Answer:
Price variance = $330 Favorable
Usage variance = $90 Unfavorable
Explanation:
Formula approach
Material price variance
$(0.045-0.042)× 110,000 = $330 Favorable
Material Usage Variance
(110,000)-(0.45×240,000) × 0.045 = $90 unfavorable
Columnar Approach
Price variance $
Standard cost (0.045 × 110,000 ) = 4950
Actual cost (0.042 × 110,000 ) = 4620
Variance 330 Favorable
Usage Variance
Ounce
Standard quantity (0.45×240,000) = 108000
Actual quantity 110,000
Variance in ounce 2000 unfavourable
× Standard price 0.045
Variance $90 Unfavorable
Consider each of the items below. Please the proper letter in the blank space provided to indicate the nature of the account or accounts to be debited when recording each transaction using the preferred accounting treatment. Prepayments should be recorded in balance sheet accounts. Disregard income tax consideration unless instructed otherwise. a. asset(s) only b. accumulated depreciation only c. expense only d. asset(s) and expense e. some other account or combination of accounts ____________A motor in one of North Company's trucks was overhauled at a cost of $000. It is expected that this will extend the life of the truck for two years. ____________Machinery which cost $130.000 was repaired at a cost of $4.500 for damage sustained during its installation. _____________Orlando Company recently purchased land and two buildings for a total cost of $35,000, and entered the purchase on the books.The $1, 200 cost of razing the smaller building, which has an appraisal value of $8, 200, is recorded. ___________Janzen Company traded its old machine with a net book value of $3,000 plus cash of $7,000 for new one which had a fair value of $9,000.____________ Jim Para and May Lawson, maintenance repair workers, spent five days in unloading and setting up a new $8,000 precision machine in the plant. The wages earned is this five-day period, $490, are. _______On June 1, the Minot Hotel installed a sprinkler system throughout the building at a cost of $13,000. As a result the insurance rate was decreased by 40%.__________An improvement, which extended the life but not the usefulness of the asset, cost $8,000. The antic of the administration building was finished at a cost of $3,000 to provide an additional office.__________ In March, the Lyon The stare bought projection equipment on the installable basis. The contract price was $23,000 payable $5.610 down and $2.250 a months. The cash price for this equipment was $22, 530. ________Lambert Company recorded the first year's interest on 6% insert on 0% $100,000 ten-year bonds sold a year ago at 94. The bonds were sold to finance the construction of a hydroelectric plant. Six months after the sale of the bonds the construction of the hydroelectric plant was completed and operations were beam.
Answer: Please refer to Explanation
Explanation:
ACCUMULATED DEPRECIATION ONLY .A motor in one of North Company's trucks was overhauled at a cost of $000. It is expected that this will extend the life of the truck for two years.
ASSETS ONLY.Machinery which cost $130.000 was repaired at a cost of $4.500 for damage sustained during its installation.
ASSETS ONLY. Orlando Company recently purchased land and two buildings for a total cost of $35,000, and entered the purchase on the books.The $1, 200 cost of razing the smaller building, which has an appraisal value of $8, 200, is recorded.
SOME OTHER ACCOUNT OR COMBINATION OF ACCOUNTS. Janzen Company traded its old machine with a net book value of $3,000 plus cash of $7,000 for new one which had a fair value of $9,000.
ASSETS ONLY. Jim Para and May Lawson, maintenance repair workers, spent five days in unloading and setting up a new $8,000 precision machine in the plant. The wages earned is this five-day period, $490, are.
ASSETS ONLY. On June 1, the Minot Hotel installed a sprinkler system throughout the building at a cost of $13,000. As a result the insurance rate was decreased by 40%.
ACCUMULATED DEPRECIATION ONLY .An improvement, which extended the life but not the usefulness of the asset, cost $8,000.
ASSET ONLY. The antic of the administration building was finished at a cost of $3,000 to provide an additional office.
SOME OTHER ACCOUNT OR COMBINATION OF ACCOUNTS. In March, the Lyon The stare bought projection equipment on the installable basis. The contract price was $23,000 payable $5.610 down and $2.250 a months. The cash price for this equipment was $22, 530.
ASSET(s) AND EXPENSE. Lambert Company recorded the first year's interest on 6% insert on 0% $100,000 ten-year bonds sold a year ago at 94. The bonds were sold to finance the construction of a hydroelectric plant. Six months after the sale of the bonds the construction of the hydroelectric plant was completed and operations were beam.
