Answer: is highly dependent upon a company's tax rate.
Explanation:
The after-tax cost of debt is defined as the net cost of debt that is determined by adjusting the gross cost of debt incurred for its tax benefits. The after-tax cost of debt
equals the pre-tax cost of debt which is then multiplied by (1 – tax rate).
The after-tax cost of debt is the cost of debt which is included while calculating the weighted average cost of capital and it has a greater effect on the cost of capital of a firm when there's an increase in the debt-equity ratio.
Consider the following balance sheet for TD. Assets Liabilities Reserves 493 Deposits 2900 Loans 2407 4. Suppose that TD is a typical bank and keeps only the required reserves. Given this data, what is the money multiplier? 5. Suppose that TD is a typical bank and keeps only the required reserves. In addition, suppose that someone deposited $700. Given this data, what is the total change in the M1 Money Supply? 6. Suppose that someone deposited $700 at TD Bank. Given this data, what is the minimum amount by which the money supply will increase?
The money multiplier represents how much money the banking system can generate from each dollar of bank reserves. The money multiplier in this case is 2900. The total change in the M1 money supply when someone deposits $700 at TD Bank is $2,030,000.
Explanation:The money multiplier is a concept that shows how much money the banking system can generate from each dollar of bank reserves. It is calculated by dividing 1 by the reserve ratio, which is the fraction of deposits that a bank keeps as reserves. In this case, since the bank keeps only the required reserves, the reserve ratio is 1/2900. Therefore, the money multiplier would be 1 divided by 1/2900, which is equal to 2900.
To calculate the total change in the M1 money supply when someone deposits $700 at TD Bank, we use the formula:
Total Change in the M1 Money Supply = New Deposits x Money Multiplier
So, the total change in the M1 money supply would be $700 x 2900 = $2,030,000.
The minimum amount by which the money supply will increase when someone deposits $700 at TD Bank is $700 x 1 = $700, as the money multiplier is always greater than or equal to 1.
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The money multiplier is calculated as 1 divided by the reserve ratio. For TD Bank, which keeps only the required reserves, the money multiplier would be 1. Depositing $700 can lead to an increase in the M1 money supply by the same amount, though the final increase can vary due to several factors.
Explanation:To calculate the money multiplier, we use the formula 1 / reserve ratio. In this case, given that the bank only keeps the required reserves, we can assume a reserve ratio of 1 (if all reserves are kept), so the money multiplier would be 1.
With regard to the changes in the M1 money supply due to a deposit of $700, it will affect how much the bank can lend out. Since TD keeps only required reserves, it can lend out all of the $700. As a result, bank credit (and therefore the M1 money supply) could increase by $700.
The minimum increase in the money supply is harder to define due to several factors, including withdrawal of cash from the banking system. However, at least the amount deposited ($700) will be added to the money supply immediately.
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A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,060. Further assume Ms. Bright paid 40 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan.
a. What is the current price of the bond? (Input answer to 2 decimal places.)
b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round answer to 2 decimal places.)c. How much of the purchase price of $1,060 did Ms. Bright pay in cash? (Do not round intermediate calculations and round answer to 2 decimal places.)
Answer:
A.) $1,152.12
B.) $92.12
C.) $424.00
Explanation:
Given
period (t) = 15 years
Coupon rate = 12%
Rate (r) = 10%
Par value = $1000
Purchase price = $1060
A.) Current price of bond :
Price = Coupon payment × [(1 - (1 + r)^-t) /r] + [par value / (1+r)^t]
Coupon payment = 12% × 1000 = $120
Plugging our values
Price = 120 × [(1-(1+0.1)^-15)/0.1] + [1000/1.1^15]
Price = $1,152.12
B.) Dollar profit on bond
Dollar profit = Current price - Purchase price
Dollar profit = $1,152.12 - $1060 = $92.12
C.)Amount paid in cash
40% of purchase amount was paid in cash
0.4 × 1060 = $424.00
Answer:
a) $1,153.72
b) $93.72
c) $424
Explanation:
Given:
Original bond was issued at 12%
YTM = 10%
Years left, N = 15 years.
a) The current price of bond:
Using Excel function, we have:
=PV(10%/2,2*15,-12%*1000/2,-1000)
= $1153.72
The current price of bond is $1,153.72
b) Dollar profit based on bond's current price will be calculated as:
Bond's current price - purchase price
= $1,153.72 - $1,060
= $93.72
Dollar profit = $93.72
c) The purchase price of $1,060 Ms. Bright paid in cash will be:
$1,060 * 40%
= $424
The manufacturing overhead budget at Rost Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,800 direct labor-hours will be required in September. The variable overhead rate is $7.00 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,120 per month, which includes depreciation of $3,640. All other fixed manufacturing overhead costs represent current cash flows. The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Answer:
Total overhead cash disbursement= $59,080
Explanation:
Giving the following information:
Estimated direct labor hours= 2,800
The variable overhead rate is $7.00 per direct labor-hour.
