Answer:
The minimum amount to sell the claim is =$37,396.85
Explanation:
The minimum amount is the present value of the the expected future sum discounted at the rate of 5%.
PV = FV × (1+r)^(-n)
FV - 90,000, r- 5%, n- 18
= 90,000 × (1.05)^(-18)
= 37,396.85
The minimum amount to sell the claim is =$37,396.85
Final answer:
Calculate the minimum amount to sell your claim now using the present value formula at an interest rate of 5% for a $90,000 inheritance received in 18 years.
Explanation:
The present value formula can be used to calculate the minimum amount to sell your claim for now:
Present Value formula: PV = FV / (1 + r)^nGiven FV = $90,000, r = 5%, n = 18 yearsCalculating the present value:PV = $90,000 / (1 + 0.05)^18 = $90,000 / (1.05)^18 = $90,000 / 2.078928 = $43,222.96
So, the minimum amount you should sell your claim for now is approximately $43,222.96.
Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were $4,380,000 and accounts receivable averaged $493,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers
Answer:
Nominal 24.83%
Effective 27.86%
Explanation:
Terms 2/10, n/40 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after sale with net credit period of 40 days.
Gross Sales = $4,380,000
Received within 10 days = $2,190,000
As $2,190,000 of Gross sales payments are made within discount period, discount will be availed on this value.
Discount = $2,190,000 x 2% = $43,800
Nominal Cost of trade = 2%
Effective cost of Trade
Nominal Cost of trade = 2% / (1 - 2%) x (365 / (40 -10 )
Nominal Cost of trade = 24.83%
Effective cost of Trade = ( 2%/(1-2%) )^(365/(40-10)) - 1
Effective cost of Trade = 27.86%
Answer:
Nominal cost = 17.7 %.
Effective cost = 19.2 %
Explanation:
Calculate daily sales based on a 365-day year,
calculate the average receivables for discount customers,
find the DSO for the nondiscount customers
Sales per day = $4,380,000 / 365 days = $12,000
Discounted sales = 0.50 ($12,000) = $6,000
Accounts receivable attributable to discount customers = 10 * $6,000 = $60,000
Accounts receivable attributable to non-discount customers = $493,500 - $60,000 = $433,500
Alternatively
$493,500 / $12,000 = 41.13 days i.e. 41 days
41 days = 0.50 (10) + .50 * DSO nondiscount
Non discount = 36/.50 = 72 days
Non discount are require to pay in 40 days but they are paying in 72 days
Effective cost = (1 + 2/98 ) ^ (365 / 42) - 1
1.192 - 1 = 0.192 = 19.2 %
Nominal cost = 2/98*365/42 = 0.177 = 17.7 %.
A hurricane (declared a federal disaster) damaged a personal auto owned by Mr. and Mrs. South on June 15, 2018. Fair market value before the flood $18,500 Fair market value after the flood 2,000 Cost basis 20,000 Insurance proceeds 13,000 Adjusted gross income for this year 25,000 Calculate the South's deductible casualty loss.
Answer:
$900
Explanation:
South's deductible casualty loss = $900
Fair market value before the flood 18500
Fair market value after the flood (2000)
Decline in FMV 16500
Cost basis 20000
Lesser of basis or decline in FMV 16500
Minus: Insurance proceeds (13000)
Net loss 3500
Minus: $100 Floor (100)
10% of AGI (2500)
Deductible Loss 900
PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Mountain Monster, and Desert Dragon from a single manufacturing facility. The manufacturing facility operates at 100% of capacity.
The following per unit information is available for the two products:
Mountain Monster
Sales price $5,400
Variable cost of goods $3,285
Manufacturing margin $2,115
Variable selling expenses $1,035
Contribution margin $1,080
Fixed expenses $485
Income from operations $595
Desert Dragon
Sales price $5,250
Variable cost of goods sold $3,400
Manufacturing margin $1,850
Variable selling expenses $905
Contribution margin $945
Fixed expenses $310
Income from operations $635.00
In addition, the following sales unit volume information for the period is as follows: Mountain Monster
Sales unit volume 5,000
Desert Dragon
Sales unit volume 4,850
a. Prepare a contribution margin by product report.
b. Calculate the contribution margin ratio for each product as a percent, rounded to one decimal place.
c. Calculate the contribution margin ratio for each product as a percent, rounded to one decimal place.
Answer:
Contribution margin ratio Mountain Monster *100= 20.0 %
Contribution margin ratio Desert Dragon * 100= 18.00%
Explanation:
PowerTrain Sports Inc.
Contribution Margin
Product Report
Mountain Monster, Desert Dragon
Sales price $5,400 $5,250
Variable cost of goods $3,285 $3,400
Manufacturing margin $2,115 $1,850
Variable selling expenses $1,035 $905
Contribution margin $1,080 $945
Fixed expenses $485 $310
Income from operations $595 $635.00
b.Contribution margin ratio= Contribution Margin / Sale
Contribution margin ratio= Sales - Variable Costs / Sale
b. Contribution margin ratio Mountain Monster *100=
=1080/5400 * 100= 0.2*100= 20.0 %
b.Contribution margin ratio Desert Dragon * 100=
=945/5250* 100 = 0.18*100= 18.00%
c.Contribution margin ratio Mountain Monster *100=
=1080/5400 * 100= 0.2*100= 20.0 %
c.Contribution margin ratio Desert Dragon * 100=
=945/5250* 100 = 0.18*100= 18.00%
Explanation of contribution margin for Mountain Monster and Desert Dragon ATVs.
a. Contribution Margin by Product Report:
Mountain Monster:
Sales price: $5,400Variable cost of goods: $3,285Contribution margin: $1,080Desert Dragon:
Sales price: $5,250Variable cost of goods sold: $3,400Contribution margin: $945b. Contribution Margin Ratio:
Mountain Monster: $1,080 / $5,400 = 0.2 or 20%
Desert Dragon: $945 / $5,250 = 0.18 or 18%
c. Contribution Margin Ratio:
Mountain Monster: $1,080 / $3,285 = 0.33 or 33%
Desert Dragon: $945 / $3,400 = 0.278 or 27.8%
Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner/manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $360,000 per year. To receive a normal profit, the firm described above would have to___________.
