Answer:
$4,800
Explanation:
The total amount of the premium can be deducted under the 12-month rule. The reason for this is that the insurance does not cover more than 12 months and can not cover any time that is outside the next year end.
John's 8−year−old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it road worthy again. His wife, Sherry, suggested that he should buy a 5−year−old used Jeep Grand Cherokee instead for $6,000 cash. Nick estimated the following costs for the two cars: Trail Blazer Grand Cherokee Acquisition cost $26,000 $6,000 Repairs $6,000 — Annual operating costs (Gas, maintenance, insurance) $2,680 $1,700 What should John do? What are his savings in the first year? Question 3 options: Fix the Trail Blazer; $3,980 Buy the Grand Cherokee; $7,700 Buy the Grand Cherokee; $ 980 Fix the Trail Blazer; $680
Answer:
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Explanation:
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Nathan owns a quick-lube oil service station. He wants to understand whether his customers are sensitive to price and if he should raise or lower his price for some of his services. What should Nathan calculate to make his decision?
Answer: Elasticity
Explanation:
According to the given question, Nathan is basically use the elasticity factor for the purpose of calculation that helps in making various types his decisions as elasticity is one of the main factor that helps in measuring the economical price change.
Elasticity is one of business degree in which we used to measure the good change in the services and the price of the products. The elasticity is one of the type of ability that helps in understating the change in the demand of the consumer.
Therefore, Elasticity us the correct answer.
On January 1, 2018, Plummer Company issued $ 400 comma 000 of 10%, five-year bonds payable at 107. Plummer Company has extra cash and wishes to retire the bonds payable on January 1, 2019, immediately after making the second semiannual interest payment. To retire the bonds, Plummer pays the market price of 94. Read the requirementsLOADING.... (Assume bonds payable are amortized using the straight-line amortization method.) Requirement 1. What is Plummer Company's carrying amount of the bonds payable on the retirement date?
Answer:
Bond carrying value is $422,400
Explanation:
The company's carrying value of bonds payable on retirement date can be deduced from the computation below:
First of all,the bonds were at a premium of 7%,hence cash realized from bonds issue =$400,000*107%=$428,000
Premium on bond issue= $428,000-$400,000=$28,000
The bond premium amortization=total premium/bond life
bond life is 5 years
bond premium amortization=$28,000/5=$5600 per year
At retirement date,the premium of one year would have been amortized,as result bond carrying value is now cash proceeds minus amortized premium
bond carrying value=$428,000-$5,600=$422,400
Which of the following variances cannot occur together during the same accounting period? Multiple Choice Unfavorable labor rate variance and favorable labor efficiency variance. Unfavorable labor efficiency variance and favorable material quantity variance. Favorable labor rate variance and unfavorable total labor variance. Favorable labor efficiency variance and favorable material quantity variance. None of the other answers are correct, because all of these variance combinations are possible.
Answer: None of the other answers are correct, because all of these variance combinations are possible.
Explanation:
All of the above combinations are possible.
A company can have an Unfavorable labor rate variance and a favorable labor efficiency variance meaning that the actual labor rate was more than the budget rate but the budgeted labor Efficiency rate was more than the actual rate.
A company can also have an Unfavorable labor efficiency variance and a favorable material quantity variance meaning that even though labor Efficiency was not satisfactory, less materials were still used than were budgeted for.
There is also a possibility of a Favorable labor rate variance and unfavorable total labor variance and a Favorable labor efficiency variance and favorable material quantity variance can also happen together when actual direct labour and material quantity variance are both less than the budgeted amount.
Frog Brand issues a $100,000 10 year bond with a stated interest rate of 6% while the market interest rate is 7% on January 1, 2020. On January 1, 2020 Frog Brand receives cash for the issue price of $92,894 for the bond and will have a balance of _____________. A. $7,106 in the Discount on Bonds Payable account B. $6,000 in the Discount on Bonds Payable account C. $7,106 in the Premium on Bonds Payable account D. $6,000 in the Premium on Bonds Payable account
Answer:
Option A => A. $7,106 in the Discount on Bonds Payable account.
