Answer:
Find attached full question:
The correct option is D.$42.79
Explanation:
In order to determine the current price per share of the company now,we discount all future free cash flows to present value as well as the company's terminal value:
company's terminal is the value of the company after the considered timing horizon
terminal value=free cash in year three*(1+g)/r-g
free cash flow in year three is $40 million
g is the growth rate of free cash flow which is 7%
r is the WACC of 13%
terminal value=40*(1+7%)/(13%-7%)=$ 713.33 million
Present of the company=-$20/(1+13%)+$30/(1+13%)^2+$40/(1+13%)^3+$713.33/(1+13%)^3=$ 527.89 million
The company's value of equity=present worth-debt== 527.89-100=427.89 million
share price=value of equity/number of shares== 427.89/10=$42.79
The current stock price of Dozier Corporation can be estimated using a two-stage discounted cash flow model. This involves discounting the projected free cash flows for the next 3 years at the company's weighted average cost of capital (WACC), then calculating the present value of all future cash flows growing at a constant rate using the Gordon Growth Model. The market value of the firm obtained is then adjusted for debt and divided by the number of outstanding shares to yield the estimated current price per share.
Explanation:The current stock price of Dozier Corporation can be estimated using a two-stage discounted cash flow model because the free cash flow is expected to grow at a steady rate after a period of 3 years. In the first stage, we discount the free cash flows for the next 3 years at Dozier Corporation's weighted average cost of capital (WACC) of 13%. In the second stage, we use the Gordon Growth Model to calculate the present value of all future cash flows growing at a constant rate of 7%. The net present value (NPV) gives us the market value of the firm. To get the price per share, we deduct the debt and divide it by the number of shares outstanding.
Example Calculation
Given FCFs (free cash flows) of $15 million, $20 million, and $25 million for the next 3 years respectively. Stage 1: NPV of explicit forecast period (3 years) = $15m/(1+13%)^1 + $20m/(1+13%)^2 + $25m/(1+13%)^3. Stage 2: Value of perpetual cash flows from year 4 onwards = ($25m * (1+7%)) / (13% - 7%). Deduct $100m of debt from this total value and divide by 10 million outstanding shares to yield the estimated current price per share.
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Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $ 233,000 Cash dividends declared for the year 50,000 Proceeds from the sale of equipment 85,000 Gain on the sale of equipment 4,500 Cash dividends payable at the beginning of the year 22,000 Cash dividends payable at the end of the year 30,000 Net income for the year 110,000 The amount of cash paid for dividends was: Multiple Choice $52,000. $60,000. $58,000. $50,000. $42,000
Answer:
$58,000
Explanation:
Data given
Cash Dividends Payable at the beginning = $22,000
Cash dividends declared = $50,000
Cash dividends payable = $30,000
The computation of cash paid for dividends is shown below:-
Cash paid for dividends = Cash Dividends Payable at the beginning + Cash dividends declared - Cash dividends payable
= $22,000 + $50,000 - $30,000
= $58,000
Therefore for computing the cash paid for dividend we simply applied the above formula.
Cooper Industries wants to replace two small delivery trucks with one larger delivery truck. The old trucks are valued at $13,000 each. The new truck will cost $52,000. If Cooper’s controllable margin is $97,000 and their operating assets were valued at $580,000 before they bought the new truck, what will their new ROI be?
A: 17.5%
B: 16.0%
C: 15.3%
D: 16.7%
The new ROI after Cooper Industries replaces two old trucks with a new one, considering their controllable margin and altered operating assets, is found to be approximately 16.0%.
Explanation:First, let's estimate the change in operating assets. Cooper Industries had old trucks valued at $13,000 each. They had two of these old trucks, so the total is $26,000. They've replaced these with a new truck costing $52,000. The net change is $52,000 - $26,000 = $26,000 increase in operating assets.
So, their total operating assets after purchasing the new truck becomes $580,000 + $26,000 = $606,000.
Return on Investment (ROI) is calculated as (Controllable Margin / Operating Assets) * 100. Therefore, the new ROI is ($97,000 / $606,000) * 100 = 16.01%, which rounds to 16.0% (Option B).
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Pine Street Inc. makes unfinished bookcases that it sells for $58.10. Production costs are $37.49 variable and $10.50 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $74.91. Variable finishing costs are expected to be $5.79 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Pine Street should sell unfinished or finished bookcases. (Round answers to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer:
Pine Street should sell finished bookcases because they have a higher contribution margin.
Explanation:
We compare the contribution margin of the two categories to find out whether Pine Street should sell unfinished or finished bookcases.
Pine Street Inc.
Unfinished bookcases
Contribution Margin
Sales Price $58.10
Less Production costs
Variable Costs $37.49
Fixed Costs $10.50 (47.99)
Contribution Margin $ 10.11
Pine Street should sell finished bookcases because they have a higher contribution margin. It is almost double of the unfinished book cases contribution margin.
