The cost of equity for the Absolute Zero Co., calculated using the Gordon Growth Model and given a constant growth rate of 4.5% in dividends, is 6.4%.
Explanation:The cost of equity for the Absolute Zero Co. can be calculated using the Gordon Growth Model, which is used to determine the value of a stock that pays dividends. The formula for this model is D1 / (k - g), where D1 is the dividend in the next period, k is the cost of equity, and g is the growth rate of dividends.
In this case, the dividend (D1) at the next time period would be $3.40 * 1.045 ($3.55), given that the dividends are expected to grow at a constant rate of 4.5%. The cost of equity (k) can thus be found by rearranging the formula to: k = D1/P0 + g = $3.40/$53 + 0.045 = 0.064 or 6.4%.
So, the cost of equity for the Absolute Zero Co. is 6.4%.
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Lexington Corporation’s weekly payroll of $24,000 included FICA taxes withheld of $1,836, federal taxes withheld of $2,990, state taxes withheld of $920, and insurance premiums withheld of $250. Prepare the journal entry to record Lexington’s payroll.
The journal entry to record Lexington Corporation's weekly payroll includes debiting Payroll Expense for $24,000 and crediting FICA Taxes Payable, Federal Taxes Payable, State Taxes Payable, Insurance Premiums Payable, and Cash for their respective amounts.
To record Lexington Corporation's weekly payroll, which includes various deductions such as FICA taxes, federal taxes, state taxes, and insurance premiums, the following journal entry is made:
Debit Payroll Expense for the total amount of the gross payroll, $24,000.Credit FICA Taxes Payable for $1,836.Credit Federal Taxes Payable for $2,990.Credit State Taxes Payable for $920.Credit Insurance Premiums Payable for $250.Credit Cash for the net amount paid to employees.The net amount paid to employees is the gross payroll minus all deductions. This amount can be calculated as $24,000 - ($1,836 + $2,990 + $920 + $250) = $18,004.
Therefore, the journal entry would be:
Payroll Expense $24,000Calculate the value of a preferred stock that pays a dividend of $6.50 per share when the market's required yield on similar shares is 14 percent. The value of the preferred stock is $ nothing per share.
Answer:
In order to find the value of a preferred stock we discount its future payments at the required yield on the stock. Because the preferred stock is perpetual in nature, meaning it pays the same amount forever, we can find it's value by dividing its dividend by its required yield. So in this case the dividend is 6.5 and the required yield is 14% so the value of the preferred stock is
6.5/0.14= $46.42
Explanation:
Indicate the effect of the transactions listed below on each of the following: working capital, current ratio, debt ratio, net income, and stockholders' equity. Use to indicate an increase, to indicate a decrease, and 0 to indicate no effect. Assume an initial current ratio of more than 1 to 1.
Working Current Debt Net Stockholders' Transaction Capital Ratio Ratio Income Equity
a. A cash dividend is declared and paid. ____ ____ ____ ____ ____
b. Cash is obtained through long-term bank loans. (Do not consider interest.) ____ ____ ____ ____ ____
c. Equipment is purchased with short-term notes. (Do not consider interest.) ____ ____ ____ ____ ____
d. Merchandise is purchased on credit. ____ ____ ____ ____ ____
e. A fixed asset is sold for more than book value. ____ ____ ____ ____ ____
Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
On February 15, 2011, Spring Hope Corporation repurchases 1,200 shares of its outstanding common stock for $7 per share. On March 1, 2011, Spring Hope sells 300 shares of treasury stock for $11 per share. On May 18, 2011, Spring Hope sells the remaining 900 shares of its treasury stock for $4 per share. Prepare the journal entries to record these transactions: To record repurchase: Debit: Credit: To record sale on March 1 Debit Credit Credit
Answer:
hhhhhhmmmmmm not sure
Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $50,000 but that employee income taxes totaling $7,000 and FICA taxes totaling $2,625 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts. Assume Lightning Electronics must also pay $250 of unemployment taxes for this pay period.
Prepare the journal entry or entries that Lightning would use to record the payroll. Include both employee and employer taxes
Journal Entires for:
1. Record the wages expense for November 1-14 time period, including payroll deductions
2. Record the payroll tax expense.
Answer:
Journal entries for the following will be shown below:
Explanation:
1.