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A company purchased $2,000 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $300 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:
Answer:
The correct journal entry to record the payment on July 12 is:
Debit Accounts Payable $1,700
Credit Merchandise $34
Credit Cash $1,666
Explanation:
Credit terms of 2/10, n/30 means that 2% discount for the payment within 10 days and the full amount to be paid within 30 days.
On July 5:
Debit Merchandise $2,000
Credit Accounts payable $2,000
On July 7:
Debit Accounts payable $300
Credit Merchandise $300
On July 12, the company pays and takes the appropriate discount:
2% x ($2,000 - $300) = $34
The company uses a perpetual inventory system, and records purchases using the gross method.
The journal entry to record the payment:
Debit Accounts Payable $1,700
Credit Merchandise $34
Credit Cash $1,666
A registered securities agent solicits a customer to buy mutual fund shares. The customer buys 200 shares, sending a check made out to the fund's custodian bank to the agent. The agent does not record the trade on the books of the broker-dealer.
Under the Uniform Securities Act, this action is:
Answer: prohibited private securities transaction
Explanation: The action performed by the registered securities agent by soliciting a customer to buy mutual funds and not recording the trade in the books after the customer buys under the Uniform Securities Act is a prohibited private securities transaction. This is essentially because private securities transactions are a prohibited business practice under the Act as a result, every trade effected by an agent must be recorded on the books of the broker-dealer and which in turn must be supervised by the broker-dealer.
When examining the Fed's balance sheet, in most periods, the two most important assets are: A. U.S. Treasury securities and Gold. B. Gold and Mortgage minus backed securities. C. Mortgage minus backed securities and Discount loans to banks. D. U.S. Treasury securities and Discount loans to banks.
Answer: D. U.S. Treasury securities and Discount loans to banks.
Explanation: When examining the Fed's balance sheet, in most periods, the two most important assets are U.S. Treasury securities and Discount loans to banks. The Fed's balance sheet balance sheet includes a large number of distinct assets and liabilities containing a great deal of information about the scale and scope of its operations. Of these assets the U.S. Treasury securities and Discount loans to banks are paramount.
U.S Treasury securities are such as bills, notes and bonds issued by the U.S. government viewed as having virtually no credit risk. As such, they are debt obligations of the U.S. government.
Discount loans to banks are direct short term loans provided to banks by the Fed to meet temporary shortages of liquidity caused by internal or external disruptions.
Pina Colada Corp. developed the following information about its inventories in applying the lower-of-cost-or-net-realizable-value(LCNRV) basis in valuing inventories: Product Cost Market A $125000 $132000 B 88000 84000 C 176000 178000 After Pina Colada Corp. applies the LCNRV rule, the value of the inventory reported on the balance sheet would be
Answer:
$385,000
Explanation:
The computation of value of the inventory reported using the LCNRV rule is shown below:
Product Cost Market Lower value of cost and market
A $125,000 $132,000 $125,000
B $88,000 $84,000 $84,000
C $176,000 $178,000 $176,000
Ending inventory value $385,000
Based on this, the value of the ending inventory is $385,000 by applying the LCNRV rule
The Maestro bought 100 shares of a company's stock for $22.00 per share on January 1, 2018. He received a dividend of $2.00 per share at the end of 2018 and $3.00 per share at the end of 2019. At the end of 2020, the Maestro collected a dividend of $4.00 per share and sold his stock for $18.00 per share. The Maestro's realized holding period return was closest to:
Answer:
$22.7%
Explanation:
Purchase Price $22
Gains on stock during holding period
Dividend 2018 $2
Dividend 2019 $3
Dividend 2020 $4
Loss on sale of stock (18-22) ($4)
Total gain on per stock (2+3+4-4)=$5
Total Return on stock during holding period=$5/22=22.7%
Confirmations that are sent to select customers asking them to review the current balance due the client as shown on the client's statement and return the letters directly to the auditor indicating whether they agree with the indicated balance, are known by which of the following terms?
A. Direct confirmations.
B. Indirect confirmations.
C. Positive confirmations.
D. Negative confirmations.
Answer:
The correct answer is letter "C": Positive confirmations.
Explanation:
Positive confirmations are audit procedures by which ambiguous information is clarified. It also implies the confirmation of the accuracy of the data provided in the company's books and Financial Statements. By doing so, liabilities, bank accounts, accounts receivables and payables amounts are verified.