Pine Street Inc.
Finished bookcases
CONTRIBUTION MARGIN
Sales Price $74.91
Less Production costs
Variable Costs $37.49 + $5.79 = $ 43.28
Fixed Costs $10.50 $ (53.78)
Contribution Margin $ 21.13
g You own a stock that is expected to earn 21 percent in an improving economy, 16 percent in a normal economy, and lose 5 percent in an economic downturn. There is 20 percent probability of an improved economy, 65 percent chance of a normal economy, and 15 percent chance of a downturn. What is your expected rate of return on this stock
Answer:
dd
Explanation:
mdd
hown here are annual financial data at December 31, 2017, taken from two different companies. Music World Retail Wave-Board Manufacturing Beginning inventory Merchandise $ 200,000 Finished goods $ 500,000 Cost of purchases 300,000 Cost of goods manufactured 875,000 Ending inventory Merchandise 175,000 Finished goods 225,000 Required: 1. Prepare the cost of goods sold section of the income statement at December 31, 2017, for each company in Merchandising Business and Manufacturing Business.
Answer and Explanation:
As per the data given in the question,
a)
Music World Retail
Partial Income Statement
For year ended Dec-31,2017
Cost of goods sold :
Beginning merchandise inventory $200,000
Add: Cost of purchase $300,000
Goods available for sale $500,000
Less: Ending merchandise inventory $175,000
Cost of goods sold $325,000
b)
Wave Board Manufacturing
Partial Income Statement
For year ended Dec-31,2017
Cost of goods sold :
Beginning finished goods inventory $500,000
Add: Cost of goods manufacture $875,000
Goods available for sale $1,375,000
Less: Ending finished inventory $$225,000
Cost of goods sold $1,150,000
We simply applied the above format
Bill and Guilda each own 50 percent of the stock of Radiata Corporation, an S corporation. Guilda's basis in her stock is $21,000. On May 26, 2018, Bill sells his stock, with a basis of $40,000, to Loraine for $50,000. For the 2018 tax year, Radiata Corporation has a loss of $104,000.
Round your final answers to the nearest dollar. Use a 365-day year in your computations.
a. Calculate the amount of the corporation's loss that may be deducted by Bill on his 2018 tax return.
$___________
b. Calculate the amount of the corporation's loss that may be deducted by Guilda on her 2018 tax return.
$___________
c. Calculate the amount of the corporation's loss that may be deducted by Loraine on her 2018 tax return.
$___________
Answer:
a) $20,800
b) $21,000
c) $31,200
Explanation:
a) Bill held his stock from January 1 to May 26. The loss accrued to him should only be for those days.
The number of days are,
= 31 (January) + 28 ( February) + 31 + 30 + 26
= 146 days.
50% of the losses accrued to him for 146 days out of 365.
= 104,000 * 0.5 * 146/365
= $20,800
b) The maximum amount of loss that Guilda can claim on her 2018 tax return as a current shareholder is equal to her current basis in the stock. That basis is $21,000 so Guilda can only deduct $21,000 from her 2018 tax return.
c) Seeing as Lorraine acquired the stock from Bill on May 26, the amount of loss due to her will be for the period she held the stock.
She held the stock for,
= 365 - 146
= 219 days
At 50% ownership, her losses will be,
= 104,000 * 0.5 * 219/365
= $31,200
Bramble Kars provides shuttle service between four hotels near a medical center and an international airport. Bramble Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below. Fare revenues (1,450 fares) $36,250 Variable costs Fuel $4,350 Tolls and parking 2,175 Maintenance 725 7,250 Contribution margin 29,000 Fixed costs Salaries 17,300 Depreciation 1,430 Insurance 1,110 19,840 Net income $9,160 Calculate the break-even point in dollars. Break-even point $ eTextbook and Media Calculate the break-even point in number of fares. Break-even point fares eTextbook and Media Without calculations, determine the contribution margin at the break-even point. Contribution margin at the break-even point $
Answer:
contribution margin at break even point = $19,840
Explanation:
total revenues $36,250
variable costs ($7,250)
fuel ($4,350)tolls and parking ($2,175)maintenance ($725)contribution margin $29,000
fixed costs ($19,840)
salaries ($17,300)depreciation ($1,430)insurance ($1,110)net income $9,160
contribution margin at break even point = $19,840
The contribution margin represents the point where total revenue is barely enough to cover for fixed expenses. Any revenue above the contribution margin will result in profits, but if revenues are lower, the company will suffer losses.
In this case, the contribution margin at break even point = total fixed expenses.