Estimated fixed manufacturing overhead= $43,120 per month
Includes depreciation of $3,640
To calculate the cash disbursement, we need to deduct from the fixed manufacturing overhead the depreciation expense because it is not a cash disbursement.
Variable overhead= 7*2,800= 19,600
Fixed overhead= 43,120-3,640= 39,480
Total overhead cash disbursement= $59,080
Final answer:
The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $62,720.
Explanation:
The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be calculated by multiplying the budgeted direct labor-hours by the variable overhead rate and adding the fixed manufacturing overhead.
In this case, the budgeted direct labor-hours for September is 2,800 and the variable overhead rate is $7.00.
So, the variable overhead cost is 2,800 x $7.00 = $19,600.
The fixed manufacturing overhead is $43,120 per month, which includes depreciation of $3,640.
So, the September cash disbursements for manufacturing overhead will be $19,600 + $43,120 = $62,720.
Dave Krug contributed $1,800 cash along with inventory and land to a new partnership. The inventory had a book value of $1,600 and a market value of $3,600. The land had a book value of $2,200 and a market value of $6,600. The partnership also accepted a $3,800 note payable owed by Krug to a creditor. Prepare the partnership’s journal entry to record Krug’s investment.
Answer and Explanation:
The Journal entry is shown below:-
Cash Dr, $1,800
Inventory Dr, $3,600
Land Dr, $6,600
To Notes payable $3,800
To Krug's Capital $8,200
(Being Krug’s investment is recorded)
Therefore to record the
Here the assets are increasing so we debited the cash, inventory and land while the liabilities and stakeholder equity also increase so we credited the notes payable and Krug's capital.
Pretzelmania, Inc., issues 7%, 10-year bonds with a face amount of $64,000 for $64,000 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid annually on December 31. Required: 1. & 2. Record the bond issue and first interest payment on December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answer and Explanation:
The Journal entries is shown below:-
The Journal entry to record the bond issue is here below:-
January 1, 2021
Cash Dr, $64,000
To Bonds payable $64,000
(Being issue of bonds is recorded)
The Journal entry to record the interest payment is shown below:-
December 31, 2021
Interest Expenses Dr, $2,240
($64,000 × 7% × 6 ÷ 12)
To Cash $2,240
(Being interest payment of bond is recorded)
Sandhill Co. had the following account balances: Sales revenue $ 431000 Cost of goods sold 226000 Salaries and wages expense 33500 Depreciation expense 64000 Dividend revenue 11400 Utilities expense 23100 Rent revenue 58800 Interest expense 36100 Sales returns and allow. 33200 Advertising expense 38100 What would Sandhill report as total revenues in a single-step income statement?
Answer:
$468,000
Explanation:
The computation of the total revenues in case for single-step income statement is shown below:
= Sales revenue - sales return and allowances + dividend revenue + rent revenue
= $431,000 - $33,200 + $11,400 + $58,800
= $468,000
We simply added all the revenues which increased the sales for the company after considering the sales return and allowances
Mosbey Inc. is working on its cash budget for June. The budgeted beginning cash balance is $29,000. Budgeted cash receipts total $187,000 and budgeted cash disbursements total $186,000. The desired ending cash balance is $51,000. The excess (deficiency) of cash available over disbursements for June will be:
Answer:
The excess cash available will be $30,000
Explanation:
The following information were given:
beginning cash balance = $29,000
budgeted cash receipt = $187,000
budgeted cash disbursement = $186,000
desired ending cash balance = $51,000
required = excess (deficiency) of cash available over disbursement.
To calculate the excess (deficiency) of cash available over disbursement, disbursements will be deducted from all the cash received and available, if the difference is positive, then the cash available is excess, if negative, then the cash available is deficiency. This is calculated as follows
Total cash available = beginning cash balance + budgeted cash receipt
= 29,000 + 187,000 = $216,000
Total disbursements = $186,000
∴Excess (deficiency) of cash available = 216,000 - 186,000 =$30,000 (excess)
The Assembly Department started the month with 78,000 units in its beginning Work in Process Inventory. An additional 254,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 21,000 units in the ending Work in Process Inventory of the Assembly Department.
How many units were transferred to the next processing department during the month?
Answer:
Outflow from assembly= 311,000 units
Explanation:
The assembly department in this scenario handles the work in process part of production.