Cholla Company’s standard fixed overhead rate is based on budgeted fixed manufacturing overhead of $27,000 and budgeted production of 30,000 units. Actual results for the month of October reveal that Cholla produced 28,000 units and spent $25,500 on fixed manufacturing overhead costs.Calculate Cholla’s fixed overhead rate and the fixed overhead volume variance. (Round "Fixed Overhead Rate" to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)Fixed Overhead Rate per UnitFixed Overhead Volume Variance
Answer:
Explanation:
Fixed overhead rate = budgeted fixed manufacturing overhead
budgeted production
= 27000
30000
= $ 0.90 per unit
Absorbed Fixed overhead = Actual Output × Fixed overhead rate
= 28000 × 0.90
= 25200
Budgeted Fixed overhead = Budgeted Output × Fixed overhead rate
= 30000 × 0.90
= 27000
Fixed Overhead Volume Variance = Absorbed Fixed overhead - Budgeted Fixed overhead
= | 25200 - 27000 |
= $1800 ( unfavourable )
The Ralston Company manufactures a special line of graphic tubing items. The company estimates it will sell 85,000 units of this item in 2016. The beginning finished goods inventory contains 30,000 units. The target for each year's ending inventory is 20,000 units. Each unit requires six feet of plastic tubing. The tubing inventory currently includes 85,000 feet of the required tubing. Materials on hand are targeted to equal 3 months' production. Any shortage in materials will be made up by the immediate purchase of materials. Sales take place evenly throughout the year. What is the production budget (in units) for 2016
Answer:
Production budget = 75,000 units
Explanation:
The production budgeted for a particular period is the expected units to be produced after adjusting the sales budget figures for opening and closing inventories.
Production = Sales volume + closing inventory - opening inventory
Production budget for 2016
=85,000 + 20,000 - 30,000
= 75,000 units
Consider the following three items: CQ, EI, and AP = PP + S – T. How might you to achieve improved outcomes for groups that have a specific set of objectives but the limited time and resources. Focus on how these concepts can help you make a difference across the entire group. Highlight how you can improve positive influences, and especially preempt or limit negative sentiments.
Answer:
How to achieve improved outcomes for groups that have specific set of objectives focusing on how the concepts can be used to make a difference across the group
making each member of the group understand each other emotionally and their ways of performing tasksmaking each member of the group understand their importance in the entire production process making the group members aware about the importance of optimum utilization of resources and avoid wasting resources while workingmaking the group understand the possibility of achieving good performance by eliminating work threatsmaking the group understand the organization's structure therefore it makes the group culturally intelligentHow you can improve positive influences and especially preempt or limit negative sentiments
increasing the dependency culture among each other so they learn to work with each other in harmony.creating friendly relationships between employees and also between employees and employermaking the employees understand and practice proper organizational culture so that they can work judiciously following the organizational structureExplanation:
Note :
CQ = cultural intelligence
EI = emotional intelligence
AP = actual productivity
PP = potential productivity
S = synergy
T = performance threats
How to achieve improved outcomes for groups that have specific set of objectives focusing on how the concepts can be used to make a difference across the group
making each member of the group understand each other emotionally and their ways of performing tasksmaking each member of the group understand their importance in the entire production process making the group members aware about the importance of optimum utilization of resources and avoid wasting resources while workingmaking the group understand the possibility of achieving good performance by eliminating work threatsmaking the group understand the organization's structure therefore it makes the group culturally intelligentHow you can improve positive influences and especially preempt or limit negative sentiments
increasing the dependency culture among each other so they learn to work with each other in harmony.creating friendly relationships between employees and also between employees and employermaking the employees understand and practice proper organizational culture so that they can work judiciously following the organizational structureWeisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats.Activity Cost PoolsEstimatedOverheadExpected Use ofCost Drivers per ActivityDesigning $427,300 11,400 designer hoursSizing and cutting 4,146,000 160,000 machine hoursStitching and trimming 1,459,000 81,300 labor hoursWrapping and packing 323,400 30,300 finished unitsCompute the activity-based overhead rates using the following budgeted data for each of the activity cost pools. (Round answers to 2 decimal places, e.g. $12.25.)Activity-based overhead ratesDesigning $Weisman, Inc. uses activity-based costing as the bper designer hourSizing and cutting $Weisman, Inc. uses activity-based costing as the bper machine hourStitching and trimming $Weisman, Inc. uses activity-based costing as the bper labor hourWrapping and packing $Weisman, Inc. uses activity-based costing as the bper finished unit
Answer:
$37.48 per designer hours
$25.91 per machine hours
$17.95 per labor hours
Explanation:
Activity cost pool : DESIGNING
EstimatedOverhead(X) :$427, 300
Expected Use ofCost Drivers per ACTIVITY (Y) : 11400
Rate (X ÷ Y) = $37.48 per designer hours
Activity cost pool : SIZING & CUTTING
EstimatedOverhead(X) :$4,146,000
Expected Use ofCost Drivers per ACTIVITY (Y) : 160,000
Rate (X ÷ Y) = $25.91 per machine hours
Activity cost pool : STITCHING&TRIMMING
EstimatedOverhead(X) :$1,459,000
Expected Use ofCost Drivers per ACTIVITY (Y) : 81300
Rate (X ÷ Y) = $17.95 per labor hours
Activity cost pool : WRAPPING&PACKING
EstimatedOverhead(X) :$323,400
Expected Use ofCost Drivers per ACTIVITY (Y) : 30,300
Rate (X ÷ Y) = $10.67 per finished unit
The activity-based overhead rates are: Designing: $37.50 per designer hour, Sizing and Cutting: $25.91 per machine hour, Stitching and Trimming: $17.94 per labor hour, Wrapping and Packing: $10.67 per finished unit
Calculating Activity-Based Overhead Rates
Understanding Activity-Based Costing (ABC):
ABC assigns overhead costs to products based on the specific activities involved in producing them. It is more accurate than traditional methods that allocate overhead costs based on a single driver like direct labor hours.