Answer:
The firm earns revenues of $360,000 per year. To receive a normal profit, the firm described above would have to earn additional revenue of $90,000
Explanation:
As per the information provided in the question, the current profit/loss after deducting all expenditure from income is as follows:
Particular Amount ($)
Revenue 360,000
Less: Wages and Salaries (200,000)
Less: Materials (75,000)
Less: New Equipment (30,000)
Less: Rented Property (20,000)
Less: Interest Costs (35,000)
Profit/Loss 0
As confirmed from the calculation above currently no profit is being earned even after the owner/manager not receiving income from the firm. Therefore, the firm should generate additional revenue of $90,000 in order to earn normal profit.
Wadhams Snow Removal's cost formula for its vehicle operating cost is $1,900 per month plus $430 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $11,470.
Required:
1. The vehicle operating cost in the planning budget for December would be closest to _________.
Answer:
$8,780
Explanation:
According to the planning budget, the monthly operating cost for the vehicle is:
[tex]C=1,900+430d[/tex]
Where 'd' is the number of snow-days.
If the company has planned for 16 snow days, then the operating cost in the planning budget would be:
[tex]C=1,900+430*16\\C=\$8,780[/tex]
The planning budget for December would be $8,780
Assume that a new law is passed which restricts investors to holding only one asset. A risk-averse investor is considering two possible assets as the asset to be held in isolaiton. The assets' possible returns and related probabilities are as followsAsset X Asset Y Pr Rx Pr Ry.10 -3% .05 -3%.10 2 .10 2.25 5 .30 5.25 8 .30 8.30 10 .25 10Which asset should be preferred?a. Asset X, since its expected return is higher.b. Asset Y, since its beta is probably lower.c. Asset Y, since its coefficient of variation is lower and its expected return is higher.d. Asset X, since its standard deviation is lower.e. Either one, since the expected returns are the same.
Answer:
(C) Asset Y, since its coefficient of variation is lower and its expected return is higher
Explanation:
Given the various probabilities (P) and returns (R) for Asset X and Asset Y, their expected return is computed as follows.
Asset X = [tex]Summation(P_{r} *R_{x} )[/tex]
= (0.1*-3%) + (0.1*2%) + (0.25*5%) + (0.25*8%) + (0.3*10%)
Expected return (Asset X) = 6.15%
Asset Y = [tex]Summation(P_{r} *R_{y} )[/tex]
= (0.05*-3%) + (0.1*2%) + (0.3*5%) + (0.3*8%) + (0.25*10%)
Expected return (Asset Y) = 6.45%.
Due to its higher expected return, Asset Y should be preferred.
The answer is option C because it contained a statement that Asset Y has a higher expected return.
Option (B) is wrong because we are not certain if Asset Y has a lower beta. We were not given any information to compute the beta.
Options (A), (D) and (E) are wrong because they did not specify Asset Y has the preferred asset.
The discount rate and the federal funds rate The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate increasesbanks' incentives to borrow reserves from the Federal Reserve, thereby increasingthe quantity of reserves in the banking system and causing the money supply to rise The federal funds rate is the interest rate that banks charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to sell government bonds, the quantity of reserves in the banking system decreases banks' need to borrow from each other rises ▼ , and the federal funds rate increases ▼
The discount rate is the interest rate on loans from the Federal Reserve to banks, while the federal funds rate is the interest rate on loans between banks. The discount rate affects banks' borrowing incentives and the money supply, while the federal funds rate is influenced by open market operations.
Explanation:The discount rate is the interest rate on loans that the Federal Reserve makes to banks. This rate affects banks' incentives to borrow reserves from the Federal Reserve, which in turn impacts the quantity of reserves in the banking system and the money supply. On the other hand, the federal funds rate is the interest rate that banks charge one another for short-term loans, and it is influenced by open market operations conducted by the Federal Reserve.
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Look at the following data: durable goods = $200 billion; nondurable goods = $350 billion; services = $600 billion; fixed investment + inventory investment = $200 billion; government purchases = $400 billion; exports = $30 billion; imports = $79 billion. GDP is equal to
Answer:
The answer is $1,701 billion
Explanation:
Gross Domestic Product (GDP) is the cumulative (total) market value of the final outputs (goods and services) produced within an economy(country) during a given period of time usually a year.
GDP = C + I + G + (X - M)
where C - expenditure by households or consumers
I - investments by businesses or firms
G - expenditure from the government
X - exports from the country
M - imports into the country
Total consumers' expenditure is:
durable goods = $200 billion;
nondurable goods = $350 billion; services = $600 billion
Total. $1,150 billion
Total business investment is $200billion
Therefore, GDP is
$1,150 + $200 + $400 + ($30 - $79)
=$1750 - $49
= $1,701 billion
Final answer:
The GDP for the provided country data is calculated using the formula for GDP, which includes adding up consumption (sum of durable, nondurable goods, and services), investment, government spending, and subtracting net exports (exports minus imports). The GDP for the country in question is $1,701 billion.
