Answer:
Fannie Mae would argue that "to the order of" is a complete order instrument that needs endorsement and can be enforced. "Pay to the order of" are negotiable instruments that must be paid via endorsement and delivery.
Explanation:
The Federal National Mortgage Association (Fannie Mae) wanted to foreclose on the house and sell it to recover the balance due. Smith argued that the words "to the order of " in the endorsement made the note an incomplete order instrument and that Fannie Mae could not enforce it. What is Fannie Mae's best response to this argument
Smith argued, among other things, that the indorsement on the note rendered it incomplete and "insufficient to support the use of executory process and,the words "to the order of [blank]" included in the subject indorsement made the instrument incomplete order paper, not bearer paper, and thus Fannie Mae could not properly enforce the note.However,Fannie Mae would argue that "to the order of" is a complete order instrument that needs endorsement and can be enforced. "Pay to the order of" are negotiable instruments that must be paid via endorsement and delivery.
Final answer:
Fannie Mae must assert that the note is still negotiable and enforceable despite the specific endorsement argument by Smith.
Explanation:
Fannie Mae's best response to Smith's argument that the note was an incomplete order instrument due to the endorsement 'to the order of ____________' would be to assert that the note is still negotiable. This is because the endorsement does not necessarily render the note incomplete, but rather provides direction on how to transfer it.
The Uniform Commercial Code (UCC) governs negotiable instruments like promissory notes, and according to the UCC, an endorsement 'to the order of' does not automatically make the note incomplete. The note can still be enforced by the holder.
Therefore, Fannie Mae could argue that the note remains valid and enforceable, allowing them to foreclose on the house and recover the balance due as the holder of the note.
A consultant has recommended that you modernize a production line. Costs include $650,000 in equipment, a $10,000 investment in net working capital at the time of installation, and $5,000 in delivery and installation costs. The consultant has billed the firm for $7,500 for her analysis of the project. If the project is undertaken, an employee training program costing $8,000 would be required. The old machinery has no book value but can be sold for $100,000. Your firm's marginal tax rate is 34%. What is the initial outlay associated with the project?
a. $619,500
b. $612,000
c. $570,000
d. $578,000
e. $607,000
Answer:
The initial outlay associated with the project is $607,000
Explanation:
According to the given data we have the following:
Cost of new equipment= $650,000
delivery and installation costs=$5,000
investment in net working capital at the time of installation=$10,000
employee training program=$8,000
The firm's marginal tax rate is 34%, hence, the after tax sale value of old machine=-$100,000×(1-0.34)=-$66,000
Therefore, the initial outlay associated with the project= $650,000+$5,000+$10,000+$8,000-$66,000=$607,000
ncentive Corporation was authorized to issue 12,000 shares of common stock, each with a $2 par value. During its first year, the following selected transactions were completed:
a.Issued 5,100 shares of common stock for cash at $21 per share.
b. Issued 1,100 shares of common stock for cash at $24 per share.
Prepare the journal entry required for each of these transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Answer and Explanation:
The journal entries are as follows
a. Cash A/c Dr $107,100 (5,100 shares × $21)
To Common Stock $10,200 (5,100 shares × $2)
To Additional Paid-in Capital in excess of par - Common Stock $96,900
(Being the issuance of stock is recorded and the remaining balance is credited to the additional paid-in capital account)
b. Cash A/c Dr $26,400 (1,100 shares × $24)
To Common Stock $2,200 (1,100 shares × $2)
To Additional Paid-in Capital in excess of par - Common Stock $24,200
(Being the issuance of stock is recorded and the remaining balance is credited to the additional paid-in capital account)
It increased the both cash and common stock stock and the additional paid in capital account as well
Problem 8-2A Record notes payable and notes receivable (LO8-2) [The following information applies to the questions displayed below.] Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $41 million cash on October 1, 2021, to provide working capital for anticipated expansion. Precision signs a one-year, 9% promissory note to Midwest Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. Problem 8-2A Part 3 3. Prepare the journal entries on September 30, 2022, to record payment of the notes payable at maturity. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.)
To record the payment of the notes payable at maturity, you would need to make journal entries that debit Notes Payable and credit Cash for the principal amount, and debit Interest Expense and credit Interest Payable for the interest payment.
Explanation:To record the payment of the notes payable at maturity, you would need to make the following journal entries:
Debit Notes Payable and credit Cash for $41 million to record the repayment of the principal amount.Debit Interest Expense and Credit Interest Payable for the interest payment.These entries reflect the payment of the loan principal and the interest.
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The Gorman Group issued $870,000 of 11% bonds on June 30, 2021, for $944,646. The bonds were dated on June 30 and mature on June 30, 2041 (20 years). The market yield for bonds of similar risk and maturity is 10%. Interest is paid semiannually on December 31 and June 30. Required: Complete the below table to record the company's journal entry. 1. to 3. Prepare the journal entries to record their issuance by The Gorman Group on June 30, 2021, interest on December 31, 2021 and interest on June 30, 2022 (at the effective rate). Calculation Req 1 to 3 Complete the below table to record the company's journal entry. (Round intermediate calculations and final answers to the nearest whole dollar. Enter interest rate to 1 decimal place. (i.e. 0.123 should be entered as 12.3).)