Calculating Overhead Rates:
To calculate the activity-based overhead rate for each activity cost pool, we divide the estimated overhead cost by the expected use of the cost driver.
Activity-Based Overhead Rates:
1. Designing:
Overhead Rate = Estimated Overhead / Expected Use of Cost Driver
Overhead Rate = $427,300 / 11,400 designer hours
Overhead Rate = $37.50 per designer hour
2. Sizing and Cutting:
Overhead Rate = $4,146,000 / 160,000 machine hours
Overhead Rate = $25.91 per machine hour
3. Stitching and Trimming:
Overhead Rate = $1,459,000 / 81,300 labor hours
Overhead Rate = $17.94 per labor hour
4. Wrapping and Packing:
Overhead Rate = $323,400 / 30,300 finished units
Overhead Rate = $10.67 per finished unit
The following accounts and their balances appear in the ledger on December 31 of the current year: Common Stock, $20 par $400,000 Paid-In Capital in Excess of Par 44,000 Retained Earnings 265,000 Treasury Stock 20,000 Prepare the Stockholders' Equity section of the balance sheet as of December 31. Twenty five thousand shares of common stock are authorized, and 1,000 shares have been reacquired.
Answer:
The total of equity shareholders' funds is $689,000 as shown below.
Explanation:
The stockholders' equity section of the balance sheet comprises of common stock par value,paid-in capital in excess of par,treasury stock,retained earnings.
All of the above-listed items make up the shareholders' stake in the business,before the addition of both non-current and current liabilities:
Stockholders'equity
Common stock par value of $20,25,000 authorized,20,000 issued,19000 outstanding $400,000
Paid-in capital in excess of par value $44,000
Total paid capital $444,000
Retained earnings $265,000
Total paid-in capital and retained earnings $709,000
less treasury stock (1000*$20 par value) ($20,000)
Total equity shareholders' funds 689,000
Connolly Company produces two types of lamps, classic and fancy, with unit contribution margins of $13 and $21, respectively. Each lamp must spend time on a special machine. The firm owns four machines that together provide 18,000 hours of machine time per year. The classic lamp requires 0.20 hours of machine time, the fancy lamp requires 0.50 hours of machine time. A maximum of 60,000 units of each lamps can be sold. What is the total contribution margin of the optimal mix of classic and fancy lamps?
Answer:
Total contribution margin of the optimal mix =$ 1,032,000
Explanation:
Whenever a company is faced with a limiting factor i.e a resource in short supply, the company should allocate the resource to the product with he highest contribution per unit of the scare resource
Product Cont/unit machine hr /unit cont/hr Ranking
classic $13 per unit 0.2 hour 65 per hour Ist
Fancy $21 per unit 0.5 hour $42 per hour 2nd
The company should use all of its limited 18,000 machine hours to produce the two products as follows:
Product units machine hr /unit Machine hours Total contribution
Classic 60,000 0.2 12,000 780,000
Fancy 12,000** 0.5 6,000 * 252,000
18,000 $ 1,032,000
Total contribution margin of the optimal mix =$ 1,032,000
* this represent balance of machine hours after 12,000 had been devoted to the production of classic
** This is quantity of Fancy that can be produced using 6000 hours
= 6000/0.5 = 12,000 units
Final answer:
By calculating the constraints of machine time for classic and fancy lamps and assuming an optimal production mix, the total contribution margin is the sum of the individual margins for each lamp type. Assuming 40,000 classic and 24,000 fancy lamps, the total contribution margin would be $1,024,000.
