Answer:
Yes
Explanation:
A a lower opening inventory leads to a lower cost of sales, hence a higher net income while a lower closing inventory leads to a higher cost of sales and hence a lower net income.
On January 1, Innovative Solutions, Inc. issued $220,000 in bonds at face value. The bonds have a stated interest rate of 5 percent. The bonds mature in 10 years and pay interest once per year on December 31.Required:1, 2 & 3. Complete the required journal entries to record the bond issuance, interest payment on December 31, early retirement of the bonds. Assume the bonds were retired immediately after the first interest payment at a quoted price of 103. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
Explanation:
The journal entries are shown below/:
On January 1
Cash A/c Dr $220,000
To Bonds payable A/c $220,000
(Being the issuance of bond is recorded)
On December 31
Interest expense A/c Dr $11,000
To Cash A/c $11,000
(Being the interest expense is recorded)
The computation is shown below:
= Face value of bond × interest rate
= $220,000 × ×5%
= $11,000
Bonds payable A/c Dr $220,000
Loss on redemption A/c Dr $6,600
To Bonds payable A/c $226,600 ($220,000 × 1.03)
(Being the retirement of the bond is recorded)
Journal entries for bond transactions include recording the initial bond issuance at face value, the annual interest payment based on the stated interest rate, and the early retirement entry recording the loss due to retirement at a premium.
To record the bond issuance, interest payment, and early retirement of the bonds for Innovative Solutions, Inc., we need to make three separate journal entries. The bond was issued at face value, thus no premium or discount is involved.
1. Journal Entry for Bond Issuance:
Dr Cash 220,000
Cr Bonds Payable 220,000
This entry reflects the receipt of cash and the obligation to pay back the bonds' face value at maturity.
2. Journal Entry for Interest Payment:
Dr Interest Expense 11,000
Cr Cash 11,000
This entry accounts for the annual interest payment, which is 5% of 220,000.
3. Journal Entry for Early Retirement:
Assuming the bonds were retired immediately after the first interest payment at a quoted price of 103, which means the company will pay 103% of the face value to retire the bonds:
Dr Bonds Payable 220,000
Dr Loss on Bond Retirement 6,600 (3% of 220,000)
Cr Cash 226,600 (103% of 220,000)
This entry removes the bond liability and recognizes the loss on retirement due to paying more than the face value.
Kong Inc. reported net income of $298,000 during 2018 and paid dividends of $26,000 on common stock. It also has 10,000 shares of 6%, $100 par value cumulative preferred stock outstanding. Common stockholders' equity was $1,200,000 on January 1, 2018, and $1,600,000 on December 31, 2018. The company's return on common stockholders' equity for 2018 is: A. 17.4% B. 17.0% C. 15.1% D. 21.3%
Answer:
B. 17.0%
Explanation:
The computation of the return on common stockholders' equity is shown below:
= (Net income - preference dividend) ÷ (Average Common stockholders' equity)
where,
Net income is $298,000
Preference dividend = 10,000 shares × $100 × 6% = $60,000
And, the Average Common stockholders' equity would be
= (Opening Common stockholders' equity + Ending Common stockholders' equity) ÷ 2
= ($1,200,000 + $1,600,000) ÷ 2
= $1,400,000
Now put these values to the above formula
So, the value would equal to
= ($298,000 - $60,000) ÷ ($1,400,000)
= 17%
The Alford Group had 280,000 shares of common stock outstanding at January 1, 2016. The following activities affected common shares during the year. There are no potential common shares outstanding. 2016 Feb. 28 Purchased 12,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 48,000 new shares. Dec. 31 Net income for 2016 is $1,242,000. 2017 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2017 is $1,242,000. Required: 1. Determine the 2016 EPS 2. Determine the 2017 EPS 3. At what amount will the 2016 EPS be presented in the 2017 comparative financial statements?
Answer:
Please see attachment
Explanation:
Please see attachment
Bonita's Braidworks hires workers to braid hair. The store sells the service for $25 per customer. The marginal revenue product of this store's fifth worker is $50. The marginal product of the fifth worker isA) 0.5 braided customers.B) 2 braided customers.C) 25 braided customers.D) indeterminate from this information.
Answer:
2 Braided Customers
Explanation:
Given:
Services Rate per customer = 25 $
Marginal Revenue Product = 50 $
Marginal Product = (Marginal Revenue Product / Service rate per customer)
Marginal Product = 50 / 25
Marginal Product = 2 Braided Customers
The marginal product of the fifth worker at Bonita's Braidworks is 2 braided customers, calculated by dividing the marginal revenue product of the fifth worker by the price per service.