Production involves different stages that includes: Raw material, work in process, finished goods.
Products flow through these different stages.
To calculate the amount transferred out we need to first calculate total WIP within the month
Total WIP= Inflow of product + Beginning inventory
Total WIP= 254,000 + 78,000
Total WIP= 332,000
Outflow from assembly= Total WIP - Ending WIP
Outflow from assembly= 332,000 - 21,000
Outflow from assembly= 311,000 units
Final answer:
To calculate the number of units transferred to the next processing department, subtract the Ending Work in Process Inventory from the sum of the Beginning Work in Process Inventory and the units added. A total of 311,000 units were transferred out during the month.
Explanation:
To determine the number of units transferred to the next processing department during the month, we should use the following formula for units in production:
Units Transferred Out = Units at the beginning + Units added - Ending Work in Process Inventory
In this case:
Units at the beginning (Beginning Work in Process Inventory) = 78,000 unitsUnits added (transferred in from the prior department) = 254,000 unitsEnding Work in Process Inventory = 21,000 unitsTo calculate:
Units Transferred Out = 78,000 + 254,000 - 21,000
Units Transferred Out = 311,000 units
Therefore, 311,000 units were transferred to the next processing department during the month.
You have been asked by the CEO of your company to manage a really important project. The CEO suggested five employees to be on your project team. You now think about the right organizational structure. Under what project management structure would these five employees face the least trade-offs with their current responsibilities?
a. A dedicated project team
b. A heavyweight project manager
c. An advisory team
d. A matrix organization
During 2020 the Blossom Company had a net income of $84000. In addition, selected accounts showed the following changes: Accounts Receivable $2500 increase Accounts Payable 800 increase Buildings 3800 decrease Depreciation Expense 1300 increase Bonds Payable 7000 increase What was the amount of cash provided by operating activities? $91800. $85300. $83600. $84000.
Answer:
The amount of cash provided by operating activities was $83,600
Explanation:
The amount of cash provided by operating activities is calculating by using following formula:
Net Income + Non-Cash Expenses (Depreciation, Depletion & Amortization Expense) + Non-Operating Losses (Loss on Sale of Non-Current Assets) − Non-Operating Gains (Gain on Sale of Non-Current Assets) + Decrease in Current Assets − Increase in Current Assets + Increase in Current Liabilities − Decrease in Current Liabilities.
In the Blossom Company,
The amount of cash provided by operating activities = Net Income + Depreciation Expense - Increase in Accounts Receivable + Increase in Accounts Payable = $84,000 + $1,300 - $2,500 + $800 = $83,600
Concord Corporation sells a product for $50 per unit. The fixed costs are $760000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $120000 and variable costs will be 50% of the selling price. The new break-even point in units is:
Answer:
35,200
Explanation:
The BEP which is the break even point is the point where the company's sales or revenue generated is equal to the cost incurred. As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.
Both sales and variable cost are dependent on the number of units sold.
The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.
With the purchase of the new equipment,
Fixed costs = $760000 + $120000
= $880,000
Variable cost per units
= 50% * $50
= $25
Let the number of units to break even be t
t(50 - 25) = 880,000
t = 880,000/25
= 35,200 units
Maxim manufactures a cat food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $3.20 and total fixed costs are $10,000. The cat food can be sold as it is for $8.55 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,600 cost. The additional processing will yield 10,000 bags of Premium Green and 3,600 bags of Green Deluxe, which can be sold for $7.55 and $5.55 per bag, respectively. If Green Health is processed further into Premium Green and Green Deluxe, the total gross profit would be:
Answer: $92,880
Explanation:
The Gross Profit can be calculated by simply removing the cost from the sales amount.
It is stated that the additional processing will yield 10,000 bags of Premium Green and 3,600 bags of Green Deluxe, which can be sold for $7.55 and $5.55 per bag.
Sales figure is therefore,
= (10,000 * 7.55) + (3,600 * 5.55)
= 75,500 + 19,980
= $95,480
Subtracting the cost to get,
= 95,480 - 2,600
= $92,880
The total gross profit would is $92,880.
At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg’s was quoted as saying, " . . . for the past several years, our individual company growth has come out of the other fellow’s hide." Kellogg’s has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg’s and its largest rival advertise, each company earns $2 billion in profits. When neither company advertises, each company earns profits of $16 billion. If one company advertises and the other does not, the company that advertises earns $56 billion and the company that does not advertise loses $4 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising?
