Answer:
a. The portfolio weights that remove all risk is 50% .
b. The risk-free rate of interest in this economy is 13.5%
Explanation:
The formula for standard deviation of a portfolio, of which i cannot type:
a. If we let sigma p = std. deviation of portfolio
rho 1,2 = correlation
if sigma = 0 and rho = -1, then the first equation can be re-written as :
0 = w1^2 * s1^2 + w2^2 * s2^2 + 2 * w1 * w2 * s1 * s2 * -1
0 = (w1s1 - w2s2)^2
w1s1 = w2s2
w1 * 0.03 = w2 * 0.03
w1 = w2 = 50%
Therefore, The portfolio weights that remove all risk is 50% .
b. Expected return of the portfolio = 0.5*20% + 0.5*7%
= 13.5%
This portfolio has zero risk, risk free rate = 13.5%
Therefore, The risk-free rate of interest in this economy is 13.5%
Gonzalez Company acquired $200,000 of Walker Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $70,000 of the bonds for 97. Journalize entries to record the following in Year 1: For a compound transaction, if an amount box does not require an entry, leave it blank.
Answer and Explanation:
The journal entries are shown below:
a. Investment Dr $200,000
To Cash $200,000
(Being the acquirement is recorded)
b. Cash Dr $6,000
To Interest revenue $6,000
(Being the cash is recorded)
The computation is shown below:
= $200,000 × 6% × 6 months ÷ 12 months
= $6,000
c. Cash $67,900 ($70,000 × 97%)
Loss on sale of investment $2,100
To Investment $70,000
(Being the cash is recorded)
d. Interest receivable $1,300
To Interest revenue $1,300
(Being the interest receivable is recorded)
= ($200,000 - $70,000) × 6% × 6 months ÷ 12 months
= $1,300
Yale Company purchased equipment having an invoice price of $21,500. The terms of sale were 2/10, n/30, and Yale paid within the discount period. In addition, Yale paid a $320 delivery charge, $350 installation charge, and $1,183 sales tax. The amount recorded as the cost of this equipment is:
Select one:
a. $21,070.
b. $21,500.
c. $21,740.
d. $22,923.
Answer:
Correct option is D
$ 22,923
Explanation:
According to International Accounting standards (IAS) 16 property plan and equipment (PPE), the cost of an asset is the purchase cost plus other costs of bringing it to the intended working conditions.
So we will add the purchase cost to the cost of delivery, tax and installation.
The purchase cost less discount = (100-2)% × 21,500= $21,070
The cost of the equipment = $21,070 + 320 + 350 + 1183
=$ 22,923
Winthrop Enterprises is a holding company (a firm that owns all or most of some other companies' outstanding stock). Winthrop has four subsidiaries. Each subsidiary borrows capital from the parent company for projects. Ervin Company is successful with its projects 93% of the time, Morten Company 76% of the time, Richmond Company 95 % of the time, and Garfield Company 82% of the time. What loan rates should Winthrop Enterprises charge each subsidiary for loans?
Answer:
Ervin loan rate is 10.8%
Morten loan rate is 8.80%
Richmond loan rate is 11.00%
Garfield loan rate is 9.50%
Explanation:
The amount to charge to each subsidiary is the weighting of each subsidiary project success rate multiplied by aggregate loan rate.
Ervin subsidiary project success weighting=(93%*4)/(93%+76%+95%+82%)
=1.08
the figure 4 represents 4 subsidiaries
Morten subsidiary project success weighting=(76%*4)/(93%+76%+95%+82%)
=0.88
Richmond subsidiary project success weighting=(95%*4)/(93%+76%+95%+82%)
=1.10
Garfield subsidiary project success weighting=(82%*4)/(93%+76%+95%+82%)
=0.95
Assuming the aggregate loan rate is 10%
Ervin loan rate=10%*1.08
=10.8%
Morten loan rate=10%*0.88
=8.80%
Richmond loan rate=10%*1.10
=11.00%
Garfield loan rate=10%*0.95
=9.5%
A sporting goods manufacturer budgets production of 48,000 pairs of ski boots in the first quarter and 39,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 19,200 kg and the cost per kg is $9. What is the budgeted materials purchases cost for the first quarter
Answer:
$831,600
Explanation:
The budget must account for all of the production of the first quarter and 20% of the production of the second quarter, the number of boots considered in the budget is:
[tex]b= 48,000 +0.20*39,000\\b=55,800\ boots[/tex]
Assuming that each boot uses exactly 2kg of raw material and that the company has 19,200 kg on hand, the amount of raw material still required is:
[tex]m = 2*55,800-19,200\\m=92,400\ kg[/tex]
If the cost per kg is $9, then the budgeted materials purchases cost for the first quarter is:
[tex]C=92,400*\$9\\C=\$831,600[/tex]
The budgeted materials purchases cost is $831,600.