Explanation:
GDP Calculation
To calculate the Gross Domestic Product (GDP) of a country, you can use the formula:
GDP = Consumption + Investment + Government Spending + (Exports - Imports)
Using the data provided for the country in the question:
Durable goods = $200 billion
Nondurable goods = $350 billion
Services = $600 billion
Fixed investment + Inventory investment = $200 billion
Government purchases = $400 billion
Exports = $30 billion
Imports = $79 billion
We sum up durable goods, nondurable goods, and services to get total consumption:
Consumption (C) = Durable goods + Nondurable goods + Services
= $200 billion + $350 billion + $600 billion
= $1,150 billion
Then calculating Net Exports (Exports - Imports):
Net Exports (NX) = Exports - Imports
= $30 billion - $79 billion
= -$49 billion
Now we can plug these values into the GDP formula:
GDP = C + Investment + Government Spending + NX
= $1,150 billion + $200 billion + $400 billion - $49 billion
= $1,701 billion
Therefore, the GDP is $1,701 billion.
The following data is related to sales and production for Spark Enterprises at a volume of 120,000 units: Total fixed costs: $300,000 Total costs: $450,000 This question has 5 parts, you must answer all 5. Each part is worth .5 points. If Spark makes 75,000 units what is the fixed cost per unit?
Answer:
$4 per unit
Explanation:
Fixed costs are those costs which remains same whatever the level of activity is. I t remains constant and do not change with the change in the level of sales / production.
But fixed cost per unit may change with the change in the activity level. if the production volume increases the per unit fixed cost decreases and if the production volume decreases the per unit fixed cost increases
In this question the fixed cost is $300,000 when the production volume is $120,000
Now Volume is revised and decreased to 75,000 units
Fixed cost per unit = $300,000 / 75,000 units = $4 per unit
On November 1, 2018, Aviation Training Corp. borrows $46,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation’s year-end is December 31.Required: Record the necessary entries in the Journal Entry.i. Record the issuance of note.ii. Record the adjustment for interest.iii. Record the repayment of the note at maturity.
Answer and Explanation:
The journal entries are shown below:
1. Cash $46,000
To Note payable $46,000
(Being the issuance of the note is recorded)
2. Interest expense ($46,000 × 6% × 2 months ÷ 12 months) $460
To interest payable $460
(Being the interest expense is recorded)
3. Note payable $46,000
Interest payable $460
Interest expense ($46,000 × 6% × 1 months ÷ 12 months ) $230
To cash $46,690
(Being the repayment of the note is recorded)
Carson Lee, a staff accountant, is a working on some research for his partner, Joe Davis. Joe has asked Carson to find the proper citation providing guidance on when the acquisition of equipment is reported in the operating section of the statement of cash flows. Using the authoritative literature, locate the correct guidance.
The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 230-10-45-12 provides guidance on when the acquisition of equipment is reported in the operating section of the statement of cash flows. This is generally when the resources have been procured from revenue operations. An example is when a company buys machinery with money from its core business activities.
Explanation:The guidance for when the acquisition of equipment is reported in the operating section of the statement of cash flows can be traced to the Generally Accepted Accounting Principles (GAAP), specifically the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 230-10-45-12. This standard stipulates that generally, purchases of equipment are a part of investing activities. Nonetheless, if the resources have been acquired from revenue operations, it may be considered an operating activity.
For example, let's presume a company purchases a substantial machine using cash from its operating activities - the money that comes from the core business operations. According to the ASC 230-10-45-12, these expenditures should be revealed in the Statement of Cash Flows under the operating activities section.
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The following price quotations are for exchange-listed options on Primo Corporation common stock. Company Strike Expiration Call Put Primo 61.12 55 Feb 7.25 0.48 With transaction costs ignored, how much would a buyer have to pay for one call option contract. Assume each contract is for 100 shares.
Answer: $725
Explanation:
One call option is valued at $7.25.
We are to find the value of a Call Option contract which is assumed to have a 100 shares in it.
If therefore, 1 call option is $7.25, then 100 call options is,
= 7.25 * 100
= $725
A buyer would have to pay $725 for one call option contract.
If you need any clarification do react or comment.
The cost for one call option contract for Primo Corporation common stock, ignoring transaction costs, would be $725.
Explanation:In the provided question, we're given data on exchange-listed options for Primo Corporation common stock. The price quotation for the call option is listed as $7.25. An options contract typically represents 100 shares of the underlying stock, unless otherwise specified. Therefore, ignoring transaction costs as mentioned in the question, the cost for one call option contract would be the price of the call option times 100. In this case, the cost for one contract would be 7.25 x 100, hence $725.
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SY manufacturer (SYM) is producing T-shirt in three colors: blue, red, and white. The monthly demand for each color is 3000 units. Each shirt requires 0.5 pound of raw cotton that is imported from LuftGeshfet-Textile (LGT) Company in Brazil. The purchasing price per pound is $2.5 (paid only when the cotton arrives at SYM’s facilities) and transportation cost by sea is $o.2 per pound. The traveling time from LGT’s facilty in Brazil to SYM facility in the United States is two weeks. The cost of placing a cotton order, by SYM, is $100 and the annual interst rate that SYM is facing is 20 percent. a. What is the optimal order quantity of cotton? b. How frequently should the company order cotton? c. What is the resulting annual holding cost? d. What is the resulting annual ordering cost?