Answer:
Explanation:
December 31, 2018 Amount. Interest Rate Total Interest expense $944,646 x 5.0% = $47,232.3 Cash. $870,000 x 5.5% = $47,850 of premium on bonds $618
June 30, 2019AmountInterest Rate
Total Interest expense $944,646 x 5.0% = $47,232.3
Cash$870,000 x 5.5% = $47,850
of premium on bonds $ 464 No Date General Journal Debit Credit 1 June 30, 2018 Cash 944,646 Bonds payable 870,000 Premium on bonds payable 74,646 December 31,2018 Interest expense 47,232.3 Premium on bonds payable 618 Cash 47,850 June 30, 2019 Interest expense 47,232.2 Premium on bonds payable 618 Cash 47,850 Record the issuance of the bond on June 30, 2018.Record the interest on December 31, 2018 (at the effective rate). Record the interest on June 30, 2019 (at the effective rate). Explanation 2. December 31, 2018 Interest expense (5% × $944,646) = $47,232.3 Cash (5.5% × $870,000) = $47,850 3.June 30, 2019Interest expense (5% × [$944,646 – $618]) = $47,201.4
Cash (5.5% × $870,000) = $47,850
Roberts Corp. reports pretax accounting income of $208,000, but due to a single temporary difference, taxable income is only $154,000. At the beginning of the year, no temporary differences existed. Roberts is subject to a tax rate of 25%. Required: Prepare the compound journal entry to record Roberts Corp.'s income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Debit Income Tax Expense $102,000 (calculated as $78,000 + $24,000, the deferred tax liability increase). Credit Deferred Tax Liability $12,000 and Income Tax Payable $90,000 (computed as $260,000 × 30%).
Given:
Pretax accounting income = $300,000
Taxable income = $260,000
Tax rate = 30%
The temporary difference is $40,000 ($300,000 - $260,000).
As there were no temporary differences at the beginning of the year, the entire $40,000 difference is attributable to temporary differences.
Since temporary differences will reverse in the future, we calculate the deferred tax liability:
Deferred Tax Liability = Temporary Difference × Tax Rate
Deferred Tax Liability = $40,000 × 30% = $12,000
Now, let's prepare the compound journal entry to record income taxes:
| Account | Debit | Credit |
| Income Tax Expense (P&L) | $78,000 | |
| Deferred Tax Liability (BS) | | $12,000 |
| Income Tax Payable (BS) | | $90,000 |
Explanation:
Income Tax Expense is calculated as the sum of taxes payable ($90,000) and the increase in the deferred tax liability ($12,000), totaling $102,000 ($90,000 + $12,000).
Deferred Tax Liability increases by $12,000 due to the temporary differences that will lead to higher taxable income in the future.
Income Tax Payable represents the actual tax liability to be paid, calculated as the taxable income ($260,000) multiplied by the tax rate of 30%, which equals $78,000.
This journal entry reflects the tax provision, recognizing both the current tax expense and the change in the deferred tax liability on the balance sheet.
complete the question
ABC Corp. has reported pretax accounting income of $300,000 for the year. Due to certain temporary differences, the taxable income amounts to $260,000. At the beginning of the year, no temporary differences existed. ABC Corp. is subject to a tax rate of 30%.
Question:
Prepare the compound journal entry to record ABC Corp.'s income taxes based on the given information. Include the necessary calculations for deferred tax liability or asset if applicable. If no entry is required, indicate "No journal entry required."
Jeremy Corporation estimated manufacturing overhead costs for the year to be $ 550 comma 000. Jeremy also estimated 8 comma 000 machine hours and 3 comma 000 direct labor hours for the year. It bases the predetermined overhead allocation rate on machine hours. On January 31, Job 25 was completed. It required 5 machine hours and 1 direct labor hours. What is the amount of manufacturing overhead allocated to the completed job?
Answer:
$343.75
Explanation:
The computation of amount of manufacturing overhead is shown below:-
For computing the amount of manufacturing overhead first we need to find out the predetermined overhead rate which is shown below:-
Predetermined overhead rate = Estimated manufacturing overhead costs ÷ Estimated machine hours
= $550,000 ÷ 8,000
= $68.75 per machine hour
Overhead allocated = Predetermined overhead rate × Machine hours
= $68.75 × 5
= $343.75
Last week, Weschler Paint Corp. completed a 3-for-1 stock split. Immediately prior to the split, its stock sold for $150 per share. The firm's total market value was unchanged by the split. Other things held constant, what is the best estimate of the stock's post-split price? a. $52.50 b. $50.00 c. $60.78 d. $57.88 e. $55.13
Answer:
The answer is B..