Stein Co. issued 17-year bonds two years ago at a coupon rate of 9.1 percent. The bonds make semiannual payments. If these bonds currently sell for 115 percent of par value, what is the YTM
Answer:
YTM is 7.43%
Explanation:
The yield to maturity of a bond can be computed using the rate formula in excel,which is given below:
=rate(nper,pmt,-pv,fv)
the nper is the number of coupon interest the bond would pay before it is redeemed at maturity starting from ,which is 15 years multiplied by 2=30
the pmt is the semiannual coupon payable by the bond,which is $1000*9.1%/2=$45.5
the pv is the price of the bond which is 115%*$1000=$1150
the fv is the face value of the bond at $1000
=rate(30,45.5,-1150,1000)=3.715%
The rate of 3.715% is a semi annual rate
annual rate 7.43%(3.715%*2)
Data for January for Bondi Corporation and its two major business segments, North and South, appear below: Sales revenues, North $660,000 Variable expenses, North $383,000 Traceable fixed expenses, North $79,000 Sales revenues, South $510,000 Variable expenses, South $291,000 Traceable fixed expenses, South $66,000 In addition, common fixed expenses totaled $179,000 and were allocated as follows: $93,000 to the North business segment and $86,000 to the South business segment. A properly constructed segmented income statement in a contribution format would show that the segment margin of the North business segment is:_______
Answer:
Net income 105,000
Explanation:
Income statement for North Segment
$
Revenue 660,000
variable cost ( 383,000)
Contribution 277,000
Fixed expenses (79,000)
income before allctd. cost 198000
Allocated fixed cost (93,000)
Net income 105,000
Final answer:
The segment margin for the North business segment is $198,000, calculated by subtracting the variable and traceable fixed expenses from the sales revenues for that segment.
Explanation:
To calculate the segment margin for the North business segment of Bondi Corporation, we need to subtract all expenses that can be directly attributed to the segment from its sales revenues. This would include both variable and traceable fixed expenses specific to the North segment.
Here's how we calculate the segment margin:
Sales revenues, North: $660,000Less: Variable expenses, North: $383,000Less: Traceable fixed expenses, North: $79,000Segment margin for North: $660,000 - $383,000 - $79,000 = $198,000Note that the common fixed expenses allocated to the North segment are not included in the segment margin calculation. They are considered when calculating the net income for the entire company.
Materials are added at the beginning of the production process at Campo Company. The following information on the physical flow of units is available for the month of November. Beginning work in process (70% complete) 90,000 Started in November 1,020,000 Completed in November and transferred out 960,000 Ending work in process (40% complete) 150,000 Cost data for November show the following. Beginning WIP inventory Direct materials costs $ 35,670 Conversion costs 110,630 Current period costs Direct materials costs $ 408,330 Conversion costs 1,521,370 Required: a. Compute the cost equivalent units for the conversion cost calculation assuming Campo uses the weighted-average method. b. Compute the cost per equivalent unit for materials and conversion costs for November.
The cost equivalent units for conversion costs using the weighted-average method in November were 1,020,000. The cost per equivalent unit for materials was $0.40, and for conversion costs was $1.49.
Explanation:To calculate the cost equivalent units for conversion costs using the weighted-average method, we need to consider the units that were started and completed in November, as well as the units still in process at the end of November.
For the units completed: 960,000 units x 100% = 960,000 equivalent units
For the units in ending work in process: 150,000 units x 40% = 60,000 equivalent units
The total cost equivalent units for conversion costs would be 960,000 + 60,000 = 1,020,000 equivalent units.
The cost per equivalent unit for materials can be calculated by dividing the total materials costs by the cost equivalent units.
For November: $408,330 / 1,020,000 = $0.40 per equivalent unit for materials.
The cost per equivalent unit for conversion costs can be calculated by dividing the total conversion costs by the cost equivalent units.
For November: $1,521,370 / 1,020,000 = $1.49 per equivalent unit for conversion costs.
The short-run is- a time period in which the prices of output cannot change but in whihc the prices of inputs have time to adjust- a time period in which output prices can change in response to supply and demand but in which all input prices have not yet been able to completely adjust- a time period in which neither the prices of output nor the prices of inputs are able to change- any time period ofless thatn a year
Answer:
a time period in which output prices can change in response to supply and demand but in which all input prices have not yet been able to completely adjust
Explanation:
Short run are the period in that at least one factor in production is fixed, in which the product can be increased by increasing the owners and increasing the number of variable factors such as purchasing more raw materials. Therefore, output may change with the increase in supply and demand.so the correct option is a time period in which output prices can change in response to supply and demand but in which all input prices have not yet been able to completely adjust1. Suppose the own price elasticity of demand for good X is -3, it's income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4, determine how much the consumption if this good will change if:
a) The price of good X decreased by 5%
b) The price of good Y increased by 8%
c) Advertising decreased by 4%
d) Income Increased by 4%
2. Suppose the cross price elasticity of demand between X and Y is 4, how much would the price of good Y have to change in order to increase the consumption of good X by 20%?
Answer:
A) X Demand fall 15% ; B) X Demand fall 32% ; C) X Demand fall 8% ; D) X Demand rise 4% . 2] Price (Y) rise 5%
Explanation:
Elasticity is the responsive change in demand of a good, due to any factor affecting it.