Explanation:The subject of this question is marginal revenue product and marginal product in economics. The Marginal Revenue Product (MRP) is the increase in revenue that results from employing one additional unit of a factor of production, in this case, a worker. On the other hand, the Marginal Product (MP) is the increase in output that arises from an additional unit of input, again in this case, a worker.
Bonita's Braidworks sells its service for $25 and the marginal revenue product of its fifth worker is $50. This means that when the fifth worker is hired, the revenue of the firm increases by $50.
This suggests that the marginal product of the fifth worker would be the marginal revenue product (MRP $50) divided by the service price of $25, which equals to two. Hence, the correct answer is B) 2 braided customers.
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Lake House. Harry has two houses, a house on the lake and a house in town. Rebecca wants to buy the house on the lake. Harry and Rebecca orally agree that Rebecca will buy the house on the lake for $300,000. Harry hurriedly writes out a contract providing that he would sell "his house" to Rebecca for $300,000. Harry signs the top of the document. Rebecca does not sign at all. No merger clause is included in the contract. Harry backs out of the contract, and Rebecca sues him. He tells the judge that the statute of frauds is not satisfied because he did not sign the document at the end and because Rebecca did not sign at all. He also tells the judge that, at any rate, the agreement referred to the house in town, not the house on the lake; and that under the parol evidence rule, he had the right to identify the correct house. Which of the following is true regarding Harry's assertion that the statute of frauds is not satisfied because Rebecca did not sign the document?
1)Is there an enforceable agreement? Which elements of an enforceable agreement exist?
2)Why or why not is there an enforceable agreement? Can Rebecca sue him?
3)Can Harry testify about the $20,000 gift? Why or why not?
Answer:
1. Yes
2. Yes
3. No
Explanation:
1 . Yes, there is an enforceable agreement between the seller (harry) and the buyer (Rebecca).
Elements of an enforceable agreement that exist between the contracting parties are:
Offer: Harry makes an offer to sell the house on the lake to Rebecca.
Acceptance: Rebecca accepts to buy the house on the lake from Harry for a consideration.
Consideration: Both the parties agree for a consideration i.e. $300,000.
Competency: Both the parties are competent and have capacity to enter into a contract.
Lawful purpose: Agreement between the parties was to transfer the ownership of the property from seller to the buyer. Hence, it is a lawful purpose.
2.Yes, it is an enforceable agreement because even though few essential terms were missing in the written agreement, the seller Rebecca would be allowed to prove her intention under due to the fact that the contract did not include merger clause. The court will look into the evidences or oral negotiations between the parties before entering into the contract.
The following essential elements were missing in the agreement at the time of entering into a contract:
The agreement should contain essential terms of the contract: name of the parties, subject matter, consideration.
Signature of both the parties.
Harry has only mentioned to sell “his house” and did not specify which house. This ‘issue’ can be resolved by parol evidence rule – because the agreement did not contain ‘no merger clause’ the court may allow to look outside the agreement in order to identify the intention of the parties. Therefore, Rebecca, under parol evidence rule, will be allowed by the court to identify the subject matter in case of the ambiguity.
Moreover, only the seller i.e. Harry signed the contract and not both the parties. This issue can be resolved by parol evidence rule. The court will look into the intention of the parties at the time of entering into the contract and hence, can make out that Rebecca wanted to buy the house on the lake.
Rebecca, therefore, can sue Harry.
3 . No, Harry cannot testify about the $25,000 gift because of the operation of the parol evidence rule. According to the parol evidence rule, any oral or written agreement (oral in this case) between the parties will not be taken into consideration that contradicts or varies the written contract.
Hence, Harry cannot testify about the $25,000 housewarming gift.
Oaktree Company purchased new equipment and made the following expenditures:
Purchase price $ 64,000
Sales tax 4,100
Freight charges for shipment of equipment 890
Insurance on the equipment for the first year 1,090
Installation of equipment 2,900
The equipment, including sales tax, was purchased on open account, with payment due in 30 days. The other expenditures listed above were paid in cash.
Required:
Prepare the necessary journal entries to record the above expenditures. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1) Record the purchase of equipment
2) Record any expenditures not capitalized in the purchase of equipment
Answer:
The Journal entries are as follows:
(1)
Equipment A/c Dr. $71,890
To cash $3,790
To accounts payable $68,100
(To record the purchase of equipment)
Workings:
Equipment value:
= Purchase price + Sales tax + Freight charges for shipment of equipment + Installation of equipment
= 64,000 +4,100 + 890 + 2,900
= $71,890
Cash Paid:
= Freight charges for shipment of equipment + Installation of equipment
= 890 + 2,900
= $3,790
Accounts payable = Purchase price + Sales tax
= 64,000 +4,100
= $68,100
(2)
Prepaid Insurance A/c Dr. $1,090
To cash A/c $1,090
(To record any expenditures not capitalized in the purchase of equipment)
The company first records the purchase of the equipment by debiting Equipment Account $68,090 and crediting Accounts Payable same amount. Other expenditures such as freight, insurance, and installation costs are separately recorded by debiting their respective expense accounts and crediting Cash account.
