Answer:
$25,000 will be an ordinary income(FMV)
Explanation:
Kate received an offer of unrestricted partnership capital interest for the expertise services. so, Kate recognizes it's an "ordinary income"which should be booked at the fair market value of the partnership interest so offered.
i.e $25,000 is ordinary income (FMV)
Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales.
The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $68,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:
Raw materials $ 10,400
Work in process $ 4,900
Finished goods $ 8,900
During the year, the following transactions were completed:
a. Raw materials purchased on account, $ 169,000.
b. Raw materials used in production, $147,000 (materials costing $126,000 were charged directly to jobs; the remaining materials were indirect).
c. Costs for employee services were incurred as follows:
Direct labor $ 156,000
Indirect labor $ 182,000
Sales commissions $ 25,000
Administrative salaries $ 45,000
d. Rent for the year was $18,900 ($13,900 of this amount related to factory operations, and the remainder related to selling and administrative activities).
e. Utility costs incurred in the factory, $20,000.
f. Advertising costs incurred, $15,000.
g. Depreciation recorded on equipment, $21,000.($15,000 of this amount related to equipment used in factory operations; the remaining $6,000 related to equipment used in selling and administrative activities.)
h. Record the manufacturing overhead cost applied to jobs.
i. Goods that had cost $226,000 to manufacture according to their job cost sheets were completed.
j. Sales for the year (all paid in cash) totaled $509,000. The total cost to manufacture these goods according to their job cost sheets was $218,000.
Required:
1. Prepare journal entries to record the transactions for the year.
2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts).
3A. Is Manufacturing Overhead underapplied or overapplied for the year?
3B. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4. Prepare an income statement for the year. All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.
Answer:
Goldnest company
A. Journal entries
1.Raw Materials Purchased.
Debit Direct Raw materials Account with $ 169,000
Credit Accounts Payable Account with $ 169,000
2.Labour Costs incurred
Debit Direct labor with $ 156,000
Debit Indirect labor with $ 182,000
Debit Sales commissions with $ 25,000
Debit Administrative salaries with $ 45,000
Credit Cash with $ 408,000
3.Rentals Costs for the year
Debit Factory Rent for the year with $13,900
Debit Office Rent for the year with $5,900
Credit Cash Account with $18,900
4. Utility costs incurred in the factory
Debit Factory Utility Account with $20,000
Credit Cash Account with $20,000
5.Advertising Expense Incurred
Debit Advertising Expense Account with $15,000
Credit Cash Account with $15,000
6. Depreciation recorded on equipment
Debit Depreciation on Factory equipment with $15,000
Debit Depreciation on Office equipment with $6,000
Credit Accumulated depreciation with $21,000
7.Sales in the Year
Debit Cash Account with $509,000
Credit Sales with $509,000
B. T Accounts are included in the attached for your understanding
C. Manufacturing overhead has been over applied by $34,300. Workings of this has been attached for your understanding
D.income statement closes with a net profit of $195,000. Refer to attached for detailed breakdown
Explanation:
These are selected 2017 transactions for Swifty Corporation: Jan. 1 Purchased a copyright for $122,750. The copyright has a useful life of 5 years and a remaining legal life of 30 years. Mar. 1 Purchased a patent with an estimated useful life of 4 years and a legal life of 26 years for $51,120. Sept. 1 Purchased a small company and recorded goodwill of $154,200. Its useful life is indefinite.prepare all the adjusting enteries at dec 31st to record amortization required by event.
Answer:
Dr Amortization expense $24,550
Cr Copyright asset $24,550
Dr Amortization $10,650
Cr Patent asset $10,650
Explanation:
It is noteworthy that an intangible such as patents,copyrights ,goodwill and so on whose useful life is infinite is not amortized,hence the goodwill would not be amortized as a result there is adjusting entries in respect of goodwill.
However, it is also imperative that an intangible asset is amortized using the lower of useful life and legal life,as a result copyright would be amortized over 5 years and patent over 4 years.
Copyright yearly amortization=$122,750/5 years=$24,550
Patent's apportioned amortization=$51,120/4 years*10/12=$10,650
The amortization in each case is debited to amortization expense account and credited to individual asset account.
Jovan's Movers rents out trucks with a crew of two on a daily basis, usually to homeowners who are moving or to companies with delivery problems. On one particular day Jovan is a truck short and intends to hire one from a local truck rental firm. However, he does not know how large the load is that needs to be moved.How big a truck should he rent? A large truck costs $200 per day (including insurance, fuel, etc.), a small truck $130 per day. A small truck is cheaper but if the load is too large, the crew may have to make two trips. Jovan assesses the additional cost of making two trips (overtime and truck mileage) at $150 beyond the costs for a single trip. He assesses the probability that two trips will be necessary if he rents a small truck at 0.40. Assume that if Jovan rents a large truck it can accommodate any size load in a single trip.a. Assuming there are no other ramifications to the decision, should Jovan rent a large truck or a small truck? Construct a decision tree (manually or using PrecisionTree) to support your answer and explain your recommendation. Would your answer change if the probability that two trips will be necessary is 50% instead of 40%?b. What is the most Jovan would pay to know for sure whether a small truck or a large truck would be adequate for the job? For example, suppose he could hire someone to inspect the contents of the move in advance. Construct a second decision tree to support your answer and estimate if the probability of needing two trips with a small truck is set to 40% as in part a).c. Suppose Jovan is risk averse, with a risk tolerance value of $1,000 (assume the exponential utility function applies). Would this change your answer to part a)?