Explanation:
So, from the question we are given the following parameters or data or information:
''Frog Brand issues a $100,000 10 year bond with a stated interest rate of 6% while the market interest rate is 7% on January 1, 2020. On January 1, 2020 Frog Brand receives cash for the issue price of $92,894 for the bond''
Hence, the discount on issue of bond can be calculated by using the formula below;
(Issued Bond) - ( the received cash on issue).
= $ 100,000 - $92,894 = $7,106.
Therefore, Frog Brand will have a balance of $7,106 in the Discount on Bonds Payable account.
Answer:
The correct option is A,$7,106 in the Discount on Bonds Payable account
Explanation:
The bonds were issued at $92,894 while the face value was $100,000,which shows that the bonds were issued at a discount since face value was higher than the cash proceeds.
In addition, the discount on bonds payable would be the difference between the face value and the cash proceeds as computed thus:
Discount on bonds payable=face value-cash proceeds
=$100,000-$92,894=$7106
. Transmissions are delivered to the fabrication line four at a time. It takes one hour for transmissions to be delivered. Approximately four vehicles are produced each hour, and management has decided that 50 percent of expected demand should be maintained as safety stock. How many kanban card sets are needed?
Answer:
Two Kanban cards is needed
Explanation:
Solution
The first step to take is to compute the required Kanban number of card sets.
By applying the formula, we have the following
Kanban cards = DL (1 +S)/C
Where,
L = The lead time to replenish an order is 1 hour
K = The number of kanban cards
D = The average number of demanded unit per a period which is 4
C= the container size which is 4
S = The safety stock represented in percentage of demand 0.50
Now,
We substitute the given values in the above formula and compute the number of kanbabn cards as follows:
Kanban cards = 4 * 1 (1 + 0.5)/4
= 6/4 =1.5
Therefore, the number of Kanban card sets are needed is 1.5
Final answer:
To calculate the number of kanban card sets needed, consider the demand and delivery rate. The average number of vehicles produced each hour is 4, and management wants to maintain 50% of expected demand as safety stock. Therefore, 2 kanban card sets are needed.
Explanation:
To calculate the number of kanban card sets needed, we need to consider the demand and delivery rate. The average number of vehicles produced each hour is 4, and management wants to maintain 50% of expected demand as safety stock. Since transmissions are delivered 4 at a time and it takes 1 hour for delivery, we can calculate the kanban card sets needed.
First, we calculate the expected demand:
Expected Demand = (Number of vehicles produced per hour) + (Safety Stock)
Expected Demand = 4 + (0.5 * 4) = 4 + 2 = 6
Next, we calculate the number of kanban card sets:
Number of Kanban Card Sets = (Expected Demand) / (Number of transmissions delivered per delivery)
Number of Kanban Card Sets = 6 / 4 = 1.5
Since kanban card sets cannot be fractional, we round up to the nearest whole number. Therefore, 2 kanban card sets are needed.
Simon graduated from Lessard University last year. He financed his education by working part-time and borrowing $16,000. During the current year, he pays $1,400 of interest on his student loan. a. If his adjusted gross income is $33,000, Simon can deduct $ of student loan interest. b. If his adjusted gross income is $77,000, Simon can deduct $
Answer:
a.
$1,400
b.
$280
Explanation:
According to Internal Revenue code the interest expense can only be deductible as adjusted gross income deduction, if the qualified education loan is used only for study credit, higher educational expenses like enrollment in the course, cost of books and accommodation cost.
a.
The maximum allowable interest deduction is $2,500.
Amount of Interest paid on the educational loan $1,400
Allowable deduction is Lesser of
maximum allowable interest deduction of $2,500.Interest Payment on educational loan of $1,400.b.