Explanation:The necessary journal entries for Oaktree Company to record the expenditures for the purchase and associated costs of equipment are as follows:
Equipment Purchase: Debit Equipment Account $68,090 (which includes both the $64,000 purchase price and $4,100 sales tax). Credit Accounts Payable $68,090. Other expenditures: Debit Freight Charges $890, Debit Equipment Insurance $1,090, Debit Installation Costs $2,900. Credit Cash Account $4,880. These are not capitalized as part of the equipment as they are separate cost incurred due to the equipment purchase but are not part of the machinery's intrinsic value. Learn more about Equipment Purchase Accounting here:
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Knowledge Check 01 Addison Corporation is considering the purchase of equipment that would increase sales revenues by $250,000 per year and cash operating expenses by $100,000 per year. The equipment would cost $400,000 and have a 5-year life with no salvage value. The simple rate of return on the investment is closest to
A. 17.5%
B. 20.0%
C. 25.5%
D. 35.0%
Answer:
C. 25.5%
Explanation:
Net operating cashflow = (250,000 - 100,000) = 150,000; This is a recurring cashflow; the PMT
Cost of equipment; the PV = 400,000
Next, calculate the rate of return using Net operating cashflow per year and the equipment cost. You can do this with a financial calculator;
N =5
PMT = 150,000
FV = 0
PV = -400,000
then CPT I/Y = 25.41%
Therefore the return is closest to 25.5%
Total budgeted fixed overhead cost for the year $ 250,000 Actual fixed overhead cost for the year $ 254,000 Budgeted direct labor-hours (denominator level of activity) 25,000 Actual direct labor-hours 27,000 Standard direct labor-hours allowed for the actual output 26,000 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)
Answer:
1. $10
2. The fixed overhead budget variance and volume variance is $4,000 unfavorable and $10,000 favorable respectively
Explanation:
1. The computation of the predetermined overhead rate for the year is shown below:
Predetermined overhead rate = (Total estimated budgeting fixed manufacturing overhead) ÷ (estimated direct labor-hours)
= $250,000 ÷ 25,000 hours
= $10
2. The computation of the fixed overhead budget variance and volume variance is shown below:
Fixed overhead budget variance = Actual fixed overhead cost for the year - Total budgeted fixed overhead cost for the year
= $254,000 - $250,000
= $4,000 unfavorable
Volume variance = (Budgeted direct labor hours - standard direct labor hours) × predetermined overhead rate
= (25,000 hours - 26,000 hours) × $10
= $10,000 favorable
Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $9.15, but management expects to reduce the payout by 5 percent per year, indefinitely. If you require a return of 15 percent on this stock, what will you pay for a share today?
Final answer:
Using the Gordon Growth Model, you should be willing to pay $43.4625 for a share of Antiques R Us today, considering the expected 5% annual decrease in dividends and the required 15% rate of return.
Explanation:
To determine the price you would pay for a share of Antiques R Us, given that dividends are expected to decrease by 5 percent indefinitely, we can use the Gordon Growth Model (also known as the Dividend Discount Model). The model takes into account the next period's expected dividend, the required rate of return on the stock, and the expected dividend growth rate. The formula for the price of the stock when dividends are declining at a constant rate is:
P = D1 / (r - g)
where:
P is the price of the stock todayD1 is the dividend next yearr is the required rate of return (15% in this case)g is the growth rate of dividends (-5% in this case)Since the company just paid a dividend of $9.15, the next year's expected dividend, D1, is $9.15 * (1 - 0.05) = $8.6925. Plugging the values into the formula gives us:
P = $8.6925 / (0.15 - (-0.05)) = $8.6925 / 0.20 = $43.4625
Therefore, you should be willing to pay $43.4625 for a share of Antiques R Us today.
In a research report, the action statements that will help solve the problem at hand through the creation of a competitive advantage is most likely to be included in the _____.
Group of answer choices
A. recommendations
B. limitations section
C. appendixes
D. research methods
E. section data
F. analysis and findings section
Answer:
A. recommendations
Explanation:
One of the most important parts of research reports, business case studies or business plans is the recommendation part.
Research reports are usually made by financial analysts, usually in order to provide an idea for lucrative investment or just to assess a particular financial instrument, stock or currency.