Answer:
a) Optimal order Quantity =4,472.13 pounds
b) No of times order per year= 12 times in a years i.e once in a month
c) Annual Holding cost = $1207.47
d) Ordering cost per annum = $1207.47
Explanation:
Total annual demand = 3000 ×3 × 12 × 0.5 pounds= 54,000 pounds
Ordering cost per order = 100
Holding cost per order = 20%× (2.5+0.2) = 0.54
Optimal order Quantity = √(2× 100×54000)/0.54
=4,472.13 pounds
No of times order per year
= 54,000/4472.13 = 12 times in a years
that is, once per month.
Annual Holding cost
= Holding cost per unit annum × Average inventory
= 0.54 × 1/2 × 4,472.135 = $1207.47
Ordering cost per annum
=Annual demand/order quantity × ordering cost per order
= 54,000/4472.13 × 100 = $1207.47
Your small remodeling business has two work vehicles. One is a small passenger car used for job site visits and for other general business purposes. The other is a heavy truck used to haul equipment. The car gets 25 miles per gallon (mpg). The truck gets 10 mpg. You want to improve gas mileage to save money, and you have enough money to upgrade one vehicle. The upgrade cost will be the same for both vehicles. An upgraded car will get 40 mpg; an upgraded truck will get 12.5 mpg. The cost of gasoline is $2.65 per gallon. Calculate the annual fuel savings in gallons for the truck and car assuming both vehicles are driven 12,000 miles per year. (Do not round intermediate calculations.)
Answer:
Explanation:
First - if we upgrade the Car :
Current cost of fuel in car - 12000/25*2.65 = 1272$
after upgrading the car , cost of fuel in car - 12000/40*2.65 = 795$
Net saving in fuel cost - 1272-795 = 477$
Second - if we upgrade the Truck :
Current cost of fuel in truck - 12000/10*2.65 = 3180$
after upgrading the truck , cost of fuel in truck - 12000/12.5*2.65 = 2544$
Net saving in fuel cost - 3180-2544 = 636 $
So, we should upgrade the truck, because it will give more saving in fuel cost.
ANNUAL FUEL SAVINGS IN GALLONS:
CAR - 477/2.65 = 180 GALLONS
TRUCK - 636/2.65 = 240 GALLONS
Emily Turnbull, president of Aerobic Equipment Corporation, is concerned about her employees’ well-being. The company offers its employees free medical, dental, and life insurance coverage. It also matches employee contributions to a voluntary retirement plan up to 6% of their salaries. Assume that no employee’s cumulative wages exceed the relevant wage bases. Payroll information for the biweekly payroll period ending January 24 is listed below.
Wages and salaries $2,300,000
Employee contribution to voluntary retirement plan 115,000
Medical insurance premiums paid by employer 46,000
Dental insurance premiums paid by employer 16,100
Life insurance premiums paid by employer 8,050
Federal and state income tax withheld 494,500
FICA tax rate 7.65%
Federal and state unemployment tax rate 6.20%
1. Record the employee salary expense, withholdings, and salaries payable (or say No journal entry required.)
2. Record the employer-provided fringe benefits (or say No journal entry required.)
3. Record the employer payroll taxes (or say No journal entry required.)
Answer:
1. Salary expense = $2,300,000
Withholdings = $494,500
Salary payable = $1,805,500
2. Total fringe benefits = $185,150
3. Payroll tax = $494,500
Explanation:
1. Employee salary expense is given as $2,300,00
Withholdings is given as $494,500. This is the sum total of federal and state FICA taxes and unemployment tax.
Salaries payable is employee salary expense less withholdings.
Salaries payable = 2,300,000 - 494,500
= $1,805,500
2. Employer-provided fringe benefits includes medical insurance, dental insurance, life insurance and voluntary retirement plan contribution. The corporation matches employee contributions to a voluntary retirement plan up to 6% of their salaries and employee contribution to voluntary retirement plan is $115,000. Since this amount is 5% of salaries, the corporation will contribute an equal amount.
Medical insurance premiums paid by employer = $46,000
Dental insurance premiums paid by employer = $16,100
Life insurance premiums paid by employer = $8,050
Employer contribution to voluntary retirement plan = $115,000
Total fringe benefits = $185,150
3. Employer payroll taxes includes Federal and state FICA taxes and unemployment tax.
Federal FICA tax (rate of 7.65%) = (7.65/100) * 2300000 = $175,950
State FICA tax (rate of 7.65%) = (7.65/100) * 2300000 = $175,950
Unemployment tax (rate of 6.20%) = (6.20/100) * 2300000 = $142,600
Total pay roll tax = 175950 + 175950 +142600
= $494,500
No journal entry required. The employer-provided fringe benefits include medical insurance, dental insurance, and life insurance. The employer payroll taxes include FICA tax, federal unemployment tax, and state unemployment tax.
Explanation:No journal entry required.The employer-provided fringe benefits are:
Medical insurance premiums paid by employer: $46,000Dental insurance premiums paid by employer: $16,100Life insurance premiums paid by employer: $8,050The employer payroll taxes are:
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The Morning Jolt Coffee Company has projected the following quarterly sales amounts for the coming year: Q1 Q2 Q3 Q4 Sales $ 830 $ 860 $ 940 $ 970 a. Accounts receivable at the beginning of the year are $420. The company has a 45-day collection period. Calculate cash collections in each of the four quarters by completing the following (A negative answer should be indicated by a minus sign. Round your answers to 2 decimal places, e.g., 32.16.):
Answer and Explanation:
a. Q1 Q2 Q3 Q4
Collection period is 45 days
cash collection of Current quarter sales (Total days in quarter- cash collection period)/total days in quarter (90-45)90=1/2
Beginning receivable (A) 420 415 430 470
Sales (B) 830 860 940 970
Cash collections © 835.00 845.00 900.00 955.00
420+(830*1/2) 415+(860*1/2) 430+(940*1/2) 470+(970*1/2)
Ending receivables (A+B-C) 415.00 430.00 470.00 485.00
b.
