Answer:
31-Dec
Dr Depreciation expense $7,000
Cr Accumulated Depreciation - Equipment $7,000
31-Dec
Dr Interest receivable $1,750
Cr Interest revenue $1,750
31-Dec
Dr Deferred Revenue $4,000
Cr Revenue or Service Revenue $4,000
Explanation:
Preparation of Journal entries
31-Dec
Dr Depreciation expense $7,000
Cr Accumulated Depreciation - Equipment $7,000
(To adjust 12 month depreciation)
31-Dec
Dr Interest receivable $1,750
($50,000 x 7% x 6/12)
Cr Interest revenue $1,750
(To adjust 6 month interest revenue accrued)
31-Dec
Dr Deferred Revenue $4,000
($16,000 x 3/12)
Cr Revenue or Service Revenue $4,000
(To record earned revenue for 3 months
On Dec 31
Depreciation expense $7,000
Accumulated Depreciation - Equipment $7,000
Interest receivable $1,750 ($50,000 × 7% × 6 ÷ 12)
Interest revenue $1,750
Deferred Revenue $4,000 ($16,000 × 3 ÷ 12)
Revenue or Service Revenue $4,000
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Tyrone and Akira, who are married, incurred and paid the following amounts of interest during 2019:
Home acquisition debt interest $ 15,000
Credit card interest 5,000
Home equity loan interest (used for home improvement) 6,500
Investment interest expense 10,000
Required: With 2019 net investment income of $2,000, calculate the amount of their allowable deduction for investment interest expense and their total deduction for allowable interest. Home acquisition principal, and the home equity loan principal combined are less than $750,000.
Answer:
The Investment Interest (limited to Investment income) = $2,000
Allowance deduction for Interest
Investment interest $2,000
Home acquisition debt interest $15,000
Home equity loan interest $6,500
$23,500 - Before phase out limits
Greg’s Bicycle Shop has the following transactions related to its top-selling Mongoose mountain bike for the month of March. Greg's Bicycle Shop uses a periodic inventory system.
Date Transactions Units Unit Cost Total Cost
March 1 Beginning inventory 20 $230 $4,600
March 5 Sale ($360 each) 15
March 9 Purchase 10 250 2,500
March 17 Sale ($410 each) 8
March 22 Purchase 10 260 2,600
March 27 Sale ($435 each) 12
March 30 Purchase 8 280 2,240
For the specific identification method, the March 5 sale consists of bikes from beginning inventory, the March 17 sale consists of bikes from the March 9 purchase, and the March 27 sale consists of four bikes from beginning inventory and eight bikes from the March 22 purchase.
Required:
a. Calculate ending inventory and cost of goods sold at March 31, 2015, using the specific identification method. The March 5 sale consists of bikes from beginning inventory, the March 17 sale consists of bikes from the March 9 purchase, and the March 27 sale consists of four bikes
from beginning inventory and eight bikes from the March 22 purchase.
b. Using FIFO, calculate ending inventory and cost of goods sold at March 31, 2015.
c. Using LIFO, calculate ending inventory and cost of goods sold at March 31, 2015.
d. Using weighted-average cost, calculate ending inventory and cost of goods sold at March 31, 2015.(Round your intermediate and final answers to 2 decimal places.)
e. Calculate sales revenue and gross profit under each of the four methods.
Answer:
Greg's Bicycle Shop
Ending Inventory:
a. Specific Identification:
Beginning inventory 1 * $230 = $230
March 9 purchase 2 * $250 = 500
March 22 purchase 2 * $260 = 520
March 30 Purchase 8 * $280 =2,240
Total value of inventory 13 units = $3,490
Cost of goods sold = Cost of goods available for sale Minus Ending Inventory
= $11,940 - $3,490
= $8,450
b. FIFO:
March 22 Purchase 5 260 1,300
March 30 Purchase 8 280 2,240
Ending Inventory 13 $3,540
Cost of goods sold = Goods available for sale Minus Ending Inventory
= $11,940 - $3,540
= $8,400
c. LIFO:
Ending Inventory:
March 1 Inventory 13 $230 $2,990
Cost of goods sold = Goods available for sale Minus Ending Inventory
= $11,940 - $2,990
= $8,950
d) Weighted -Average Cost:
Ending Inventory = $248.75 * 13 = $3,233.75
Cost of Goods Sold = $248.75 * 35 = $8,706.25
Specific FIFO LIFO Weighted
Identification Average
Sales $13,900 $13,900 $13,900 $13,900.00
Cost of goods sold 8,450 8,400 8,950 $8,706.25
Gross profit $5,450 $5,500 $4,950 $5,193.75
Explanation:
Dat and Calculations:
Shop uses periodic inventory system
Date Transactions Units Unit Cost Total Cost Total