After presenting the summary and conducting proper analyses comes the recommendation section. In this section, strategic solutions and action plans are presented, given that they are the rational output of the needed analyses and prerequisites related to research.
Every recommendation represents an actionable solution that should be implemented or pursued in order to gain some benefits. Here are some recommendations:
- Investment recommendations - Analysts may discover it is extremely lucrative to invest in a particular industry.
- Purchase of particular shares - After proper research, it may be implied that shares of a particular company are stable in the long run, making them appealing for a steady income through dividends.
D’Souza Company sold 7,000 units of its product at a price of $86.00 per unit. Total variable cost is $51.20 per unit, consisting of $40.60 in variable production cost and $10.60 in variable selling and administrative cost. Compute the manufacturing (production) margin for the company under variable costing.
The manufacturing margin for D’Souza Company, under variable costing, is calculated by subtracting the variable production cost from the sale price per unit and then multiplying by the total units sold, resulting in $317,800.
Explanation:The student's question involves calculating the manufacturing or production margin under variable costing. According to the information provided, D’Souza Company sold 7,000 units at a price of $86.00 per unit, with a total variable cost of $51.20 per unit. The variable production cost is $40.60, and the variable selling and administrative cost is $10.60 per unit. To calculate the manufacturing margin, we subtract the variable production cost from the sales price for each unit and then multiply by the total number of units sold. This can be shown as:
Manufacturing Margin = (Sale Price per Unit - Variable Production Cost per Unit) × Total Units Sold
Manufacturing Margin = ($86.00 - $40.60) × 7,000
Manufacturing Margin = $45.40 × 7,000
Manufacturing Margin = $317,800
Therefore, the manufacturing margin for D’Souza Company using variable costing for the sale of 7,000 units is $317,800.
Final answer:
The manufacturing margin for D'Souza Company is computed by subtracting the variable production cost per unit from the sales price per unit, resulting in a margin of $45.40 per unit. Multiplying by the total units sold (7,000 units), the total manufacturing margin is $317,800.
Explanation:
Manufacturing Margin Computation
To compute the manufacturing margin (also known as the production margin) under variable costing for D'Souza Company, we need to consider the selling price per unit and the variable production cost per unit. The manufacturing margin is the difference between the sales revenue per unit and the variable production costs per unit, representing the profit made on each unit before fixed costs and selling/administrative expenses are considered.
In this case, the company sold 7,000 units at a price of $86.00 per unit. The variable production cost per unit is $40.60. To calculate the manufacturing margin, we subtract the variable production cost per unit from the sales price per unit:
Manufacturing Margin = Sales Price per Unit - Variable Production Cost per Unit
Manufacturing Margin = $86.00 - $40.60
Manufacturing Margin = $45.40 per unit
Now, to find the total manufacturing margin, we multiply the margin per unit by the total units sold:
Total Manufacturing Margin = Manufacturing Margin per Unit × Total Units Sold
Total Manufacturing Margin = $45.40 × 7,000
Total Manufacturing Margin = $317,800
Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below:
Puget Sound Divers Planning Budget For the Month Ended May 31
Budgeted diving-hours (q) 350
Revenue ($420.00q) $ 147,000
Expenses:
Wages and salaries ($11,500 $130.00q) 57,000
Supplies ($4.00q) 1,400
Equipment rental ($2,200 $25.00q) 10,950
Insurance ($3,900) 3,900
Miscellaneous ($510 $1.44q) 1,014
Total expense 74,264
Net operating income $ 72,736
Required:
During May, the company’s actual activity was 340 diving-hours. Compute the flexible budget of activity.
Answer:
operating income 84740.4
Explanation:
The flexible budget will work out the numbers for a level of activity of 340 units
Revenue $420 x 340 = 142,800
Wages and salaries $11,500 fixed component + $130 x 340 = 55,700
Supplies $4.00 x 340 = 1,360
Insurnace (fixed) $3,900
Miscellaneous $510 fixed component + $1.44 x 340 = 999,6
Operating Income:
Revenues 142,800
total expenses (58,059.6)
operating income 84740.4
. PPF Model – Assume the Real GDP in this economy is composed of a $3500 b Private Sector and a $1100 b Public Sector after "G" increases by $100 b. A small, initial movement in the PPF Model will be from Point ______ half-way toward Point _____
Answer: R to T
Explanation:
The economy is still in recession, but possible start of a recovery.
In comparing two online e-tailers, Walmart vs. DeepDiscounts, Walmart should be considered the better online business based on brand name reputation and the fact that Walmart has a brick and mortar store. Group of answer choices True False
Answer:
The correct answer is letter "A": True.