Elasticity = % change in demand / % change in factor affecting demand So, % change in demand = % change in factor x Elasticity
Given : Price Elasticity = -3 , Income Elasticity = 1 , Advertising Elasticity = 2 , Cross Price Elasticity = -4
A) Price of good decrease by 5% : So, Demand would change by 5 x price elasticity, 5 x -3 i.e - 15% (demand fall)
B) Price of good Y increase by 8% : So, X's Demand would change by 8 x -4 i.e - 32 % (demand fall)
C) Advertising decreased by 4% : So, X's demand would change by -4 x 2 i.e - 8% (demand fall)
D) Income increase by 4% : So, X's demand would change increase by 4 x 1 i.e 4% (demand rise)
2. Cross Price Elasticity = 4 ; Desired change in quantity = 20% increase
Elasticity ( 4 ) = desired % change in demand (20%) / % change in Y price
% change in Y price = 20 / 4 = 5 % (price rise)
If the elasticity is 1.4, advise lowering the price; if it is 0.6, raise the price; if it is 1, maintain the price. Gasoline price elasticity of supply affects UPS and FedEx. The income elasticity of bread consumption is -0.307, making bread an inferior good.
Explanation:If the elasticity of demand for the company's product is 1.4, the company should lower the price. This is because the decrease in price will be offset by the increase in the amount of the product sold, resulting in higher total revenue. If the elasticity were 0.6, the company should raise the price. Increasing the price will offset the decrease in the number of units sold, leading to higher total revenue. If the elasticity is 1, the total revenue is already maximized, and the company should maintain its current price level.
The gasoline price elasticity of supply refers to the percentage change in quantity supplied as a result of a given percentage change in the price of gasoline. For a company like UPS or FedEx, this means that if the price of gasoline increases, the company's supply of transportation services will become less elastic. This could lead to higher costs for the company and possibly a decrease in their ability to meet customer demand.
To calculate the income elasticity of bread consumption, we use the formula: (Change in Quantity / Average Quantity) / (Change in Income / Average Income). In this case, the change in quantity consumed is -8 (30 - 22), the average quantity is 26 (30 + 22 / 2), the change in income is 13000 (38000 - 25000), and the average income is 31500 (25000 + 38000 / 2). Plugging these values into the formula, we get (-8 / 26) / (13000 / 31500) = -0.307. Since the income elasticity is negative, bread is an inferior good.
Harold Manufacturing produces denim clothing. This year, it produced 5,120 denim jackets at a manufacturing cost of $41.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. Jackets can be sold as is to a secondhand clothing shop for $8.00 each. Jackets can be disassembled at a cost of $32,200 and sold to a recycler for $12.00 each. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,120 jackets into only 2,900 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $101,700, but the jackets can then be sold for their regular price of $45.00 each.
Answer:
the best option is number 1, sell the jackets to a secondhand store at $8 will yield $40,960 in profits
Explanation:
the previous manufacturing costs can be considered sunk costs because they cannot be recovered, so we must analyze the options to determine which one yields the highest profit.
option 1
sell 5,120 jackets to secondhand stores at $8 each, profit = $40,960
option 2
disassemble the jackets and sell them at $12 each, profit = $61,440 - $32,200 (disassembling costs) = $29,240
option 3
rework the jackets, profit = ($45 x 2,900) - $101,700 = $28,800
the best option is number 1, sell the jackets to a secondhand store at $8 will yield $40,960 in profits
MoveIt Corporation is the world’s leading express-distribution company. In addition to the world’s largest fleet of all-cargo aircraft, the company has more than 54,000 ground vehicles that pick up and deliver packages. Assume that MoveIt sold a delivery truck for $26,000. MoveIt had originally purchased the truck for $43,000 and had recorded depreciation for three years.
1.Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was
(a) $17,000,
(b) $12,000, and
(c) $19,000
2.Using the following structure, indicate the effects on disposal of the truck, assuming that Accumulated Depreciation was (a) $17,000, (b) $12,000, and (c) $19,000.
3.Prepare the journal entry to record the disposal of the truck, assuming that Accumulated Depreciation was (a) $17,000, (b) $12,000, and (c) $19,000.
The gain or loss on disposal is calculated by subtracting the net book value (cost less accumulated depreciation) from the sale price of the asset. Depending on the amount of accumulated depreciation, the MoveIt Corporation would record a break-even, a loss, or a gain on the sale of its delivery truck.
Explanation:Calculating Gain or Loss on Disposal:
To calculate the gain or loss on the disposal of the delivery truck, we need to consider the truck's original cost, the accumulated depreciation, and the sale price. The formula for calculating gain or loss is:
Sale Price - (Original Cost - Accumulated Depreciation) = Gain or Loss
For (a) $17,000 in accumulated depreciation: $26,000 - ($43,000 - $17,000) = $0 (no gain or loss)For (b) $12,000 in accumulated depreciation: $26,000 - ($43,000 - $12,000) = -$5,000 (loss)For (c) $19,000 in accumulated depreciation: $26,000 - ($43,000 - $19,000) = $2,000 (gain)Journal Entry for Disposal of the Truck:
The journal entry varies based on the accumulated depreciation and whether there was a gain or loss:
For (a) $17,000 accumulated depreciation, the entry would balance with no gain or loss accounted for.For (b) $12,000 accumulated depreciation, the loss of $5,000 would be recorded.For (c) $19,000 accumulated depreciation, a gain of $2,000 would be recorded.Newhard Company assigns overhead cost to Jobs on the basis of 125% of direct labor cost. The job cost sheet for Job 313 includes $10,000 in direct materials cost and $12,000 in direct labor cost. A total of 1,000 units were produced in Job 313.