Explanation:
Stock split is the issuing of new shares to existing shareholders according to their current holdings from the total outstanding shares. It increases the number of outstanding shares.
Post-split stock price = Current price/new per old
Number of new shares = 3
Number of old shares = 1
Pre-split stock price = $150
Therefore, post-split stock price is:
1/3 x $150
=$50
Kier Company issued $660,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 5-year term to maturity. The bonds have a 6.00% stated rate of interest and interest is payable in cash on December 31 each year. Based on this information alone, what are the amounts of interest expense and cash flows from operating activities, respectively, that will be reported in the financial statements for the year ending December 31, Year 1?
Answer:
Interest Expense $39,600
Cash Flow from Operating Activities $39,600
Explanation:
Payment of Interest Expense is the cash expense paid during the year which is deducted from the operating profit in the calculation of net income which is used to determine the cash flow from operating activities.
Interest on the Bond = $660,000 x 6% = $39,600
At the time of payment Journal Entry will be as follow
Dr. Interest Expense $39,600
Cr. Cash $39,600
As the cash is paid against the operating activities.
Joseph Gallo, the founder of the famous wine company that bears his name, said that when he first started selling wine right after Prohibition (laws outlawing the sale of alcohol), he poured two glasses of wine from the same bottle and put a price of 10 cents a bottle on one and 5 cents a bottle on the other. He let people test both and asked them which they wanted. Most wanted the 10-cent bottle, even though they were the same wine.
What does this tell us about people?
Can you think of other areas where that may be the case?
What does this suggest about pricing?
As a reminder, see below regarding my course policies on "Discussion" (Also located in the Course Syllabus).
Answer to Question 1: What does this tell us about people?
The experiment shows us that people always associate higher prices with higher quality. But this is not always the case.
According to a research in 2008 by Goldstein and his team it was established that people do not derive more satisfaction or utility from more expensive wine when they don’t know much the wine cost.
In a more recent but similar study, results showed that there is a clear correlation between price and perceived value.
When participants were told that a wine had a high price, participants gave that wine higher ratings.
So in summary:
when people know the cost or the value of things, they tend to appreciate it more.When people are presented with options involving cheap and expensive items of the same function they'd always attribute the expensive one to be of higher quality.Answer to Question 2: Can you think of other areas where that may be the case?
A similar research was carried out by Dan Ariely.
This scenario was tested on drugs and how people reported to have felt when they were given an information about the drug they are taking.
It was discovered that students who paid more for cold medicine said they felt better than students who purchased the same medicine at a discounted price.
Answer to Question 3: What does this suggest about pricing?
Pricing goes beyond numbers. Its all about how clients perceive your product in relation to the problem they are trying to solve or the pain point, or pleasure point they are trying to satisfy.
Cheers!
On August 1, Ernie wrote to Elsie offering to sell Elsie his car for $7,600, and he promised to hold the offer open for ten days. On August 4 Ernie changed his mind; he sent Elsie a letter revoking the offer. On August 5 Elsie e-mailed Ernie, accepting the offer. Ernie’s letter of revocation arrived on August 6. Is there a contract? Explain.
Answer:
Yes, the contract is still valid.
Explanation:
Let us first clarify some terms first.
A contract is referred to as a legally binding agreement that is recognized, known and governs the rights and duties of the parties involved in an agreement. A contract is legally enforceable because it meets the features and approval of the law. An agreement basically involves the exchange of goods, transactions, services, money, or promises. In the case of breach of contract, the law awards the injured party access to legal remedies which include damages and cancellation.
Letter of revocation is an act by which a person having authority, calls back or in other words annuls a power, gift, or benefit, which had been bestowed upon another.
Yes, the contract still holds. This is due to the reason that the letter had a date mentioned on it which is August 4, a day before the contract was accepted even though the revocation letter arrived late.
Therefore, as regards to the date on the letter, the contract is still valid.
Final answer:
A binding contract appears to have been formed between Ernie and Elsie for the sale of Ernie's car because Elsie accepted the offer via email before receiving Ernie's revocation letter. According to the mailbox rule, the acceptance is effective when dispatched, making Elsie's acceptance on August 5 effective and the contract valid.
Explanation:
The situation described involves contractual obligations and whether an agreement has been formed between Ernie and Elsie. Under contract law, an offer can typically be revoked before it has been accepted. In this case, Ernie made an offer to sell his car to Elsie for $7,600 and agreed to keep the offer open for ten days. However, Ernie changed his mind and attempted to revoke the offer on August 4, sending Elsie a letter of revocation. Elsie sent an email accepting the offer on August 5, before receiving the letter of revocation which arrived on August 6.
As per the mailbox rule, which is widely accepted in contract law, an acceptance is effective when dispatched, as long as the communication is by an expressly or impliedly authorized means of communication. Since Elsie's acceptance via email was sent before Ernie's revocation was received, the acceptance would generally be considered effective on August 5, resulting in a binding contract. Ernie's revocation would only be effective upon receipt, which happened after the acceptance was already sent. Therefore, based on the given information, it appears that a contract was formed when Elsie emailed her acceptance on August 5.