Journal entries for the wages expense is as follows:
Wages expense A/c.........................Dr $50,000
Income Tax Payable A/c................Cr $7,000
FICA taxes payable A/c...................Cr $2,625
Cash A/c...............................................Cr $40,375
Working Note:
Cash = Wage expense - Income tax payable - FICA taxes payable
= $50,000 - $7,000 - $2,625
= $40,375
2.
Journal entry for the payroll expenses is as follows:
Payroll tax expense A/c............................Dr $2,875
FICA taxes payable A/c............................Cr $2,625
Unemployment taxes payable A/c.........Cr $250
To record the payroll of Lightning Electronics, debit the Wages Expense for the gross wages earned and then credit the specific withholdings: Income Taxes Payable, FICA Taxes Payable, and Net Pay Payable to Employees. When recording the employer's payroll tax expense, debit the Payroll Tax Expense for the FICA taxes and unemployment taxes, and then credit the corresponding tax liabilities.
Explanation:Lightning Electronics would use the following journal entries to record this payroll:
When recording the wages expense for November 1-14 inclusive of payroll deductions:Debit Wages Expense: $50,000Credit Income Taxes Payable: $7,000Credit FICA Taxes Payable: $2,625Credit Net Pay Payable to Employees: $40,375 (This is the wages expense minus the income and FICA taxes).When recording the payroll tax expense:Debit Payroll Tax Expense: $2,625 for FICA taxes and $250 for unemployment taxes. These are employer contributions.Credit FICA Taxes Payable: $2,625Credit Unemployment Taxes Payable: $250The first set of entries records the total wages earned and the amounts deducted for tax purposes. The second set of entries focuses on the employer's payroll tax expense.
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The following transactions occurred during July: Received $900 cash for services performed during July. Received $5,350 cash from the issuance of common stock to owners. What is the amount of revenue that will be reported on the income statement for the month ended July 31?
Answer:
$900
Explanation:
In the income statement, the total revenues and the total expenses are recorded.
If the total revenues are more than the total expenditure then the company earns net income
And, If the total revenues are less than the total expenditure then the company have a net loss
This net income or net loss would reflect in the statement of the retained earning account.
So, only $900 would be reported on the income statement as the other transaction reflect the financing activity
You own a stock portfolio invested 25 percent in Stock Q, 25 percent in Stock R, 15 percent in Stock S, and 35 percent in Stock T. The betas for these four stocks are 1.28, 0.45, 1.78, and 1.22, respectively. What is the portfolio beta?
Answer:
1.1265
Explanation:
The computation of the portfolio beta is shown below:
= Stock Q portfolio percentage × beta of Stock Q + Stock R portfolio percentage × beta of Stock R + Stock S portfolio percentage × beta of Stock S + Stock T portfolio percentage × beta of Stock Q
= 0.25 × 1.28 + 0.25 × 0.45 + 0.15 × 1.78 + 0.35 × 1.22
= 0.32 + 0.1125 + 0.267 + 0.427
= 1.1265
The practice of delegating authority to division-level managers by top management is:
a. decentralization.
b. good business practice.
c. centralization.
d. autonomy.
e. never done in business today
Answer:
The correct answer is (A)
Explanation:
Decentralisation is fundamentally the exchange of power and responsibility regarding public operations from the central government to halfway and nearby governments or semi free government associations or potentially the private part is a complex idea. Various sorts of decentralisation must to be recognised on the grounds that they have various qualities, strategy suggestions, and conditions for success. Types of decentralisation incorporate political, financial, and market decentralisation
Discount-Mart (see Problem 16.8), as part of its new Lean program, has signed a long-term contract with Specialty Lighting and will place orders electronically for its halogen lamps. Ordering costs will drop to $.50 per order, but Discount Mart also reassessed its carrying costs and raised them to $20 per lamp.
a) What is the new economic order quantity?
b) How many orders will now be placed?
c) What is the total annual cost of managing the inventory with this policy?
Answer:
Please see attachment
Explanation:
Please see attachment
To determine the new economic order quantity, ordering cost per order, and total annual cost, the EOQ formula is applied using the given ordering costs and the increased carrying costs. The new EOQ is derived from these values and the annual demand (assumed known). From there, the annual number of orders and the total annual cost of inventory management can be calculated.