Adjusted Gross Income $77,000
Formula
Educational Interest rate = (AGI - $65,000) / $15,000
Placing values in the formula
Educational Interest rate = ($77,000 - $65,000) / $15,000
Educational Interest rate = 1.13 = 0.8%
Allowable interest deduction = [ (lesser of interest deduction or interest payment on the educational loan) x ( 1 - Educational interest rate)
Allowable interest deduction = $1,400 x ( 1 - 0.8 ) = $280
Using existing plant and equipment, Priceless Moments Figurines can be manufactured using plastic, clay, or any combination of these materials. A figurine can be manufactured by F = 4P + 2C, where P is pounds of plastic and C is pounds of clay. Plastic costs $2 per pound and clay costs $5 per pound. What would be the lowest cost of producing 40,000 figurines? a. $20,000 b. $100,000 c. $60,000 d. $10,000
Answer:
a) 20,000
Explanation:
F = 4P + 2C, where P is pounds of plastic and C is pounds of clay. Plastic costs $2 per pound and clay costs $5 per pound.
4P + 2C = 60000 units
Now suppose only plastic is used.
so C=0 and we get 4 P = 40000
i.e P = 10000 pounds of plastic to produce 40000 figurine...
COST = 2 P + 5 C
In this case, its only 2 P
i.e 2 x 10000 = $20000
Now suppose only clay is used.
so P=0 and we get 2 C = 40000
i.e C = 20000 pounds of clay to produce 40000 figurine...
COST = 2 P + 5 C
In this case, its only 5 C
i.e 5 x 20000 = $100000
Hence least cost is $20,000 by using only clay to produce 40,000 figurines
32,500 shares of common stock outstanding at a price per share of $80 and a rate of return of 12.95 percent. The firm has 7,350 shares of 7.90 percent preferred stock outstanding at a price of $95.50 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $407,000 and currently sells for 111.5 percent of face. The yield to maturity on the debt is 8.11 percent and the bonds have a coupon rate of 5.6 percent. What is the firm's weighted average cost of capital if the tax rate is 40 percent?
Answer:
WACC = 11.1%
Explanation:
The weighted Average cost of Capital is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion each source of finance bears to the total capital in the pool.
Market of securities
Common stock = $80 × 32,500= 2,600,000.
Preferred stock = $95.50 × 7,350= 701,925.00
Bond = 407,000/100 × 111.5= 453,805.00
Cost of each capital type
Common stock= 12.95
Preferred stock = (7.90%× 100)/95.50= 8.3%
Bond= 8.11%× (1-0.4)=4.87%
WACC
Type Market Value Cost Market value cost
Common stock 2,600,000. 12.95% 336,700.00
Preferred 701,925.00 8.3% 58,065.00
Bond 453,805.00 4.87% 22,100.30
Total 3,755,730.00 416,865.30
WACC = (416,865.30 / 3,755,730.00) × 100
= 11.1%
WACC = 11.1%
Max sells for Whatisits Company. His batting average is by far the highest in the firm – .400. Unfortunately, his average order is the lowest – $3,000. He only saves himself by making a large number of calls per day (5) while working 275 days a year. Which of the following questions is most relevant to a sales manager evaluating Max? As Max's sales manager, before talking with Max what one fact would you like to know?
A) How is his home life?B) The size of the potential accounts in Max's territory.C) Is he using some stimulants?D) What is his work record with the company?E) How old is he?
Answer:
B) The size of the potential accounts in Max's territory
Explanation:
The question that is most relevant to a sales manager evaluating Max will be the size of the potential accounts in Max's territory because Max sells his batting average is by far the highest in the firm – .400 and his average order is the lowest – $3,000 in which he only saves himself by making a large number of calls per day (5) while working 275 days a year which is why As Max's sales manager, before talking with Max the one fact I would like to know will be The size of the potential accounts in Max's territory.