Selling price per unit $ 59 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 11 Direct labor $ 6 Variable manufacturing overhead $ 4 Fixed manufacturing overhead per year $ 88,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 4 Fixed selling and administrative expense per year $ 80,000 Year 1 Year 2 Units in beginning inventory 0 1,000 Units produced during the year 11,000 8,000 Units sold during the year 10,000 5,000 Units in ending inventory 1,000 4,000 The net operating income (loss) under variable costing in Year 1 is closest to:Multiple Choice a. $380,000 b. $340,000 c. $180,000 d. $172,000
Answer:
b. $340,000
Explanation:
Given
Selling price per unit $ 59
Manufacturing costs:
Variable manufacturing cost per unit produced:
Direct materials $ 11
Direct labor $ 6
Variable manufacturing overhead $ 4
Fixed manufacturing overhead per year $ 88,000
Selling and administrative expenses:
Variable selling and administrative expense per unit sold $ 4
Fixed selling and administrative expense per year $ 80,000
We calculate the Variable Cost of Goods sold by the variable costs allocated to the units sold.For this we deduct the ending inventory costs from the unit produced costs.
Year 1
Units sold during the year 10,000
Sales Price $59
Sales $ 590,000
Units in beginning inventory 0
Units produced during the year 11,000
Manufacturing Variable Costs per unit (11+6+4)= $ 21
Variable Manufacturing Costs= $231,000
Less Ending Inventory (1,000 *21)= 21,000
Variable Cost of Goods Sold = $210,000
Add Variable selling and administrative expenses ( 4*10,000)= 40,000
Total Variable Costs = $250,000
Contribution Margin $340,000
Answer:
The correct answer is D. $ 172,000
Explanation:
Variable costing Year 1
Sales (10,000 * $ 59) (A) $ 590,000
Variable manufacturing costs
Direct materials (11,00 * $ 11) $ 121,000
Direct labor (11,000 * $ 6) $ 66,000
Variable overhead $ 4 (11,000 * $ 4) $ 44,000
******************************************************************
Cost of goods available for sale (B) $ 231,000
Ending inventory (1,000 * $ 21) (C) $ 21,000
*******************************************************************
Gross contribution margin (A - B + C) $ 380,000
Variable selling & admin expense $ 40,000
********************************************************************
Contribution margin $ 340,000
Less fixed costs
Fixed manufacturing overhead $ 88,000
Fixed selling and administrative expense $ 80,000
***********************************************************************
Net operating income $ 172,000
1. What are KPI’s in the hospitality industry? a.Key Personal Indicators b.Key Performance Indicators c.Key Pathways Into Success d.Data that is seldom looked at by senior leadership 2. Which of the following is a labor KPI as discussed in the lecture notes. a.Covers per hour b.# of Employees c.Number of employees needed to run a shift d.# of Managers
Answer:
1) Key Performance Indicators (KPIs)
2) Covers per hour
Explanation:
Critical success factors (CSFs) are fundamental requirements for competitive success. They represent what a business must excel at to make it very competitive and successful.
For example, customer satisfaction, quality product, employee satisfaction, productivity
Key Performance Indicators (KPI) are metrics which are used to measure whether or a business is achieving its CSFs
For example, a measure (KPI) of employee productivity would be amount of covers achieved per hour of labour
During August, Boxer Company sells $358,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,600 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,200 in parts for repairs. The entry to record the estimated warranty expense for the month is:
Answer:
The entry to record is Debit Warranty Expense $17,900 and credit Estimated Warranty Liability $17,900
Debit Credit
Warranty expense $17,900
Warranty payable $17,900
Explanation:
In order to prepare the entry to record, first we would have to calculate how much would be the warranty expense for the month, this would be calculated as follows according to the given data:
warranty expense=$358,000×5%=$17,900
Therefore, the entry to record is the following:
Debit Warranty Expense $17,900 and credit Estimated Warranty Liability $17,900
Debit Credit
Warranty expense $17,900
Warranty payable $17,900
You are the manager of a marketing company. The company recently hired a new writer who suggested the company order noise-reduction headphones so writers can concentrate. You think this is a good idea, and you don’t expect there will be resistance to the request. However, you need to write a recommendation report to the president before ordering the headphones.
What should you include in your report you are using a direct approach?
A. An explanation of the pros, cons, and costs
B. A description of alternative solutions with the most promising first
C. A general reference to the problem in the subject line
Answer:
A
Explanation:
Remember, a marketing manager has limited functions. The best things to include in the report is the pros, cons and cost of the noise reduction headphones.
The pros should highlight how it increases the writers customers service delivery which goes a long way to increase the marketing success of the firm.
Also, the cost as it pertains to the overall marketing cost the company should be mentioned, while also including the cons if any.