The formula used to calculate break even point in units is:
break even point in units = total fixed costs / contribution margin per unit
total fixed costs = $19,840contribution margin per unit = ($36,250/1,450 fares) - ($7,250/1,450 fares) = $25 - $5 = $20break even point in units = $19,840 / $20 = 992 fares
Culver Company has completed all of its operating budgets. The sales budget for the year shows 50,180 units and total sales of $2,273,600. The total unit cost of making one unit of sales is $23. Selling and administrative expenses are expected to be $301,900. Interest is estimated to be $10,000. Income taxes are estimated to be $214,000.
Required:
Prepare a budgeted multiple-step income statement for the year ending December 31, 2017.
Answer:
Net Income = $593,560
Explanation:
Cost of Goods Sold=sales unit × cost of sales per unit
= $23 × 50,180 = $1,154,140
Income statement December 31,2017
Particular Amount($)
Sales 2,273,600
Less:-Cost of goods sold (1,154,140)
Gross Profit 1,119,460
Less-Selling and Administrative Expenses (3,019,00)
Income from Operation 817,560
Less-Estimated Interest (10,000)
Income before Taxes 807,560
Less-Income Taxes (214,000)
Net Income 593,560
Electronic Superstore's inventory increases during the year by $5 million, and its accounts payable to suppliers increases by $7 million during the same period. What is the amount of cash paid to suppliers of merchandise during the reporting period if its cost of goods sold is $45 million? (Enter your answers in millions (i.e., $10,100,000 should be entered as 10.1).)
Answer:
$43.0 million
Explanation:
The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as
Opening balance + purchases - cost of goods sold = closing balance
The difference between the closing balance and the opening is$5 million
Hence the
Purchases - $45,000,000 = $5,000,000
Purchases = $5,000,000 + $45,000,000
= $50,000,000
The movement in the payable accounts may be expressed as
opening balance + purchases - cash paid = closing balance
$50,000,000 - cash paid = $7,000,000
Cash paid = $50,000,000 - $7,000,000
= $43,000,000
The Electronic Superstore paid $43 million in cash to its merchandise suppliers during the reporting period.
Explanation:The question is asking about the cash flow activities of the Electronic Superstore related to its suppliers. In this scenario, the company's cost of goods sold is $45 million, its inventory increased by $5 million, and its accounts payable increased by $7 million, all during the same period. To calculate the cash paid to suppliers, start with the cost of goods sold, add the increase in inventory (because these are goods that were bought but not yet sold), then subtract the increase in accounts payable (since this money is owed but has not yet been paid in cash).
So, here's the step-by-step calculation: Cash paid to suppliers = Cost of goods sold + Increase in inventory - Increase in accounts payable. Substituting the given values gives: Cash paid = $45 million + $5 million - $7 million = $43 million.
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WACC.
Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding scenario.
He will borrow $4 comma 911 from Wendy, who will charge him 4% on the loan.
He will also borrow $4 comma 305 from Bebe, who will charge him 6% on the loan, and $2 comma 784 from Shelly, who will charge him 12% on the loan.
What is the weighted average cost of capital for Eric?
Answer:
6.57%
Explanation:
The WACC formula is really easy you just have to calculate the weights of the debt or equity whatever is given in the question and then multiply it by the percentage of borrowing given. The total borrowing in this question is 12000(4911+4305+2784).
WACC for this question will be calculated as:
=> (4911/12000)*0.04 + (4305/12000)*0.06 + (2784/12000)*0.12
=> 0.0657
=> 6.57%
Hope this helps,
Goodluck buddy
gvWegmans Bakery produces cheese cake for sale. The bakery which operates 5 days per week and 52 weeks per year can produce cake at the rate of 40 cakes per day. The bakery sets up cake production operation and produces the predetermined quantity Q has been produced. The setup cost for a production run of cheese cake is $250. The holding cost is $5 per year. The annual demand for cheese cake is constant during the year and is equal to 4000. Determine the following: Round answers to nearest whole number. (a) the optimal production run quantity (Q). (b) the total annual inventory cost (AHC AOC). (c) the optimal number of production runs per year. (d) The run length (production run time).
Answer:
(a) the optimal production run quantity (Q) = 633
(b) the total annual inventory cost (AHC AOC) = $ 3,162.28
(c) the optimal number of production runs per year = 7
(d) The run length (production run time) = 16 days
Explanation:
(a) the optimal production run quantity (Q).
optimal production run quantity = √(2×Annual Demand×Setup Costs) / Holding Costs
= √(2×4000×$250)/ $5
= 633
(b) the total annual inventory cost (AHC AOC).
total annual inventory cost = Setup Costs + Holding Costs
= 4,000/633×$250+633/2×$5
= $1,579.78+$1,582.50
= $ 3,162.28
(c) the optimal number of production runs per year.
number of production runs per year = Total Demand / optimal production run quantity
= 4,000/633
= 7
(d) The run length (production run time).
production run time = optimal production run quantity / produce
= 633 / 40 cakes
= 16 days
Pocahontas School District, an independent public school district, financed the acquisition of a new school bus by signing a note for $105,000 plus interest on the unpaid balance at 6%. Annual principal payments of $35,000, plus interest, are due each July 1. Assuming that the District maintains its books and records in a manner that facilitates the preparation of the fund financial statements, the appropriate entry in the General Fund at the date of acquisition is
Answer:
Debit Expenditures $105,000
Credit Other financing sources $105,000.