Answer: i ≤ 23% Collision is profitable under usual trigger strategy
Explanation:
Given Data;
When both advertise = $2 billion
When neither advertise = $16 billion
When one advertise ( cheats )= 54 billion
The other loses = $4 billion
Period for each cheating = 1
Therefore:
Cheat - Collision / Collision - period for each cheating
= 54 - 16 / 16 - 1
= 38 / 15
= 2.533 ≤ ( 1/i )
Collusion is profitable under usual trigger strategies
Coronado Industries has 4760000 shares of common stock outstanding on December 31, 2020. An additional 198000 shares are issued on April 1, 2021, and 477000 more on September 1. On October 1, Coronado issued $6050000 of 8% convertible bonds. Each $1,000 bond is convertible into 40 shares of common stock. No bonds have been converted. The number of shares to be used in computing basic earnings per share and diluted earnings per share on December 31, 2021 is
Answer:
BEPS Shares = 5,067,500
DEPS Shares = 5,309,500
Explanation:
Basic Earnings per Share (BEPS) = Earnings Attributable to Holders of Common Stock / Weighted Average Number of Common Shares.
Weighted Average Number of Common Shares
Outstanding Common Shares 4,760,000
Additional Shares: April( 9/12 × 198000) 148,500
Additional Shares: April( 4/12 × 477000) 159,000
Total Weighted Average Number of Common Shares 5,067,500
Diluted Earnings per Share (DEPS) =Adjusted Earnings Attributable to Holders of Common Stock /Adjusted Weighted Average Number of Common Shares.
Adjusted Weighted Average Number of Common Shares
Basic Earnings per Share Common Shares 5,067,500
Convertible Bonds ($6,050,000/$1,000 × 40) 242,000
Total Weighted Average Number of Common Shares 5,309,500
You are a professional financial analyst that is employed to help evaluate possible merger and acquisition candidates. You have already reviewed the numbers, and the company seems solid on paper. You are unable to make a visit to the company yourself and are instead sending one of your direct reports to conduct the visit on your behalf. This is his first site visit, and he wants to review the work you have already done to familiarize himself with the company and asks for advice on things to look for. You offer to give advice on ways to find out if the company is "cooking its books" and what to look for when you conduct a "smell test."
What financial ratios should he be looking at and what do they tell you?
Answer:
Explanation:
Below are some of the financial ratios he should consider:
a) Financial leverage ratios: This is used to measure the company earnings to service debt payments.
b) Return on investment: This is the ratio that is used to evaluate the profitability of the firm and the profit that is available to the stakeholders after all payments have been made.
c) Price to Earnings Ratio: This is an indicator of the price of the company's stock concerning the earnings per share. It is used to analyze if the stock price is over-priced or under-priced.
You will receive annual payments of $20,000 to be paid at the end of each of the next 4 years. The appropriate discount rate is 15% What is the present value of the payments? Future Value of 1 (15%, 4 periods) = 1.74901 Future Value of an Annuity of 1 (15%, 4 periods) = 4.99338 Present Value of 1 (15%, 4 periods) = 0.57175 Present Value of an Annuity of 1 (15%, 4 periods) = 2.85498 Group of answer choices $57,099.60 $80,000.00 $31,470.30 $72,095.60
Answer:
Present Value = $57,099.57
Explanation:
The Present Value of a series of future equal amount is the amount the sum in today's terms that would make one to be indifferent . It is the future series of cash flows discounted at the opportunity cost rate of return.
Present Value = A × ( 1-(1+r)^(-n))/r
A- annual cash flow- 20,000, r- discount rate - 15%, n number of years- 4
PV = 20,000 × (1- 1.15^(-4))/0.15
= 20,000 × 2.85498
= $57,099.57
A loop of wire carrying a current of 2.0 A is in the shape of a right triangle with two equal sides, each 15 cm long. A 0.7 T uniform magnetic field is parallel to the hypotenuse. Find the magnitude of the resultant magnetic force on the two sides.
Answer:
F = 0.312 N
Explanation:
Given,
Current, I = 2 A
Length of the equal side = 15 cm = 0.15 m
Magnetic field, B = 0.7 T
Magnetic filed is parallel to hypotenuse
θ = 135°
Force on the first side of the triangle
[tex]F = i BL \sin \theta[/tex]
Force on the another side
[tex]F = i BL \sin \theta[/tex]
Resultant magnetic Force
[tex]F = 2 \times 2\times 0.7 \times 0.15 \sin 135^0[/tex]
F = 0.312 N
What was the original purpose of the English jail, as conceived by King Henry II?
a. To confine offenders awaiting execution
b. To house offenders awaiting transfer to prison
c. To house suspects awaiting trial
d. To punish individuals convicted of crimes
Answer:
c. To house suspects awaiting trial
Explanation:
King Henry II established jails in the 12th century during his reign for the primary purpose of housing suspects awaiting trial. People who were already convicted of crimes but awaiting punishment were also kept in jails before their fate as decided. The King put in place a county Sheriff who oversaw the collection of rent for the King and also had a say on people who who went to jail. This was among the early forms of jails established.