Answer:
Explanation:
In this problem business of Jovan is to rent out trucks and earn revenues. On a particular day there is a shortage of one truck. It can be taken on rent from other party. If a big truck is hired, then any load can be carried. But the rental cost is $200. Small truck cannot carry weight beyond a range. In that case two trips are needed. Rental of one trip of small truck is $130. Cost of two trip is $150 extra. So it is $130+$150=$280. Probability of two trips is 40%. So based on these data, following decision tree diagram is draw:
From this decision tree expected rental cost of small truck based on probability is-
Expected rental of small truck =0.6 x $130 + 0.4 x $280
=$78+\$112
=$190
Decision: Since expected rental of small truck is $190, it is lower than rental of big truck of $200. So small truck is recommended.
If probabilities of trips are 50:50, then expected rental of small truck is-
Expected rental of small truck =0.5 x $130 + 0.5 x $280
=$65 + $140
=$205
Now it is more than rental of big truck. So hiring of big truck is recommended.
b) Now Jovan wants to hire an outside consultant. He will assess and recommend whether to hire a big truck or a small truck. If he recommend for big truck, then big truck will be hired. Otherwise a small truck will be bought. As per current situation probability of two trip is 40%. If consultant approves this situation, then big truck will be hired. Thus probability of hiring big truck is 40% under recommended scenario. So probability of hiring small truck with one trip is 60%. On this basis decision chart is drawn below:
Based on this diagram, expected cost of hiring a truck is-
Expected rental =0.4 x $200 + 0.6 x $130
= $80 + $78
= $158
If you compare this expected cost with the expected cost of $190 in part (a), then it is lower by $190-$158=$32
Hence, maximum $32 can be paid to consultant for hiring and taking perfect decision.
c) Now Jovan has been taken as risk averser. His risk tolerance value is $1,000. Suppose utility function is exponential of following form-
U=e^{P} where p is the probability of two trips by small truck
As a risk averser he will undertake risk only when this U value is $1,000.
U=e^{P} = $1,000
Take log on both side to get-
Plog e = log1,000
{P}{log}2.71828 = log1,000 [ since e =2.71828]
{P}= 3 / 0.43429189
=6.929 percent
So the risk averse Jovan will go for small truck only when probability of two trips for small car is 6.929 percent. Here it is 40%. So big truck will be hired.
A stock market crash will cause Group of answer choices aggregate demand to decrease, which the Fed could offset by purchasing bonds. aggregate demand to decrease, which the Fed could offset by selling bonds. aggregate demand to increase, which the Fed could offset by selling bonds. aggregate demand to increase, which the Fed could offset by purchasing the money supply.
Answer:
A stock market crash will cause aggregate demand to decrease, which the Fed could offset by purchasing bonds.
Explanation:
A stock market crash happens when the prices of stocks fall generally and suddenly that investors are taken unawares. It triggers some reactions which further threatens the market overall and depresses aggregate demand. It also weakens investors' confidence, reduces productivity, consumption, and the ability of firms to fund their activities, and leads the economy to recession.
Stock market crashes are triggered by unexpected economic event, catastrophe, or crisis. For example, the collapse of Lehman brothers as a result of bankruptcy. They are further exacerbated by panic reactions, underlying economic underperformance, and investors' fear.
The Fed as the US central bank in charge of the monetary policy can try to stem the downward spiral caused by a stock market crash by purchasing bonds. This makes more money available in the economy for consumption.
Before the crash, the Fed can decide to bail out the institution, e.g. an airline or a financial institution, that could trigger a crash. But, most stock market crashes are not foreseen.
A company issues 10%, 5-year bonds with a par value of $270,000 on January 1 at a price of $280,682, when the market rate of interest was 9%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:
Answer:
$13,500 semiannually
Explanation:
The Interest payment of a bond is calculated using the par value and the coupon rate of the bond. It is calculated by multiplying par value with coupon rate of the bond. Premium or Discount is amortized separately and added in the interest expense value.