Explanation:To solve for the new economic order quantity (EOQ), we use the EOQ formula: EOQ = √(2DS/H), where D is the annual demand, S is the ordering cost per order, and H is the carrying cost per unit per year. Unfortunately, the annual demand (D) isn't provided in the question, so we will assume that it is given from the previous problem (Problem 16.8). Assuming D is known:
a) The new economic order quantity (EOQ) can be calculated by substituting the provided values of S which is $0.50, and H which is $20 into the formula.
b) The number of orders now placed annually would be D divided by the new EOQ.
c) To find the total annual cost, combine the annual ordering cost and the annual carrying cost. The annual ordering cost can be found by multiplying the ordering cost per order (S) by the number of orders (D/EOQ), while the annual carrying cost is the EOQ divided by 2, multiplied by the carrying cost per lamp (H).
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Whitewall Tire Co. just paid an annual dividend of $1.70 on its common shares.
If Whitewall is expected to increase its annual dividend by 2.10 percent per year into the foreseeable future and the current price of Whitewall's common shares is $20.44, what is the cost of common stock for Whitewall?
Answer:
10.59%
Explanation:
First, find next year's dividend using dividend discount model formula;
D1 = D0 (1+g)
D0 = current dividend paid = 1.70
D1 = expected next year's dividend
g = growth rate = 2.10% or 0.0210 as a decimal
therefore. D1 = 1.70 (1+0.0210)
D1 = 1.70 *1.0210
D1 = 1.7357
With the current price of $20.44, find the cost of stock (r) ;
r = [tex]\frac{D1}{P0} + g[/tex]
P0 = Current price
r = [tex]\frac{1.7357}{20.44} + 0.0210\\ \\ =0.0849 +0.0210\\ \\ =0.1059[/tex]
As a percentage, the cost of stock is 10.59%
The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2017 balance sheet. The following is provided.
1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000 are held at First National Bank of Yojimbo.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to write checks on this balance, $5,000,000.
3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse through salary reduction)
4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt.
5. Petty cash fund of $1,000
6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000
7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank
8. The comp[any has two certificates of deposits, each totaling $500,000. These CDs have a maturity of 120 days.
The amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is $8,871,000.
Explanation:The amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is calculated by considering a combination of cash and cash equivalents. Cash and cash equivalents include:
Commercial savings account and commercial checking account balances at First National Bank of Yojimbo - $600,000 + $900,000 = $1,500,000Money market fund account at Volonte Co. - $5,000,000Travel advances - $180,000Petty cash fund - $1,000I.O.U. from Marianne Koch - $190,000Bank overdraft - $0 (since the company has no deposits at the bank)Certificates of deposits - $1,000,000Total cash to be reported on the balance sheet = $1,500,000 + $5,000,000 + $180,000 + $1,000 + $190,000 + $0 + $1,000,000 = $8,871,000. Therefore, the amount of cash to be reported on Clint Eastwood Co.'s December 31, 2017 balance sheet is $8,871,000.
For which of the countries described is a trade deficit most beneficial? A country with a lower-than-optimal savings rate. A country with a strong preference for imported consumption goods. No country benefits from a trade deficit. A country aggressively purchasing capital goods.
Answer:A country aggressively purchasing capital goods.
Explanation:
Capital goods are used as raw materials for the productions of other goods.
The dominance of a country in purchasing capital goods which leads to deficit in his balance of payment may not connotes negativity for the goods can be used to produce consumer goods for local consumption or export which will on the long run reduce the deficit.
Assume you plan to travel to the Southern Hemisphere after final exams. You’ve narrowed your choices down to two that you like equally: Colombia or Australia. The total cost of your trip to Australia will be 5,000 Australian Dollars. The total cost of your trip to Colombia will be 5,000,000 Colombian Pesos. Based on the November 1, 2019 exchange rates, which trip is priced less in terms of U.S. Dollars? Show your work.
Answer:
The trip to Colombia is priced less at $1,497.07.
Explanation:
Using the following spot inter-bank market on November 1, 2019,
1 USD = 3339.85 COP (Colombian Pesos) and
1 USD = 1.4455 AUD (Australian Dollars
5,000 Australian Dollars on that day would be equivalent to
= [tex]\frac{5000}{1.4455}[/tex]
= $3,459.01
5,000,000 Colombian Pesos on that day would be equivalent to
= [tex]\frac{5000000}{3339.85}[/tex]
= $1,497.07
Considering the U.S Dollars equivalent of both cost, the trip to Colombia is priced less at $1,497.07.