March 1 Beginning inventory 20 $230 $4,600 Sales
March 5 Sale ($360 each) 15 $360 $5,400
March 9 Purchase 10 250 2,500
March 17 Sale ($410 each) 8 $410 $3,280
March 22 Purchase 10 260 2,600
March 27 Sale ($435 each) 12 $435 $5,220
March 30 Purchase 8 280 2,240
Total Goods available for sale 48 35 $11,940 $13,900
Ending Inventory = 13 (48 - 35)
Weighted average cost = Cost of goods available for sale/Units of Goods available for sale
= $11,940/48 = $248.75
Specific Identification:
March 5 sale 15 consists of bikes from 15 beginning inventory Bal 5 - 4 = 1
March 17 sale 8 consists of bikes from the March 9 purchase Bal = 2
March 27 sale 12 consists of four bikes from beginning inventory and eight bikes from the March 22 purchase Bal = 2
Ending Inventory:
Specific Identification:
Beginning inventory 1 * $230 = $230
March 9 purchase 2 * $250 = 500
March 22 purchase 2 * $260 = 520
March 30 Purchase 8 * $280 =2,240
Total value of inventory 13 units = $3,490
FIFO:
March 22 Purchase 5 260 1,300
March 30 Purchase 8 280 2,240
Ending Inventory 13 $3,540
LIFO:
March 1 Beginning inventory 13 $230 $2,990
Weighted-Average Costs:
Ending Inventory = $248.75 * 13 = $3,233.75
Cost of Goods Sold = $248.75 * 35 = $8,706.25
Intangible Assets and Goodwill: Amortization and Impairment In early 2011, Bowen Company acquired a new business unit in a merger. Allocation of the acquisition cost resulted in fair values assigned as follows:
Intangible Asset Fair Value Estimated Value
Customer lists $400,000 5 years
Developed technology 640,000 10 years
Internet domain name 1,040,000 Indefinite
Goodwill 4,960,000 Indefinite
The goodwill is assigned entirely to the acquired business unit. Impairment reviews at the end of 2011 and 2012 did not identify any impairment losses. After the business suffered a downturn during 2013, the year-end impairment review yielded the following information: Customer lists are estimated to have undiscounted future cash flows of $200,000 and discounted future cash flows of $144,000.
The internet domain name is estimated to have undiscounted future cash flows of $800,000 and discounted future cash flows of $600,000. The acquired business unit has a fair value of $13,600,000, a carrying amount of $14,800,000, and the fair value of its identifiable net assets is $11,360,000.
Required:
Determine Bowen's amortization expense and impairment write-offs for 2013.
At the end of each of the next four years, a new machine is expected to generate net cash flows of $8,000, $12,000, $10,000, and $15,000, respectively. What are the cash flows worth today if a 3% discount rate is appropriate
Answer:
Total PV= $41,556.88
Explanation:
Giving the following information:
Cash flows:
1= $8,000
2= $12,000
3= $10,000
4= $15,000
Interest rate= 3%
To calculate the present value, we need to use the following formula on each cash flow:
PV= FV/(1+i)^n
PV1= 8,000/1.03= 7,767
PV2= 12,000/1.03^2= 11,311.15
PV3= 10,000/1.03^3= 9,151.42
PV4= 15,000/1.03^4= 13,327.31
Total PV= $41,556.88
Lansbury Inc. had the following balance sheet at December 31, 2019.
LANSBURY INC. BALANCE SHEET DECEMBER 31, 2019
Cash $20,000 Accounts payable $30,000
Accounts receivable 21,200 Notes payable (long-term) 41,000
Investments 32,000 Common stock 100,000
Plant assets (net) 81,000 Retained earnings 23,200
Land 40,000 $194,200
$194,200
During 2021 the following occurred:
1. Lansbury Inc. sold part of its investment portfolio for $15,000 This transaction resulted in a gain of $3,400 for the firm. The company classifies its investments as available-for- sale.
2. A tract of land was purchased for $18,000 cash.
3. Long-term notes payable in the amount of $16,000 were retired before maturity by paying $16,000 cash.
4. An additional $20,000 in common stock was issued at par.
5. Dividends totaling $8,200 were declared and paid to stockholders.
6. Net income for 2021 was $32,000 after allowing for depreciation of $11,000
7. Land was purchased through the issuance of $30,000 in bonds.
8. At December 31, 2021, Cash was $32,000 Accounts Receivable was $41,600 and Accounts Payable remained at $30,000
Requried:
a. Prepare a statement of cash flows for 2017.
b. Prepare an unclassified balance sheet as it would appear on December 31, 2017.
c. Compute two cash flow ratios.
Answer:
LANSBURY INC.