Explanation:
Pocahontas School District Journal entry
Therefore Assuming that the District maintains its books and records in a manner that facilitates the preparation of the fund financial statements, the appropriate entry in the General Fund at the date of acquisition is
Debit Expenditures $105,000
Credit Other financing sources $105,000.
Because Pocahontas School District financed the acquisition of a new school bus by signing a note for $105,000 .
Pelicans Ice is a snow cone stand near the local park. To plan for the future, it wants to determine its cost behavior patterns. It has the following information available about its operating costs and the number of snow cones served.
Month Number of snow cones Total operating costs
January 6,400 $5,980
February 7,000 $6,400
March 4000 $5000
April 6,900 $6,330
May 8000 $9000
June 7,250 $6,575
Using the high-low method, the monthly operating costs if Pelicans sells 12,000 snow cones in a month are:
A) $9,800. B) $7,200. C) $21,000. D) $2,600.
Answer:
The total operating of 12,000 snow cones is $13,000
Explanation:
Variable cost=Cost at highest level-Cost at lowest level/highest activity-lowest activity
cost at highest level of activity=$9000,with 8000 level of activity
cost at lowest level of activity =$5,000 with 4000 level of activity
variable cost=$9,000-$5,000/8000-4000=$1
fixed cost=total cost -variable cost
at 8,000 level of activity fixed cost is computed thus:
fixed cost=$9,000-(8000*$1)=$1000
for 12,000 snow cones
total cost=$1,000+(12,000*$1)=$13,000
The options are not correct
Smart Stream Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cellular phones are as follows:
Variable costs per unit: Fixed costs:
Direct materials $150 Factory overhead $350,000
Direct labor 25 Selling and admin. exp. 140,000
Factory overhead 40
Selling and administrative expenses 25
Total $240
Smart Stream desires a profit equal to a 30% rate of return on invested assets of $1,200,000.
a. Determine the amount of desired profit from the production and sale of 10,000 cellular phones.
$
b. Determine the cost per unit for the production of 10,000 units of cellular phones.
$per unit
c. Determine the product cost markup percentage for cellular phones.
%
d. Determine the selling price of cellular phones. Round to the nearest dollar.
Cost $per unit
Markup $per unit
Selling price $per unit
Calculate desired profit, cost per unit, product cost markup percentage, and selling price for Smart Stream Inc. using the cost-plus approach to product pricing.
a. Desired profit: Desired profit = Rate of return on invested assets * Invested assets = 30% * $1,200,000 = $360,000.
b. Cost per unit: Cost per unit = Total costs / Number of units = $240 / 10,000 units = $24 per unit.
c. Product cost markup percentage: Markup percentage = (Desired profit + Total fixed costs) / Total variable costs * 100% = ($360,000 + $490,000) / ($150 + $25 + $40 + $25) * 100% = 103.08%.
d. Selling price: Selling price per unit = Cost per unit + Markup per unit = $24 + ($24 * 1.0308) = $24 + $24.92 = $48.92 (rounded to $49).
Rio Coffee Shoppe sells two coffee drinks, a regular coffee and a latte. The two drinks have the following prices and cost characteristics: Regular Coffee Latte Sales price (per cup) $ 1.60 $ 2.80 Variable costs (per cup) 0.90 1.70 The monthly fixed costs at Rio are $5,494. Based on experience, the manager at Rio knows that the store sells 70 percent regular coffee and 30 percent lattes. Required: How many cups of regular coffee and lattes must Rio sell every month to break even
Answer:
a) Regular coffee cups required to be sold = 4,690
b) Latte cups required to be sold = 2,010
Explanation:
As per the data given in the question,
For computing Contribution per mix :
Particulars Regular Coffee Latte
Sales price $1.60 $2.80
Less: variable cost $0.90 $1.70
Contribution $0.70 $1.10
Contribution per mix = ($0.70 × 70%) + ($1.10 × 30%)
= $0.82
Breakeven point at sales mix = Fixed cost ÷ Contribution per mix
=$5,494 ÷ $0.82
= 6,700 mixes
Requirement:
Cups of regular coffee for breakeven = Breakeven at sales mix × %of regular coffee sales
=6,700 × 70%
= 4,690 Cups
Cups of latte for breakeven = Breakeven at sales mix × %of latte sales
=6,700 × 30%
=2,010 Cups
Why is it difficult for the federal government to increase or decrease spending
Answer:
here you go bruv
Explanation:
The New York Times published a chart today that succinctly explains why it is so hard to cut the federal government's spending: the programs that people want to cut don't cost very much, and the programs that cost a lot people don't want to cut.