Required:
a. What is the total manufacturing cost assigned to Job 313?
b. What is the unit product cost for Job 313?
a. Total manufacturing cost _____
b. Unit product cost _____
Answer:
a. Total manufacturing cost $37,000
b. Unit product cost $37
Explanation:
Total Cost = Sum of all manufacturing costs
Total manufacturing cost -
direct materials $10,000
direct labor $12,000
overhead ($12,000×125%) $15,000
Total $37,000
Unit Product Cost = Total Cost / Number of Units
= $37,000/ 1,000 units
= $37
Answer:
a. Total manufacturing cost is $37,000
b. Unit product cost is $37 per unit
Explanation:
The total manufacturing cost is the sum of the direct and indirect costs. The indirect costs are also known as overheads.
Given that the job cost sheet for Job 313 includes $10,000 in direct materials cost and $12,000 in direct labor cost,
Total direct cost = $10,000 + $12,000
= $22,000
Also given that the Company assigns overhead cost to Jobs on the basis of 125% of direct labor cost
Total overheads = 125% * $12,000
= $15,000
Hence total manufacturing cost
= $22,000 + $15,000
= $37,000
Given that 1,000 units were produced,
Unit cost = $37,000/1000
= $37 per unit
Sisters of Charity of the Incarnate Word, operates a health and Wellness Center. Meaux was a paying member of the Health Center. The rules of the center which Meaux had been given state, "The Health and Wellness Center is not responsible for lost or stolen items." A sign stating, "We cannot assure the safety of your valuables" was posted at the check in desk. The Wellness Center furnished a lock and key to each member but had a master key to open lockers in case a member forgot or lost a key. One day, Meaux went to the Wellness Center and placed his clothes, an expensive Rolex watch, and a money clip with $400 cash in the locker assigned him. On returning from swimming, Meaux discovered that his locker had been pried open and that his watch and money had been stolen by some unknown person. Meaux sued the Sisters of Charity alleging that a bailment had been created between him and the sisters and that the sisters, as bailee, were negligent and therefore liable to him for the value of the stolen property. Was a bailment created between Meaux and the Sisters of Charity? What is required for a bailment to be made?
Answer:
a) A bailment was not created between Meaux and the Sisters of Charity. This answer is supported by the two requirements for a bailment to be made, stated in answer b) below.
b) A bailment is the temporary transfer of physical control of an item of personal property from the bailor to the bailee. It is not a transfer of ownership.
For a bailment to be made, there must be physical control of the bailed item and intention to control on the part of the bailee. Items kept in the lock are not under the custody of the Sisters of Charity and they did not have any intention to safeguard them; no wonder the rule and warning sign.
Explanation:
The alleged bailee, the Sisters of Charity, did not have any intention to control and there was no way they could have known what Meaux deposited in the lock. That was why the rules of the health and wellness center clearly declared that the Center was not responsible for lost or stolen items and went further with a sign that "we cannot assure the safety of your valuables."
These rule and sign are good warnings which Meaux should have taken into consideration before enrolling as a member of the center and also before bringing his expensive Rolex watch and cash to the center.
That the Sisters of Charity kept the master key for locks was for the interest of the Center patrons when they lost or forgot their keys.
The UJava espresso stand needs two inputs, labor and coffee beans, to produce its only output, espresso. Producing an espresso always requires the same amount of coffee beans and the same amount of time. What type of production function will appropriately describe the production process at UJava, where B represents ounces of coffee beans, and L represents hours of labor? Write down the functional form of the production function.
Answer:
Q = min[3B; 40L]
Explanation:
This is an example of Leontief production function in which factors of production, in this case B and L, are used in fixed proportion that is determined by the production technology which makes substitutability between factors impossible.
If we assume that 3 ounces of B and 40 minutes of L are always required to produce one unit of espresso represented by Q, the functional form of the production function can be written as follows:
Q = min[3B; 40L].
UJava's production process can be illustrated with the Cobb-Douglas production function, represented as Q = BL. Here, Q denotes the number of espressos produced, B is the amount of coffee beans used and L signifies the hours of labour utilised.
Explanation:The question is asking about the production function of UJava, a notional stand selling espresso, for which the input variables are labour (L) and coffee beans (B). Given the usage of beans and labour is fixed per unit of espresso, the appropriate production function would be the Cobb-Douglas production function.
The functional form of the production function would be expressed as: Q = BL, where Q represents the number of espressos produced. In this case, the output (Q - number of espressos made) is dependent on the labor employed (L - hours worked) and the amount of coffee beans used (B - ounces).
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The centralized computer technology department of Hardy Company has expenses of $320,000. The department has provided a total of 4,000 hours of service for the period. The Retail Division has used 2,750 hours of computer technology service during the period, and the Commercial Division has used 1,250 hours of computer technology service. Additional data for the two divisions is following below: Retail Division Commercial Division Sales $2,150,000 $1,200,000 Cost of goods sold 1,300,000 800,000 Selling expenses 150,000 175,000 Determine the divisional income from operations for the Retail Division and the Commercial Division. Do not round interim calculations. Hardy Company Divisional Income from Operations Retail Division Commercial Division $ $ $ $ $ $ Income from operations $ $
Answer:
Retail Division $480,000
Commercial Division $30,000
Explanation:
To measure divisional income consider only those items attributable to a particular division.