You are planning your retirement in 10 years. You currently have $171,000 in a bond account and $611,000 in a stock account. You plan to add $6,900 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 11.25 percent and the bond account will earn a return of 7.75 percent. When you retire, you plan to withdraw an equal amount for each of the next 24 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 7 percent.How much can you withdraw each year in your retirement?
Answer :
$194,767.71
Explanation :
As per the data given in the question,
Future value of ordinary annuity = C × [(1+i)^n - 1 ÷ i]
value of bond = $171,000 × (1+0.0775)^10 + $6,900 × ((1+0.0775)^10 - 1) ÷ 0.0775
= $360,718.90 + $98,778.37
= $459,497.27
Now
Future value of stock = $6,11000 × (1+0.1125)^10
= $1,774,358.645
Combined value = $459,497.27 + $1,774,358.645
= $2,233,855.92
After solving this, we need to apply the PMT formula for yearly payment i.e to be shown below
NPER = 24 years
RATE = 7%
PV = $2,233,855.92
FV= 0
The formula is shown below:
= PMT(RATE;NPER;-PV;FV;0)
The present value comes in negative
After applying the above formula, the yearly payment is $194,767.71
Sheridan Company purchased machinery on January 2, 2015, for $880000. The straight-line method is used and useful life is estimated to be 10 years, with a $82000 salvage value. At the beginning of 2021 Sheridan spent $187000 to overhaul the machinery. After the overhaul, Sheridan estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $45000. The depreciation expense for 2021 should be
Answer:
$67,900
Explanation:
For computing the depreciation expense for the year 2021 we need to first find out the depreciation expense for 6 years after that the book value which is shown below:
Depreciation expense for 6 years using the straight line method is
= (Original cost - salvage value) ÷ (estimated useful life)
= ($880,000 - $82,000) ÷ (10 years)
= ($798,000) ÷ (10 years)
= $79.800
In this method, the depreciation is same for all the remaining useful life
This is a one year depreciation
So for six years, the accumulated depreciation is
= $79,800 × 6 years
= $478,800
The six years is calculated from Jan 2, 2015 to 2021
Now the book value is
= Purchase value of the machinery - accumulated depreciation
= $880,000 - $478,800
= $401,200
And, there is an overhaul expense i.e $187,000
So total cost is
= $401,200 + $187,000
= $588,200
The salvage value is $45,000
And the remaining life is 8 years
So, the depreciation expense for 2021 is
= ($588,200 - $45,000) ÷ 8 years
= $67,900
Large airlines might have come close to perfecting price discrimination by creating an incredibly complex pricing system designed to fill as many seats as possible. But once the Internet made it easier for flyers to compare fares, the strategy fell apart. Southwest Airlines founder Herb Kelleher said, "The high-fare, last-minute, walk-up business customer" is "gone forever." Kelleher is referring to what economists would call:
Answer:
Third degree price discrimination
Explanation:
Third degree price discrimination is when different customers are charged different price when purchasing the same product. The customers are differentiated on the basis of sex, age, location, and time of use.
In this scenario where large airlines create an incredibly complex pricing system designed to fill as many seats as possible, the last customer that comes to buy a ticket is charged at a higher price.
This exemplifies a third degree price discrimination that is based on time of use.
However the internet has made it easier to compare prices resulting in failure of this strategy.
Crossroad chooses to report a financial asset at its fair value. The asset trades in two different markets; however, neither market is the principal market for the financial asset. In the first market, sales proceeds are $76, which is net of transaction costs of $6. In the second market, the sales proceeds are $80, which is net of transaction costs of $1. What amount should Crossroads report as the fair value of the asset
Answer:$81
Explanation:
The options given are:
a. $76
b. $80
c. $81
d. $82
If the principal market that is, the market that the greatest volume of activity can't be identified, then the most advantageous market would be used to determine the fair value of a financial asset.