Collection period is 60 days
cash collection of Current quarter sales (Total days in quarter- cash collection period)/total days in quarter (90-60)90=1/3
Beginning receivable (A) 420 553.33 573.33 626.67
Sales (B) 830 860 940 970
Cash collections © 696.67 840.00 886.67 950.00
420+(830*1/3) 553.33+(860*1/3) 573.33+(940*1/3) 626.67+(970*1/3)
Ending receivables (A+B-C) 553.33 573.33 626.67 646.67
c .
Collection period is 30 days
cash collection of Current quarter sales (Total days in quarter- cash collection period)/total days in quarter (90-30)90=2/3
Beginning receivable (A) 420 276.67 286.67 313.33
Sales (B) 830 860 940 970
Cash collections © 973.33 850.00 913.33 960
420+(830*2/3) 276.67+(860*2/3) 286.67+(940*2/3) 313.33+(970*2/3)
Ending receivables (A+B-C) 276.67 286.67 313.33 323.33
The cash collections for each quarter are calculated based on the company's sales and its 45-day collection period. For Q1 it's $830, for Q2 it's $1275, for Q3 it's $1370, and for Q4 it's $1440.
Explanation:Overall, let's understand that the cash collections are the amounts the company is able to gather from customers based on the company's receivable accounts. The 45-day collection period means that it takes the company approximately one and a half month to collect cash from its sales. To calculate the cash collections, we have to consider this collection timeline in relation to company's quarterly sales.
For the Q1, cash collections will be equivalent to the sales of Q1 since the collection period is within the same quarter. So, the cash collection for Q1 will be $830. For Q2, it'll include 45 days of Q1 sales and rest of Q2 sales. Thus, for Q2 we consider half of Q1 sales ($415) and full Q2 sales ($860) making it total of $1275. Using the same logic, Q3 cash collections would be half of Q2 sales ($430) and full Q3 sales ($940) resulting in $1370. And for Q4, it'll be half of Q3 sales ($470) and full Q4 sales ($970) totalling to $1440.
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Granite Construction Company is considering selling excess machinery with a book value of $175,000 (original cost of $315,000 less accumulated depreciation of $140,000) for $180,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $200,000 for four years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $34,400. a. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery.
Final answer:
Granite Construction Company should sell the excess machinery based on a differential analysis of the cash inflows and outflows for both alternatives.
Explanation:
To determine whether Granite Construction Company should lease or sell the excess machinery, a differential analysis needs to be prepared. First, let's calculate the cash inflows and outflows for both alternatives:
Alternative 1: Lease
Cash inflows: $200,000
Cash outflows: $34,400
Net Cash Flow: $200,000 - $34,400 = $165,600
Alternative 2: Sell
Cash inflows: $180,000 - 5% brokerage commission
Cash outflows: None
Net Cash Flow: $180,000 - (5% * $180,000) = $180,000 - $9,000 = $171,000
Next, compare the net cash flows to determine the more profitable alternative:
If Granite Construction Company leases the machinery:
Net Cash Flow: $165,600
If Granite Construction Company sells the machinery:
Net Cash Flow: $171,000
The alternative with the higher net cash flow is more profitable, so in this case, Granite Construction Company should sell the excess machinery.
The sales of Carephase Company for the year are as given below: Quarter 1 $400,000 Quarter 2 $360,000 Quarter 3 $620,000 Quarter 4 $580,000 Fifty percent of the sales of the company are paid in cash. Of the sales on account, 60 percent are collected in the quarter of sale, the remaining 40 percent are collected in the quarter following the sale. Calculate the cash receipts for Quarter 4.
Answer:
The correct answer is $588,000.
Explanation:
According to the scenario, the computation of the given data are as follows:
We can calculate the cash receipts for Quarter 4 by using following formula:
Cash receipts for Quarter 4 = Cash Sales + Cash collected from credit sales in Qtr 4 + Accounts receivable of Qtr 3
Where, Cash sales = $580,000 × 50% = $290,000
Cash collected from credit sales in Qtr 4 = ($580,000 × 50%) ×60% = $174,000
Accounts receivable of Qtr 3 = ($620,000 × 50%) × 40% = $124,000
By putting the value, we get
Cash receipts = $290,000+$174,000+$124,000
= $588,000
Final answer:
Quarter 4 cash receipts for Carephase Company are calculated by summing 50% of the Quarter 4 sales, 60% of Quarter 4 sales on account, and 40% of Quarter 3 sales on account. The total cash receipts for Quarter 4 are $588,000.
Explanation:
To calculate the cash receipts for Carephase Company in Quarter 4, we need to consider the cash sales and the collections from sales made on account in both Quarter 3 and Quarter 4. According to the information given, 50% of the sales are paid in cash, and of the sales on account, 60% are collected in the quarter of the sale and the remaining 40% in the following quarter.