Which of the following would NOT generally be a motive for a firm to hold inventories? to hedge against inflation to decouple various parts of the production process to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand to minimize reordering costs
Answer:
The answer is to minimize the reodering cost
Explanation:
We have three motives for holding inventory
1. Transaction motives of holding inventory This is to enable day to day transaction running of inventories.
2. Precautionary motives of holding inventory: Holding inventory to guard against unforeseen circumstances or to meet emergencies. For example, unexpected increase in demand.
3. Speculative motives of holding inventory. This is the holding of inventory in order to take advantage of any potential Investments. For example, to hedge against risk, take advantage of discounts.
All the options EXCEPT 'to minimize reodering cost' option are the reasons holding inventories.
Mikkelson Corporation's stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.)
Answer:
The new required rate of return is 14.41%
Explanation:
The required rate of return (r) is the minimum return that investors require to invest in a company's stock. The required rate of return can be calculated using the CAPM approach. The formula for required rate of return (r) is,
r = rRF + Beta * rpM
Where,
rRF is the risk free raterpM is the market risk premiumUsing the old values, we calculate the beta of stock to be,
0.1175 = 0.055 + Beta * 0.0475
0.1175 - 0.055 = Beta * 0.0475
0.0625 / 0.0475 = Beta
Beta = 1.3158 rounded off to 1.32
The new risk premium = 4.75% + 2% = 6.75%
The new required rate of return (r) is,
r = 0.055 + 1.32 * 0.0675
r = 0.1441 or 14.41%
The rounded off figure for beta is used in calculation of new required rate of return so the answer might differ a little if the figure for beta was not rounded off.
To find Mikkelson Corporation's new required rate of return, first calculate the beta using the CAPM formula, then apply the new market risk premium and compute the new rate. The new required rate of return is 14.41%.
To find the company's new required rate of return, we'll use the Capital Asset Pricing Model (CAPM). The CAPM formula is:
CAPM: E(Ri) = Rf + β(E(Rm) – Rf)
First, we'll need to calculate the beta (β) of Mikkelson Corporation.
Step 1: Calculate the Beta (β)
Given the old values: E(Ri) = 11.75%, Rf = 5.50%, and Market Risk Premium (Rm – Rf) = 4.75%, we substitute these into the CAPM formula to find the beta:11.75% = 5.50% + β(4.75%)Solving for β:11.75% - 5.50% = β(4.75%)6.25% = β(4.75%)β = 6.25% / 4.75% = 1.32Step 2: Calculate the New Required Rate of Return
With the increase in investor risk aversion, the new market risk premium is:New Market Risk Premium = Old Market Risk Premium + IncreaseNew Market Risk Premium = 4.75% + 2% = 6.75%Using the CAPM formula again to find the new required return:E(Ri) = Rf + β(New Market Risk Premium)E(Ri) = 5.50% + 1.32(6.75%)E(Ri) = 5.50% + 8.91% = 14.41%Therefore, the company's new required rate of return is 14.41%.Evan Engineering Group receives royalties on a technical manual written by two of its engineers and sold to a publishing company. Royalties are 10% of net sales, receivable on October 1 for sales in January through June and on April 1 for sales in July through December of the prior year. Sales of the manual began in July 2015, and Evan accrued royalty revenue on $30,010 of sales at December 31, 2015. Evan received royalties of $2,613 on April 1, 2016. On October 1, 2016 Evan received royalties of $4,631. The 2nd half of 2016 sales were estimated to be $43,220 What is Evan's 2016 royalty revenue
Answer:
$8,565
Explanation:
Sales revenue of the year 2015 = $30,010
Accrued royalty revenue on December 31, 2015 = 30,010 x 10%
= $3,001
Evan received royalties of $2,613 on April 1, 2016.
Hence, royalty receivable for the year ended December 31, 2015 = 3,001- 2,613
= $388
On October 1, 2016, Evan received royalties of $4,631.
Thus, royalty received for the first half of the year 2016 = 4,631 - 388
= $4,243
The 2nd half of 2016 sales were estimated to be $43,220
Hence, royalty for the second half of the year 2016 = 43,220 x 10%
= $4,322
Evan's 2016 royalty revenue = Royalty revenue for the first half + Royalty revenue for the second half
= 4,243 + 4,322
= $8,565
Nate is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Nate based on his stated credentials without verifying them. Two days into the job, Nate's team lead realizes that Nate does not know much of what he claimed to know during the interview. This scenario best exemplifies
a. adverse selection
b. corporate governance
c. moral hazard
d. shared value creation
The scenario with Nate and the start-up company is an example of adverse selection, where the employer faces imperfect information regarding the candidate's abilities and hires based on misrepresented qualifications.