Sunland’s Shop can make 1000 units of a necessary component with the following costs: Direct Materials $21000 Direct Labor 6000 Variable Overhead 3000 Fixed Overhead ? The company can purchase the 1000 units externally for $39000. The unavoidable fixed costs are $2000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?
Answer:
$9,000
Explanation:
Total variable cost of manufacturing the components are as follows;
Direct materials $21,000
Direct labor 6,000
Variable overhead 3,000
————
Total $30,000
If we purchase the cost is $39,000 and the company is indifferent if they will manufacture or purchase. Therefore;
$39,000 - 30,000 = $9,000 (unavoidable fixed cost)
Consider a $10,000 machine that will reduce pretax operating costs by $3,000 per year over a 5-year period. Assume no changes in net working capital and a zero scrap value after five years. For simplicity, assume straight-line depreciation to zero, a marginal tax rate of 34 percent, and a required return of 10 percent. The net present value of acquiring this machine is:A) $83.B) $449.C) $689.D) $827.E) $1,235.
Answer:
A) $83
Explanation:
First, find aftertax OCF per year
aftertax OCF = (Operating benefit - depreciation)*(1-tax) +depreciation
Depreciation per year = 10,000/5 = 2,000
Tax = 34%
aftertax OCF per year = (3,000 - 2,000)*(1-0.34) + 2,000
= 660 +2,000
= 2,660
Next, find the PV of the aftertax OCF per year. It is an annuity;
PMT = 2,660
N = 5
I/Y = 10%
FV = 0
then CPT PV = 10,083.493
Subtract the initial cost of the machine to find the Net Present Value (NPV);
NPV = -$10,000 + $10,083.493
NPV = $83.493
Pierre’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new salon is $270,000. A new salon will normally generate annual revenues of $65,850, with annual expenses (including depreciation) of $39,900. At the end of 15 years the salon will have a salvage value of $76,000.
Calculate the annual rate of return on the project. (Round answer to 0 decimal places, e.g. 125.)
Answer:
15%
Explanation:
The formula to compute the accounting rate of return or annual rate of return is shown below:
= Annual net income ÷ average investment
where,
Annual net income equal to
= Annual revenues - annual expenses
= $65,850 - $39,900
= $25,950
And, the average investment would be
= (Initial investment + salvage value) ÷ 2
= ($270,000 + $76,000) ÷ 2
= $346,000 ÷ 2
= $173,000
Now put these values to the above formula
So, the rate would equal to
= $25,950 ÷ $173,000
= 15%
LA Diversified Inc. recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3.8%. The stock has a beta of 0.88. The current risk-free rate is 2.4% and the market return is 10.9%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Answer:
$51.22
Explanation:
For computing the intrinsic value, first we have to determine the current year dividend and expected rate of return which is shown below:
The computation of the next year dividend is shown below:
= $3 + $3 × 3.8%
= $3 + 0.114
= $3.114
And, the expected rate of return would be
= Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 2.4% + 0.88 × (10.9% - 2.4%)
= 2.4% + 0.88 × 8.5%
= 2.4% + 7.48%
= 9.88%
Now the intrinsic value would be
= Next year dividend ÷ (Required rate of return - growth rate)
= $3.114 ÷ (9.88% - 3.8%)
= $3.114 ÷ 6.08%
= $51.22
The intrinsic value of the stock is $45.45, calculated using the dividend discount model and the Capital Asset Pricing Model.
Explanation:To calculate the intrinsic value of the stock, we can use the Capital Asset Pricing Model (CAPM).
First, we need to calculate the required rate of return using the CAPM formula:
Risk-free rate + Beta * (Market return - Risk-free rate)
Plugging in the given values:
Required rate of return = 2.4% + 0.88 * (10.9% - 2.4%) = 9.1%
To calculate the intrinsic value, we can use the dividend discount model:
Intrinsic value = Dividends per share / (Required rate of return - Dividend growth rate)
Plugging in the given values:
Intrinsic value = $3 / (9.1% - 3.8%) = $45.45
Therefore, the intrinsic value of the stock is $45.45.
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The following information is from the annual financial statements of Raheem Company. 2017 2016 2015 Net sales $ 445,000 $ 376,000 $ 421,000 Accounts receivable, net (year-end) 43,000 40,800 37,500 Compute its accounts receivable turnover for 2016 and 2017.