So for Quarter 4, the cash receipts from cash sales would be 50% of Quarter 4 sales, which is 50% of $580,000, equating to $290,000. In addition, 60% of the sales on account from Quarter 4 (50% of $580,000) will be collected, amounting to $174,000. Furthermore, 40% of the sales on account from Quarter 3 will be collected in Quarter 4, which is 40% of $310,000 (being 50% of $620,000 as sales on account for Quarter 3), yielding $124,000.
Summing these up gives us the total cash receipts for Quarter 4: $290,000 (cash sales) + $174,000 (Quarter 4 collections on account) + $124,000 (Quarter 3 collections on account) = $588,000.
The Variable Speed Company manufactures a line of high quality tools. The company sold 1,000,000 hammers at a price of $4 per unit last year. The company estimates that this volume represents a 20% share of the current hammers market. The market is expected to increase by 5%. Marketing specialists have determined that, as a result of a new advertising campaign and packaging, the company will increase its share of this larger market to 24%. Due to changes in prices, the new price for the hammer will be $4.30 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates. What are the estimated sales revenues in the coming year
Answer:
Estimated sales revenue next year =$ 5,418,000.
Explanation:
Current market size = Company share/percentage of market share
= 1,000,000./0.2
=5,000,000 units
New market size with 5% increase
= 105%× current market size
=105% × 5,000,000
=5,250,000 units
Company new if it will now accounts for 24% of the market size
Company new market share = 24% × New market size
= 24%× 5,250,000
= 1,260,000 units
Estimated sales revenue next year
= Price per unit × new market share
= $4.30 per unit. × 1,260,000
=$ 5,418,000.0
Answer:
The estimated sales revenue for the coming year is $5,418,000.00
Explanation:
Quantity sold initially 1,000,000
initial total market share =1,000,000/20%
initial market total market share=5,000,000 hammers
new total market share=5,000,000*(1+5%)
=5,000,000*(1+0.05)
=5,000,000*1.05
=5,250,000
Variable speed new share of market is 24%
market share in units=24%*5,250,000=1,260,000
Estimate sales revenue=variable market share*new unit price
new unit price is $4.30
estimated sales revenue=1,260,000*$4.30=$5,418,000.00
Thornton Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $13,770,000; it will enable the company to increase its annual cash inflow by $5,100,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $27,900,000; it will enable the company to increase annual cash flow by $9,300,000 per year. This plane has an eight-year useful life and a zero salvage value.
Required
Determine the payback period for each investment alternative and identify the alternative Thornton should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.)
Answer:
The correct answer for first plane is 2.7 years and for second plane is 3 years and first plane should be accepted.
Explanation:
According to the scenario, the computation of the given data are as follows:
Payback period = Cost of first airplane ÷ Annual cash inflow
First plane cost = $13,770,000
Cash flow = $5,100,000
So, Payback period for first plane = $13,770,000 ÷ $5,100,000
= 2.7 years
Second plane cost = $27,900,000
Cash flow = $9,300,000
So, Payback period for second plane = $27,900,000 ÷ $9,300,000
= 3 years
First plane should be accepted as it has less payback period.
Bill deposits $100 at the end of each year for thirteen years into fund A. Seth deposits $100 at the end of each year for thirteen years into fund B. Fund A earns an annual effective rate of 15% for the first five years and an annual effective rate of 6% thereafter. Fund B earns an annual effective rate of i throughout the thirteen years. The two funds have equal accumulated values at the end of the thirteen years. Find i.
Answer:
The value of interest is 7,387%
Explanation:
We will first deal with fund A. First we will deal with the first 5 years earning interest at 15%.
Using a financial calculator we enter the following keystrokes
n = number of years i = interest pmt = annual payments FV = future value
n = 5 i = 15% pmt = 100 COMP FV
FV = 674,23
Now we wil use 674,23 as our Present Value (PV).
n = 8 PV = 674,23 i = 6% pmt = 100 comp FV
FV = 2064,36
Now we use this figure as the FV in Fund B to determine the interest rate.
n = 13 FV = 2065,36 pmt = 100 comp I *Note that either payments or FV needs to be entered as a negative otherwise the calculator will give you an error.
Interest = 7,387%
To find the effective annual interest rate Seth's fund needs to match the future value of Bill's fund, set the future values of the two funds equal to each other, and solve for i.
Explanation:To solve this problem, we need to calculate the future value of Bill's and Seth's annual deposits to their respective funds over the thirteen years.
For Bill's deposits in Fund A, we need to divide it into two parts due to the change in the interest rate. The first part has 5 years of deposits with an interest rate of 0.15, while the second part has 8 years of deposits with an interest rate of 0.06. So, the accumulated value of Bill's deposits at the end of thirteen years will be:
Future_value_Bill = $100 * [(1+0.15)^5 - 1] / 0.15 + $100 * [(1+0.06)^8 - 1] / 0.06.
For Seth's deposits in Fund B, it's simpler because the interest rate remains the same over the thirteen years. So, the accumulated value of Seth's deposits after thirteen years can be calculated as: Future_value_Seth = $100 * [(1+i)^13 - 1] / i.
Since it's given that the two funds have equal accumulated values at the end of the thirteen years, we can set the above two formulas equal to each other and solve for i:
$100 * [(1+0.15)^5 - 1] / 0.15 + $100 * [(1+0.06)^8 - 1] / 0.06 = $100 * [(1+i)^13 - 1] / i.
Solving this equation will yield the annual effective rate, i, for Seth's account Fund B.