Statement of Cash Flows
For the year ended December 31, 2021
Cash flows from operating activities:
Net income $32,000
Adjustments to net income:
Depreciation expense $11,000- Gain on sale of investment portfolio ($3,400)- Increase in accounts receivable ($20,400) ($12,800)Net cash from operating activities $19,200
Cash flows from investing activities:
Sale of investment portfolio $15,000
Purchased land ($30,000)
Purchased land ($18,000)
Net cash from investing activities ($33,000)
Cash flow from financing activities:
Issuance of common stock $20,000
Issuance of bonds $30,000
Retirement of notes payable ($16,000)
Dividends paid ($8,200)
Net cash from financing activities $25,800
Net cash increase $12,000
Beginning cash balance $20,000
Ending cash balance $32,000
b. Prepare an unclassified balance sheet as it would appear on December 31, 2017.
LANSBURY INC.
Balance Sheet
For the year ended December 31, 2021
Assets:
Cash $32,000
Accounts receivable $41,600
Investments $20,400
Plant assets, net $70,000
Land $88,000
Total assets $252,000
Liabilities:
Accounts payable $30,000
Notes payable $25,000
Bonds payable $30,000
Total liabilities $85,000
Stockholders' Equity:
Common stock $120,000
Retained earnings $47,000
Total stockholders' equity $167,000
Total liabilities + equity $252,000
c. cash flow coverage ratio = operating cash flows / total liabilities = $19,200 / $85,000 = 0.23
current liability coverage ratio = operating cash flows / current liabilities = $19,200 / $30,000 = 0.64
Portions of the financial statements for Peach Computer are provided below.
PEACH COMPUTER
Income Statement
For the year ended December 31, 2021
Net sales $1,800,000
Expenses:
Cost of goods sold $1,050,000
Operating expenses 560,000
Depreciation expense 50,000
Income tax expense 40,000
Total expenses 1,700,000
Net income $100,000
PEACH COMPUTER
Selected Balance Sheet Data
December 31
2021 2020 Increase (I) or Decrease (D)
Cash $102,000 $85,000 $17,000 (I)
Accounts receivable 45,000 49,000 4,000 (D)
Inventory 75,000 55,000 20,000 (I)
Prepaid rent 3,000 5,000 2,000 (D)
Accounts payable 45,000 37,000 8,000 (I)
Income tax payable 5,000 10,000 5,000 (D)
Required:
Prepare the operating activities section of the statement of cash flows for Peach Computer using the direct method.
Answer:
Net cash flows from Operating activities = $139,000
Explanation:
Statement of Cash Flows
Cash-flows from Operating activities
Net income for the year $100,000
Adjustment for non-cash effects
Depreciation expenses $50,000
Decrease in Accounts receivables $4,000
Increase in Inventory -$20,000
Decrease in Prepaid rent $2,000
Increase in Accounts payable $8,000
Decrease in Income tax payable -$5,000 $39,000
Net cash flows from Operating activities $139,000
The following information is available for Windsor Inc. for the year ended December 31, 2017:_______.
Loss on discontinued operations $66,000 Retained earnings January 1, 2017 $1,260,000
Rent revenue 98,000 Selling expenses 876,000
Income tax applicable to continuing operations 297,000 Income tax applicable to loss on discontinued operations 23,000
Administrative expenses 507,000 Cost of goods sold 1,648,000
Loss on write-down of inventory 37,000 Sales revenue 3,775,000
Gain on sale of equipment 31,000 Cash dividends declared 230,000
Unrealized gain on available-for-sale securities 27,000 Interest expense 57,000
200,000 shares were outstanding during all of 2017.
Answer:
Requirement
Prepare Income statement
Calculate the per share of common stock
Windsor Inc.
Income statement for the year ended December 31, 2017
Sales $3,775,000
Less: Cost of goods sold $1,648,000
Gross profit $2,127,000
Operating expenses
Selling expenses $876,000
Administrative expenses $507000
Total operative expenses $1,383,000
Operative income $744,000
Other revenues and (expenses):
Rent revenue $98000
Gain on sale of equipment $31000
Interest expenses ($57,000) $72,000
Income before income taxes $816,000
Income tax applicable to continuing $297,000
operations
income from continuing operations $519,000
Discontinued operations:
Loss on discontinued operations ($66000)
Income tax applicable to loss on ($23,000)
discontinued operations
Total discontinued operations $89,000
Income before extraordinary item $430,000
Extraordinary item:
Loss on write-down of inventory ($37000)
Income after extraordinary item $393,000
Other comprehensive income:
Unrealized gain on available-for-sale securities $27,000
Comprehensive Income $420,000
EPS = Net Income of a company / Outstanding Shares
EPS = $420,000/200,000
EPS = $2.1 per share
A Corporation sells a single product for $20 per unit. Last year, the company's sales revenue was $300,000 and its net operating income was $24,000. If fixed expenses totaled $96,000 for the year, the break-even point in unit sales was: A) 12,000 units B) 9,900 units C) 15,000 units D) 14,100 units
Answer:
A) 12,000 units
Explanation:
For computing the break even point in units sales first determine the variable cost which is shown below:
= Sales revenue - fixed expenses - net operating income
= $300,000 - $96,000 - $24,000
= $180,000
And, the variable cost per unit is
= $180,000 ÷ ($300,000 ÷ $20)
= $12
Now the break even point is
= Fixed cost ÷ Contribution margin per unit
= $96,000 ÷ ($20 - $12)
= 12,000 units
Suppose that in a competitive market without government regulations, the equilibrium price of a hamburger is $7 each.
Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.
Statement Price Control Binding or Not
Due to new regulations, fast-food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so.
The government prohibits fast-food restaurants from selling hamburgers for more that $5 each.
Answer:
Price Ceiling regulations prohibit the price of a good or service from being higher than a set price known as the Price Ceiling.
Price Floor regulations prohibit the price of a good or service from being lower than a set price known as the Price floor.
When either Price Ceiling or Floor is said to be nonbinding, it means that it does not affect the market/ equilibrium price of the good or service.
Binding Ceilings or Floors affect the market/ equilibrium price.
Due to new regulations, fast-food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so. BINDING PRICE CEILING.
The Fast-food restaurants cannot pay above a certain amount which makes this a Price Ceiling. It is binding because the Market wants to pay higher wages to hire more people but cannot therefore the price ceiling is having an effect on the equilibrium price.
The government prohibits fast-food restaurants from selling hamburgers for more that $5 each. BINDING PRICE CEILING.
Fast-food restaurants are not allowed to sell above the set price of $5 which makes this a price ceiling. It is Binding because the equilibrium price is $7 which means that fast-food restaurants are forced to sell below the equilibrium price therefore this Price ceiling affects the equilibrium price.
Answer:
See Below..
Explanation:
1. Due to new regulations, fast-food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so.
Price Ceiling and Binding
In the labor market, minimum wage laws are an example of a price floor while a cap on wages is an example of a price ceiling. Moreover, the impact of the minimum wage laws depends on the skill and experience of the worker. In this case, new regulations restrict fast-food restaurants from increasing wages and, thus, attracting more workers. This binding price ceiling causes a shortage of workers in this labor market.
2. The government prohibits fast-food restaurants from selling hamburgers for more that $5 each.
Price Floor and Binding
A price ceiling is a legal maximum on the price at which a good can be sold. Therefore, prohibiting fast-food restaurants from selling hamburgers for more than a particular price is an example of a price ceiling. A binding price ceiling is a price ceiling that is set below the equilibrium price. Because the equilibrium price is $7 each for hamburgers, a legal maximum price of $5 is a binding price ceiling. A binding price ceiling will ultimately cause a shortage, while a non-binding price ceiling has no effect on the equilibrium price and quantity.
Hope this helped you!
A pie graph uses _________to represent information. a. Lines c. Odd numbers b. Dots d. Percentages
Answer:
the answer is D.
Explanation:
During job interviews, potential employers often ask candidates to describe a time where they have demonstrated their initiative and/or results driven skills. This week, you’ll have a chance to practice.
In paragraph 1, describe a time at work, home, or school where there was a problem and you took the initiative to solve that problem and to seek results on your own.
In paragraph 2, explain how the process went and describe the solution that you developed.
Answer:
During a pandemic everyone and everything is crazy and it hasn't gone very for me at work or at home. I guess that's why they say it's best for you stay home and quaretine for days because of a test that came back positive.
Explanation:
A client heard through its hotline that John, the purchases journal clerk, periodically enters fictitious acquisitions. After John creates a fictitious purchase, he notifies Alice, the accounts payable ledger clerk, so she can enter them in her ledger. When the payables are processed, the payment is mailed to the nonexistent supplier’s address, a post office box rented by John. John deposits the check in an account he opened in the nonexistent supplier’s name.
Required
a. Define fraud, fraud deterrence, fraud detection, and fraud investigation.
b. List four personal (as opposed to organizational) fraud symptoms, or red flags, that indicate the possibility of fraud. Do not confine your answer to this example.
c. List two procedures you could follow to uncover John’s fraudulent behavior. (CIA Examination, adapted)
Answer: See explanation
Explanation:
a. Fraud is a criminal deception by someone which is done for either personal or financial gain.
Fraud deterrence is when the likely causes of fraud are identified and removed so as to prevent fraud from occuring.
Fraud detection are the activities that are done so as to prevent money or any other thing from being gotten by false pretenses.
Fraud investigation has to do with using investigative skills and accountability in order to know if fraud has taken place.
b. Fraud symptoms that indicate the possibility of fraud include:
1. Accounting and analytical anomalies
2. Tips and complaint
3. Extravagant lifestyle
4. Unusual behavior
c. The procedures that could be done to uncover John’s fraudulent behavior are:
• Stock reconciliation: This will help show the fictitious acquisitions. Since no receipt are given for the goods, this will help in the detection of the fraud.