Explanation:
Walmart can be considered one of the pioneers when it comes to talking about online business. Its success does not only rely on the deals offered but also in the wide variety of products they sell. It does not imply DeepDiscounts.com is a bad online business but, compared to Walmart, the latter has several steps ahead.
Final answer:
It is not necessarily true that Walmart is the better online business compared to DeepDiscounts based solely on brand reputation and physical stores. Consumer preferences and the broader impacts of 'Wal-Martization' also play important roles in determining the success and preference of an online retailer.
Explanation:
Whether Walmart should be considered the better online business compared to DeepDiscounts solely based on brand name reputation and the presence of brick-and-mortar stores is not necessarily true. The statement oversimplifies the complex nature of online retail success. While factors such as brand reputation and the omni-channel approach that includes both online presence and physical stores may contribute to the strength of a business like Walmart, they do not automatically make it superior to an online e-tailer like DeepDiscounts.
Additionally, the effect of 'Wal-Martization' poses concerns about local economic impacts and employee compensation. This consideration might lead some consumers to prefer supporting businesses like L.L. Bean, which have a model heavily reliant on mail-order sales and focus on customer guarantees and quality reputation.
However, it is important to recognize that consumer behavior is influenced by a variety of factors, including product selection, prices, customer service, convenience, and personal values. These factors could lead some consumers to prefer smaller, niche e-tailers over larger chains.
In October, Pine Company reports 18,600 actual direct labor hours, and it incurs $126,540 of manufacturing overhead costs. Standard hours allowed for the work done is 22,200 hours. The predetermined overhead rate is $5.75 per direct labor hour. Compute the total overhead variance.
Answer:
The total overhead variance in hours taken is 3,600 hours
The total overhead cost variance is $1,110
Explanation:
The variance is about the different between budget/ standard and actual figures.
Standard hours allowed for the work done is 22,200 hours; and the predetermined overhead rate is $5.75 per direct labor hour. So total cost budgeted for work done is $127,650 = $5.57 x 22,200 hours
The total overhead variance in hours taken = standard hours of 22,200 - actual direct labor hours of 18,600 = 3,600 hours
The total overhead cost variance = standard cost - actual cost = $127,650 - $126,540 = $1,110
To compute the total overhead variance in this scenario, you subtract the standard overhead from the actual overhead ($126,540 - $127,650). The total overhead variance for Pine company in October amounts to -$1,110. A negative variance indicates less overhead cost than what was expected.
Explanation:In business, particularly in manufacturing, overhead variance is the difference between the actual overhead incurred and the standard overhead. Standard overhead is predetermined, typically computed based on direct labor hours.
To compute the total overhead variance in this scenario, we have to define actual overhead as indicated by the $126,540. Standard overhead is calculated as the product of the predetermined overhead rate of $5.75 and the standard hours allowed which amounts to $5.75× 22,200 = $127,650.
The total overhead variance is thus the difference between these two amounts: Actual overhead - Standard overhead = $126,540 - $127,650 = -$1,110. Therefore, the total overhead variance for Pine company in October is -$1,110 - a negative variance indicates less overhead cost than what was expected or budgeted for which can be seen as favorable.
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Surf City's ad Manager, Dan, calls the billboard company to buy the billboard. He speaks with Jim, a salesperson. Jim asks how long Dan intends to run the campaign. Dan replies he expects to keep an outdoor message up along the interstate for 10 years or more. Jim responds that while a 30-sheet poster is a good choice, more permanence and impact can be achieved with a(n)A. junior poster.B. painted bulletin.C. spectacular.D. inflatable panel.E. inside bus.
Answer:
The answer is letter B. Painted Bulletin
Explanation:
Painted Bulletin, because you can move them to different choice locations every 3 months. This way you can advertise your product, service, and store all over the town.
Assume that you are a common stockholder of Inside Incorporated. If the company needed additional capital, and maintaining your current level of voting control was important, would you prefer to have it issue additional common stock or additional preferred stock
Answer:
Additional Preferred Stock
Explanation:
Preferred Stock always provides a preferential right in terms of distribution of earnings. But in no manner it increases the common equity, or the number of participants in common equity.
Also, there is no voting right attached with the preference shares of a company.
As when new equity will be issued the number of shareholders will increase and also the share percentage held currently will fall.
Accordingly the voting right and voting control will fall.
As investor do not desire the above, the preference share capital shall be issued so that there is no decline in voting share or control of the investor.
As a common stockholder maintaining voting control, you would prefer additional preferred stock issuance as it generally doesn't offer voting rights, hence, your voting control isn't diluted. On the contrary, issuing additional common stock reduces a shareholder's voting control.