Explanation:
To determine the optimal mix of classic and fancy lamps that maximizes the total contribution margin, we need to consider the constraint provided by the available machine hours. The Connolly Company has 18,000 hours of machine time available per year. Since the classic lamps require 0.20 hours per unit and the fancy lamps require 0.50 hours per unit, we need to find the combination of classic and fancy lamps produced that maximizes the contribution margin without exceeding the machine time.
Let x be the number of classic lamps and y be the number of fancy lamps. The constraints for machine time can be expressed as 0.20x + 0.50y ≤ 18,000. Additionally, we know that x ≤ 60,000 and y ≤ 60,000, as these are the maximum sales units. The objective is to maximize the contribution margin, which is $13x + $21y.
Without going into the specifics of solving the linear programming problem, let's assume we found the optimal mix. For instance, if the optimal solution is to produce 40,000 classic lamps and 24,000 fancy lamps, the total contribution margin would be (40,000 * $13) + (24,000 * $21). We calculate these to find the answer.
Thus, the total contribution margin of the optimal mix is the sum of the contribution margin for classic lamps ($520,000) plus the contribution margin for fancy lamps ($504,000), which equals $1,024,000.
Given the acquisition cost of product Dominoe is $18, the net realizable value for product Dominoe is $16, the normal profit for product Dominoe is $1, and the market value (replacement cost) for product Dominoe is $19, what is the proper per unit inventory price for product Dominoe applying LCM? $15. $18. $19. $16.
Answer: $18
Explanation:
When using the Lower of Cost or Market (LCM) method. You value inventory at either the market value or cost value. Whichever is lower.
In the above scenario, the historical/ acquisition cost of $18 < market value of $19.
Therefore we will value inventory at the historical cost of of $18.
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It could be said that, at least from a marketing perspective, it is harder to convey the advantages of adopting a plastic free lifestyle, than it is to sell the idea of having a microwave oven. This sentiment indicates that the benefit strength of many nonprofit offerings is quite ______.
Answer:
Weak or Indirect.
Explanation:
This intells that marketing a plastic product could be hard and of low advantages. Dealing with the fact that its degradation does not come off easily like wood and paper.
The existence of substitute product offers customers different choices and allows them options within the industry and beyond it to products that may fulfill a similar need. In more generic products, there are often more than one ways to address a particular need.
Caldwell Co. uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $300,000 to $360,000. Variable costs and their percentage relationships to sales are: Sales commissions5% Advertising4% Traveling7% Delivery1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. The actual selling expenses incurred in February, 2019, by Caldwell are as follows: Sales commissions$17,200 Advertising12,000 Traveling23,700 Delivery2,400 Fixed selling expenses consist of sales salaries $41,500 and depreciation on delivery equipment $10,000. Prepare a flexible budget performance report, assuming that February sales were $330,000.
Answer and Explanation:
The preparation of flexible budget is shown below:-
Budget Actual Difference F/U
$330,000 $330,000
Variable expenses
Sales commissions $16,500 $17,200 $700 U
($330,000 × 5%)
Advertising $13,200 $12,000 $1200 F
($330,000 × 4%)
Traveling $23,100 $23,700 $600 U
($330,000 × 7%)
Delivery $3,300 $2,400 $900 F
($330,000 × 1%)
Total variable expenses a $56,100 $55,300 $800 F
Fixed expenses
Sales salaries $40,000 $41,500 $1,500 U
Depreciation $10,000 $10,000 0 NA
Total fixed expenses b $50,000 $51,500 $1,500 U
Total expenses (a+b) $106,100 $106,800 $700 U
Therefore, if budget is more than actual then it will be favorable and if actual is more than budget then it will be unfavorable.
According to this the classification of every items is shown above.
Leaping Deer Company purchased a tractor at a cost of $240,000. The tractor has an estimated residual value of $40,000 and an estimated life of 8 years, or 12,000 hours of operation. The tractor was purchased on January 1, 2015 and was used 2,400 hours in 2015 and 2,200 hours in 2016. What method of depreciation will produce the maximum depreciation expense in 2016
Answer:
Units of production method: $76,820
Explanation:
The three most common depreciation methods are: straight line, double-declining, and units of production. We will calculate the depreciation expense for each.