Today, the current jails have the same model with the first jails, albeit with several other functions. People who commit crimes are kept in jails, those awaiting trials, parole and probation violators, are also kept in jails.
The original purpose of the English jail, as introduced by King Henry II, was to house suspects who were awaiting trial. This represented the shift from immediate punishment without a formal trial to a more centralized, formal justice system.
Explanation:
The original purpose of the English jail, as conceived by King Henry II, was c. To house suspects awaiting trial. This marked a significant shift from previous practices of self-regulation in communities towards the centralized system of justice we see today. Prior to this development, punishments were typically carried out immediately, without a formal trial process. However, Henry II introduced the concept of holding alleged offenders in a 'gaol' or jail until they could be brought to a formal trial. Hence, the inception of the practice of jailing suspects pending their trial.
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If you wanted your organizational unit to create a new product that is essentially an entirely new industry, what type of innovation would you encourage? A radical innovation A systems innovation An incremental innovation Choose the answer that best completes each sentence. Because workgroups develop their own , intranets build a common cultural foundation that can help unify employees in different units and locations around common company values.
Answer:
1. A radical innovation.
2. Subcultures
Explanation:
If you wanted your organizational unit to create a new product that is essentially an entirely new industry, you will encourage a radical innovation.
A radical innovation also known as the disruptive innovation is an innovative approach aimed at destroying or supplanting old business strategies and models with an invention to breakthrough and change the whole industries by creating new products.
Because workgroups develop their own subcultures, intranets build a common cultural foundation that can help unify employees in different units and locations around common company values.
The Paris Company provides catering services. The cost of catering supplies is $300 per month plus $100 per job catered plus $25 per meal served. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company budget for May was 27 jobs to be catered and 160 meals to be served. The actual activity for May was 26 jobs catered and 192 meals served, and the actual cost of catering supplies was $7,620.
The cost of catering supplies in Paris' planning budget for the month of May was:
a. $6,700
b. $7,700
c. $7,400
d. $7,000
Answer:
d. $7,000
Explanation:
The computation of the cost of catering supplies in case of planning budget is shown below:
= Cost of catering supplies + cost per job × number of jobs + cost per meal served × number of meals
= $300 + $100 × 27 jobs + $25 × 160 meals
= $300 + $2,700 + $4,000
= $7,000
We simply applied the above formula so that the cost of catering supplies for planning budget could come
A company began construction of a new warehouse on Jan 1, 2018. The building was finished and ready for use on Sept 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 313,000 September 1, 2018 $ 465,000 December 31, 2018 $ 465,000 March 31, 2019 $ 465,000 September 30, 2019 $ 313,000 The company had $5,500,000 in 15% bonds outstanding through both years. The capitalized interest in 2018 was:
Answer:
$70,200
Explanation:
the formula to determine the amount of interest capitalized is:
$313,000 x 15% x 1 (whole 2018) = $46,950$465,000 x 15% x 4/12 (Sept.-Dec.) = $23,250total $70,200US GAAP allows companies to treat the cost of borrowing (interests) during the project's inception period as part of the original capital investment amount.
OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $500,000 per year in direct labor costs. The company requires a 10% return from its investments. 1. Compute the proposed investment’s net present value. 2. Using your answer from part 1, is the investment’s internal rate of return higher or lower than 10%?
Net Present Value (NPV) and Internal Rate of Return (IRR) are key to making a capital budgeting decision. You can calculate NPV using the formula: NPV = Σ [CFt / (1+r)^t] - C0. Then, compare NPV to the required return to determine if IRR is above or below the discount rate.
Explanation:The given scenario is a case of capital budgeting, wherein OptiLux is considering a manufacturing investment. Net Present Value (NPV) and Internal Rate of Return (IRR) are the major tools for making a capital budgeting decision.
1. The NPV of the proposed investment could be computed via the formula: NPV = Σ [CFt / (1+r)^t] - C0. 'CFt' is the cash inflow during period t, 'r' is the discount rate, and 't' is the time period. For this scenario, CFt would be the annual savings of $500,000, r would be the required return of 10%, and the initial investment (C0) is $4 million. By calculating NPV, we will find whether or not the proposed investment adds value to the firm above the required return.
2. As for IRR, it's the discount rate that makes NPV equal to zero. If the NPV is positive at the 10% discount rate, it shows that our IRR is higher than 10%, and if the NPV is negative, our IRR is lower than 10%. Given this, you can make a decision on the IRR based on the calculated NPV.