Explanation:As a common stockholder, if you want to maintain your current level of voting control in Inside Incorporated, you would prefer the company to issue additional preferred stock and not common stock.
When additional common stock is issued, your percentage share of the voting rights in the company would decrease. Issuing common stock dilutes the existing shares, thereby reducing a shareholder's voting control. However, when Inside Incorporated issues additional preferred stock, it does not dilute your voting control since preferred stockholders usually have no voting rights.
Preferred stockholders have a higher claim on dividends and assets in case of liquidation than common stockholders, but do not participate in the voting process of the company. This means as a common stockholder, your voting rights and control over the company would remain intact even with the issuance of additional preferred stock.
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What is meant by assessment?
a. Activities that occur between two or more businesses.
b. Provides services for connecting network resources across network domains.
c. Documenting rules, procedures, and guidelines to be tested against a system.
d. The encryption key that is held privately by the user.
Answer: Option C
Explanation: In simple words, assessment refers to checking something or someone in respect of its quality, quantity or other such characteristic as such. Usually assessment is done by comparing the actual results with some criteria that was set before.
By doing assessment one can not only find out if there is any problem he or she can also evaluate what were the reasons and whats steps should be taken further to resolve it.
Hence from the above we can conclude that the correct option is C .
Answer:
C. Documenting rules, procedures, and guidelines to be tested against a system.
Which of the following factors does not affect the initial market price of a stock?
(A) The company's anticipated future earnings.
(B) The current state of the economy.
(C) The par value of the stock.
(D) The expected dividend rate per share.
Initial Market Price or Initial Public Offering is the price equal to the value of the expected dividend in the future and the fluctuation of supply and demand.
Which factor does affect the initial market price of stock?The fundamental factors like level of earning, cash flow per share, dividends per share, and the expected growth in the earning affect the initial price of the stock. A growing economy leads to greater confidence in investors and helps in the rise of the stock market. The country's economy affects the price of stocks. The par value of the stock is defined as the initial face value of the company's shares that are announced or decided by the directors as per the guidelines and the total value of the fund to be issued.Thus, the par value does not affect the initial price of the stock.
The correct answer is C.
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You expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 in each of the three years. You believe the stock will sell for $20 at the end of the third year.
What is the stock price if the discount rate for the stock is 10%?
Answer:
$18.095417
Explanation:
To obtain the current stock price, bring all paid dividends and the stock selling price to present value at a 10% rate per year:
[tex]P=\frac{(1.00)}{(1+0.10)}+\frac{(1.25)}{(1+0.10)^2}+\frac{(20+1.50)}{(1+0.10)^3}\\P= \$18.095417[/tex]
*Note that for the dividends paid after the first year, only one period was considered, and for the dividends paid after the second year, only two periods were considered.
The stock price is $18.095417
Assume the Fed is trying to decide whether to lower the required reserve ratio to 7%. Currently, the required reserve ratio is 10%. If banks keep no excess reserves, how much more would the money supply increase if the Fed lowers the reserve ratio when someone deposits $300 into a checking account?
Answer
The answer and procedures of the exercise are attached in the image below.
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.
Exercise 7-15On April 1, 2020, Bridgeport Company assigns $505,300 of its accounts receivable to the Third National Bank as collateral for a $327,200 loan due July 1, 2020. The assignment agreement calls for Bridgeport to continue to collect the receivables. Third National Bank assesses a finance charge of 4% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). Prepare the April 1, 2020, journal entry for Bridgeport Company.
Answer:
Please see attachment .
Explanation:
Please see attachment .
The effective combined tax rate in a firm is 40%. An outlay of $2 million for certain new assets is under consideration. Over the next 8 years, these assets will be responsible for annual receipts of $600,000 and annual disbursements (other than for income taxes) of $250,000. After this time, they will be used only for stand-by purposes with no future excess of receipts over disbursements a) What is the prospective rate of return before income taxes?
b) What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 8 years?
c) What is the prospective rate of return after taxes if it is assumed that the assets must be written off for tax purposes over the next 20 years, using straight line depreciation?
Answer:
a) The prospective rate of return before income taxes is 40%
b) The prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 8 years is 24%
c) The prospective rate of return after taxes if it is assumed that the assets must be written off for tax purposes over the next 20 years, using straight line depreciation 150%
Explanation:
a) What is the prospective rate of return before income taxes?
The annual profit from business only is $350,000 = annual receipts of $600,000 - annual disbursements of $250,000
Then total profit in 8 years is $2.8 million = $350,000 x 8 years
So profit from investment after 8 years (regardless net present value) is $800,000 = $2.8 million - outlay of $2 million
The prospective rate of return before income taxes is 40% = profit $800,0000/ investment of $2 million x 100%
b) What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 8 years?