The most advantageous market is the market that has the highest net price, after transaction cost has been considered even though the transaction costs is not included into the fair value. Therefore, the second market gives the highest net price of $80 after the consideration of the transaction costs, hence, it should be utilized for fair value purposes.
The fair value amount include the transaction costs, which give $80 + $1 = $81
The fair value amount is $81.
The Waverly Company has budgeted sales for the year as follows:
Quarter sales in unit
1=12,000
2=14,000
3=18,000
4=16,000
The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units. The finished goods inventory at the start of the year is 3,000 units. Scheduled production for the second quarter (in units) is:
a.17,500 units.
b.16,500 units.
c.15,000 units.
d.13,000 units.
Answer:
Production= 15,000 units
Explanation:
Giving the following information:
Sales:
Q2=14,000
Q3=18,000
The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.
To calculate the production for the second quarter, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
Production= 14,000 + (18,000*0.25) - (14,000*0.25)
Production= 15,000 units
(3 points) The management of Balboa Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $825,000 with depreciation to date of $400,000 as of December 31, 2014. On December 31, 2014, management projected its future net cash flows from this equipment to be $390,000 and its fair value to be $365,000. The company intends to use this equipment in the future. Instructions (a) Prepare the journal entry (if any) to record the impairment at December 31, 2014. g
Answer:
Impairment Loss $35,000 (debit)
Accumulated Impairment Loss $35,000 (credit)
Explanation:
Impairment of an Asset occurs when the Carrying Amount of an Asset exceed its Recoverable Value.
Carrying Amount Calculation
Carrying Amount = Cost - Accumulated Depreciation
= $825,000 - $400,000
= $ 425,000
Recoverable Value Determination
Recoverable Value of an Asset is the Higher of
Value in use of the Asset and,Fair Value less Cost to sellValue in Use of the Asset = $390,000
Fair Value Less Cost to Sell = $365,000
Therefore, the Recoverable Amount is $390,000
Impairment Analysis
Carrying Amount, $ 425,000 > Recoverable Amount $390,000.
Therefore the Equipment is Impaired
Impairment loss is $35,000
Journal
Impairment Loss $35,000 (debit)
Accumulated Impairment Loss $35,000 (credit)
If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements, we would expect that a. the demand for products in this industry would increase. b. the market price of products in this industry would decrease in the short run but not in the long run. c. the firms in the industry would make a long-run economic profit. d. competition would force producers to pass the lower production costs on to consumers in the long run. g
Answer: competition would force producers to pass the lower production costs on to consumers in the long run
Explanation:
Occupational safety law deals with the health and safety of workers at their workplace and safety for activities outside of work. It is the function of employers to take care of their employees safety.
In a case whereby the occupational safety laws are changed so that the firms will no longer take expensive steps in order to meet regulatory requirements, there would be more competition which would lead to reduction on prices as a result of lower production cost which would be eventually passed from the producers to the consumers in the long run.
Final answer:
If occupational safety laws were changed, we would expect an increase in demand, a decrease in the short-run market price, potential decrease in long-run market price, and competition leading to lower prices for consumers in the long run. Option A is correct .
Explanation:
In this scenario, if occupational safety laws were changed and firms no longer had to take expensive steps to meet regulatory requirements, we would expect several outcomes:
The demand for products in this industry may increase because firms would be able to produce goods at a lower cost and potentially offer lower prices to consumers, attracting more buyers.In the short run, the market price of products in this industry may decrease because firms no longer have to incur expensive safety-related costs. However, in the long run, the market price may not decrease significantly as the entry of new firms into the industry and increased competition may stabilize prices.The firms in the industry may not make long-run economic profit. In the long run, the entry of new firms and increased competition may drive down prices and reduce profits.Competition may force producers to pass on the lower production costs to consumers in the long run. As firms are able to produce goods at a lower cost, they may choose to lower their prices to remain competitive and attract more customers.Of the following, which are actions most closely associated with countercyclical monetary policy? Select the two correct answers below. Select all that apply: During an economic boom, interest rates should be kept high. When the economy slows down, the federal reserve should buy financial assets from commercial banks. During an economic boom, the supply of loanable funds should be increased. During an economic recession, the interest rate should should be increased.