As per given data
Par value = $270,000
Coupon Rate = 10%
Interest Payment = $270,000 x 10% = $27,000 annually = $13,500
The company pay $13,500 semiannually as interest payment
Exercise 169 Yates Manufacturing Company incurs the following manufacturing costs and expenses during the month of May. 1. Assembly line wages 2. Raw materials used directly in product 3. Depreciation on office equipment 4. Property taxes on factory building 5. Rent on factory building 6. Sales commissions 7. Depreciation on factory equipment 8. Factory utilities 9. Wages for factory maintenance workers 10. Advertising 11. Indirect materials used in production 12. Factory manager's salary
Answer:
1. Assembly line wages - Direct labor, manufacturing cost
2. Raw material used directly in product - Direct material, manufacturing cost
3. Depreciation on office equipment - In direct, Administrative cost
4. Property tax on factory building - Indirect, Manufacturing cost
6. Sales commission - Selling cost
7. Depreciation on factory equipment - Direct, Manufacturing cost
8. Factory utilities - Administrative cost
9. Wages for factory maintenance workers - Direct, Manufacturing cost
10. Advertising - Selling cost
11. Indirect material used in production - Indirect, Manufacturing cost
12. Factory manager's salary - Administrative cost
Explanation:
The cost which is affected by the production of units is known as variable cost. The cost which does not vary with the units produced is fixed cost.
The costs which are related to selling and storage of the finished goods is selling cost. The cost which is not affected by units produced and is related to office premises and controlling an organization is administrative cost. The cost which varies with the production of units and is incurred to convert raw material into finished goods is manufacturing cost.
Knowledge Check 01 During the current year, Armstrong Corporation reported net income of $18 million and EPS of $5.00 per share. The average number of common shares outstanding during the year was 3.6 million. The price of a share of its common stock was $2.50 at the beginning of the year and $5.00 at the end of the year. What is the company’s price/earnings (P/E) ratio at the end of the year?
Answer:
PE ratio is 1
Explanation:
Price earning ratio determines the ratio of price of a share by the earning per share . It measures the times value which a investor pays for each $1 earning of the shares.
To calculate the price earning ratio at the end of the year, we will use the price of the share at the end of the year.
Price Earning Ratio = Market Price / Earning Per share
Price Earning Ratio = $5 / $5
Price Earning Ratio = 1 times
Answer:
P/E = 1
Explanation:
The price earnings (P/E ) can be used to determine the value of a stock , The ratio relates the price of a stock to its earning. A stock with a higher P/R indicates a high potent for growth.
The price earning ratio is computed as follows:
P/E = price per share/EPS
P/E = 5/5 = 1
The Berwin Company established a master budget volume of 35,000 units for April. Actual overhead costs incurred amounted to $98,500. Actual production for the month was 34,000 units. The standard variable overhead rate was $1.75 per direct labor hour. The standard fixed overhead rate was $1.50 per direct labor hour. One direct labor hour is the standard quantity per finished unit. Assume the allocation base for fixed overhead costs is the number of direct labor hours. SR1a. A. Compute the total manufacturing overhead cost variance.
Answer:
$12,000 Favorable
Explanation:
Given that,
Actual overhead costs incurred = $98,500
Actual production for the month = 34,000 units
Standard variable overhead rate = $1.75 per direct labor hour
Standard fixed overhead rate = $1.50 per direct labor hour
One direct labor hour is the standard quantity per finished unit.
Firstly, we need to find out the overhead applied by multiplying the actual production units with the standard overhead rate and standard quantity per finished unit.
Total standard overhead rate:
= Standard variable overhead rate + Standard fixed overhead rate
= $1.75 + $1.50
= $3.25
Overhead applied:
= Actual production × standard quantity per finished unit × Total standard overhead rate
= 34,000 × 1 × $3.25
= $110,500
Therefore, the total manufacturing overhead cost variance is determined by deducting the Actual overhead costs from the overhead applied.
It is calculated as follows:
= Overhead applied - Actual overhead costs incurred
= $110,500 - $98,500
= $12,000 Favorable
Walker, Inc., uses a standard cost system. Overhead cost information for Product One for the month of October follows: Total actual overhead incurred $14,750 Fixed overhead budgeted $1,800 Total standard overhead rate per direct labor hour $4.25 Variable overhead rate per direct labor hour $3.75 Standard hours allowed for actual production 3,500 What is the overall (or net) overhead variance?
Answer:
$125
Explanation:
Total actual overhead incurred $14,750
Less Standard hours allowed for actual production 3,500 ×Total standard overhead rate per
direct labor hour $4.25 ($14,875)
Overhead variance $125
Therefore the overall (or net) overhead variance is $125
Del Gato Clinic's cash account shows a $15,307 debit balance and its bank statement shows $13,567 on deposit at the close of business on June 30. Outstanding checks as of June 30 total $1,199. The June 30 bank statement lists a $15 bank service charge. Check No. 919, listed with the canceled checks, was correctly drawn for $389 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $398. The June 30 cash receipts of $2,933 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. 1.Prepare its bank reconciliation using the above information.