• Alice should verify the details such as the address, phone number and name attached to the purchase and find a way of tracking it.
Quiz Instructions
Question 1
5 pts
(02.01 LC)
Which of these factors is likely to have the greatest influence on purchases by consumers to choose a different
option than originally intended?
The price of a good or service
The price of alternatives or substitutes
Their own income
Their personal preferences
Answer:
The price of alternatives or substitutes
Reason: When there are alternatives or substitutes, this means that the consumer can then get better options.
What potential consequences could result from the
worst
kitchen safety violation that you see in this picture?
If a company paid $6,000 in advance for a year's worth of insurance, how
much money would need to be adjusted after one month?
O A. $500
B. $6,000
O C. $1,000
O D. $3,000
Answer:
A.
Explanation:
because 500x12 = 6,000 if you need to pay 500 every month then you need to pay 6,000 every year because they are 12 months each year and 500x12 = 6,000
Answer:
A
Explanation:
If annualized interest in the U.S. and France are 9% and 13%, respectively, and the spot value of the French franc is $0.1109, then at what 180-day forward rate will interest rate parity hold
Answer:
0.1130 FF/$
Explanation:
Spot value = 0.1109 FF/$
Interest rate in US for 180 days = 9%*180/365 = 0.044384
Interest rate in France for 180 days = 13%*180/365 = 0.06411
Forward rate = Spot value*(1+Interest rate in US)/(1+Interest rate in France)
Forward rate = 0.1109*(1+0.06411)/(1+0.044384)
Forward rate = 0.1109*(1.06411/1.044384)
Forward rate = 0.1109* 1.018888
Forward rate = 0.1130 FF/$
A steel rolling mill can produce I-beams at the rate of 20 tons per week. Customer demand for the beams is 5 tons per week. To produce the I-beams, the mill must go through a setup that requires changing to the required rolling patterns. Each setup costs the mill $10,000 in labor and lost production. The I-beam cost the mill $2,000 per ton and has an inventory holding rate of 25 percent. Assume the plant operates for 50 weeks in a year. Using Microsoft Excel, calculate the following:
a) the optimal production batch size of the mill.
b) The maximum (highest) inventory level at the plant
c) The annual inventory holding cost
d) The annual setup cost of the plant
e) The annual product cost f) Total Annual Inventory Cost (TAIC)
Answer:
A) 114 tons
C) $22800
D) $22807.02
Explanation:
Given Data:
annual holding cost (H) = 25% * $2000
setup cost (s) = $10000
production rate = 20
weekly demand = 5 tons
first we have to calculate the Annual demand , holding cost and the usage rate:
Annual demand = 5 tons * 52 weeks
= 260 tons
Holding cost (H) = 25% * $2000
= $500
Usage rate = (production rate) / (customer demand)
= 20 / 5 = 4 tons
A) Optimal production batch size of the mill
Qp = [tex]\sqrt{\frac{2DS}{H} } * \sqrt{\frac{P}{P-u} }[/tex]
= [tex]\sqrt{\frac{2*260*10000}{500} } * \sqrt{\frac{20}{20-4} }[/tex]
= 114 tons
C) The annual inventory holding cost
Annual holding cost
= [tex]\frac{Imax}{2} * H[/tex]
Imax = ( Qp / P ) (p-u)
= (114 / 20 ) ( 20 - 4 )
= 91.2 tons
therefore Annual holding cost : = ( 91.2 / 2) * 500 = $22800
D) Annual setup cost of the plant
= [tex]\frac{D}{Qp} * S[/tex]
D = 260
Qp = 114
S = $10000
hence Annual setup cost of the plant
= (260/114) * 10000
= $22807.02
Blaster Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sale of 30,000 pairs of boots.
Budgeted Costs Budgeted Costs per Pair Percentage of Costs Considered Variable
Direct materials $ 630,000 $ 21 100 %
Direct labor 300,000 10 100
Manufacturing overhead
(fixed and variable) 720,000 24 25
Selling and administrative
expenses 600,000 20 20
Totals $ 2,250,000 $ 75
Required:
a. Compute the sales price per unit that would result in a budgeted operating income of $900,000, assuming that the company produces and sells 30,000 pairs. (Hint: First compute the budgeted sales revenue needed to produce this operating income.) Assume that the company decides to sell the boots at a unit price of $121 per pair.
b-1. Compute the total fixed costs budgeted for the year.
b-2. Compute the variable cost per unit.
b-3. Compute the contribution margin per pair of boots.
b-4. Compute the number of pairs that must be produced and sold annually to break even at a sales price of $121 per pair.