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To calculate the net present value (NPV) of the proposed investment in the automated manufacturing system, we need to calculate the present value of the cash flows over the 20-year life of the system. The NPV will help us determine if the investment's internal rate of return (IRR) is higher or lower than 10%.
Explanation:To determine the net present value (NPV) of the proposed investment in the automated manufacturing system, we need to calculate the present value of the cash flows over the 20-year life of the system. The cash flow in each year is the direct labor cost savings of $500,000.
Using a 10% discount rate, we can calculate the present value of each cash flow using the formula: PV = CF/(1+r)^n, where CF is the cash flow, r is the discount rate, and n is the time period.
Year 1: PV = $500,000/(1+0.10)^1 = $454,545.45Year 2: PV = $500,000/(1+0.10)^2 = $413,223.14...Year 20: PV = $500,000/(1+0.10)^20 = $89,051.72
The NPV is the sum of all the present values: NPV = $454,545.45 + $413,223.14 + ... + $89,051.72. Calculate the sum of all the present values to get the NPV of the proposed investment.
To determine if the investment's internal rate of return (IRR) is higher or lower than 10%, we can compare the NPV to zero. If the NPV is positive, it implies that the IRR is higher than 10%. If the NPV is negative, it implies that the IRR is lower than 10%. If the NPV is exactly zero, it implies that the IRR is exactly 10%.
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The Alpha Company produces toys for national distribution. Standards for a particular toy are: Materials: 12 ounces per unit at 56¢ per ounce. Labor: 2 hours per unit at $2.75 per hour. During the month of December, the company produced 1,000 units. Information for the month follows: Materials: 14,000 ounces were purchased and used at a total cost of $7,140. Labor: 2,500 hours worked at a total cost of $8,000. Calculate the labor rate variance and the labor efficiency variance, respectively. Rate Variance Efficiency Variance
Answer:
a. Labor rate variance = - $1,125 (adverse )
b. Labor efficiency variance = - $1,375 (adverse)
Explanation:
a. Labor rate variance
Actual labor rate = $8,000 / 2,500 = $3.20 per hour
Labor rate variance = Actual hours * (Standard rate - Actual rate) = 2,500 * ($2.75 - $3.20) = - $1,125 adverse
b. Labor efficiency variance
Standard labor hours = Actual units * Standard hour per unit = 1,000 * 2 = 2,000 hours
Labor efficiency variance = (Standard labor hours - Actual labor hours) * Standard rate = (2,000 - 2,500) * $2.75 = - $1,375 (adverse)
The labor rate variance for Alpha Company is $1,125 (Unfavorable), and the labor efficiency variance is $1,375 (Unfavorable).
First, we calculate the Labor Rate Variance (LRV) using the formula:
LRV = (Actual Hourly Wage - Standard Hourly Wage) × Actual Hours Worked
Given:
Actual Hourly Wage = Total Labor Cost / Actual Hours Worked = $8,000 / 2,500 = $3.20 per hourStandard Hourly Wage = $2.75 per hourActual Hours Worked = 2,500 hoursSo:
LRV = ($3.20 - $2.75) × 2,500 = $0.45 × 2,500 = $1,125 (Unfavorable)
Next, we calculate the Labor Efficiency Variance (LEV) using the formula:
LEV = (Actual Hours Worked - Standard Hours Allowed) × Standard Hourly Wage
Given:
Standard Hours Allowed = Standard Hours Per Unit × Actual Units Produced = 2 hours/unit × 1,000 units = 2,000 hoursActual Hours Worked = 2,500 hoursStandard Hourly Wage = $2.75 per hourSo:
LEV = (2,500 - 2,000) × $2.75 = 500 × $2.75 = $1,375 (Unfavorable)
To sum up:
Rate Variance: $1,125 (Unfavorable)Efficiency Variance: $1,375 (Unfavorable)Moreno Company publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $20 per year. During November 2020, Moreno sells 15,000 subscriptions beginning with the December issue. Moreno prepares financial statements quarterly and recognizes subscription revenue at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue.