Explanation:The scenario described in the question best exemplifies adverse selection, which is a situation where one party in a transaction has more or better information compared to another party. In this case, the employer (the start-up) has imperfect information about the qualifications and abilities of Nate. Nate misrepresented his skills and experience to obtain the job, and after hiring him based on those false credentials, his inability to perform as expected becomes clear. Adverse selection occurs in various markets, including labor and financial capital markets, where information asymmetry can lead to sub-optimal outcomes, such as hiring a poor-quality employee or acquiring a "lemon." To mitigate this, employers may use various mechanisms like requiring degrees from certain institutions, reviewing past work history, seeking references, and looking for other indicators of ability and character to screen potential employees more effectively.
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Free-Flo Pipes & Plumbing Corporation is a private employer involved in an employment discrimination suit under the Civil Rights Act of 1964. Punitive damages may be recovered against Free-Flo only if the employer a. acted with malice or reckless indifference. b. can easily afford to pay the amount. c. has one hundred or more employe
Answer:
acted with malice or reckless indifference.
Explanation:
Employment discrimination.is one that is as a result of am employer's race, gender, religion, national origin, disability, age, sex, orientation, and gender by an employer.
Under the Civil rights act of 1964 Free-Flo Pipes & Plumbing Corporation will be liable if they acted with malice or reckless indifference.
All employees must be able to express themselves and work freely without being targeted in a wrong way by employers.
Pinewood Company purchased two buildings on four acres of land. The lump-sum purchase price was $900,000. According to independent appraisals, the fair values were $450,000 (building A) and $250,000 (building B) for the buildings and $300,000 for the land. Required: Determine the initial valuation of the buildings and the land.
Answer:
Buildings = $630,000
Land = $270,000
Explanation:
When a lump purchase price is given on buildings and land, the costs of Building and Land must be determined separately using fair values.
This is because Depreciation on Land and Building is different.
Buildings
Cost = (450,000+250,000)/ 1000,000 × $900,000
= $630,000
Land
Cost = (300,000)/ 1000,000 × $900,000
= $270,000
E16-25 (EPS with Convertible Bonds and Preferred Stock) On January 1, 2014, Crocker Company issued10-year, $2,000,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of Crockercommon stock. Crocker�s net income in 2014 was $300,000, and its tax rate was 40%. The company had100,000 shares of common stock outstanding throughout 2014. None of the bonds were converted in 2014.Instructions(a) Compute diluted earnings per share for 2014.(b) Compute diluted earnings per share for 2014, assuming the same facts as above, except that$1,000,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferredshare is convertible into 5 shares of Crocker common stock.
Answer:
The answer is given below;
Explanation:
EPS=Net income-preferred dividends/Weighted average shares outstanding
a.Net income=$300,000*(1-30%)=$210,000
Common stocks 100,000
Bonds assumed to be converted into common stocks =$2,000,000/$1,000=2,000*15=30,000
Total common stocks=100,000+30,000=130,000
Diluted EPS=$210,000/130,000=$1.615
b.
*Net income=210,000-(1,000,000*6%)=$150,000
Common stocks=100,000
Bonds =$1,000,000/$1,000=1,000*15=15,000
Preferred stocks=$1,000,000/$100=10,000*5=50,000
Total weighted average shares=100,000+15,000+50,000=165,000
Diluted EPS=Net income-preferred dividends/Weighted average shares
EPS=*$150,000/165,000=$.909
Kephlee is an amusement park operator and provided the following select financial data:
($ in millions) December 31, 2020
Revenue $121.5
Cash proceeds from the sale of a merry go round $15.4
Cash flows from operations $121.4
December 31, 2019 December 31, 2020
Accounts receivable 95.4 123.5
Deferred revenue 34.6 45.6
Based on the information provided, what were cash sales during 2020?
A. $136.9
B. $119.8
C. $104.4
D. $93.4
E. $82.4
To calculate cash sales during 2020, subtract the change in accounts receivable from the revenue.
Explanation:To calculate cash sales during 2020, we need to consider the change in the Accounts Receivable balance. Cash sales are the portion of revenue that is collected in cash rather than through accounts receivable. We can calculate cash sales by subtracting the change in accounts receivable from the revenue.
Change in Accounts Receivable = Ending Accounts Receivable - Beginning Accounts Receivable
Change in Accounts Receivable = $123.5 million - $95.4 million = $28.1 million
Cash Sales = Revenue - Change in Accounts Receivable
Cash Sales = $121.5 million - $28.1 million = $93.4 million
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Poodle Company owns 80 percent of the common stock of Shepherd Inc. Poodle acquires some of Shepherd's bonds from an unrelated party for less than the carrying value on Shepherd's books and holds them as a long-term investment. For consolidated reporting purposes, how is the acquisition of Shepherd's bonds treated?
Complete Question:
Poodle Company owns 80 percent of the common stock of Sheperd Inc. Poodle acquires some of Sheperds' bonds from an unrelated party for less than the carrying value on Sheperds' books and holds them as a long-term investment. For consolidated reporting purposes, how is the acquisition of Sheperds' bonds treated?
As a decrease in the Bonds Payable account on Sheperds' books.
As an increase in noncurrent assets.