The depreciation booked in expenses annually in every 8 years is $250,000
The annual profit after tax annually is $60,000 = (annual profit from business of $350,000 – depreciation of $250,000) x (1-40%)
So the profit after tax and straight-line depreciation in 8 years is $480,000 = annual profit of $60,000 x 8 years
The prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 8 years is 24% = $480,000/ $2 million x 100%
c) What is the prospective rate of return after taxes if it is assumed that the assets must be written off for tax purposes over the next 20 years, using straight line depreciation?
The depreciation booked in expenses annually in every 20 years is $100,000
The annual profit after tax annually is $150,000 = (annual profit from business of $350,000 – depreciation of $100,000) x (1-40%)
So the profit after tax and straight-line depreciation in 20 years is $3 million = annual profit of $150,000 x 20 years
The prospective rate of return after taxes if it is assumed that the assets must be written off for tax purposes over the next 20 years, using straight line depreciation 150% = $3 million/ $2 million x 100%
Leary Manufacturing Corporation purchased 5,000 shares of its own previously issued $10 par common stock for $125,000. As a result of this event, A. Leary’s Common Stock account decreased $50,000. B. Leary’s total stockholders’ equity decreased $125,000. C. Leary’s Paid-in Capital in Excess of Par Value account decreased $75,000. D. All of these answer choices are correct.
Answer:
D. All of these answer choices are correct.
Explanation:
When a company purchases its own shares then the equity capital is reduced, as it is not an investment, but rather reducing the ownership share.
Equity value reduces with the par value of the share.
The paid in capital in excess of par value shall also be reduced if the share is bought for a value more than the par value, but in case if it is bought for less than the par value then the par value shall reduce the equity balance and that the difference in par value and bought up value shall be added to retained earnings.
In the given instance the total equity shall be reduced by $125,000
In this the equity capital by $50,000 and paid in capital in excess of par value by $125,000 - $50,000 = $75,000
Thus, all the statements are correct.
Which of the following items are normally classified as current liabilities for a company that has a one-year operating cycle? (You may select more than one answer.
a. Note payable due in 18 months.
b. Bank debt due in 5 years.
c. Loan due in 18 months.
d. Portion of long-term note due in 1 month.
e. Portion of long-term note due in 10 months.
f. Wages payable due in 7 days.
Answer:
The correct answer are D, E and F
Explanation:
Current liabilities are the short-term obligations of the company or the business which are due within the period of one year or within a operating cycle. An operating cycle states the cash conversion cycle, which is the time taken by the company to purchase the inventory and then convert the inventory into cash through sales.
The items which can be classified as Current Liabilities are portion of the long term note which is due in 1 month, wages payable due in 7 days and portion of the long term note which is due in 10 months.
The following financial information was summarized from the accounting records of Buddy Corporation for the current year ended December 31: Beagle Division Dalmatian Division Corporate Total Cost of goods sold $47,200 $30,270 Direct operating expenses 27,000 20,400 Net sales 99,000 87,000 Interest expense $2,040 General overhead 18,160 Income tax 4,700
Required: Calculate:
(a) The gross profit for the Dalmatian Division. $
(b) The income from operations from the Dalmatian Division. $
(c) The gross profit for the Beagle Division. $
(d) The income from operations from the Beagle Division. $
(e) The net income for Buddy Corporation. $
Answer:
(a) $56,730
(b) $36,330
(c) $ 51,800
(d) $24,800
(e) $36,230
Explanation:
(a) Gross profit for the Dalmatian Division:
= Net sales - Total Cost of goods sold
= $87,000 - $30,270
= $56,730
(b) Income from operations from the Dalmatian Division:
= Gross Profit - Direct operating expenses
= $56,730 - $20,400
= $36,330
(c) Gross profit for the Beagle Division:
= Net sales - Total Cost of goods sold
= $99,000 - $47,200
= $ 51,800
(d) Income from operations from the Beagle Division:
= Gross Profit - Direct operating expenses
= $51,800 - $27,000
= $24,800
(e) Total income from operations;
= $36,330 + $24,800
= $61,130
Earnings before interest and taxes:
= Total income from operations - General overhead
= $61,130 - $18,160
= $42,970
Earnings before taxes:
= Earnings before interest and taxes - Interest expense
= $42,970 - $2,040
= $40,930
Net income = Earnings before taxes - Income taxes
= $40,930 - $4,700
= $36,230
Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid $120,000 to tear down two buildings on the land. Salvage was sold for $8,100. Legal fees of $5,220 were paid for title investigation and making the purchase. Architect's fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000.
The cost of the land that should be recorded by Wilson Co. is?