Retail Division
Sales 2,150,000
Less Cost of Sales (1,300,000)
Controllable Contribution 850,000
Less Controllable Fixed Cost :
Selling expenses (150,000)
Allocated Central Cost (2,750/4,000×$320,000) (220,000)
Divisional Profit Contribution 480,000
Commercial Division
Sales 1,200,000
Less Cost of Sales (800,000)
Controllable Contribution 400,000
Less Controllable Fixed Cost :
Selling expenses (150,000)
Allocated Central Cost (1,250/4,000×$320,000) (220,000)
Divisional Profit Contribution 30,000
The stockholders' equity section on the December 31, 2012, balance sheet of Chemfast Corporation reported the following amounts:
Contributed Capital
Preferred Stock (par $20; authorized 10,000 shares, ? issued, of which 1,000 shares are held as treasury stock) $108,000
Additional Paid-in Capital, Preferred 15,390
Common Stock (no-par; authorized 20,000 shares, issued and outstanding 6,200 shares) 632,400
Retained Earnings 32,000
Treasury Stock, 1,000 Preferred shares at cost 9,600
Assume that no shares of of treasury stock have been sold in the past. Complete the following statements (Amounts to be deducted should be indicated by a minus sign. Round "per share values" to 2 decimal places.)
1. The number of shares of preferred stock issued was?
2. The number of shares of preferred stock outstanding was?
3. The average issue price of the preferred stock was? (per share)
4. The average issue price of the common stock was? (per share)
5. The treasury stock transaction increased (decreased) stockholders? equity by?
6. The treasury stock cost? (per share)
7. Total stockholders' equity is?
Answer:
1. The number of Shares of Preferred Stock issued was
88000/20 = 4400
2. Number of shares outstanding was
4400 - 1000= 3400
3. Average issue price of the preferred stock was
(88000+10340)/4400= 22.35
4. Average issue price of the common stock was
(478400/5200)= 92
5. The treasury stock transaction decreased stock equity by 9100
6. The treasury stock cost (9100/1000)= 9.1
7. Total stockholder Equity is 589,640
Stockholders Equity
Capital stock
Preferred stock 88000
paid in capital in excess of par 10340
Common stock 478400
total paid in capital 576740
Retained Earnings 22000
total paid in capital & Retained earnings 598740
less Treasury stock -9100
total Stockholders Equity 589640
Chemfast Corporation has issued 5,400 preferred shares, with 4,400 shares outstanding. The average issue price is $22.87 for preferred and $102.00 for common stock, while the treasury stock transaction decreased equity by $9,600.
Let's break down the provided data regarding Chemfast Corporation's stockholders' equity to answer the questions:
1. The number of shares of preferred stock issued was:
To find the number of issued preferred shares, use the par value:
Total amount of Preferred Stock / Par Value = $108,000 / $20 = 5,400 shares.
2. The number of shares of preferred stock outstanding was:
Issued shares minus treasury shares:
5,400 issued shares - 1,000 treasury shares = 4,400 outstanding shares.
3. The average issue price of the preferred stock was (per share):
Average issue price includes additional paid-in capital:
(Total Preferred Stock + Additional Paid-in Capital) / Number of issued shares = ($108,000 + $15,390) / 5,400 = $22.87 per share.
4. The average issue price of the common stock was (per share):
Total Common Stock / Number of issued shares = $632,400 / 6,200 = $102.00 per share.
5. The treasury stock transaction increased (decreased) stockholders' equity by:
The purchase of treasury stock decreases equity:
-$9,600 (since no shares have been sold).
6. The treasury stock cost (per share):
Cost of treasury stock / Number of treasury shares = $9,600 / 1,000 = $9.60 per share.
7. Total stockholders' equity is:
Summing up all components:
(Preferred Stock + Additional Paid-in Capital, Preferred + Common Stock + Retained Earnings) - Treasury Stock = ($108,000 + $15,390 + $632,400 + $32,000) - $9,600 = $778,190.
Stockholders’ equity of Ernst Company consists of 79,000 shares of $5 par value, 9% cumulative preferred stock and 275,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company’s inception. Ernst did not declare any dividends in the prior year, but it now declares and pays a $120,000 cash dividend at the current year-end. Determine the amount distributed to each class of stockholders for this two-year-old company.
Answer:
Preferred stock dividends is $71,100
Common stock dividends is $48,900
Explanation:
The cumulative preferred stockholders would be paid prior year dividends as well as the current year's,hence would be entitled to two years' dividends with remnant thereafter being paid to common stockholders.
preferred stock dividends=79,000*$5*9%=$35,550
The preferred stock dividends per year is $35,550,which means that they would get $71,100 (dividends for two years).
Common stock dividends=$120,000-$71,100 =$48,900
The rationale for preferred stocks receiving arrears of dividends is because of the cumulative nature which entitles them to arrears of dividends
Answer:
Explanation:
Amount paid as a preferred dividend
preferred dividend = previous year dividend + current year dividend
{number of share × par value + {number of share × par value
× preferred dividend percentage} × preferred dividend percentage}
{79,000 shares × $5 each × 9%} + {79,000 shares × $5 each × 9%}
$35,550 + $35,550 = $71,100
the amount paid as preferred dividend is $71,100
Amount paid as common stock dividend = Total cash dividend paid - preferred dividend = $120,000 - $71,100
$48,900
the amount paid as common stock dividend is $48,900
Which of the following is not a result of following a well-designed budgeting process? Multiple Choice Assurance of future profits. Improved performance evaluations. Improved coordination of business activities. Improved communication of management's action plans. Improved decision-making processes.