Answer:
a. Sales volume = (Fixed costs + Target income) / Contribution margin per unit
Fixed costs = ( Percentage of fixed Selling and Admin expenses) +
Percentage of fixed Manufacturing expenses
= 600,000 * 80% + 720,000 * 75%
= 480,000 + 540,000
= $1,020,000
30,000 units = (1,020,000 + 900,000) / Contribution Margin per unit
Contribution margin per unit = 1,920,000/30,000
= $64
Sales per unit = Contribution margin per unit + Variable cost per unit
Variable Cost per unit = 21 + 10 + (24*25%) + (20 * 20%)
= $41
Sales per unit = 64 + 41
= $105 per unit
b - 1. Fixed costs = ( Percentage of fixed Selling and Admin expenses) + Percentage of fixed Manufacturing expenses
= 600,000 * 80% + 720,000 * 75%
= 480,000 + 540,000
= $1,020,000
b - 2. Variable Cost per unit
= Direct materials + Direct Labor + variable percentage of Manufacturing overhead cost per unit + variable percentage of Selling and administrative per unit
= 21 + 10 + (24*25%) + (20 * 20%)
= $41
b - 3. Contribution margin = Selling price - Variable cost
= 121 - 41
= $80
b - 4. Breakeven Point = Fixed Cost / Contribution margin
= 1,020,000/80
= 12,750 units
Orange Inc., an orange juice producer with a current debt-to-equity ratio of 2, is considering expanding its operations to produce toothpaste. Unsurprisingly, the toothpaste industry faces a different set of risks than the orange juice industry. However, the executives at Orange Inc. observe that Paste Inc., a toothpaste company, has a cost of equity of 12%, a cost of debt of 6%, and a debt-to-value ratio of 40%. Orange Inc. plans to finance its expansion into toothpaste production with 50% debt and 50% equity. The cost of debt for Orange Inc. is also 6%, and the corporate tax rate is 25%. Solve for the discount rate that Orange Inc. should use when evaluating whether to go forward with the expansion Note: Orange Inc. does not want to use the Adjusted Present Value method.
Appropriate Rate = 12.08%
Appropriate Rate = 9.60%
Appropriate Rate = 13.20%
Appropriate Rate = 8.85%
Assume Last Inc. has no cash on hand, but wants to take on a project that adds $30 million in market value to the firm's assets, and has an NPV of $20 million. The project requires an initial investment of $10 million. LastQ Inc. wants to maintain its 50% Debt to Value Ratio.
How much debt should LastQ issue, and how much should they pay stockholders in dividends?
Issue $30 million in debt, pay $5 million to shareholders
Issue $15 million in debt, pay $5 million to shareholders Issue $10 million in debt, pay $20 million to shareholders
Issue $20 million in debt, pay $8 million to shareholders
Answer:
Appropriate Rate = 8.85%
Explanation:
Given the following :
Paste Inc,
cost of debt (Kd) = 6% = 0.06
Cost of Equity Ke = 12% = 0.12
Weight of debt ; Wd = 40%
Weight of equity; We = 1 - 40% = 0.6
Pretax discount :
We * Ke + Wd * Kd
0.6 * 0.12 + 0.4 * 0.06 = 0.096
For orange :
Weight of debt (Wd) = 50% = 0.5
Weight of Equity (We) = 50% = 0.5
Cost of debt (Kd) = 6% = 0.06
Tax rate (r) = 25% = 0.25
Cost of Equity (Ke) :
Pretax discount + 1(pretax discount - cost of debt)
0.096 + 1(0.096 - 0.06)
0.096 + 0.096 - 0.06 = 0.132
WACC: for orange Inc.
We * Ke + Wd * Kd * ( 1 - tax rate)
0.5 * 0.132 + 0.5 * 0.06 * (1 - 0.25)
0.5 * 0.132 + 0.5 * 0.06 * 0.75
0.066 + 0.0225
= 0.0885
= 0.0885 * 100%
= 8.85%
Geoffrey brought $50,000 into his business at the start of the accounting period. During the year, he needed $5,000 for a personal emergency. He borrowed this money from the business’s accounts. Under which accounting heads will the business record these transactions?
Geoffrey’s business will credit $50,000 to the
account and debit $5,000 from the
account.
Answer:
50,000 would be Capital and 5,000 would be drawings.
Explanation:
To repeat an important concept, the focus of marketing must constantly involve what 4 things?_________________
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37 POINTS
Answer:
point
Explanation:
this are the point
Flintlnc. provided the following information for the year 2017.