Answer and Explanation:
The preparation of the bank reconciliation is presented below:
Del Gato Clinic's
Bank reconciliation statement
June 30
Particulars Amount Particulars Amount
Bank cash balance $13,567 Company cash balance $15,307
Add: Deposits Add: Recording error $9
in transit $2,933
Less: Outstanding Less: service fee -$15
Check - $1,199
Bank balance Company balance
After reconciliation $15,301 After reconciliation $15,301
The recording error is come from
= $398 - $389
= $9
And we do the adjustment accordingly that increased and decreased the company cash and bank cash balance
Final answer:
Bank reconciliation for Del Gato Clinic identifies discrepancies between the book balance and the bank statement, involving deposits in transit, outstanding checks, a bank service fee, and an error in recording a check amount.
Explanation:
Bank Reconciliation for Del Gato Clinic :
The process of bank reconciliation involves matching the balances in an entity's accounting records for a cash account with the corresponding information on a bank statement. The goal of this exercise is to identify any discrepancies between the two sources and make the necessary adjustments to confirm the actual cash balance. Below is the step-by-step bank reconciliation for Del Gato Clinic as of June 30:
Start with the ending balance per bank statement: $13,567.
Add deposits in transit (June 30 cash receipts not recorded by the bank): $2,933.Subtract outstanding checks: -$1,199.Adjusted bank balance: $15,301 (13,567 + 2,933 - 1,199).Start with the ending balance per books: $15,307.Subtract bank service fees not yet recorded in the books: -$15.Adjust for Check No. 919 recording error (subtract the difference between recorded amount and the actual amount): -$9 (398 - 389).Adjusted book balance: $15,283 (15,307 - 15 - 9).After the adjustments, there is a small difference of $18 between the adjusted bank balance and the adjusted book balance ($15,301 vs. $15,283). This difference needs to be investigated and corrected in the company's accounting records for proper reconciliation.
Final answer:
Bank reconciliation for Del Gato Clinic identifies discrepancies between the book balance and the bank statement, involving deposits in transit, outstanding checks, a bank service fee, and an error in recording a check amount.
Explanation:
Bank Reconciliation for Del Gato Clinic :
The process of bank reconciliation involves matching the balances in an entity's accounting records for a cash account with the corresponding information on a bank statement. The goal of this exercise is to identify any discrepancies between the two sources and make the necessary adjustments to confirm the actual cash balance. Below is the step-by-step bank reconciliation for Del Gato Clinic as of June 30:
Start with the ending balance per bank statement: $13,567.
Add deposits in transit (June 30 cash receipts not recorded by the bank): $2,933.Subtract outstanding checks: -$1,199.Adjusted bank balance: $15,301 (13,567 + 2,933 - 1,199).Start with the ending balance per books: $15,307.Subtract bank service fees not yet recorded in the books: -$15.Adjust for Check No. 919 recording error (subtract the difference between recorded amount and the actual amount): -$9 (398 - 389).Adjusted book balance: $15,283 (15,307 - 15 - 9).After the adjustments, there is a small difference of $18 between the adjusted bank balance and the adjusted book balance ($15,301 vs. $15,283). This difference needs to be investigated and corrected in the company's accounting records for proper reconciliation.
The multiplier for a futures contract on a stock market index is $50. The maturity of the contract is 1 year, the current level of the index is 1,800, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.2% per month. Suppose that after 1 month, the stock index is at 1,820. a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly
Answer:Cash Flow mark to market proceeds = $754.45
Explanation:
given :
stock market index = $50
current stock index= 1800
risk free interest rate= 0.5%
dividend yield=0.2%
Contract=1 year=12 month
Solution
The Current Index value after 12 months ie for future price = Current Stock Index * (1 + Risk Free - Dividend Yield)^12
Current Index value after 12 months = 1800 * (1 + 0.50% - 0.20%)^12
Current Index value after 12 months = 1865.88
Also, Future Index value after 1 month = Future Stock Index * (1 + Risk Free - Dividend Yield)^12-1
Future Index value after 1 month= 1820 * (1 + 0.50% - 0.20%)^11
Future Index value after 1 month = 1880.97
Therefore, Cash Flow mark to market proceeds = (Future Index Future Value - Current Index Future value) * Multiplier which when variables are imputed gives us
Cash Flow mark to market proceeds = (1880.97 - 1865.88) * 50
Cash Flow mark to market proceeds = $754.45
Answer:
$754.5
Explanation:
Given that
S0 = 1800
Interest rate = 5% = 0.05
Dividend yield = 2% = 0.02
Recall that
The initial futures price is:
F0 = S0 (1 + rf - d)
Thus,
= 1800 x (1 + .005 - .002)12
= 1865.88
Again,
In one month, the futures price will be:
F0 = 1820x (1 + .005 - .002)11 = 1880.97
The increase in the futures price is 15.09, that is 1880.97 - 1865.88, so the cash flow will be:
15.0 x $ 50
= $754.5
Barbara Bright is the purchasing agent for West Value Company. West Valve sells industrial values and fluid control devices. One of the most popular values is the Western, which has an annual demand of 4,000 units. The cost of each value is $90, and the inventory carrying cost is estimated to be 10% of the cost of each value. Barbara has made a study of the costs involved in placing an order for any of the values that West Valve stocks and she has concluded that the average ordering cost is $25 per order. Furthermore, it take about two weeks for an order to arrive from the supplier, and during this time the demand per week for West values is approximately 80.
a) What is the EOQ?