Answer:
Assurance of future profits
Explanation:
Budgeting refers to estimating a future cost or revenue as on today so as to reduce business uncertainty and achieve planned goals. For example, budgeted costs reveal the estimated costs that would be incurred in the near future.
Budgeting is based upon past figures and current trends so as to estimate the future prospects of an activity under consideration. Such an activity reveals the course of action and aids better planning for the future.
For instance, a cash budget reveals the cash surplus or defict which shall arise in the near future and such a budget draws a firm's attention towards the funds it will require in the near future and from what sources those can be raised.
Since budgeting is an estimate and cannot account for unforeseen business events whose indications did not exist at the time of preparing such budgets, it's results cannot guarantee or assure future profits to a business. It's purpose is to reduce uncertainity, it cannot altogether eliminate uncertainity.
Zoe's Bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase, so all of the cost curves (with the exception of fixed cost) shift leftward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will ________ its price and ________ its level of production.
Answer:
Not change
Decrease
Explanation:
A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply.
The bakery cannot change its price because it operates in a perfectly competitive market.
Instead the bakery would reduce cost by decreasing its level of production.
I hope my answer helps you
Zoe's Bakery will increase its price and decrease its level of production, as the short-term response in a perfectly competitive market leads to only a partial offset of the higher costs.
Zoe's Bakery operates in a perfectly competitive industry where an increase in variable costs leads to a leftward shift in the cost curves, which includes the average total cost, average variable cost, and marginal cost curves. In response to increased costs, to maximize profits, Zoe's Bakery will increase its price and decrease its level of production. This is because, in the short run, firms in perfectly competitive markets can only increase prices to partially offset the higher costs—prices rise, but by less than the increase in cost per unit. This could result in economic losses, potentially causing firms to exit the market in the long run. As a consequence, the price may eventually increase by the full amount of the increase in production cost to reach a new equilibrium.
Smashed Pumpkins Co. paid $184 in dividends and $610 in interest over the past year. The company increased retained earnings by $510 and had accounts payable of $666. Sales for the year were $16,475 and depreciation was $744. The tax rate was 40 percent.
Required:
1. What was the company's EBIT?
Answer: $1,766.67
Explanation:
Alright then.
First we will calculate the Earnings after tax by using the retained earnings and dividends as dividends are shared after tax.
After tax profit = Retained Earnings + Dividends.
= 510 + 184
= $694
Now we add the tax back. That looks something like,
694 = (1 - T) * x
x = 694/1 - T
x = 694 / 1 - 0.4
x = 1156.66666667
Earnings before tax was $1,156.67
Now we add the Interest back to get EBIT
= 1,156.67 + 610
= $1,766.67
$1,766.67 was the company's EBIT.
If you need any clarification do react or comment.
The company's EBIT (Earnings Before Interest and Taxes) for Smashed Pumpkins Co. is $1766.67.
To calculate the company's EBIT (Earnings Before Interest and Taxes), we need to consider the dividends, interest, increase in retained earnings, and the tax rate provided.
First, we calculate the net income after taxes by adding the increase in retained earnings ($510) to the dividends paid ($184), giving us $694.
Next, to find the pre-tax income, we divide the net income after taxes by (1 - tax rate). With a tax rate of 40%, this gives us a pre-tax income of $694 / (1 - 0.4) = $1156.67.
Finally, we can determine the EBIT by adding the interest incurred ($610) to the pre-tax income, which results in an EBIT of $1156.67 + $610 = $1766.67.
This calculation assumes all other operating expenses are already included in the sales and depreciation figures and that there are no other income or expenses to consider.
Symon's Suppers Co. has announced that it will pay a dividend of $4.19 per share one year from today. Additionally, the company expects to increase its dividend by 4.2 percent annually. The required return on the company's stock is 10.4 percent. What is the current share price?
Answer:
$67.6
Explanation:
MV=D1/(Ke-g)
D1=4.19
g=4.2%
Ke=10.4%
MV=4.19/(10.4%-4.2%)
MV=$67.6
On January 1, 2018, Truesdale, Inc., purchased a piece of machinery for use in operations. The total acquisition cost was $33,000. The machine was expected to produce a total of 60,000 units during its life. The machine actually produced 16,000 units during 2018, 23,000 units during 2019, and 21,000 units during 2020. The machine has a salvage value of $3,000. Using the units-of-production method, the amount of depreciation that should be recorded during 2018, is approximately A. $8,000 B. $10,000 C. $8,800 D. $11,000
Answer:
A. $8,000
Explanation:
For computing the amount of depreciation expenses, first, we need to find out the depreciation expense per unit which is shown below:-
Depreciation expense per unit = (Total acquisition cost - Salvage value) ÷ Total units
= ($33,000 - $3,000) ÷ 60,000
= $30,000 ÷ 60,000
= 0.50 per unit
Amount of depreciation expenses = Actual Machine produced × Depreciation expense per unit
= 16,000 × 0.50
= $8,000
Therefore for computing the depreciation expenses we simply multiply the actual machine produced with depreciation expense per unit.