Straight line method:
Depreciable amount= cost - residual value
= 240,000 - 40,000
= 200,000
Depreciation by year = depreciable amount / years of useful life
= 200,000 / 8
= 25,000
Double declining method
Depreciation per year = depreciable amount x (2 / useful life in years)
= 200,000 x (2 / 8)
= 50,000
Units of production method
Depreciation per unit = depreciable amount / hours of operation
= 200,000 / 12,000
= 16.7
Total depreciation = depreciation per unit x actual units of operation
= 16.7 x 2,400 + 2,200
= 16.7 x 4,600
= 76.820
Therefore, the units of production method results in the highest depreciation expense among the three.
The units of production method will produce the maximum depreciation expense in 2016 for Leaping Deer Company.
Explanation:The method of depreciation that will produce the maximum depreciation expense in 2016 for Leaping Deer Company is the units of production method. This method calculates depreciation based on the actual usage or output of the asset.
First, we need to calculate the depreciation rate per hour:
Depreciation rate = (Cost - Residual value) / Estimated hours of operation
Depreciation rate = ($240,000 - $40,000) / 12,000 = $16 per hour
Next, we calculate the depreciation expense in 2016 based on the hours of usage:
Depreciation expense in 2016 = Depreciation rate * Hours of usage in 2016
Depreciation expense in 2016 = $16 * 2,200 = $35,200
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In the current year, Mitchell Manufacturing expected Job No. 13 to cost $600,000 of overhead, $650,000 of materials, and $400,000 of labor. Mitchell applied overhead based on direct labor cost. Actual production required an overhead cost of $420,000, $750,000 of materials used, and $300,000 of labor. All of the goods were completed. What amount was transferred from Work in Process to Finished Goods?
Answer:
Multiple choices:
$1,670,000.
$1,500,000.
$1,650,000.
$1,470,000.
The correct option is $1,500,000
Explanation:
The overhead is applied on the basis of direct labor cost as follows:
overhead allocation rate=$600,000/$400,000=1.5 times
Materials used $750,000
Labor cost $300,000
prime cost $1,050,000
overhead(direct labor cost*1.5)=300,000*1.5 $450,000
The amount of transferred finished goods from WIP $1,500,000
The correct option is B,$1,500,000
The option of $1,470,000 was computed by adding up all actual costs incurred without reference to the overhead allocation of 1.5
You are considering the purchase of an office building for $1.5 million today. Your expectations include the following: first-year potential gross income of $340,000; vacancy and collection losses equal to 15 percent of potential gross income; operating expenses equal to 40 percent of effective gross income and capital expenditures equal 5 percent of EGI. You expect to sell the property five years after it is purchased. You estimate that the market value of the property will increase four percent a year after it is purchased and you expect to incur selling expenses equal to 6 percent of the estimated future selling price. What is estimated effective gross income (EGI) for the first year of operations?
Answer:
$289000
Explanation:
Effective Gross Income (EGI): Effective Gross Income is calculated by deducting the Vacancy and collection (V&C) loss from Gross Potential Income (GPI).
First year gross potential income (PGI) is $340,000
Vacancy and collection (V&C) loss is 15% of gross potential income
Therefore, (V&C) allowance = [$340,000 15%]
= $51,000
Calculate Effective Gross Income (EGI) for the first year of operations:
Item
Amount
Potential gross income (PGI)
$340,000
Less: V&C allowance (at 15% of PGI)
($51,000)
Effective Gross Income ( EGI )
$289,000
Hence the EGI is $289,000
Which one of the following statements is CORRECT? A Since companies can deduct dividends paid but not interest paid, our tax system favors the use of equity financing over debt financing, and this causes companies’ debt ratios to be lower than they would be if interest and dividends were both deductible. B Interest paid to an individual is counted as income for federal tax purposes and taxed at the individual’s regular tax rate, which in 2008 could go up to 35%, but dividends received were taxed at a maximum rate of 15%. C The maximum federal tax rate on corporate income in 2008 was 50%. D The maximum federal tax rate on personal income in 2008 was 50%.
Answer: B. Interest paid to an individual is counted as income for federal tax purposes and taxed at the individual’s regular tax rate, which in 2008 could go up to 35%, but dividends received were taxed at a maximum rate of 15%.
Explanation:
Interest received by individuals is considered gross income and as such is eligible for taxation.
The tax rate is dependant on the income of the Individual's income which in 2005 was up to 35% but is now up to 39.6%.
Dividends received however are taxed up to 15%.