Answer:
9.60; 10.62
Explanation:
In 2016:
Average accounts receivables:
= (Beginning accounts receivable + Ending accounts receivable) ÷ 2
= (37,500 + 40,800) ÷ 2
= 39,150
Accounts receivable turnover = Net sales ÷ Average accounts receivables
= $376,000 ÷ 39,150
= 9.60
In 2017:
Average accounts receivables:
= (Beginning accounts receivable + Ending accounts receivable) ÷ 2
= (40,800 + 43,000) ÷ 2
= 41,900
Accounts receivable turnover = Net sales ÷ Average accounts receivables
= $445,000 ÷ 41,900
= 10.62
For the quarter ended March 31, 2017, Croix Company accumulates the following sales data for its newest guitar, The Edge: $316,700 budget; $303,100 actual. In the second quarter, budgeted sales were $383,500, and actual sales were $387,400.
a. Prepare a static budget report for the second quarter and for the year to date. CROIX COMPANY Sales Budget Report For the Quarter Ended June 30, 2017.
b. Second Quarter Year to Date Product Line Budget Actual Difference Budget Actual Difference Guitar: The Edge $ $ $ $ $ $ Click if you would like to Show Work for this question: Open Show Work.
Answer:
Explanation:
The preparation of ta static budget report for the second quarter is shown below:
CROIX COMPANY
Sales Budget Report
For the Quarter Ended June 30, 2017
Second Quarter Year to date
Product Line Budget Actual Difference Budget Actual Difference
New Guitar $383,500 $387,400 $3,900 $700,200 $690,500 $9,700
Favorable Unfavorable
The year to date balances are computed below:
For Budget:
= $383,500 + $316,700
= $700,200
For Actual:
= $387,400 + $690,500
= 690,500
To prepare the sales budget report for Croix Company for the second quarter and year to date, compare budgeted and actual sales for The Edge guitar.
Croix Company Sales Budget Report
For the Quarter Ended June 30, 2017:
a. Second QuarterBudget: $383,500; Actual: $387,400b. Year to DateGuitar: The EdgeBudget: $700,200; Actual: $690,500; Difference: $9,700According to the ________ cheating model, assuming little or no product differentiation among a small number of firms, if one firm decides to cheat on a collusive agreement by reducing its prices, others will as well and, in the long run, firms in this industry will earn no economic profits.
Answer:
Cartel, oligopoly
Explanation:
In this kind of market with little producers and little differenciation among the products there are no incentives for other companies to enter because of the barriers, so it's extremely likely that if one of them reduces their prices this industry can't generate economic profits.
Daily demand for a product is 100 units, with a standard deviation of 25 units. The review period 10 days and the lead time is 6 days. At the time of review there are 50 units in stock. If 98 percent service probability is desired, how many units should be ordered.
Answer:
1755 units are ordered
Explanation:
given data
Daily demand = 100 units
standard deviation = 25 units
review period = 10 days
lead time = 6 days
stock = 50 units
service probability = 98 percent
to find out
how many units should be ordered
solution
order quantity is calculated in fix time period formula is express as
q = [tex]\bar{d}(L+R) + z \sigma_{L+R} - I[/tex] .........................a
here L is lead time and R is review time and σ is standard deviation and I is stock and d is Daily demand
so first we find here standard deviation that is
[tex]\sigma_{L+R} = \sqrt{L} * \sigma[/tex] ...................1
[tex]\sigma_{L+R} = \sqrt{25} * 25[/tex]
[tex]\sigma_{L+R} =100[/tex]
so the value of z is for 98 % service probability is 2.05
so put here value in equation 1
q = 100 × ( 6 +10) +(2.05) × 100 - 50
q = 1755 units
so 1755 units are ordered
To maintain a 98% service probability, we calculate the reorder point using daily demand, service level, lead time, and review period. As 1816.52 units is our reorder point and we currently have 50 units in stock, therefore the company should order approximately 1767 units.
Explanation:The calculation solves for the reorder point using the formula Reorder Point = Daily demand * (Lead time + Review period) + Service Level * Standard Deviation * sqrt(Review period + Lead time). Here, Daily demand is 100 units, Lead time is 6 days, Review period is 10 days, the Standard Deviation is 25 units, and the Service Level for a 98% service probability is approximately 2.06 (from z-value table).
So, Reorder Point = 100 * (6+10) + 2.06* 25 * sqrt(10 + 6) = 1816.52. The number of units that should be re-ordered is thus the reorder point minus the current stock, which results in 1816.52 - 50 = 1766.52. As we cannot order in fractions, we should round it up to 1767 units.