Consider the following statements regarding Company A and Company B:The two companies have identical operating results but have made different accounting method choices.Company B reported lower COGS than Company A this year. Prices rose throughout the year.Both companies took a PP&E write downs in 2016. Company B reversed the write down and wrote the assets back up this year.Which of the two companies most likely reports under US GAAP?A. A onlyB. B onlyC. A and BD. Neither A nor B
Answer:
A. A only
Explanation:
U.S. Generally Accepted Accounting Principles (GAAP) does not allow property, plant, and equipment to be written up or revalued. If the fair value of PP&E falls below the book value and the amount is material then a company must write down the asset to fair value.
Since under US GAAP, once PPE is written, it can not be reversed. as Company B is indicated to have reversed the write down while company A did not. It therefore means that Company A only is reporting under US GAAP.
Final answer:
Company A is most likely to report under US GAAP because US GAAP does not permit reversal of PP&E write-downs, and higher COGS reported by Company A could be indicative of using the LIFO method, permitted under US GAAP when prices rise.
Explanation:
The question asks which of the two companies, A or B, most likely reports under US GAAP, given that:
Company B reported lower COGS than Company A this year while prices rose.Company B reversed a PP&E write-down this year that was taken in 2016.Under US GAAP, reversing a write-down of PP&E (property, plant, and equipment) is not permitted once it is recorded. Moreover, if prices rise throughout the year and inventory valuation methods remain constant, COGS (Cost of Goods Sold) would typically increase under the last-in, first-out (LIFO) method which is allowed under US GAAP. This premise leads to the conclusion that Company A, which did not reverse the PP&E write-down and potentially follows LIFO accounting (assuming it led to higher COGS), is the one that most likely reports under US GAAP. Therefore, the correct answer is A. A only.
QUESTION 20 The South Division reported income from operations of $400,000 and total service department charges of $200,000. As a result, a. the gross profit margin was $200,000 b. income from operations before service department charges was $600,000 c. net income was $200,000 d. consolidated net income was $200,000
Answer:
Option (b) is correct.
Explanation:
Given that,
Income from operations = $400,000
Total service department charges = $200,000
The income from operations already takes into account the service department charges which means that it is already deducted. Hence, if we add the total service department charges to the income from operations then we can get the income from operations before service department charges.
So, the income from operations before service department charges is as follows:
= Income from operations + Total service department charges
= $400,000 + $200,000
= $600,000
1. Dougie’s Donuts most recent free cash flow (FCF) was $225 million; the FCF is expected to grow at a constant rate of 4%. The firm’s WACC is 12.55%, and it has 15 million shares of common stock outstanding. The firm has $75 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other non-operating assets. It has $545 million in debt and $50 million in preferred stock. a. What is the value of operations? b. Immediately prior to the repurchase, what is the intrinsic value of equity? c. Immediately prior to the repurchase, what is the intrinsic stock price? d. How many shares will be repurchased? How many shares will remain after the repurchase? e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock prices.
Answer:
a. What is the value of operations? = 2736.84 millions
b. Immediately prior to the repurchase,= 2811.84millions
what is the intrinsic value of equity? = 2216.84 millions
c. Immediately prior to the repurchase, what is the intrinsic stock price? = 147.79
d) How many shares will be repurchased?= 0.51million
How many shares will remain after the repurchase? = 14.49 millions
e. Immediately after the repurchase,= 2141.84millions
what is the intrinsic value of equity? The intrinsic stock prices. = 147.79
Explanation:
Find the picture in the attachment
After the amount due on a sale of $28,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment. The cost of the merchandise returned was $ 16,800.
What is the amount of the refund owed to the customer? $ _____
Journalize the entries made by the seller to record (A) the refund and ( B) the return of merchandise.
A. Sales Returned and Allowances _____ Sales Discounts _____ Cash _____
B. Merchandise Inventory _____ Cost of Merchandise Sold _____
Answer: Please see explanation column for answers
Explanation:
A) Amount refund owed to customer=
Sale of item - discount on item
=$28000- ($28000 x 2%) = $27,440
B)Journal of the entries made by the seller to record refund
Dr Sales Returned and allowances - $28,000
Cr Sales Discount $560
Cr Cash $27,440
c) Journal of the entries made by the seller to record return of merchandise
Cr Merchandise Inventory-$16,800
Dr Cost of Merchandise Sold -$16,800
Answer:
The amount of refund owed to customer is the amount of cash $27,440 received from the customer.
Dr sales returned and allowances $28,000
Cr Cash $27,440
Cr sales discount $560
Return of merchandise:
Dr merchandise inventory $16,800
Cr Cost of merchandise sold $16,800
Explanation:
The entries passed initially that need to be reversed now are:
The discount on the sale is 2% of $28,000=$560 debit to sales discount
Cash received from the customer =$28000-$560=$27,440 debit to cash account
Actual amount debited to sales is $28,000 credit to sales account
Upon return of the merchandise,the merchandise inventory is debited and cost of merchandise sold is credited with cost of merchandise at $16,800
On January 1, 2021, Tropical Paradise borrows $43,000 by agreeing to a 6%, five-year note with the bank. The funds will be used to purchase a new BMW convertible for use in promoting resort properties to potential customers. Loan payments of $831.31 are due at the end of each month with the first installment due on January 31, 2021.
Required:
Record the issuance of the installment note payable and the first two monthly payments.