(b) What is the ROP?
Answer:
EOQ = 149.07 units
Re-order Point (ROP) = 160 units
Explanation:
The Economic Order Quantity (EOQ) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the holding cost.
It is computed using he formulae below
EOQ = √ (2× Co× D)/Ch
EOQ = √ (2× 25× 4000)/(10%× 90)
EOQ = 149.07 units
Re-order Point (ROP)
The level of stock at which are replenishment order will be placed
Maximum consumption × maximum lead time
= 80× 2 = 160 units
Characteristics of competitive markets
The model of competitive markets relies on these three core assumptions:
1. There must be many buyers and sellers a few players can't dominate the market.
2. Firms must produce an identical product buyers must regard all sellers' products as equivalent.
3. Firms and resources must be fully mobile, allowing for free entry into and exit from the industry.
The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.
Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.
The government has granted a patent to a pharmaceutical company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.
A. yes,meets all assumptions
B.no,no free entry
C.no, not many sellers
D.No, not an identical product
In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed.
A.yes,meets all assumptions
B.no,no free entry
C.no, not many sellers
D.No, not an identical product
In a major metropolitan area, one chain of coffee shops has gained a large market share because customers feel its coffee tastes better than that of its competitors.
A.yes,meets all assumptions
B.no,no free entry
C.no, not many sellers
D.No, not an identical product
Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.
A. yes,meets all assumptions
B.no,no free entry
C.no, not many sellers
D.No, not an identical product
Answer:
Explanation:
First scenario: The answer is No, not many sellers. The drug of the pharmaceutical company has patent right and it is the only firm selling this product. This makes the company a monopolist (single seller)
Second scenario: No, not an identical product. Cable company and phone company produce different products. Cable companies majorly deal with television access.
Third Scenario: no, not many sellers. One firm is dominating the market and customers prefers this. Its product has been differentiated and it can charge its own price.
Fourth scenario: yes,meets all assumptions. The socks are identical and consumers do not care about the seller because the same utility will be derived from the socks.
Lion Corp. has a $4,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 20 years to maturity. The yield to maturity on this bond is 2.1 percent. What is the dollar price of the bond
Answer:
$5,627
Explanation:
Price of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Both of these cash flows discounted and added to calculate the value of the bond.
According to given data
Face value of the bond is $4,000
Coupon payment = C = $4,000 x 4.6% = $184 annually = $92 semiannually
Number of periods = n = 20 years x 2 = 40 period
Market Rate = 2.1% annually = 1.05% semiannually
Price of the bond is calculated by following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond = 92 x [ ( 1 - ( 1 + 1.05% )^-40 ) / 1.05% ] + [ $4,000 / ( 1 + 1.05% )^40 ]
Price of the Bond = $2,992.30 + $2,634.95
Price of the Bond = $5,627.25
Answer:
Price of the bond =$5626.2518
Explanation:
The price of a bond is the present value (PV) of the future cash inflows expected from the bond discounted using the yield to maturity.
The price of the bond can be calculated as follows:
PV of interest payment + PV of redemption Value
Step 1
PV of interest payment
Interest payment =( 4.6%× $4000)/2
=$ 92
Semi annual yield = 2.1/2 = 1.05 %
PV of interest payment
= 92× (1-(1.0105)^(-20×2))/0.0105)
= 2992.30
Step 2
PV of redemption value
= 4,000 × (1+0.0105)^(-20×2)
= 2633.948
Step 3
Price of bond
= $12992.30+ $2633.94
=$5626.2518
Boland Company sells a product that is priced at $20 per unit. The per unit contribution margin is equal to 25 percent of the sales price. If fixed costs amount to $55,000 and the company has a desired profit of $20,000, the number of units that must be sold to earn the desired profit is:______
Answer:
The number of units needed to be sold to earn a desired profit is 15000 units.
Explanation:
The desired profit is the profit that a firm wants to earn. The umber of units needed to earn a desired profit can be calculated using the break even approach.
Under break even the number of units required to break even are calculated by dividing the total fixed costs by the contribution margin per unit.
To calculate the number of units needed to earn desired profit, we need to add the desired profit figure to the fixed cost and divide the total by contribution margin per unit.
The contribution margin per unit is = 20 * 0.25 = $5 per unit
The units needed to earn desired profit = (55000 + 20000) / 5
Units needed to earn desired profit = 15000 units
DLW, Inc just started its business. DLW purchased factory equipment for $800,000 on January 1. It is estimated that the equipment will have a $30,000 salvage value at the end of its estimated 10-year useful life. If the company uses the straight-line method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be:
Answer:
Annual depreciation= $77,000
Explanation:
Giving the following information:
Purchase price= $800,000
Salvage value= $30,000
Useful life= 10 year
Under the straight-line method of depreciation, the depreciation expense is constant along the useful life.