Everything related to the bonds is eliminated in the consolidation worksheet, and nothing related to the bonds appears in the consolidated financial statements.
As a retirement of bonds.
A loss on the constructive retirement of a parent's bonds by a subsidiary is effectively recognized in the individual accounting records of the parent and its subsidiary:
I. at the date of constructive retirement.
II. over the remaining term of the bonds.
I
II
Both I and II
Neither I nor II
When one company purchases the debt of an affiliate from an unrelated party, a gain or loss on the constructive retirement of debt is recognized by which of the following?
Issuing Affiliate Purchasing Affiliate Consolidated Entity
A. No No Yes
B. Yes Yes No
C. No No No
D. Yes Yes Yes
Option A
Option B
Option C
Option D
Which of the following statements is(are) correct?
I. The amount assigned to the noncontrolling interest may be affected by a constructive retirement of bonds.
II. A constructive retirement of bonds normally results in an extraordinary gain or loss.
III. In constructive retirement, the entity would still consider the bonds outstanding, even though they are treated as if they were retired in preparing consolidated financial statements.
I
II
I and III
I, II, and III
Answer:
1. For consolidated reporting purposes, Company M's bonds will be treated as a retirement of bonds.
2. For consolidated reporting purposes, everything related to the intercompany bonds is eliminated in the consolidation worksheet, and nothing related to the bonds appears in the consolidated financial statements.
3. A loss on the constructive retirement of a parent's bonds by a subsidiary is effectively recognized in the individual accounting records of the parent and its subsidiary:
I. at the date of constructive retirement.
II. over the remaining term of the bonds.
Both I and II
4. When one company purchases the debt of an affiliate from an unrelated party, a gain or loss on the constructive retirement of debt is recognized by
Option A
5. The incorrect statement is:
I. The amount assigned to the noncontrolling interest may be affected by a constructive retirement of bonds.
Final answer:
For consolidated reporting, Poodle Company's acquisition of Shepherd Inc.'s bonds at less than carrying value is treated by eliminating the investment and corresponding liability from the consolidated balance sheet, and any related gain is also eliminated.
Explanation:
When Poodle Company, which owns 80 percent of Shepherd Inc.'s common stock, acquires some of Shepherd's bonds for less than the carrying value and holds them as a long-term investment, the acquisition of these bonds is accounted for in consolidated financial statements. Consolidation requires elimination of intercompany balances and transactions because they are internal to the corporate group. Hence, this intra-group bond acquisition would involve eliminating the investment in the bonds from the assets of Poodle Company and the corresponding liability from the balance sheet of Shepherd Inc., to the extent of the ownership percentage. This adjustment ensures that the consolidated financial statements only reflect external transactions and balances. Any gain from purchasing the bonds below their carrying value will be eliminated in the consolidated financial statements, as the gain is considered unrealized from the perspective of the corporate group.
Kartman Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 8.1 pounds $ 8.60 per pound $ 69.66 Direct labor 0.4 hours $ 40.00 per hour $ 16.00 Variable overhead 0.4 hours $ 5.60 per hour $ 2.24 In June the company's budgeted production was 5,000 units but the actual production was 5,100 units. The company used 23,750 pounds of the direct material and 2,450 direct labor-hours to produce this output. During the month, the company purchased 27,000 pounds of the direct material at a cost of $186,180. The actual direct labor cost was $58,621 and the actual variable overhead cost was $13,231. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for June is:
Answer:
Manufacturing overhead rate variance= $490 favorable
Explanation:
Giving the following information:
Variable overhead:
Standard Quantity= 0.4 hours
Standard rate= $5.6 per hour
Budgeted production= 5,000 units
Actual production= 5,100 units
The company used 2,450 direct labor-hours.
The actual variable overhead cost was $13,231.
To calculate the variable overhead rate variance, we need to use the following formula:
Manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity
Actual rate= 13,231/2,450= $5.4
Manufacturing overhead rate variance= (5.6 - 5.4)*2,450
Manufacturing overhead rate variance= $490 favorable
Two countries, Great Britain and the United States, produce just one good: beef. Suppose the price of beef in the United States is $2.80 per pound and in Britain it is £3.70 per pound.
(a) According to PPP theory, what should the $/£ spot exchange rate be?
(b) Suppose the price of beef is expected to rise to $3.10 in the U.S., and to £4.65 in Britain. What should the one-year forward $/£ exchange rate be?
(c) Given your answers to parts (a) and (b), and given that the current interest rate in the United States is 10 percent, what would you expect the current interest rate to be in Britain?
Answer:
Step 1
a) The exchange rate is $2.80=3.70 pounds. Divide both sides by 2.8
$1= 1.32 pounds
STEP 2
b) The exchange rate is $3.10=4.65 pounds. Divide both sides by 3.1
$1=1.5 pounds
STEP 3
(S₁-S₂/S₂) * 100 = i(s) - i(w)
S1 is the original exchange rate or 1.32 pounds per dollar. S2 is the end exchange rate or 1.5. i$ is listed as 10%, solve for iW.