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At Scorla Automobiles, a few machines in the assembly section were faulty and had to be shut down till they were repaired. This reduced the output of automobiles for the quarter. In this case, the costs incurred by Scorla Automobiles for repairing the machines are an example of _____.A. prevention costsB. appraisal costsC. internal failure costsD. external failure costs
Answer:
internal cost of failure
Explanation:
In the processing and manufacturing sectors, there are broadly four main types of quality costs. Poor quality costs comprises of internal costs of failure and external costs of failure. while good quality cost comprises of cost of evaluation and cost of prevention.
Internal costs of failure are described as the costs incurred by the company due to production failures is found before the product is delivered to the consumer.
In this situation, such machines must be reduced in manufacturing section as they were found faulty, leading in lost power of machinery. This form of loss is known as internal cost of failure.
Answer:
Prevention costs.
Explanation:
Prevention costs are cost arising due to a need to improve the manufacturing process. The manufacturing process may be machine intensive or human capital intensive. in the case of Scorla Automobiles, the repairs of faulty machines will prevent internal failure cost which may arise due to product (final product) nonconformity to required quality standards and also external cost like legal lawsuits from customers due to product failure.
Two versions of the purchasing power parity (PPP) are the absolute PPP and the relative PPP. Suppose the government releases information that causes expectations that the purchasing power of money in the future will be less than previous expectations. What will happen to the exchange rate today? Will both absolute PPP and relative PPP hold here or will only one hold?
Answer:
Please see attachment
Explanation:
Please see attachment
Debra, age 51, is self-employed and has never made a lot of money. But, she has consistently saved $4632 per year into a traditional IRA. Over the years, she has taken full advantage of the tax law and deducted each year’s contribution from her tax return. If Debra started saving at age 26 and has earned an average annual return of 5%, how much is the account worth today?
A. $619398.
B. $48556.
C. $23677.
D. $221072.
Answer:
D. $221072.
Explanation:
In this question, we use the future value formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Present value = $0
Rate of interest = 5%
NPER = 25 years
PMT = 4,632
The formula is shown below:
= -FV(Rate;NPER;PMT;PV;type)
So, after solving this, the answer would be $221,071.92
During the year, Sheldon Company had net credit sales of $40,000. At the end of the year, before adjusting entries, the balance in Accounts Receivable was $11,500 (debit) and the balance in Allowance for Bad Debts was $670 (credit). If the company uses an income statement approach to estimate bad debts at 7%, what is the ending balance in the Allowance for Bad Debts account? O A. $1,475 OB. $3,470 ○ C. $2,130 OD, $2,800
Answer:
B. $3,470
Explanation:
An income statement approach to estimate bad debts involves the estimation of bad debt as a percentage of credit sales.
Given the following information about Sheldon Company;
net credit sales = $40,000
Accounts Receivable = $11,500
Allowance for Bad Debts = $670
Estimate of bad debts = 7% × $40,000
= $2,800
Ending balance in the Allowance for Bad Debts account = $2,800 + $670
= $3,470
Roland Company operates a small factory in which it manufactures two products: A and B. Production and sales result for last year were as follow:
A B
Units sold 8,000 16,000
Selling price per unit 65 52
Variable costs per unit 35 30
Fixed costs per unit 15 15
For purposes of simplicity, the firm allocates total fixed costs over the total number of units of A and B produced and sold.
The research department has developed a new product (C) as a replacement for product B. Market studies show that Roland Company could sell 11,000 units of C next year at a price of $80, the variable costs per unit of C are $39. The introduction of product C will lead to a 10% increase in demand for product A and discontinuation of product B. If the company does not introduce the new product, it expects next year's result to be the same as last year's.
Answer:
Check the following explanation
Explanation:
Roland Company
Basic calculation –
Contribution margin and net income of products A and B
A B
Sales (units) 8,000 16,000
Selling price $65 $52
Variable cost $35 $30
Unit Contribution margin $30 $22
Contribution margin $240,000 $352,000
Fixed Cost $120,000 $240,000
Net income $120,000 $112,000
Analysis of profitability of Product C is introduced –
10% Increase in sales of Product A
Discontinuation of Product B
Incremental revenue – 10% increase in sales of Product A
Increased units =10% x 8,000 = 800 units
Additional contribution margin = $30 x 800 =$24,000
Incremental cost – contribution loss from discontinuation of product B
16,000 x 22 =$352,000
Profitability of C
Sales price (11,000 units) $80
Variable cost $39
Unit contribution margin $41
Contribution margin $451,000 (11,000 x $41)
Add: incremental revenue $24,000 (contribution margin from additional units of Product A)
Total income $475,000
Less: Incremental cost $352,000 (loss of contribution from discontinuation of Product B)
Net increase in income $123,000
Note: The fixed costs are irrelevant for the decision to introduce Product C, as those costs are sunk costs and the firm allocates the same to products on a predetermined basis and not directly traceable.