Assume the perpetual inventory method is used. 1) The company purchased $13,800 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,300 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,600 cash. What effect will the return of merchandise to the supplier have on the accounting equation?
Answer:
Assets and liabilities are reduced by $3,300.
Explanation:
The effect that the return of merchandise to the supplier have on the accounting equation is that Assets and liabilities are reduced by $3,300 because the purchase return will decrease assets or reduced the assets which is the merchandise inventory and decrease liabilities or reduced the liabilities which is accounts payable by $3,300 which is said to be the full invoiced amount of the merchandise returned.
The return of merchandise to the supplier impacts the accounting equation by reducing both assets and liabilities of the company. The assets decrease due to the reduction in inventory and cash, and the liabilities decrease because the accounts payable have been settled.
Explanation:When the company returned merchandise to the supplier for the amount of $3,300, it impacted the accounting equation by decreasing both the assets and liabilities of the company. Initially, the company had a liability (accounts payable) of $13,800. However, when returning the merchandise, the company reduced the accounts payable by $3,300 to $10,500. Using the perpetual inventory method, the inventory (an asset) would also reduce by $3,300.
Furthermore, the company took advantage of the 2/10 discount and paid the liability within the discount period. Therefore, the payment is 98% of $10,500, which is $10,290. So, the company's assets (cash) would decrease by this amount, and the liabilities (accounts payable) would reduce to zero.
In conclusion, the return of merchandise and the payment within the discount period impact the accounting equation. The assets decrease due to the reduction in inventory and cash, and the liabilities decrease due to the settlement of accounts payable.
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Consider two bonds, a 3-year bond paying an annual coupon of 3%, and a 20-year bond, also with an annual coupon of 3%. Both bonds currently sell at par value. Now suppose that interest rates rise and the yield to maturity of the two bonds increases to 6%. a. What is the new price of the 3-year bond?
Answer:
New price = $919.81
Explanation:
Computation of the given data are as follows:
Let Face value (FV) = $1,000
YTM (Rate ) = 6%
Time period (Nper) = 3 years
Coupon rate = 3%
Coupon payment = 3% × $1,000 = $30
So, we can calculate the new price by using financial calculator.
The attachment is attached below:
New price = $919.81
Daniel Patrick Moynihan, the late senator from New York, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets.
True or False:
This tax won't raise much revenue because the high tax rate would likely cause the equilibrium quantity to be near zero.
Answer:
True.
Explanation:
Daniel Patrick Moynihan, the late senator from New York, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets.
However, this tax won't raise much revenue because the high tax rate would likely cause the equilibrium quantity to be near zero.
What range of returns should you expect to see with a 99 percent probability for the riskiest asset in this group?: Large company stocks have an average return of 9.1 percent and a standard deviation of 18.7 percent; small company stocks have an average return of 10.85 percent and a standard deviation of 24.64 percent; and corporate bonds have an average return of 6.8 percent and a standard deviation of 11.4 percent.
Answer: Range is, -63.07% to 84.77%
Explanation:
The range of returns that you can expect to see 99% of the time is calculated by the formula
= Mean+- (3 * standard deviation)
The question asks for the range of returns you should expect to see with a 99 percent probability for the RISKIEST ASSET.
The Riskiest Asset is one with the highest standard deviation which is the Small Company Stock.
Calculating the range therefore is,
Lower limit,
= Mean - (3 * standard deviation)
= 10.85% - (3 * 24.64%)
= -63.07%
Upper limit
= Mean + (3 * standard deviation)
= 10.85% - (3 * 24.64%)
= 84.77%
Range is, -63.07% to 84.77%
Final answer:
The range of returns for small company stocks with a 99 percent probability is -63.07 percent to 84.77 percent. This calculation is based on the highest standard deviation among the assets, which indicates the highest risk level.
Explanation:
To determine the range of returns for the riskiest asset with a 99 percent probability, we'll use the concept of standard deviation and the empirical rule, which applies to normally distributed data. Considering that small company stocks have the highest standard deviation at 24.64 percent, they are the riskiest asset among those listed. The empirical rule says that for a normal distribution, approximately 99 percent of the data will fall within three standard deviations of the mean.
Accordingly, we calculate the range as follows:
Identify the mean return for small company stocks: 10.85 percent.
Calculate three standard deviations: 3 × 24.64 percent = 73.92 percent.
Compute the lower and upper bounds: 10.85 percent ± 73.92 percent.
So, the range with 99 percent probability is -63.07 percent to 84.77 percent. This wide range highlights the high risk and high potential return associated with small company stocks.
On March 1, 2018, E Corp. issued $1,400,000 of 8% nonconvertible bonds at 101, due on February 28, 2028. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the holder to purchase, for $65, one share of Evan's $45 par common stock. On March 1, 2018, the market price of each warrant was $3. By what amount should the bond issue proceeds increase shareholders' equity?