Answer:
During an economic boom, interest rates should be kept high.
When the economy slows down, the federal reserve should buy financial assets from commercial banks.
Explanation:
Countercyclical monetary policy can be defined as the process of having the Fed move in the opposite direction in response to economic upswing and downturn by boosting employment and output through increased monetary supply. When countercyclical monetary policy is adopted, there are dangers of overreaction.
The actions most closely associated with countercyclical monetary policy are;
- During an economic boom, interest rates should be kept high.
- When the economy slows down, the federal reserve should buy financial assets from commercial banks.
Vaughn Manufacturing produces corn chips. The cost of one batch is below: Direct materials $17 Direct labor 12 Variable overhead 10 Fixed overhead 14 An outside supplier has offered to produce the corn chips for $27 per batch. How much will Vaughn Manufacturing save if it accepts the offer?
Answer:
$26.00 per batch .
Explanation:
Consider the costs and savings per batch that arise if Vaughn accepts the offer.
Analysis of Costs and Savings
Purchase Cost ($27.00)
Savings :
Direct materials $17.00
Direct labor $12.00
Variable overhead $10.00
Fixed overhead $14.00
Total Savings $26.00
Therefore if Fixed overheads are avoidable, the savings would be $26.00 per batch .
Answer:
Vaughn Manufacturing will save $12 if it accepts the offer
Explanation:
We need to calculate the manufacturing cost of the product and then compare it to the purchase price and the fixed cost after purchase.
Manufacturing Cost:
Direct Material $17
Direct Labor $12
Variable Overhead $10
Fixed Overhead $14
Total cost $53
Purchasing cost:
Purchase price $27
Fixed overhead cost $14
Total cost $41
Saving = Manufacturing cost - Purchase cost = $53 - $41 = $12
As we know that the fixed overhead cost does not vary with the change in the production or sales activity and it cannot be avoided because it has to incurred even the chips is purchase from the outside supplier. Vaughn Manufacturing will save $12 if it accepts the offer.
The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level. 1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.
Missing information:
Direct materials (4.0 lbs. x $4.00 per lb.) $ 16.00
Direct labor (2.0 hrs. x $11.00 per hr.) 22.00
Overhead (2.0 hrs. x $18.50 per hr.) 37.00
Total standard cost $ 75.00
Overhead Budget (75% Capacity)
Variable overhead costs
Indirect materials $ 15,000
Indirect labor 75,000
Power 15,000
Repairs and maintenance 30,000
Total variable overhead costs $ 135,000
Fixed overhead costs
Depreciation--building 25,000
Depreciation--machinery 72,000
Taxes and insurance 18,000
Supervision 305,000
Total fixed overhead costs 420,000
Total overhead costs $555,000
Answer:
I used an excel spreadsheet to calculate the flexible budget because there is no room here. The production levels represent 13,000 units, 15,000 units and 17,000 units respectively. As total output increases, cost per unit decreases.
Creating a flexible overhead budget involves identifying and adding fixed and variable costs at various capacity levels. The result unveils if the firm's average variable cost of production can earn profits when the market price is higher and overlooks fixed costs.
Explanation:The question refers to the creation of a flexible overhead budget at different capacity levels (65%, 75%, and 85%), classifying each item as variable or fixed cost. Here's a simplified approach: Begin by identifying fixed costs - costs that remain constant regardless of the production volume. In this scenario, the fixed cost is given as $160, which will persist at a zero production level. It also becomes the vertical intercept of the total cost curve.
Next, you add variable costs with production increases because these costs fluctuate based on production volume. To calculate the average variable cost, you divide the variable cost by the total output at each production level. The resulting average variable costs are usually U-shaped.