Yes, Roland Company should introduce Product C next year.
Explanation: As the decision results in incremental revenue of $123,000 the introduction of Product C is profitable.
Final answer:
The student's question pertains to the introduction of a new product in a business and how it would change the financial outcomes of production and sales, including impacts on costs, revenues, and break-even analysis.
Explanation:
The subject of the question concerns decision making within a business context, specifically around the introduction of a new product and its impact on production and sales. To assist the student in understanding the implications of such a decision, we can refer to the concepts of total cost, variable cost, and break-even price point. An analysis typically considers how the addition of a new product would affect unit costs, sales volumes, and ultimately profit margins.
To compute the financial effects of introducing product C, we would calculate the new average variable cost, average fixed cost, and new break-even price for product A (due to increased demand) and product C. These figures would be critical in determining if product C is a profitable alternative to product B and by how much it would affect the firm's overall profitability.
Becker Bikes manufactures tricycles. The company expects to sell 520 units in May and 650 units in June. Beginning and ending finished goods for May is expected to be 180 and 145 units, respectively. June’s ending finished goods is expected to be 155 units. Each unit requires 3 wheels at a cost of $22 per wheel. Becker requires 20 percent of next month’s material production needs on hand each month. July’s production units is expected to be 620 units.
Compute Becker’s direct materials purchases budget with respect to wheels for May and June.
The direct materials purchases budget for Becker Bikes with respect to wheels for May and June are $39,590 and $51,744 respectively based on their expected sales, inventories, and the cost of wheels.
Explanation:To compute Becker's direct materials purchases budget with respect to wheels for May and June, you have to know how many wheels Becker's needs each month. The number of wheels needed depends on the number of tricycles to be sold and the beginning and ending inventory for each month.
In May, Becker bikes expects to sell 520 units and has a beginning inventory of 180 units and ending inventory of 145 units. Therefore, the total number of tricycles to be manufactured in May is 520 (to be sold) + 145 (ending inventory) - 180 (beginning inventory) = 485 units. Since each tricycle requires 3 wheels, Becker needs 485 units * 3 wheels/unit = 1455 wheels for May. Since the cost for each wheel is $22, the total cost of wheels for May is 1455 wheels * $22/wheel = $31,010. As Becker needs 20% of next month's (June) production requirements on hand at the end of May, the budget for May needs to include an additional 650 (June production) * 20% * 3 (wheels per tricycle) = 390 wheels or 390 * $22 = $8,580. So, the total budget for May is $31,010 + $8,580 = $39,590.
In June, Becker wants to sell 650 tricycles and has a beginning inventory of 145 units and is targeting an ending inventory of 155 units, so it will need to produce 650 (to be sold) + 155 (ending inventory) - 145 (beginning inventory) = 660 units. Again, as each tricycle requires 3 wheels, Becker needs 660 units * 3 wheels/unit = 1980 wheels for June. Multiplying the number of wheels by the cost per wheel gives a total cost of $43,560. Additionally, Becker needs 20% of July's production (620 units) on hand at the end of June. Calculating this would result in 620 units * 20% * 3 wheels per tricycle = 372 wheels for a cost of $8,184. Therefore, the total budget for June is $43,560 + $8,184 = $51,744.
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The direct materials purchases budget for May is $38,060, and for June, it is $43,560. This considers production needs, beginning and ending finished goods, cost per wheel, and required material on hand. These calculations ensure sufficient wheels are purchased.