We need to use the following formula:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (800,000 - 30,000)/10
Annual depreciation= $77,000
Chang Industries has bonds outstanding with a par value of $216,000 and a carrying value of $227,000. If the company calls these bonds at a price of $221,000, the gain or loss on retirement is:
A. 5,000 gainB. 6,000 gainC. 6,000 lossD. 5,000 lossE. 11,000 gain
Answer:
A. $6,000 gain
Explanation:
Data provided
Carrying Value = $227,000
Call Price = $221,000
The computation of gain or loss on retirement is shown below:-
Gain on Retirement = Carrying Value - Call Price
= $227,000 - $221,000
= $6,000
Therefore for computing the gain on retirement we simply deduct the call price from carrying value.
Two economists estimate the government expenditure multiplier and come up with different results. One estimates the multiplier at 0.8, while the other comes up with an estimate of 1.4. Explain why these estimates are different in terms of the assumptions that each economist is making. A. Compared to the first economist, the second economist is assuming a longer time frame for the effects of the increased expenditure to be observed. B. Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both. C. Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both. D. Unlike the first economist, the second economist must be assuming that the government expenditure is devoted to useful projects.
Answer:
B. Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both.
Explanation:
In the absence of market failures, when the government taxes market participants, the effect is to move the market: Group of answer choices away from the competitive equilibrium, thereby enhancing social efficiency. closer to the competitive equilibrium, thereby enhancing social efficiency. closer to the competitive equilibrium, thereby reducing social efficiency. away from the competitive equilibrium, thereby reducing social efficiency.
Answer:
Closer to the competitive equilibrium, thereby reducing social efficiency.
Explanation:
The market is not failed itself, so there is no need of taxes to clear it but to arrange revenue for government taxes some of the luxurious products the tax shifts supply curve to left and decrease equilibrium quantity which makes the dead weight loss in the market and the quantity get away from the efficient level.
In absence of market failures, when the government taxes market participants, the effect is to move the market :
There is a 2 percent defect rate at a specific point in a production process. If an inspector is placed at this point, all the defects can be detected and eliminated. The inspector would cost $11 per hour and could inspect units in the process at the current production rate of 53 per hour. If no inspector is hired and defects are allowed to pass this point, there is a cost of $10 per defective unit to correct the defects later on. Assume that the line will operate at the same rate (i.e., the current production rate) regardless of whether the inspector is hired or not.
a. If an inspector is hired, what will be the inspection cost per unit? (Round your answer to 3 decimal places.)
b. If an inspector is not hired, what will be the defective cost per unit? (Round your answer to 3 decimal places.)
c. Should an inspector be hired based on costs alone?
Final answer:
After calculating the costs, hiring an inspector results in a slightly higher per unit cost ($0.208) compared to allowing defects and correcting them later ($0.20 per unit). Nevertheless, the benefits of ensuring quality might outweigh these costs.
Explanation:
The questions deal with analyzing the cost-effectiveness of hiring an inspector in a production process with a 2% defect rate. To answer these, we consider the given defect rate, costs associated with hiring an inspector and correcting defects, and the production rate.
a. Inspection Cost Per Unit
The inspector costs $11 per hour and inspects 53 units per hour. Therefore, the inspection cost per unit is calculated as $11 divided by 53 units, resulting in approximately $0.208 per unit (rounded to three decimal places).
b. Defective Cost Per Unit
With a 2% defect rate and a $10 cost to correct each defect later, for every 100 units produced, we expect 2 defects. So, the cost per unit due to defects is (2 units * $10) / 100 units, which equals $0.20 per unit (rounded to three decimal places).
c. Should an Inspector be Hired Based on Costs Alone?
Comparing the two costs, the inspection cost per unit ($0.208) is slightly higher than the defective cost per unit ($0.20). However, the difference is minimal, and hiring an inspector might be beneficial considering potential savings in rework time and preservation of product quality and brand reputation, which are not captured in the immediate cost comparison.
What is the difference between accounting profit and economic profit?Accounting profit emphasizes cost of debt and equity while economic profit focuses on cost of debt.Accounting profit is synonymous with NI, while economic profit represents EPS.Accounting profit accounts for interest expense while economic profit accounts for interest expense and opportunity cost.Accounting profit can be calculated by NOPAT – [WACC × (Costly Capital)], while economic profit is simply NI.
Answer:
The answer is C. Accounting profit accounts for interest expense while economic profit accounts for interest expense and opportunity cost.
Explanation:
Accounting cost is the difference between total revenue and total cost. The total cost are related to the operation of the business. These cost are also known as explicit cost. Accounting cost does not consider implicit cost(opportunity cost) Examples of accounting cost are interest expense, depreciation expense, cost of sales etc.