A. Prepare the entry in November for the receipt of the subscriptions
B. Prepare the adjusting entry at December 31, 2020, to record sales revenue recognized in December 2020.
C. Prepare the adjusting entry at March 31, 2021, to record sales revenue recognized in the first quarter of 2021.
Answer and Explanation:
The journal entries are shown below:
A. Cash $300,00
To Unearned Subscription Revenue $300,000
(Being the receipts of the subscription is recorded)
For recording this we debited the cash as it increased the assets and also increased the liability so unearned subscription revenue is credited
B. Unearned Subscription Revenue $300,000
To Subscription Revenue $300,000
(Being the sales revenue is recorded)
For recording this we debited the unearned subscription revenue as it reduced the liabilities and at the same time it increase the revenue so the subscription revenue is credited
C. Unearned Subscription Revenue $75,000
To Subscription Revenue $75,000
(Being the sales revenue is recorded)
The computation is shown below:
= $300,000 × 3 months ÷ 12 months
= $75,000
For recording this we debited the unearned subscription revenue as it reduced the liabilities and at the same time it increase the revenue so the subscription revenue is credited
The three months are calculated from December 31 to March 31
A chocolatier, Alain, in Belgium conducted extensive market research and focus groups, to understand the perfect chocolate for a distinct group of consumers. The perfect piece of chocolate would have a target weight of 60 grams. The voice of the specific consumers prefers a specification of +/- 2 grams. Alain has targeted a selling price of 15 Euros a piece. A box of dozen would be 150 Euros, gift wrapped for special occasions. Alain searched for a depositor that would give the most accurate fill weight, with a tight tolerance, a machine that would not only make elegant shapes of chocolate with precise caramel filling and clean impression. A confectionery machinery maker, Mod d’Art has several models. Model A. costs $5,000 and could produce fill weights at average of 60.50 grams, and standard deviation of 1.5 grams. Model B. costs $15,000, but with a standard deviation of 0.95 grams, with 59.95 grams average fill weight. Model C. runs $25,000; this deluxe model has standard deviation of 0.60 grams, average fill weight of 60.15 grams.
Answer :
Voice of consumer = 4
Cpk of Model A= 0.333
Cpk of Model B= 0.7017
Cpk of Model C= 1.1388
Explanation :
As per the data given in the question,
Voice of consumer = Upper limit - Lower limit
= 62 - 58
= 4
Cp of Model A = Voice of consumer ÷ (6 × Standard deviation)
= 4 ÷ (6 × 1.5)
= 0.4444
Cpk of Model A = Min(Cpl, Cpu)
and Cpl = (Mean-lower limit) ÷ (3 × standard deviation)
Cpu = (Upper limit- Mean) ÷ (3 × standard deviation)
So, Cpk of Model A = Min((60.5 - 58) ÷ (3 × 1.5), (62 - 60.5) ÷ (3 × 15))
= Min(0.555, 0.333)
Hence, , Cpk of Model A = 0.333
Cp of Model B = (62-58) ÷ (6 × 0.95)
= 0.7017
Cpk of Model B = Min((59.95 - 58) ÷ (3 × 0.95), (62 - 59.95) ÷ (3 ×0.95))
Cpk of Model B = 0.6842
Cp of Model C = (62 - 58) ÷ (6 × 0.60)
= 1.111
Cpk of Model C = Min((60.15 - 58) ÷ (3 × 0.60), (62 - 59.95) ÷ (3 ×0.60))
= 1.1388
On January 1, 2017, Shay issues $330,000 of 12%, 15-year bonds at a price of 97.00. Six years later, on January 1, 2023, Shay retires 20% of these bonds by buying them on the open market at 104.50. All interest is accounted for and paid through December 31, 2022, the day before the purchase. The straight-line method is used to amortize any bond discount. 7. Prepare the journal entry to record the bond retirement at January 1, 2023.
Answer and Explanation:
As per the data given in the question, Journal entries are as follows:
Jan 1
Bonds payable A/C Dr. $66,000
Loss on bonds' redemption A/c Dr. $4,158
To Discount on bonds payable A/c $1,188
($5,940*20%)
To Cash A/c $68,970
($66,000*104.5%)
(To record retirements of bonds before maturity)
Computation
Discount on bonds = $330,000 × 3% = $9,900
Amortized bond discount = $9,900 ÷ 15 × 6
= $3,960
Unamortized bond discount = $9,900 - $3,960
= $5,940
Face value of bonds retired = $330,000 × 20%
= $66,000
Trini Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Answer:
$102,870
Explanation:
The computation of Total cash disbursements is shown below:-
Variable overhead = Direct labor budget × Variable overhead rate
= 8,100 × $1.40
= $11,340
Fixed expenses incurred in cash = Total fixed expenses - Depreciation
= $100,440 - $8,910
= $91,530
Total cash disbursements = Total variable manufacturing overhead + Fixed cash overhead
= $91,530 + $11,340
= $102,870
Therefore for computing the Total cash disbursements we simply applied the above formula.
