard rate per direct labor hour?
Answer:
Standard rate per direct labor hour is $27.1
Explanation:
Standard rate per direct labor hour includes the hourly pay rate, Payroll taxes and fringe benefits. For Theresa Corporation,
We have given that
Basic direct labor rate is $21.00 per hour
Payroll Taxes is 10% of basic direct labor rate i.e. 10% of $21.00 = $2.10 per hour
Fringe Benefits is $4.00 per hour.
So Standard rate per direct labor hour = $21.00 + $2.10 + $4.00 = $27.1
* Government support programs for sugar products were introduced in the 1930s, yet are still in place long after the original rationale disappeared. What does this tell you about political decisions relating to international trade?
Answer:
It tells us that agriculture is a politically-sensitive sector, and agricultural protectionism is very common not only in the US, but also in the rest of the developed world.
In most trade agreements, countries add protections for specific primary sectors. The rationale is protect farmer's incomes and modes of living, but the economic reality is that these subsidies tend to produce either higher prices for consumers, or overproduction. In the US, for example, many analysts argue that corn subsidies are directly related with the high obesity levels in the country, because so much corn is produced that corn syrup is added to a wide variety of foods.
Bramble Corp. reported the following items for 2016: Income tax expense $62000 Contribution margin 180000 Controllable fixed costs 80000 Interest expense 68000 Total operating assets 40000 How much is controllable margin?
Answer:
controllable margin = $100,000
Explanation:
given data
Income tax expense = $62000
Contribution margin = 180000
fixed costs = 80000
Interest expense = 68000
Total operating assets = 40000
to find out
How much is controllable margin
solution
we get here controllable margin that is express as
controllable margin = contribution - controllable fixed cost ....................1
put here value we get
controllable margin = 180000 - 80000
controllable margin = $100,000
The controllable margin for Bramble Corp. for the year 2016 is calculated by deducting the controllable fixed costs from the contribution margin. Upon calculation, it comes out to be $100,000, which measures the efficiency of the company.
Explanation:The controllable margin for Bramble Corp. can be calculated using the formula: Controllable Margin = Contribution Margin - Controllable Fixed Costs. The contribution margin is the difference between the company's total sales and its total variable costs. The controllable fixed costs are the overhead expenses that management has control over and can alter.
So, in the case of Bramble Corp., their contribution margin for 2016 was $180,000, and their controllable fixed costs were $80,000. Therefore, we subtract the controllable fixed costs from the contribution margin:
Controllable Margin = $180,000 - $80,000 = $100,000
Therefore, the controllable margin for Bramble Corp. for the year 2016 was $100,000. This depicts the profitability of the company after accounting for both variable and controllable fixed costs and it is one of the vital metrics to measure the efficiency of a company.
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White Sands Heavy Equipment Co. produces industrial equipment that it sells through its national sales force.
Its sales reps often must negotiate with customers to match the low prices of foreign competitors. Apparently, the firm has:
A. an "F.O.B.-Seller's Factory" price policy.
B. been violating the Robinson-Patman act.
C. a skimming price policy.
D. a status quo pricing objective.
E. a flexible-price policy.
Answer:E. a flexible price policy
Explanation:
The flexible price policy is a bargaining system between the buyer and seller to trade together at an agreed price.
The FOB seller factory price policy means where the ownership of the goods transferred to buyer, Robinson's act is only to prevent price discrimenation in the retail industry from the producers, a skimming price policy makes use of dual prices whithin a time interval, a status quo pricing objective is to maintain homogeneous price in the market among the sellers.