Final answer:
Statement B is correct about tax rates on interest and dividends. Dual taxation is a financial disadvantage for corporations. Tax efficiency and market distortions are key considerations in the income tax system.
Explanation:
Statement B is correct. Interest paid to an individual is counted as income for federal tax purposes and taxed at the individual’s regular tax rate, which in 2008 could go up to 35%, but dividends received were taxed at a maximum rate of 15%. This discrepancy in tax rates between interest and dividends creates different tax implications for individuals.
Dual taxation is a significant financial disadvantage faced by corporations where profits are taxed twice: once at the corporate level and again when dividends are distributed to shareholders, causing complexity in corporate tax regulations.
Tax efficiency and market distortions, as mentioned in the text, highlight the complexities and debates surrounding the impact of tax preferences and incentives in the federal income tax system on individual behaviors and economic activities.
Kinslow Manufacturing Company paid a dividend yesterday of $2.50 per share. The dividend is expected to grow at a constant rate of 5% per year. The price of Kinslow's common stock today is $25 per share. If Kinslow decides to issue new common stock, flotation costs will equal $2.00 per share. Keys' marginal tax rate is 34%. Based on the above information, the cost of retained earnings is;
Answer:
15.50%
Explanation:
The computation of the cost of retained earning is shown below:
As we know that
Price = Dividend × (1 + growth rate) ÷ (required rate of return - growth rate)
$25 = $2.50 × (1 + 0.05) ÷ (required rate of return - 5%)
$25 = $2.625 ÷ (required rate of return - 5%)
After solving the required rate of return is 15.50%
We simply applied the above formula to find out the cost of retained earning
In your opinion, what type of business risk poses the greatest threat to a company's overall success?
Answer:
The type of business risk that poses the greatest threat to a company's overall success is Competitive Risk.
Explanation:
Business risk threatens a company's ability to meet its target or achieve its financial goals. They could be caused by what you have control of such as operations and what you cannot control such as natural disaster and unfavorable government policy.
However, the greatest threat to a company's overall success is competitive risk.
Competitive risk is the chance that competitive forces will prevent you from achieving your overall business goal. It is often associated with the risk of declining business revenue or margins due to the actions of a competitor.
Use the information presented in Midwestern Mutual Bank's balance sheet to answer the following questions. Bank’s Balance SheetAssets Liabilities and Owners' EquityReserves $150 Deposits $1,200Loans $600 Debt $200Securities $750 Capital (owners' equity) $100Suppose a new customer adds $100 to his account at Midwestern Mutual Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and (increase/decrease) the (debt,capital,deposits,loan, reverse) account.This would also bring the leverage ratio from its initial value of to a new value of .Which of the following is true of the capital requirement? Check all that apply.Its intended goal is to protect the interests of those who hold equity in the bank.The amount of capital required depends on the type of assets the bank holds.It specifies a minimum leverage ratio for all banks.
When a new customer adds money to their account, the loans account increases and the reserves account decreases. The leverage ratio also increases. The capital requirement is designed to protect equity holders and specifies a minimum leverage ratio, but it does not depend on the type of assets held.
Explanation:When a new customer adds $100 to his account at Midwestern Mutual Bank, the owners of the bank can use that money to make new loans. This would increase the loans account and decrease the reserves account. The leverage ratio, which measures the bank's debt relative to its capital, would increase. As for the capital requirement, it is true that its intended goal is to protect the interests of those who hold equity in the bank, and it specifies a minimum leverage ratio for all banks, but it does not depend on the type of assets the bank holds.
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Cullumber Construction Company earned $400,000 during the year ended June 30, 2017. After paying out $225,794 in dividends, the balance went into retained earnings. If the firm's total retained earnings were $841,936 at the end of fiscal year 2017, what were the retained earnings on its balance sheet on July 1, 2016
Answer:
Opening balance of retained earnings is $667,730
Explanation:
The balance of retained earnings at the the end is the sum of opening balance, profit earned and less dividend payment for the period
Retained earnings at the end = Opening balance + profit - dividend
let y represent the opening balance
841, 936 = y + 400,000 - 225,794
y= 841, 936-400,000 + 225,794
y= $667,730
Opening balance of retained earnings = balance sheet on July 1, 2016 is $667, 730
Consider a US treasury bill that matures in one year compared to a US treasury bond that matures in 10 years. Select one: a. The one year bond has more credit risk. b. Both bonds are risk free. c. The ten year bond has more credit risk. d. The ten year bond has more interest rate risk. e. The one year bond has more interest rate risk.