Answer:
$210,000
Explanation:
No market value was been given for the bonds.
Therefore the amount attributable to the warrants (shareholders' equity) =
Market price of each warrant was $3 ×50 detachable stock warrants per bond
=$150
Issued $1,400,000/$1,000 bond
=$1,400
Hence:
$150 × 1,400 bonds
= $210,000.
Therefore the amount that the bond should issue if proceeds increase shareholders' equity is $210,000
The following section is taken from Blossom's balance sheet at December 31, 2021. Current liabilities Interest payable $ 40,500 Long-term liabilities Bonds payable (8%, due January 1, 2025) 505,000 Interest is payable annually on January 1. The bonds are callable on any annual interest date. (a) Journalize the payment of the bond interest on January 1, 2022. (b) Assume that on January 1, 2022, after paying interest, Blossom calls bonds having a face value of $100,000. The call price is 103. Record the redemption of the bonds. (c) Prepare the adjusting entry on December 31, 2022, to accrue the interest on the remaining bonds.
Answer:
(a) Journalize the payment of the bond interest on January 1, 2022.
Dr Interest payable - bonds payable 40,400
Cr Cash 40,400
The interest expense on the bonds payable should have been accrued on the 2021 balance sheet, that is why we debit interest payable and not interest expense.
(b) Assume that on January 1, 2022, after paying interest, Blossom calls bonds having a face value of $100,000. The call price is 103. Record the redemption of the bonds.
Dr Bonds payable 100,000
Dr Call premium 3,000
Cr Cash 103,000
(c) Prepare the adjusting entry on December 31, 2022, to accrue the interest on the remaining bonds.
interest expense = $405,000 x 8% = $32,400
Dr Interest expense - bonds payable 32,400
Cr Interest payable - bonds payable 32,400
Final answer:
Long-term liabilities, such as bonds payable, require specific journal entries for payment and adjusting entries for accrued interest. Understanding these entries is key in handling financial obligations effectively.
Explanation:
Long-term liabilities are debts that are due to be paid beyond one year. They are shown on a company's balance sheet. When journalizing the payment of bond interest, the company would debit Interest Expense and credit Cash. If bonds are called, the company debits Bonds Payable, debits the related Premium on Bonds Payable account, and credits Cash for the amount paid. The adjusting entry on December 31, 2022, to accrue interest on the remaining bonds would involve debiting Interest Expense and crediting Interest Payable.
Filer Manufacturing has 7.4 million shares of common stock outstanding. The current share price is $44, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $68.2 million and a coupon rate of 6.1 percent and sells for 109.2 percent of par. The second issue has a face value of $58.2 million and a coupon rate of 6.6 percent and sells for 107.1 percent of par. The first issue matures in 9 years, the second in 26 years. Suppose the company’s stock has a beta of 1.3. The risk-free rate is 2.2 percent, and the market risk premium is 6.1 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 40 percent. What is the company’s WACC?
Answer:
6.08%
Explanation:
WACC = [(market value of equity / total value of financing) x cost of equity] + [(market value of debt / total value of financing) x cost of debt x (1 - tax rate)]
market value of equity = 7,400,000 shares x $44 = $325,600,000total value of financing = $325,600,000 + $74,474,400 + $62,332,200 = $462,406,600cost of equity = risk free rate of return + Beta × (market rate of return – risk free rate of return) = 2.2% + 1.3(6.1% - 2.2%) = 2.2% + 5.07% = 7.27%market value of debt₁ = $68,200,000 x 1.092 = $74,474,400 market value of debt₂ = $58,200,000 x 1.071 = $62,332,200tax rate = 40%cost of debt₁ = yield to maturity = [C + (F - P)/n] / (F + P)/2 = [2,080,100 + (68,200,000 - 74,474,400)/18] / (68,200,000 + 74,474,400)/2 = 1,731,522 / 71,337,200 = 0.0242 x 2 = 4.8545% cost of debt₂ = yield to maturity = [C + (F - P)/n] / (F + P)/2 = [1,920,600 + (58,200,000 - 62,332,200)/52] / (58,200,000 + 62,332,200)/2 = 1,841,135 / 60,266,100 = 0.03055 x 2 = 6.11002%WACC = [(market value of equity / total value of financing) x cost of equity] + [(market value of debt₁ / total value of financing) x cost of debt₁ x (1 - tax rate)] + [(market value of debt₂ / total value of financing) x cost of debt₂ x (1 - tax rate)]
WACC = [($325,600,000 / $462,406,600) x 7.27%] + [($74,474,400 / $462,406,600) x 4.8545% x (1 - 40%)] + [($62,332,200 / $462,406,600) x 6.11002% x (1 - 40%)] = 5.12% + 0.47% + 0.49% = 6.08%
Cheyenne Corporation obtained a franchise from Sage Hill Inc. for a cash payment of $128,000 on April 1, 2020. The franchise grants Cheyenne the right to sell certain products and services for a period of 8 years. Prepare Cheyenne’s April 1 journal entry and December 31 adjusting entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer and Explanation:
The journal entries are shown below:
On April 1
Franchise $128,000
Cash $128,000
(Being the franchise obtained is recorded)
It increased the assets and decreased the assets so both the accounts are debited and credited
On December 31
Amortization expense $12,000
Franchise $12,000
(Being amortization expense is recorded)
The computation is shown below:
= $128,000 × 9 months ÷ 12 months ÷ 8 years
= $12,000
It increased the expenses and decreased the assets so both the accounts are debited and credited
Final answer:
The transaction of obtaining a franchise by Cheyenne Corporation would involve a journal entry debiting 'Franchise' and crediting 'Cash'. The adjusting entry for amortization by the end of the year would debit 'Amortization Expense—Franchise' and credit 'Accumulated Amortization—Franchise' with the calculated prorated expense.