Retained earnings, January 1, 2017 $ 589,400
Administrative expenses 246,000
Selling expenses 307,200
Sales revenue 1,812,200
Cash dividends declared 83,000
Cost of goods sold 821,500
Loss on discontinued operations 78,200
Rent revenue 40,200
Unrealized holding gain on available-for-sale securities 16,900
Income tax applicable to continuing operations 192,700
Income tax benefit applicable to loss on discontinued operations 43,010
Income tax applicable to unrealized holding gain on available-for-sale securities
2,000
1. Prepare a single-step income statement for 2017. Shares outstanding during 2017 were 100,000. (Round earnings per share to 2 decimal places, e.g. $1.48.)
2. Prepare aretained earning statement for 2017. Shares outstanding for 2017 were 100000.
Answer: See explanation
Explanation:
1. Prepare a single-step income statement for 2017. Shares outstanding during 2017 were 100,000. (Round earnings per share to 2 decimal places, e.g. $1.48.)
The income from continuing operations for earnings per share was calculated as:
= 285000/100000
= $2.85
The loss on discontinued operations was calculated as:
= 35190/100000 shares
= 0.35
Check the attachment for the solution.
2. Prepare aretained earning statement for 2017. Shares outstanding for 2017 were 100000.
Check the attachment for the solution
A machine with a useful life of six years and a residual value of $3,000 was purchased at the beginning of year 1 for $30,000. The machine was sold for $15,000 on April 1 in year 4. a. What was the book value of the machine at the end of year 3 assuming the straight-line method of depreciation is used
Answer:
Book value= $16,500
Explanation:
Giving the following information:
Useful life= 6 years
Purchase value= $30,000
Residual value= $3,000
First, we need to calculate the annual depreciation using the straight-line method:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (30,000 - 3,000) / 6
Annual depreciation= $4,500
Now, the accumulated depreciation at the end of year 3:
Accumulated depreciation= 3*4,500= $13,500
Finally, the book value:
Book value= purchase price - accumulated depreciation
Book value= 30,000 - 13,500
Book value= $16,500
What can you conclude about a firm in the short run from its marginal product numbers as its output approaches capacity production
Answer: Law of Diminishing returns would apply
Explanation:
The Law of Diminishing returns is used to describe the phenomenon where after a certain level of input, the output produced no longer increases at an increasing rate but instead starts increasing at a decreasing rate.
For instance;
Labor Output
2 4
4 8
6 16
8 20
10 22
Notice how at first the output increased by 4 then by 8 but then started increasing by 4 and then by 2. This is the Law of Diminishing Marginal returns and a reality that normally faces a firm in the short run as its output approaches capacity production.
How is an excise tax different from a sales tax?
A). An excise tax is not deductible.
B). An excise tax applies to specific products.
C). An excise tax applies only to imported goods.
D). An excise tax is an indirect tax.
The answer is B.
An excise tax applies to specific products.
Hopes this helps :)
The difference between excise tax and sales tax is that an excise tax applies to specific products.
So, option B). is correct.
Excise tax and sales taxSales tax is applied to practically everything you buy, whereas excise tax is only applied to certain goods and services. Excise duty is charged on the manufacture of goods, whereas sales tax is levied on the selling of commodities.
One distinction between sales and excise taxes is that sales taxes are computed as a percentage of the purchase price, whereas excise taxes are assessed per unit. The difference between excise tax and sales tax is that an excise tax applies to specific products.
So, option B). is correct.
Find out more information about sales tax here:
https://brainly.com/question/372989?referrer=searchResults
Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $19 1,000. The trial balances for the two companies on December 31, 20X7, included the following amounts:
Prince Corporation Sword Company
Debit Credit Debit Credit
Cash $94,000 $39,000
Accounts Receivable 53,000 58,000
Inventory 188,000 108,000
Land 92,000 34,000
Buildings and Equipment 494,000 161,000
Investment in Sword
Company 217,000
Cost of Goods Sold 494,000 257,000
Depreciation Expense 24,000 14,000
Other Expenses 74,000 74,000
Dividends Declared 56,000 26,000
Accumulated Depreciation $151,000 $70,000
Accounts Payable 64,000 28,000
Mortgages Payable 189,000 141,000
Common Stock 294,000 45,000
Retained Earnings 348,000 84,000
Sales 685,000 403,000
Income from Sword
Company Prince
Corporation 55,000
$1,786,000 $1,786,000 $771,000 $771,000
Additional Information
1. On January 1, 20X7, Lime reported net assets with a book value of $150,000. A total of $20,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7.