[(1.32-1.5)/1.5] * 100 = 10 - i(w)
22%
Payson Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $1,200,000 and either has: Even cash flows of $300,000 per year or The following expected annual cash flows: $150,000, $150,000, $400,000, $400,000, and $100,000.
Calculate the payback period for each case.
Answer:
The payback period for even cash flow is 4 years
The payback period for uneven cash flows is 5 years
Explanation:
The payback period is a term used in capital budgeting and is one of the ways of assessing a project. It calculates the time required to recover the total cost invested in the project initially.
Payback period for Even cash flows
Payback period = Number of years till last period + Unrecovered cost at the beginning of the last period for payback / Total cash flows during the last period
The last period here refers to the period in which the cost will be recovered.
The initial cost is $1200000
Recovery till last year of payback = 300000 + 300000 + 300000 = $900000
Payback period = 3 + 300000 / 300000 = 4 years
Payback under uneven cash flows
Initial cost = $1200000
Recovery till last year of payback = 150000 + 150000 + 400000 +400000 = 1100000
Payback period = 4 + 100000 / 100000 = 5 years
Current assets: Cash and cash equivalents $ 346 $ 265 Current investments 5 443 Net receivables 594 186 Inventory 10,592 8,409 Other current assets 1,230 235 Total current assets $ 12,767 $ 9,538 Current liabilities: Current debt $ 8,421 $ 4,026 Accounts payable 1,787 1,041 Other current liabilities 1,091 2,343 Total current liabilities $ 11,299 $ 7,410 Required: 1-a. Calculate the current ratio for ACME Corporation and Wayne Enterprises.
Answer:
For ACME Corporation = 1.12 times
For Wayne Enterprises = 1.29 times
Explanation:
The computation of current ratio is shown below:-
For ACME Corporation
Current Ratio = Total Current Assets ÷ Current Liabilities
= $12,767 ÷ $11,299
= 1.12 times
For Wayne Enterprises
Current Ratio = Total Current Assets ÷ Current Liabilities
= $9,538 ÷ $7,410
= 1.29 times
Here, we assume first figure for ACME Corporation and second figure for Wayne Enterprises
George decided to open a health club. His girlfriend Lydia, a marketing manager at a small company, tried to convince him to do some marketing research, but he said, "I know what I don't like about health clubs; that's all the information I need. Besides, I can't afford an expensive research project." He opened the club in a shopping center about 15 miles from his home. Six months later, his club had very few members and he was running out of cash. List some key types of primary and secondary data George could have collected before opening his club that might have helped him be more successful, keeping in mind his limited budget.
Answer:
1) Identify a wellness speciality - conventional or a claim to fame wellness focus - and its ROI
2) The capital required and ROI on different areas accessible
3) Buy versus Lease on supplies
4) The opposition investigation in the region
5) demography of the area
6) promoting methods that are most appropriate to the area - individual or family focused.
7) Hiring talented staff, and sources for substitution of staff
Johns Company manufactures products R, S, and T from a joint process. The following information is available: Product R S T Total Units produced 12,000 ? ? 24,000 Sales value at split-off ? ? $ 50,000 $ 200,000 Joint costs $ 48,000 ? ? $ 120,000 Sales value if processed further $ 110,000 $ 90,000 $ 60,000 $ 260,000 Additional costs if processed further $ 18,000 $ 14,000 $ 10,000 $ 42,000 Assuming that joint product costs are allocated using the relative-sales-value at split-off approach, what was the sales value at split-off for products R and S? Product R Product S A) $ 55,000 $ 75,000 B) $ 63,000 $ 81,000 C) $ 80,000 $ 70,000 D) $ 91,000 $ 83,000 E) $ 101,000 $ 92,000
Answer:
C) $ 80,000 $ 70,000
Explanation:
R = ($48,000/$120,000) x $200,000
=0.4×$200,000
= $80,000
S = $200,000-$50,000-$80,000
= $70,000
Therefore the sales value at split-off for products R is $80,000 and S $70,000
In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 12.00 % and a volatility of 25.00 %. Currently, the risk-free rate of interest is 4.00 %. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20.00 %, a volatility of 80.00 %, and a correlation of 0.20 with the Tanglewood Fund. Calculate the required return and use it to decide whether you should add the venture capital fund to your portfolio.
Answer:
The answer is 9.12%
Explanation:
From the question stated, we calculate for the required return and use it to decide whether you should add the venture capital fund to your portfolio
Now,
For the calculation of required return
Required return =[(risk free) + (correlation * Volatility venture/Volatility fund) (Expected return - Risk free)]
[ 4.00% + ( 0.20 * 80.00%/ 25.00%) * (12.00% - 4.00%)]
[ 4.00% + (0.20 * 320%) * (8%)]
[4.00% + ( 0.64) * (8%)]
[ 4.00% + 0.0512]
= 0.0912 =9.12
Therefore the required return is = 9.12%