Explanation:
When Cheyenne Corporation obtains a franchise from Sage Hill Inc., the initial journal entry on April 1, 2020 would involve debiting the asset account 'Franchise' and crediting 'Cash' because an asset (the franchise rights) is being acquired for cash. Since the franchise has a limited life of 8 years, it must be amortized over this period. The yearly amortization expense is computed by dividing the initial franchise cost by the number of years, which in this case is $128,000 ÷ 8 = $16,000 per year. For the partial year from April 1 to December 31 (9 months), the prorated amortization expense would be $16,000 ÷ 12 × 9 = $12,000. Therefore, the December 31 adjusting entry involves debiting 'Amortization Expense—Franchise' and crediting 'Accumulated Amortization—Franchise'. The entries are as follows:
April 1, 2020
Debit Franchise $128,000Credit Cash $128,000December 31, 2020
Debit Amortization Expense—Franchise $12,000Credit Accumulated Amortization—Franchise $12,000Calculate the inventory turnover for 2019. (Round your answer to 2 decimal places.) Calculate the number of days' sales in inventory for 2019, using year-end inventories. (Use 365 days a year. Round your answer to 1 decimal place.) Calculate the accounts receivable turnover for 2019. (Round your answer to 1 decimal place.) Calculate the number of days' sales in accounts receivable for 2019, using year-end accounts receivable. (Use 365 days a year. Round your answer to 1 decimal place.)
Answer:
A.3.63 times
B.95.5 days
C.21.0 times
D.13.5 days
Explanation:
a.
Inventory turnover = Cost of goods sold / Average inventories
Hence:
= $602,250 / $166,000
= 3.63 times
b.
Number of days’ sales in inventory = Inventory at year-end / Average day’s cost of good sold
= $157,575 / $1,650
= 95.5 days
Average day’s cost of goods sold
= Annual cost of good sold / 365
= $602,250 / 365 = $1,650
c.Accounts receivable turnover
= Sales / Average accounts receivable
= $821,250 / $39,100
= 21.0 times
d.
Number of days’ sales in accounts receivable
= Accounts receivable at year-end / Average day’s sales
= $30,400 / $2,250 = 13.5 days
Average day’s sales = Annual sales / 365
= $821,250 / 365
= $2,250
Final answer:
Explanation of inventory turnover, days' sales in inventory, accounts receivable turnover, and days' sales in accounts receivable for the year 2019.
Explanation:
Inventory Turnover for 2019:
Calculate Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $500,000 / $100,000 = 5 times
Days' Sales in Inventory for 2019:
Calculate Days' Sales in Inventory = 365 days / Inventory Turnover
Days' Sales in Inventory = 365 days / 5 = 73 days
Accounts Receivable Turnover for 2019:
Calculate Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable
Accounts Receivable Turnover = $700,000 / $50,000 = 14 times
Days' Sales in Accounts Receivable for 2019:
Calculate Days' Sales in Accounts Receivable = 365 days / Accounts Receivable Turnover
Days' Sales in Accounts Receivable = 365 days / 14 = 26 days
Mertens Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $31,700, and its ending inventory on December 31 was understated by $16,300. In addition, a purchase of merchandise costing $20,700 was incorrectly recorded as a $2,070 purchase. None of these errors were discovered until the next year. As a result, taxable income for this year was:
Answer:
The answer is, The taxable income for this year was Understated by $3,230
Explanation:
Solution
Particulars: Under statement of beginning inventory January 1.