2. Lime's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment.
3. Jersey used the equity method in accounting for its investment in Lime.
4. Detailed analysis of receivables and payables showed that Sword owed Prince $23,000 on December 31, 20x7.
Required:
Prepare all consolidating entries needed to prepare a full set of consolidated financial statements for 20x7
Answer:
Explanation:
two companies on December 31, 20X7
Use the following data to calculate the current ratio. Koonce Office Supplies Balance Sheet December 31, 2014
Cash $130,000 Accounts payable $100,000
Accounts receivable $100,000 Salaries and wages payable $20,000
Inventory $110,000 Mortgage payable 160,000
Prepaid insurance $60,000 Total liabilities 320000
Stock investments $170,000 Common stock $240,000
Land 180000 Retained earnings $500,000
Buildings 210000 Total stockholders' equity 740000
Less: Accumulated depreciation ($40,000) Total liability and 1.060,000
$170,000 stockholder equity
Trademarks $140,000
Total assets $1.060,000
a. 2.50:1
b. 2.13:1
c. 1.44:1
d. 2.86:1
Answer:
a. 2.50:1
Explanation:
Calculation for Current ratio
First step is to Calculate the Total current assets :
Cash $130,000
Accounts receivables $100,000
Inventory $110,000
Prepaid insurance $60,000
Total current assets (a) $400,000
Second step is to Calculate the Total current liabilities :
Accounts payable $140,000
Salaries and wages payable $20,000
Total current liabilities (b) $160,000
Now let find the current ratio using this formula
Current ratio = Total current assets / Total current liabilities
Let plug in the formula
Current ratio =$400,000 / $160,000
Current ratio =2.50 : 1
Therefore the Current ratio will be 2.50 : 1
Fit-for-Life Foods reports the following income statement accounts for the year ended December 31.
Gain on sale of equipment $6,350 Depreciation expense—Office copier $600
Office supplies expense 770 Sales discounts 15,700
Insurance expense 1,240 Sales returns and allowances 4,000
Sales 215,000 TV advertising expense 2,100
Office salaries expense 31,500 Interest revenue 600
Rent expense—Selling space 11,000 Cost of goods sold 88,100
Sales staff wages 23,000 Sales commission expense 13,600
Required:
Prepare a multiple-step income statement.
Answer: Check attachment
Explanation:
Note that, in the attachment, the total expense was calculated as the addition of the selling expense and the general and administrative expenses. This will be:
= $49700 + $34110
= $83810
Operating income was calculated as:
= Gross profit - Total expenses
= $107200 - $83810
= $23390
Check the attachment for further details.
ClevelandInc. leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $48,555 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $240,000, and a cost to Cleveland of $240,000. The estimated fair value of the crane is expected to be $45,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is probable. Abriendo’s incremental borrowing rate is 8%, and Cleveland’s implicit interest rate of 8% is known to Abriendo. Discuss what should be presented in the balance sheet, the income statement, and the related notes of both the lessee and the lessor at December 31, 2020.
Answer:
The correct answer is "2,40,000". The further explanation is given below.
Explanation:
The given fair value is:
= $240,000
The presentation in books of lessee will be:
⇒ [tex]Record \ of \ assets =PV \ of \ Lease \ Payment +Unguaranteed \ residual \ value[/tex]
⇒ [tex]Annuity \ value \ of \ 8 \ percent \5 \ year\times 48555+Anuity \ value \ of \ 5th \ year\times 45000[/tex]
On putting the values, we get
⇒ [tex]3.9927\times 48555+0.6806\times 45000[/tex]
⇒ [tex]193865.54+30627[/tex]
⇒ [tex]224492.54 \ i.e., 2,24,493[/tex] ($)
Presentation in books of Lessor , the fair value of assets will be
= [tex]2,40,000[/tex] ($)
What are the nominal and effective costs of trade credit under the credit terms of 3/10, net 30? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.
Answer:
Nominal cost of trade credit = [Discount percentage / (100- Discount Percentage) ] * [ 365 Days / (Credit's Outstanding - Discount Period) ]
Nominal cost of trade credit = 3/97 * 365/30 - 10
Nominal cost of trade credit = 3/97 * 365/20
Nominal cost of trade credit = 0.030928 * 18.25
Nominal cost of trade credit = 0.564436
Nominal cost of trade credit = 56.44%
Effective cost of trade = (1 + Periodic rate)^n - 1
Periodic rate = 0.03 / 0.97 = 0.3093
Periods/year = 365 / (30-10) = 18.25
Effective cost of trade = (1 + 0.3093)^18.25 - 1
Effective cost of trade = (1 .3093)^18.25 - 1
Effective cost of trade = 1.74354232297 - 1
Effective cost of trade = 0.74354232297
Effective cost of trade = 74.35%
Answer:
nominal cost of credit = 56.44% ;EAR = 74.35%
Explanation:
1.nominal cost of credit =
"(discount rate /1 - discount rate )" or part 1
multiply by "365/(days the credit is outstanding -discount days )" or part 2 .Thus ,nominal cost of credit= (0.03/1-0.03 )*(365 /30 -10)= part 1* part 2 = 0.030928*18.25=56.44%
2.EAR =[ (1 - "part 1 ") ^("part 2") ] - 1= [ (1+0.030928)^18.25 ] -1 =1.74348 -1 = 0.74348 or 74.348% or 74.35%