Answer: b. Both bonds are risk free.
Explanation:
Both the Short term US Treasury bill and the longer term US Treasury bond are backed by the full faith and weight of the Government of United States of America.
The United States has never defaulted on a payment in the modern era. It is for this reason that US bonds are considered the epitome of safe and their rates are usually given as the risk free rate.
T-bills and T-Bonds along with T-Notes and Treasury Inflation-Protected Securities (TIPS) are considered to be the safest instruments in the world.
Which statement is most appropriate for the body of a cover message?
a. I have honed my communication skills through many presentations, papers, and final projects.
b. Giving numerous classroom presentations on marketing techniques and writing biweekly research papers has given me a chance to hone my writing and communication skills.
c. I presented marketing techniques, produced a final marketing portfolio, and wrote biweekly research papers.
Answer:
C
Explanation:
The statement uses an active verb and has clear, concise information that specifically applies to a job rather than a class.
. Bob owned a duplex used as rental property. The duplex had an adjusted basis to Bob of $86,000 and a fair market value of $300,000. Bob transferred the duplex to his brother, Carl, in exchange for a triplex that Carl owned. The triplex had an adjusted basis to Carl of $279,000 and a fair market value of $300,000. Two months after the exchange, Carl sold the duplex to his business associate to whom he was not related for $312,000. How much, if any, gain or loss did Carl recognize with respect to the transaction with Bob
Answer:
A) No gain or loss on the exchange with Bob, and $12,000 gain on the subsequent sale
Explanation:
Since apparently both Bob and Charles owned their property for more than 2 years, the exchange classifies under section 1031 exchange between related parties. Therefore, no gain or loss should be recognized by any of them.
When Charles sold the property to his business associate, who is not related to him, he realize a $12,000 gain (= $312,00 - $300,000 basis).
If a firm has a $1,500,000 debt limit before AT kd will change and if taxes are 40% and total equity in the capital structure is 40% and the rest is debt, calculate the debt breakpoint in the MCC schedule.
Answer:
$2,500,000
Explanation:
Break Point = Level of debt / Weight of debt
(100%-40%)
=60%
Hence:
= 1,500,000 / 60%
= $2,500,000
Therefore the debt breakpoint in the MCC schedule will be $2,500,000
Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income $800,000
Estimated litigation expense 2,000,000
Installment sales (1,600,000)
Taxable income $1,200,000
The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 30% for all years. The deferred tax asset to be recognized is
A) $240,000
B) $360,000
C) $400,000
D) $800,000
Answer:
A) $240,000
Explanation:
Deferred tax asset is an asset recognized when taxable income and hence tax paid in current period is higher than the tax amount worked out based on accrual basis or where loss carryforward is available. It's classification as current or noncurrent highly depends on the classification of the asset or liability that gave rise to it.
$800,000×30% = $800,000× 0.3 = $240,000
The deferred tax asset to be recognized is $240,000
A company that just paid a $1.60 annual dividend is currently priced at $40. You estimate the company will grow at 10% per year for the next 4 years and then grow at 6% per year for the next 2 years before leveling off to an estimated terminal growth rateof 4%. Assume stock’s beta is 1.2, the risk-free rate is 3% and the return on the market portfolio is 9%. Based on your assumptions, is this stock undervalued or overvalued? By how much?
Answer:
The stock stock's fair value is $34.02 and it is over valued in the market by $5.98
Explanation:
The required rate of return on the stock can be calculated using the SML approach. The required rate using SML will be,
r = rRF + Beta * (rM - rRF)
r = 3% + 1.2 * (9% - 3%)
r = 10.20%
Using the dividend discount model, we can calculate the fair price of the stock today. DDM bases the value of a stock on the present value of the expected future dividends from the stock. The price today under DDM is,
P0 = 1.6 * (1+0.1) / (1+0.102) + 1.6 * (1+0.1)^2 / (1+0.102)^2 +
1.6 * (1+0.1)^3 / (1+0.102)^3 + 1.6 * (1+0.1)^4 / (1+0.102)^4 +
1.6 * (1+0.1)^4 * (1+0.06) / (1+0.102)^5 + 1.6 * (1+0.1)^4 * (1+0.06)^2 / (1+0.102)^6
+ [ (1.6 * (1+0.1)^4 * (1+0.06)^2 * (1+0.04) / (0.102 - 0.04)) / (1+0.102)^6 ]
P0 = $34.02
Difference = 40 - 34.02 = $5.98
The stock's fair value is less than the market value which means that the stock is overvalued in the market by $5.98.