Economic cost is the difference between total revenue and the addition of explicit and implicit cost. Implicit cost(opportunity cost) is the cost of alternative forgone i.e the course of action that was abadoned for the current action. Economic cost considers all the accounting cost and the Implicit cost
On January 1, 2009, AML company issues bonds maturing in 5 years. The par value of the bonds is $10,000, the annual coupon rate is 4-percent, and the compounding period is semiannually. The market initially prices these bonds using annual market interest rate 6-percent. The market interest rate on June 30, 2010 was 5% and the market interest rate on Dec. 31, 2012 was 8%.1. Were the bonds issued at par, a discount or a premium?2. Calculate the issue price.3. Record journal entry on the date of issuance.4. Will the interest expense increase or decrease over the years?5. Calculate the interest expense on Jun 30, 2010.6. Record journal entry on the interest expense on Jun 30, 2010.
Answer:
Explanation:
Solution is attached below
You are considering buying common stock in Grow On, Inc. You have projected that the next dividend the company will pay will equal $3.90 and that dividends will grow at a rate of 6.0% per year thereafter. If you would want an annual return of 25.0% to invest in this stock, what is the most you should pay for the stock now?
Answer:
$20.52
Explanation:
Given that
Estimated dividends for next period = $3.90
Required rate of return = 25%
Growth rate = 6%
The computation of Price of stock is given below:-
Price of stock = Estimated dividends for next period ÷ (Required rate of return - Growth rate)
= $3.90 ÷ (0.25 - 0.06)
= $3.90 ÷ 0.19
= $20.52
Therefore for computing the price of stock we simply applied the above formula.
"Southern Foods just paid an annual dividend of $3.10 a share. Management estimates the dividend will increase by 4 percent for one year then 8 percent for two years then 2% forever. The required rate of return is 12 percent. What is the value of this stock today"
Answer:
THE VALUE OF THE STOCK TODAY IS $35.63
Explanation:
The dividend discount model bases the value of the stock on the present value of the expected future dividends from the stock. Using the three stage growth model of DDM, we can calculate the price of this stock today. The price/value of this stock today is,
P0 = 3.1 * (1+0.04) / (1+0.12) + 3.1 * (1+0.04) * (1+0.08) / (1+0.12)^2 +
3.1 * (1+0.04) * (1+0.08)^2 / (1+0.12)^3 +
[ (3.1 * (1+0.04) * (1+0.08)^2 * (1+0.02) / (0.12 - 0.02)) / (1+0.12)^3 ]
P0 = $35.63
A corporation has issued $100 par, 6 1/2% cumulative convertible preferred stock, callable at par. The preferred is convertible into 2 shares of common stock. Currently, the preferred stock is trading at $100 while the common stock is trading at $50. If a customer buys 100 preferred shares, converts, and then sells the common stock in the market, the profit or loss is (ignoring commissions):
Answer:
$0
Explanation:
Amount paid by the customer for 100 preferred stock = 100 * $100 = $10,000
Number of preferred stock when converted to common stock = 100 * 2 = 200 shares
Revenue from selling the 200 shares = 200 * $50 = $10,000
Profit or loss to customer = Revenue from selling the 200 shares - Amount paid by the customer for 100 preferred stock = $10,000 - $10,000 = $0
Therefore, the customer made no profit nor loss.
Final answer:
There is no profit or loss when a customer buys 100 preferred shares at $100 each, converts them into 200 common shares, and sells the common stock at the market price of $50 per share, as the total amount received from selling the common stock equals the initial investment.
Explanation:
To determine the profit or loss when a customer buys 100 preferred shares, converts them, and then sells the common stock in the market, we need to follow these steps:
Firstly, the customer buys 100 preferred shares at $100 each. Since they are convertible into 2 shares of common stock per preferred share, after conversion, the customer would have 200 shares of common stock.
Next, the common stock is currently trading at $50 per share. If the customer sells all 200 shares of common stock at this market price, they would receive $10,000 (200 shares x $50/share).
The initial investment for the preferred shares was $10,000 (100 shares x $100/share). As the selling price of the common stock is also $10,000, once converted and sold, there is no profit or loss from this transaction (ignoring commissions and other possible fees).
An investor will pay $2,318.63 for an n-year $2,000 par bond with a coupon rate of 10% compounded semiannually or he will pay $2,531.05 for an nyear $2,000 par bond with a coupon rate of 11% compounded semiannually. Assuming that the investor gets the same yield on the two bonds, find this yield rate expressed as a nominal rate convertible two times per year. Also find n.
Answer:
28 years
Explanation:
check the pictures attached below for the explanation and i hope it helps. Thank you
The yield rate for both bonds is approximately 8.02% annually, compounded semiannually. The number of periods n is found to be 20 periods or 10 years. These results are obtained by equating the present value equations for both bonds and solving for the yield rate and period.