Amount: 31700
The Effect on taxable income :Overstated
Particulars: Under statement of Ending inventory December 31
Amount: -16300
The Effect on taxable income: Understated
Particulars: Purchases of Incorrect record of ($20700-$2070)
Amount: -18630
The Effect on taxable income: Understated
Particulars:Net Effect on taxable income for above transactions
Amount: -3230
The Effect on taxable income: Understated
Therefore, from the above information from the question stated, the taxable income for this year was Understated by $ 3,230
Indigo Corporation had a projected benefit obligation of $3,386,000 and plan assets of $3,617,000 at January 1, 2020. Indigo also had a net actuarial loss of $528,020 in accumulated OCI at January 1, 2020. The average remaining service period of Indigo’s employees is 7.70 years.Compute Indigo’s minimum amortization of the actuarial loss.Minimum amortization of the actuarial loss
Answer:
Amortized to pension expense $21,600
Explanation:
Compututation of Indigo’s minimum amortization of the actuarial loss
Amortization
Projected benefit obligation($3,386,000)
Plan assets $3,617,000
Corridor percentage10%
Corridor amount $361,700
Accumulated loss $528,020
Excess loss subject to amortization $166,320
($361,700- $528,020)
Average remaining service 7.70
Amortized to pension expense $21,600
($166,320÷7.70)
Therefore the Minimum amortization of the actuarial loss will be $21,600
Problem 9-20 Two investment advisers are comparing performance. One averaged a 16% rate of return and the other a 15% rate of return. However, the beta of the first investor was 1.3, whereas that of the second investor was 1. a. Can you tell which investor was a better selector of individual stocks (aside from the issue of general movements in the market)? First investor Second investor Cannot determine b. If the T-bill rate was 7% and the market return during the period was 10%, which investor would be considered the superior stock selector? Second investor First investor Cannot determine c. What if the T-bill rate was 4% and the market return was 14%? First investor Second investor Cannot determine
Answer:
Imma solve it out for you no problem. Give me a quick second
Explanation:
Give me a minute to solve it out real quick. I gotchu
At the end of May, the following adjustment data were assembled:A. Insurance expired during May is $275B. Supplies on hand on May 31 are $715C. Depreciation of office equipment for May is $330D. Accrued receptionist salary on May 31 is $325E. Rent expired during May is $1,600F. Unearned fees on May 31 are $3,210Required:Journalize the adjusting entries.
Answer and Explanation:
The journal entries are shown below:
a. Insurance expense $275
To Prepaid insurance $275
(Being the insurance expense is recorded)
b. Supplies expense $785 ($1,500 - $715)
To Supplies $785
(Being the supplies expense is recorded)
We assume the balance of supplies before adjustment is $1,500
c. Depreciation - office equipment $330
To Accumulated depreciation $330
(Being the depreciation expense is recorded)
d. Salary Dr $325
To Accrued salary $325
(Being the accrued salary is recorded)
e. Rent expense $1,600
To Prepaid rent $1,600
(Being the rent expense is recorded)
f. Unearned fees $790
To Fees revenue $790
(Being the unearned fees is recorded)
We assume the balance of unearned fees before adjustment is $4,000
So, $790 is come from
= $4,000 - $3,210
= $790
Adjusting entries are recorded to account for income and expenditures in the correct accounting period. The entries include adjustments for insurance, supplies, depreciation, salaries, rent, and unearned fees, according to the provided end-of-May adjustment data.
Explanation:Adjusting entries are made in the journal at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred. The goal is to update the accounts for any earned revenues and incurred expenses that have not been recorded during the accounting period. Here are the adjusting entries based on the provided adjustment data:
Insurance Expense: Debit Insurance Expense $275, Credit Prepaid Insurance $275Supplies: Debit Supplies Expense for the used amount, Credit Supplies for the same amount to reflect the $715 on handDepreciation: Debit Depreciation Expense $330, Credit Accumulated Depreciation – Office Equipment $330Salaries Expense: Debit Salaries Expense $325, Credit Salaries Payable $325Rent Expense: Debit Rent Expense $1,600, Credit Prepaid Rent $1,600Unearned Fees: Debit Unearned Fees $3,210, Credit Fees Earned $3,210These adjusting entries ensure that the company's financial statements reflect the true financial position and results of operations for May.
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Describe whether the following changes cause the short-run aggregate supply to increase, decrease, or neither. a. The price level increases. b. Input prices decrease. c. Firms and workers expect the price level to fall. d. The price level decreases. e. New policies increase the cost of meeting government regulations. f. The number of workers in the labor force
Answer:
Short Run Aggregate Supply SRAS is the total goods and services available in an economy at different price levels with respect to fixed production resources.
Explanation:
A) When the price level increases, aggregate supply increases as well because demand is high and manufacturers will produce more.
B) When Input prices decrease, short run aggregate supply is not affected.
C) When firms and workers expect the price level to fall, aggregate supply decreases to cushion the effect of imminent loss due to fall in prices.
D) When the price level decreases, supply also decreases since it is an indication that the market is approaching saturation,
E) New policies increase the cost of meeting government regulations and does not necessarily influence SRAS.
F) The number of workers in the labor force does not affect SRAS.