Answer and Explanation:
The Journal entry with their narrations is shown below:-
1. Cash Dr, $43,000
To Notes Payable $43,000
(Being Cash is recorded)
2. Interest expenses Dr, $215
($43,000 × 6% ÷ 12)
Notes payable Dr, $616.31
To Cash $831.31
(Being Interest expenses is recorded)
3. Interest expenses Dr, $211.92
($43,000 - $616.31) × 6% ÷ 12)
Notes payable Dr, $619.39
To Cash $831.31
(Being Interest expenses is recorded)
Therefore we have recorded the issuance of the installment note payable and the first two monthly payments.
The issuance of the installment note payable and the first two instalments by Tropical Paradise can be recorded using journal entries. The issuance results in a 'Cash' debit and 'Notes Payable' credit worth $43,000. Payments result in 'Interest Expense' and 'Notes Payable' debits and a 'Cash' credit, where the amount reflects the payment towards interest and principal.
Explanation:Tropical Paradise's decision to borrow and subsequent payments can be recorded via journal entries. The issuance of the installment note payable would result in journal entry namely 'Cash' (Debit $43,000) and 'Notes Payable' (Credit $43,000). This represents the increase in cash by the loan amount and the establishment of the liability to pay this sum back to the bank.
Upon making the first monthly payment of $831.31, Tropical Paradise would make another journal entry: 'Interest Expense' (Debit $215) and 'Notes Payable' (Debit $616.31) to reflect the payment of some of the principal and interest, and 'Cash' (Credit $831.31) to show the reduction in available cash from making the payment. These entries would be repeated for the second payment as well.
The interest expense is calculated as the outstanding principal (in these cases, $43,000 and $42,383.69) multiplied by the annual interest rate (6%), divided by the number of periods in the year (12).
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Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Flower Depot have to achieve to earn a target profit of $240,000
Answer:
Break-even point (dollars)= $600,000
Explanation:
Giving the following information:
Selling price per unit= $10
Variable costs per unit= $4
Fixed costs= $120,000
Desired profit= $240,000
To determine the sales level to achieve the desired profit, we need to use the break-even point in dollars formula:
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= (120,000 + 240,000) / [(10 -4)/10]
Break-even point (dollars)= 360,000/ 0.6
Break-even point (dollars)= $600,000
An individual has $ 30,000 invested in a stock with a beta of 0.6 and another $30,000 invested in a stock with a beta of 1.2. if these are the only two investments in her portfolio, what is her portfolio’s beta?
Answer:
Portfolio beta = 0.9
Explanation:
The portfolio beta is the weighted average of the two beta using tge amount invested as the weight.
Total amount invested = 30,000 + 30,000 = 60,000
Portfolio beta =
=(30,000/60,000)× 0.6 + (30,000/600000)× 1.2
Portfolio beta= 0.9
Suppose that the federal administration plans to fight a deep, ongoing recession with a nationwide plan of increasing infrastructure. Congress approves it and adjusts the budget accordingly to put the plan in motion immediately. Aggregate demand spending components include consumption (C), investment (I), government (G), and exports (X) minus imports (M). Analyze what the aggregate demand and aggregate supply model predicts about the infrastructure plan to answer three questions.
Complete Questions:
Suppose that the federal administration plans to fight a deep ongoing recession with a nationwide plan of increasing infrastructure. Congress approves it and adjusts the budget accordingly to put the plan in motion immediately. Aggregate demand spending components include consumption (C), investment (I), government (G), and exports (X) minus imports (M). Analyze what the aggregate demand and aggregate supply model predicts about the infrastructure plan to answer the following three questions.
1. What happens to the level of G
(a. it can increase (+), b. decrease (-) or c. stay constant (0)).
2. What likely happens to the aggregate demand curve?
a. The curve shifts to the left (A decrease in AD)
b. The curve shifts to the right (An increase in AD)
c. The curve remains in the same spot
3. What likely happens to the level of unemployment?
a. unemployment decreases
b. unemployment remains the same
c. unemployment increases
Answer:
1. option a
2. option b
3. option a
Explanation:
1. Level of government spending will increase.Option A.
2. It will shift to the right. Option B.
3. Unemployment will decrease. Option A. This is because as AD increases firms will employ more workers to produce more output. Thus, unemployment will decrease.
Final answer:
Increasing government infrastructure spending boosts the government spending component of aggregate demand, expected to shift the aggregate demand curve rightward and stimulate the economy. This can alleviate unemployment and possibly lead to increased productivity and lower costs for businesses.
Explanation:
When the federal administration decides to combat a deep, ongoing recession by increasing infrastructure spending, we are discussing changes within the realm of macroeconomics, specifically looking at the aggregate demand and aggregate supply (AD-AS) model.
According to the AD-AS model, government spending (G) is a crucial component of aggregate demand, which also includes consumption (C), investment (I), and net exports (X-M, which is exports (X) minus imports (M)).
An increase in government spending, in an effort to improve infrastructure, directly increases the G component of aggregate demand. This is expected to shift the aggregate demand curve to the right, indicating a higher total planned expenditure in the economy at every price level.
This shift to the right suggests a stimulation in total spending, which includes higher employment and production levels, potentially helping to alleviate unemployment and lift the economy out of recession.
Moreover, this additional spending typically results in a multiplier effect, as the initial government spending leads to increased incomes for businesses and workers involved in infrastructure projects, who then increase their consumption spending, possibly leading to further increases in aggregate demand.
The impact on aggregate supply might be less immediate, but over the long term, improved infrastructure can reduce costs for businesses and improve productivity, which can shift the aggregate supply curve to the right as well.