To solve this, we can use the present value formula for bonds:
1. Identify Variables:
Bond 1:Price = $2,318.63Coupon Rate = 10% semiannual (5% per period)Face Value = $2,000Bond 2:Price = $2,531.05Coupon Rate = 11% semiannual (5.5% per period)Face Value = $2,0002. Present Value (PV) Formula:
We use: [tex]PV = C * (1 - (1 + r)^-n) / r + F / (1 + r)^n[/tex]
PV = Present Value (Price of Bond)C = Coupon Payment = Face Value * Coupon Rater = Yield Rate per periodn = Number of periodsF = Face Value3. Equate Present Value Equations:
For Bond 1: $2,318.63 = $100 * (1 - (1 + r)²ⁿ) / r + $2,000 / (1 + r)²ⁿ
For Bond 2: $2,531.05 = $110 * (1 - (1 + r)²ⁿ ) / r + $2,000 / (1 + r)²ⁿ
4. Solving for Yield Rate (r) and Number of Periods (2n):
Using a financial calculator or solving via iterations, you will find:
r ≈ 0.0401 (4.01% semiannually)
5. Nominal Annual Yield Rate:
Nominal Yield Rate = 2 * r = 2 * 0.0401 = 0.0802 or 8.02%
6. Solving for Number of Periods (n):
Substitute r back into one of the equations to solve for n:
$2,318.63 = $100 * (1 - (1 + 0.0401)²ⁿ ) / 0.0401 + $2,000 / (1 + 0.0401)²ⁿ
Solving this equation, n = 10 years or 20 periods.
A bakery makes a limited number of croissants each day for sale in its coffee shop. The croissants cost $1.00 each to produce and sell for $2.00 each. Leftover croissants are sold in the bakery the following day for $0.60 each, and all of those are sold
The excess cost is:
The shortage cost is:
The optimal service level is
Answer:
$0.40 ; $1 and $71.43%
Explanation:
The computation is shown below:
Excess cost is
= Unit cost - Salvage Value
= $1 - $0.60
= $0.40
The shortage cost is
= Selling value - unit cost
= $2 - $1
= $1
And, the optimal service level is
= Shortage cost ÷ (Shortage cost + excess cost)
= $1 ÷ $1.60
= 71.43%
Basically we applied the above formulas
A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. Which of the following are correct descriptions of what happens to the individual firms and the whole market as the market first leaves and then returns to long-run equilibrium?
Answer:
It will cause Market price to decrease in the short-run. There will be short-run decrease on Individual firms' profit-maximizing output .A good number of Firms will exit the market in the long run. Finally, market quantity will decrease in the long-run.A decrease in demand in a market in long-run equilibrium causes a fall in price and output, leading to economic losses that force firms to exit. The market eventually returns to the long-run equilibrium, where all firms earn zero economic profits. The process of reaching this state is influenced by firms' decisions to enter or exit the market.
Explanation:When the demand in a market decreases, the immediate result is a reduction in market price and output. This causes economic losses that lead to firms exiting the market, thereby reducing the overall market supply. This process continues until the point where the remaining firms are only earning normal profits, and the market has returned to the state of long-run equilibrium.
In long-run equilibrium, all firms in perfectly competitive markets earn zero economic profits. This is because as long as a firm is earning positive economic profits, other firms will enter the market and increase supply, which then lower the price and eventually the profit to zero.
Consequently, entry and exit decisions play an essential role in the adjustment process to long-run equilibrium. When firms are making profits, new firms will enter, enlarging the industry and driving down prices until no further firms want to enter because there are no more profits above the normal. Conversely, if firms are making losses, firms will exit, shrinking the industry and driving up prices until firms no longer want to exit because all remaining firms are making normal profit.
Learn more about Long-Run Equilibrium here:https://brainly.com/question/34165831
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Norton Co., a U.S. corporation, sold inventory on December 1, 2018, with payment of 10,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Dec. 1 Spot rate: $ 1.7241 Dec. 31 Spot rate: $ 1.8182 Jan. 30 Spot rate: $ 1.6666 What amount of foreign exchange gain or loss should be recorded on January 30?
Answer:
exchange loss on 30 January is -$1,516
Explanation:
The amount of loss or gain to recognize in the books on January 30 depends on the movement in exchange rate between December 31 and January 30.
Invariably,exchange rate has declined by -0.1516 (1.6666-1.8182) between December 31 and January 30,hence the exchange loss that should be recorded on January is shown below:
exchange loss= -0.1516 *10,000=-$1,516
Denton Company had the following department information for the month of September: Total materials costs, $50,000; equivalent units of materials, 20,000; total conversion costs, $30,000; and equivalent units of conversion costs, 10,000. What is the total manufacturing cost per unit for the month of September
Answer:
$5.50
Explanation:
Material cost per unit = $50,000/20,000 = $2.50
Conversion costs = $30,000/10,000 = $3.00
Total manufacturing cost per unit = Material cost per unit + Conversion costs = $2.5$ + $3 = $5.50
Therefore, the total manufacturing cost per unit for the month of September is $5.50.