Drew Corp had a beginning balance on January 1, 2019 in Accounts Receivable of $200,000 and a beginning credit balance in the Allowance for Doubtful Accounts of $4,000. During 2019, Drew sold $1,000,000 of goods on credit and collected $800,000. If Drew estimates that 2% of their ending accounts receivable will eventually not be collected, the adjusting journal entry for the Bad Debt Expense will include a credit to Allowance for Doubtful Accounts of A. $ 4,000 B. $ 8,000 C. $ 16,000 D. $ 6,980 E. none of the listed choices
Answer:
The adjusting journal entry for the Bad Debt Expense will include a credit to Allowance for Doubtful Accounts of A. $ 4,000
Explanation:
Ending balance in Accounts Receivable = Beginning balance in Accounts Receivable + Sales on credit - Cash Collected = $200,000 + $1,000,000 - $800,000 = $400,000
Drew estimates that 2% of their ending accounts receivable will eventually not be collected.
Estimated uncollectible = 2% x $400,000 = $8,000
Drew Corp had a beginning credit balance in the Allowance for Doubtful Accounts of $4,000. Bad debts expense = $8,000 - $4,000 = $4,000
The adjusting journal entry for the Bad Debt Expense:
Debit Bad debts expense $4,000
Credit Allowance for Doubtful Accounts $4,000
The risk-free rate, average returns, standard deviations, and betas for three funds and the S&P 500 are given below. Fund Avg Std Dev Beta A 17.5 % 26.5 % 1.35 B 12.5 % 23.5 % 1.10 C 13.5 % 20.5 % 1.15 S&P 500 10 % 15 % 1 rf 4.0 % If these portfolios are subcomponents that make up part of a well-diversified portfolio, then portfolio ______ is preferred.
Answer:
Portfolio A is preferred.
Explanation:
Given the following sorted data from the question:
Fund Avg Std Dev Beta
A 17.5% 26.5% 1.35
B 12.5% 23.5% 1.10
C 13.5% 20.5% 1.15
S&P 500 10% 15% 1
rf 4.0%
To determine the preferred portfolio, the Treynor measure for each portfolio is estimated as follows:
Treynor measure = (Avg - rf rate) / beta
Therefore, we have:
Treynor measure of Portfolio A = (17.5% - 4.0%) / 1.35 = 10.00%
Treynor measure of Portfolio B = (12.5% - 4.0%) / 1.10 = 7.73%
Treynor measure of Porfolio C = (13.5% - 4.0%) / 1.15 = 8.26%
Since the 10% Treynor measure of Portfolio A is the highest, Portfolio A is preferred.
You are given the following information about Palmer Golf Shop, Inc. The 2018 balance sheet of Palmer Golf Shop, Inc., showed long-term debt of $2.5 million, and the 2019 balance sheet showed long-term debt of $2.35 million. The 2019 income statement showed an interest expense of $175,000. What was the firm’s cash flow to creditors during 2019? The 2018 balance sheet of Palmer Shop, Inc., showed $725,000 in the common stock account and $3.75 million in the additional paid-in surplus account. The 2019 balance sheet showed $955,000 and $3.6 million in the same two accounts, respectively. If the company paid out $635,000 in cash dividends during 2019, what was the cash flow to stockholders for the year? What is cash flow from assets? Suppose you also know that the firm’s net capital spending for 2019 was $500,000 and that the firm increased its net working capital investment by $65,000. What was the firm’s 2019 operating cash flow, or OCF?
Answer and Explanation:
The computation is shown below:
a. Cash Flow to Creditors
Cash Flow to Creditors = Interest Expenses Paid – Net Increase in Long term debt
= Interest Expenses Paid – [Long term debt at the end – Long term Debt at the Beginning]
= $175,000 – [$2,350,000 - $2,500,000
= $175,000 - (-$150,000)
= $325,000
b. Cash Flow to Stockholders
Cash Flow to Stockholders = Dividend Paid – Net New Equity
= Dividend Paid – [(Ending common stock balance + Additional paid-in surplus account at the end) - (Beginning common stock balance + Additional paid-in surplus account at the beginning)
= $635,000 – [($955,000 + $3,600,000) – ($725,000 + $3,750,000)]
= $635,000 – [$4,555,000 - $4,475,000]
= $635,000 - $80,000
= $555,000
c. Cash Flow from assets
Cash Flow from assets = Cash Flow to Creditors + Cash Flow to Stockholders
= $325,000 + $555,000
= $880,000
d. Operating Cash Flow
As We know that,
Cash flow from assets = Operating Cash flows – Change in Net Working capital – Net Capital Spending
$880,000 = Operating cash flow - ($65,000) - $500,000
So,
Operating cash flow = $880,000 + $65,000 + $500,000
= $1,445,000