Answer:
The cost of land should be recorded by Wilson Co. : $1,480,320
Explanation:
The cost of land, under GAAP, is all the costs incurred minus any revenue earned which are necessary to put the land to its ready-to-be-used stage, that is factory site.
Thus, all the cost regarding to construction should not be recorded as cost of land, instead, it should be assessed whether it is recorded as the cost of factory.
In details, the cost of land in the question is equal to:
Purchasing price + Tear down two buildings cost - Salvage from two building + Legal fees for investigation and making the purchase + Title insurance cost + Pavement cost = 1,350,000 + 120,000 - 8,100 + 5,220 +3,600 + 9,600 = $1,480,320.
The cost of the land that should be recorded by Wilson Co. includes all direct costs associated with acquiring and preparing the land for its intended use, excluding costs related to the building or construction. Therefore, the recorded cost of the land would be $1,476,720.
Explanation:The cost of the land to be recorded by Wilson Co. includes the purchase price of the land, the costs to prepare the land for its intended use, and other direct costs associated with obtaining the land. These would include costs to demolish any existing structures (with any salvage value offsetting this), legal fees associated with the purchase, and any assessments for local improvements such as pavement. It would not include architect's fees, liability insurance during construction, excavation costs, construction costs, or interest costs during construction as these are considered part of the cost of the building, not the land.
Therefore, the cost of the land that should be recorded by Wilson Co. is calculated as follows: $1,350,000 (purchase price) + $120,000 (demolition costs) - $8,100 (salvage) + $5,220 (legal fees) + $9,600 (pavement assessment) = $1,476,720.
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After researching Valero Energy common stock, Sandra Pearson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 500 shares of Valero Energy. At the time of the sale, a share of common stock had a value of $73. Three months later, Valero Energy is selling for $20 a share, and Sandra instructs her broker to cover her short transaction. Total commissions to buy and sell the stock were $65. What is her profit for this short transaction?
Answer:
$26,435
Explanation:
Given that,
Short shares sold = 500
Share of common stock had a value = $73
Three months later, Valero Energy is selling = $20 a share
Profit for this short transaction:
= Sales - Purchase - Brokerage
= (500 shares × $73) - (500 shares × $20) - $65
= $36,500 - $10,000 - $65
= $26,435
Therefore, her profit for this short transaction is $26,435.
Mark Welsch deposits $8,000 in an account that earns interest at an annual rate of 8%, compounded quarterly. The $8,000 plus earned interest must remain in the account 4 years before it can be withdrawn. How much money will be in the account at the end of 4 years?
Final answer:
Mark Welsch will have approximately $11,790.85 in his account at the end of 4 years, after depositing $8,000 with an interest rate of 8% compounded quarterly.
Explanation:
To calculate the future value of Mark Welsch's deposit, we need to apply the formula for compound interest. The general formula is A = P[tex](1 + r/n)^{nt}[/tex], where:
P is the principal amount (the initial amount of money)r is the annual interest rate (in decimal form)n is the number of times the interest is compounded per yeart is the time the money is invested for, in yearsIn this scenario:
P = $8,000r = 8% or 0.08 in decimaln = 4 (since the interest is compounded quarterly)t = 4 yearsSubstituting these values into the compound interest formula:
A = 8000[tex](1 + 0.08/4)^{ 4*4}[/tex]
Let's do the math:
Divide the annual interest rate by the number of compounding periods: 0.08/4 = 0.02.Add 1 to the result of step 1: 1 + 0.02 = 1.02.Raise the result of step 2 to the power of the total number of compounding periods: 1.0216 (since 4 years times 4 quarters per year equals 16 quarters).Multiply the principal amount by the result of step 3: $8000 * 1.0216.The final calculation gives us the future value of the investment.Upon performing the calculations, we find that A is approximately $11,790.85.
This is the amount of money Mark will have in his account at the end of 4 years, including the principal and the compound interest earned over time.
What does the IS curve show? A. It shows equilibrium points in the goods marketlong dashthe combinations of the real interest rate and equilibrium output. B. It shows equilibrium points in the goods marketlong dashthe combinations of planned investment spending and net exports. C. It shows equilibrium points in the goods marketlong dashthe combinations of the real interest rate and net exports. D. It shows equilibrium points in the goods marketlong dashthe combinations of planned expenditure and equilibrium output.
Answer:
Option (A) is correct.
Explanation:
Investment spending curve refers to the curve shows various combination of real interest rate and the equilibrium output. There is a negative relationship between the real interest rate and output which means that an increase in the real interest rate will reduce the output of an economy and if there is a fall in the real interest rate then as a result there is an increase in the output.