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Money, Inc., a calendar year S corporation in Denton, Texas, has two unrelated shareholders, each owning 50% of the stock. Each shareholder has a $400,000 stock basis as of January 1, 2015. At the beginning of 2015, Money has an AAA of $300,000 and AEP of $600,000. During 2015, Money has an operating income of $100,000. At the end of the year, Money distributes securities worth $1,000,000, with an adjusted basis of $800,000. b. At the end of the year, before the distribution, each shareholder's basis is $___after the distribution, each shareholder's basis is $______ . Each shareholder has $____ of dividend income.
Answer:
each shareholder has $250,000 of the dividends.
Explanation:
At the end of the year, just before the distribution, each shareholder's basis is:
= $400000 + 10000 + 50000
= $550,000
after the distribution, each shareholder's basis is:
= 300000 + 200000
= $500000
therefore, each shareholder has $250,000 of the dividends.
Charlotte's Crochet Shoppe has 14,300 shares of common stock outstanding at a price per share of $75 and a rate of return of 11.61 percent. The company also has 280 bonds outstanding, with a par value of $2,000 per bond. The pretax cost of debt is 6.13 percent and the bonds sell for 97.2 percent of par. What is the firm's WACC if the tax rate is 40 percent?
Charlotte's Crochet Shoppe's Weighted-Average Cost of Capital (WACC) is 8.9%.
Data and Calculations:
Outstanding common stock shares = 14,300
Price per share = $75
Value of common stock = $1,072,500 ($75 x 14,300)
Return of return of common stock = 11.61%
Price of Bonds = $1,944 ($2,000 x 97.2%)
Value of bonds outstanding = $544,320 ($1,944 x 280)
Selling rate of bonds = 97.2%
Pretax cost of debt = 6.13%
After-tax cost of debt = 3.678% (6.13% x (1 - 40%)
Total value of stock and debt = $1,616,820 ($1,072,500 + $544,320)
Weight of common stock = 66.3% ($1,072,500/$1,616,820 x 100)
Weight of bonds = 33.7% ($544,320/$1,616,820 x 100)
WACC = (66.3% x 11.61%) + (33.7% x 3.678%)
= 7.7% + 1.2%
= 8.9%
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A confidence interval, at the 95% confidence level, will be used to answer the question, "What is the mean annual salary (in US dollars) of a Tesla car owner?" Data was collected from 36 Tesla owners across the US. The mean annual salary of those 36 Tesla owners was $289000 with a standard deviation of $1342.
Answer:
The answer to the question is given below in the explanation section
Explanation:
From the question we recall the following
The mean: this is the the value at the center of the confidence interval which represents the quantity.
let Z* denotes when building the confidence level
]The mean = 289000, n = 36, standard deviation= 1342
Z* for 95% Confidence Interval = 1.96
The margin of error = 1.96*[1342/√(36)] = 438.39
The 95% Confidence Interval is given by:
Lower CI = Mean - Margin of error = 289000 - 438.39 = 288561.61
Upper CI = Mean + Margin of error = 289000 + 438.39 = 289438.39
When the sample is decreased to 20 Tesla owners, the confidence interval widens.
A 95% confidence interval for the mean annual salary of Tesla car owners is calculated using a t-distribution with the given sample mean and standard deviation. The confidence interval helps estimate the true mean salary within a certain level of certainty.
Explanation:The question presented requires the construction of a 95% confidence interval for the mean annual salary of Tesla car owners, based on a sample mean of $289,000 and a standard deviation of $1,342 from 36 Tesla owners. To create the confidence interval, the appropriate distribution to use is the t-distribution, since the standard deviation is from a sample and the sample size is relatively small. Calculating the confidence interval involves finding the t-value that corresponds to the 95% confidence level and the degrees of freedom (which is the sample size minus one), and then multiplying this value by the standard error of the sample mean, which is the sample standard deviation divided by the square root of the sample size.
Using the sample data and the appropriate statistical methods, we can estimate the range in which the true mean annual salary of all Tesla car owners is likely to fall, with 95% certainty. This analysis is essential for making informed business decisions or for academic study.
suppose that a new alloy is invented which uses copper and zinc in fixed proportions where 1 unit of output requires 3 units of copper and 3 units of zinc for each unit of alloy produced. If no other inputs are needed, the price of copper is $3, and the price of zinc is $3, what is the average cost per unit when 4,000 units of the alloy are produced?
Answer:
$18 per unit
Explanation:
Average cost per unit is the cot of the product to product on average basis. Any product uses different costs to produce like material, Labor and overheads.
In this question there is only material cost of Copper and Zinc material to make Alloy.
Total Cost = 4,000 units [($3x3)+($3x3)] = $72,000
Average cost per unit = Total Cost / Total numbers of unit
Average cost per unit = $72,000 / 4,000 = $18 per unit
Answer:
the average cost per unit when 4,000 units of the alloy are produced : $18.00
Explanation:
Step 1. Calcutate the the Unit Cost of the New
Materials Costs
Copper (3 units × $3) = $9.00
Zinc (3 units $3) = $9.00
Total = $18.00
Step 2 Calculate the Total Cost of the New
Total Cost=Unit Cost × Total Units of Production
= $18.00 × 4,000 units
= $72,000
On October 15, 2021, a 6% stock dividend was declared and distributed. The fair value of the common stock on this date was $32.3 per share. Fractional share rights represented 100,000 shares. Cash was paid in lieu of issuing fractional share rights. On the date of declaration and payment, the company had 10.3 million shares of common stock outstanding. The par of the common shares was $5 per share.
Prepare any necessary journal entries to record the above events.