The student has asked how to compute Becker's direct materials purchases budget with respect to wheels for May and June. Here are the specifics:
Direct Materials Purchases Budget
May Purchases
Expected sales: 520 units
Beginning finished goods: 180 units
Ending finished goods: 145 units
Wheels per unit: 3
Cost per wheel: $22
May production needs:
Production Units = Expected Sales + Ending Finished Goods - Beginning Finished Goods
Production Units = 520 + 145 - 180 = 485 units
Total Wheels Needed = 485 × 3 = 1455 wheels
Wheels Required for June = 20% of June Production Needs
Wheels Required for June = 620 × 3 × 20% = 372 wheels
Total Wheels Needed in May = 1455 + 372 - 20% of May Wheels = 1455 + 372 - 97.2 = 1729.8 ≈ 1730 wheels
Total May Budget = 1730 × $22 = $38,060
June Purchases
Expected sales: 650 units
Beginning finished goods: 145 units
Ending finished goods: 155 units
Wheels per unit: 3
Cost per wheel: $22
June production needs:
Production Units = Expected Sales + Ending Finished Goods - Beginning Finished Goods
Production Units = 650 + 155 - 145 = 660 units
Total Wheels Needed = 660 × 3 = 1980 wheels
Wheels Required for July = 20% of July Production Needs
Wheels Required for July = 620 × 3 × 20% = 372 wheels
Total Wheels Needed in June = 1980 + 372 - 372 = 1980 wheels
Total June Budget = 1980 × $22 = $43,560
Two Brothers Moving prepared the following sales budget: Month Cash Sales Credit Sales March $ 19 comma 000 $ 5 comma 000 April $ 40 comma 000 $ 20 comma 000 May $ 38 comma 000 $ 39 comma 000 June $ 51 comma 000 $ 48 comma 000 Credit collections are 10% in the month of sale, 65% in the month following the sale, and 20% two months following the sale. The remaining 5% is expected to be uncollectible. What are the total cash collections in May at Two Brothers Moving?
Answer:
The total cash collections in May at Two Brothers Moving is projected to be at $17,900.
Explanation:
Please find the below for detailed explanation and calculations:
The May cash collection of Two Brothers Moving is budgeted to include the following collection from credit sales:
10% of Credit Sales in May + 65% of Credit Sales in April + 20% of Credit Sales in March = 10% x $39,000 + 65% x $20,000 + 20% x $5,000 = $17,900.
As a result, the total cash collections in May of Two Brothers Moving is projected at $17,900.
You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $206 million, paid taxes of $47 million, and its depreciation expense was $71 million. Cruise's gross fixed assets increased by $74 million from 2007 to 2008. The firm's current assets decreased by $14 million and spontaneous current liabilities increased by $6.4 million. What is Cruise's operating cash flow, investment in operating capital and free cash flow for 2008, respectively in millions?
Answer:
$230 million , $176.40 million
Explanation:
The operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
= $206 million +$71 million - $47 million
= $230 million
The computation of the free cash flow is shown below:
= Operating cash flows + Change in Net Working Capital - net capital Expenditure.
= $230 million + 20.4 million - $74 million
= $176.40 million
he financial statements of Simon Co. include the following items (amounts in thousands): Income Statement For the Year Ended December 31, 2017 Net income $ 840 Depreciation and amortization expense 640 At December 31 Balance Sheets 2017 2016 Accounts receivable $ 250 $ 340 Inventory 340 300 Accounts payable 160 180 Income taxes payable 100 30 Required: Calculate the net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017. (Enter your answer in thousands. (i.e., 20,000 should be entered as 20))
Answer:
$1,580
Explanation:
The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:
Cash flow from Operating activities - Indirect method
Net income $840
Adjustment made:
Add : Depreciation and amortization expense $640
Add: Decrease in accounts receivable $90 ($250 - $300)
Less: Increase in inventory -$40 ($340 - $300)
Less: Decrease in accounts payable -$20 ($160 - $180)
Add: Increase in income tax payable $70 ($100 - $70)
Total of Adjustments $740
Net Cash flow from Operating activities $1,580
Final answer:
The net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017 is $2,120 thousand
Explanation:
To calculate the net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017, you can use the indirect method by starting with the net income and then adjusting for non-cash expenses and changes in working capital.
The formula for the net cash flow from operations is:
Net Cash Flow from Operations = Net Income + Depreciation and Amortization Expense - Increase in Accounts Receivable + Increase in Inventory - Increase in Accounts Payable - Increase in Income Taxes Payable
Using the given information in the financial statements, we can calculate:
Net Cash Flow from Operations = $840 + $640 - ($340 - $250) + ($340 - $300) - ($180 - $160) - ($100 - $30)
= $2,120 thousand