Answer:
The answer is given below;
Explanation:
For Dividend
Dividend Expense (10.3*5*6%) Dr. $3.090 Million
Bank Cr.$3.090 Million
For fractional Shares,
Capital 100,000*32.3 Dr.$ 3,230,000
Cash Cr.$ 3,230,000
An investor starts with $1 million and converts it to 0.75 million pounds, which is then invested for one year. In a year the investor has 0.7795 million pounds, which she then converts to dollars at an exchange rate of 0.72 pounds per dollar. The U.S. dollar annual rate of return earned was _____.
Answer:
8.26%
Explanation:
If the investor had, at the end of the year, 0.7795 million pounds, when converting that amount to U.S. dollars at an exchange rate of 0.72 pounds per dollar, the investor would have:
[tex]A = 0.7795\ million\ pounds*\frac{\$1}{0.72\ pounds}\\A=\$1.08264\ million[/tex]
Since the investment lasted for exactly 1 year, the annual rate of return was:
[tex]r=\frac{\$1.08264}{\$1}-1\\ r=0.08264\\r=8.26\%[/tex]
The U.S. dollar annual rate of return earned was 8.26%.
Answer:
Multiple choices are:
4.97%
5.27%
6.45%
7.69%
8.26%
The U.S. dollar annual rate of return earned was is 8.26%
Explanation:
Initial investment =$1 million
dollar value of investment after 1 year=pounds value*$1/pounds exchange rate
pounds value of investment after 1 year=0.7795 million pounds
$1 equals to 0.72 pounds in year
dollar value of investment after 1 year=0.7795*$1/0.72
dollar value of investment after 1 year=$1.082638889
U.S dollar annual rate of return earned=dollar value of investment after 1 year-initial dollar investment/initial dollar investment
U.S dollar annual rate of return earned=($1.082638889 million-$1 million)/$1 million*100
U.S dollar annual rate of return earned=0.082638889
U.S dollar annual rate of return earned=8.26%
During December, Far West Services makes a $2,000 credit sale. The state sales tax rate is 6% and the local sales tax rate is 2.5%. Record sales and sales tax payable. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Debit Accounts receivable $2170
Credit sales revenue $2000
Credit State tax $120
Credit Local tax $50
Explanation:
When sales are made on credit, the entries required are debit Accounts receivable and credit Sales revenue.
Considering the taxes, the entries would then be grossed by the tax percentage and the grossed amount is debited to accounts receivable while the taxes are credited to the tax payable account.
State tax
= 6% * $2,000
= $120
Local tax
= 2.5% * $2,000
= $50
Total receivable
= $2000 + $120 + $50
= $2170
Answer:
Dr. Account Receivable $2,170
Cr. Sales tax Payable $170
Cr. Sales $2,000
Explanation:
Goods and Services are subject to taxes and these taxed are collected by the business from its customers on the behalf of the government. The tax is included in the invoices and recorded separately from the sales.
Credit sales = $2,000
Sales Tax = $2,000 x 6% = $120
Local sales tax = $2,000 x 2.5% = $50
Total Sales tax Payable = $120 + 50 = $170
Receivable amount = $2,000 + $120 + $50 = $2,170
At the beginning of 2014, Aristotle Company acquired a mine for $845,160. Of this amount, $96,400 was ascribed to the land value and the remaining portion to the minerals in the mine. Surveys conducted by geologists have indicated that approximately 11,890,000 units of the ore appear to be in the mine. Aristotle incurred $163,880 of development costs associated with this mine prior to any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use when all of the mineral has been removed was $38,560. During 2014, 2,570,000 units of ore were extracted and 2,189,000 of these units were sold.
(a) Compute the total amount of depletion for 2014.
(b) Compute the amount that is charged as an expense for 2014 for the cost of the minerals sold during 2014.
Answer:
a. Total amount of depletion for 2014 - $ 29,168,862
b. Charged as expenses for minerals sold = $ 24,844,607
Explanation:
Computations
Depreciable cost
Total cost of acquisition $ 845,160
Add: Development costs of mine $ 163,880
Add: Land reusable costs $ 38,560
Total depletable costs of minerals $ 1,047,600
Estimated ore recovery 11,890,000 tons
Cost of ore per ton $ 11.35 per ton
Total amount of depletion for 2014
$ 11.35 per ton * 2,570,000 tons $ 29,168,862
Charged as expenses on ore sold
Mineral ore sold - 2,189,000
Charged as expenses
$ 11.35 per ton * 2,189,000 $ 24,844,607
Answer:
(a) Compute the total amount of depletion for 2014.
$205,600(b) Compute the amount that is charged as an expense for 2014 for the cost of the minerals sold during 2014.
COGS = $175,120Explanation:
mine's cost:
purchase price $845,160
- land value $96,400
+ development costs $163,880
+ reparation costs $38,560
total cost = $951,200
depletion cost per ton of ore = $951,200 / 11,890,000 = $0.08 per ton
During 2014, 2,570,000 tons were extracted = 2,570,000 x $0.08 = $205,600
2,189,000 tons were sold x $0.08 = COGS = $175,120
ACME Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its break-even sales are 8,100 units. The margin of safety as a percentage of sales is closest to __________.
Answer:
Margin of safety ratio= 0.19= 19%
Explanation:
Giving the following information:
ACME Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its break-even sales are 8,100 units.
To calculate the margin of safety as a percentage, we need to use the following formula:
Margin of safety ratio= (current sales level - break-even point)/current sales level
Margin of safety ratio= (170*10,000 - 170*8,100) / (170*10,000)
Margin of safety ratio=(1,700,000 - 1,377,000) / 1700,000
Margin of safety ratio= 0.19= 19%