Once the fixed and variable costs are determined at each capacity level (65%, 75%, and 85% in this instance), they can be combined to get the total cost. For example, at a capacity level of 75%, assuming variable costs were $15,000 and given the fixed costs of $160, the total cost would be $15,160. Repeat the same for other capacity levels.
The overall idea is if the firm's average variable cost of production is lower than the market price, profits would be earned if we overlook fixed costs. The figures and percentages might vary and thus the calculation should be done based on the numbers and percentages provided.
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Good Investments Company forecasts a $1.74 dividend for 2017, $1.87 dividend for 2018 and a $1.98 dividend for 2019 for Mountain Vacations Corporation. For all years after 2019, Good Investments Company forecasts that Mountain Vacations will pay a $2.10 dividend. Using the dividend discount valuation model determine the intrinsic value of Mountain Vacations Corporation, assuming the company's cost of equity capital is 7%. Select one: A. $24.48 B. $18.12 C. $27.91 D. $29.37
Answer:
The correct option is D,$29.37
Explanation:
The intrinsic value of the company is the present value of the dividends plus the present value of the terminal value in year 3
present of dividends=$1.74/(1+7%)+$1.87/(1+7%)^2+$1.98/(1+7%)^3=$ 4.88
Terminal value=dividend after year /cost of capital
=$2.10/7%=$30
present value of terminal value=$30 /(1+7%)^3=$ 24.49
Note that the discount factor of year 3 is applicable to the terminal value as well.
sum of present value of dividends and terminal value=$ 24.49+$4.88=$29.37
has projected EBIT to be $225,000 for next year. Their tax rate is 21% and there is $`500,000 in equity. Precise Electronics Inc has no debt currently, but the board is considering a loan of $150,000 at 8% interest, which they will use to repurchase shares of their own stock at $50 per share. If there is a recession, EBIT could be only 75% of projected. If there is an expansion, EBIT might be 40% greater than projected. What will their return on equity be under the current structure and under the proposed structure for each scenario
Answer:
current EBIT = $225,000, net income = $225,000 x 0.79 = $177,750
EBIT under expansion = $225,000 x 1.4 = $315,000, net income = $315,000 x 0.79 = $248,850
EBIT under recession = $225,000 x 0.75 = $168,750, net income = $168,750 x 0.79 = $133,312.50
current equity = $500,000
equity under proposed structure = $500,000 - $150,000 = $350,000
interest expense per year under proposed structure = $150,000 x 8% = $12,000
net income current economy = ($225,000 - $12,000) x 0.79 = $168,270
net income economic expansion = ($315,000 - $12,000) x 0.79 = $239,370
net income economic recession = ($168,750 - $12,000) x 0.79 = $123,832.50
return on equity = net income / total equity
ROE under current structure:
no change in the economy = $177,750 / $500,000 = 35.55%economic expansion = $248,850 / $500,000 = 49.77%economic recession = $133,312.50 / $500,000 = 26.67%ROE under proposed structure:
no change in the economy = $168,270 / $350,000 = 48.08%economic expansion = $239,370 / $350,000 = 68.39%economic recession = $123,832.50 / $350,000 = 35.38%Chico Company paid $560,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture, $140,000; Building, $460,000, and Land, $110,000. Based on this information, what is the cost that should be allocated to the office furniture? (Round your intermediate percentages to four decimal places: ie .054231 = 5.42%.)
Answer: $110,432
Explanation:
The cost allocated to the Office furniture is the percentage of total appraised cost * the price paid for the basket purchase because it shows what proportion of the Basket Purchase should be ascribed to the Office furniture.
Total Appraised value = 140,000 + 460,000 + 110,000
= $710,000
Office furniture Proportion = 140,000/710,000
= 0.1971830985
=0.1972
Amount to be allocated to Office furniture = 0.1972 * 560,000
= $110,432
$110,432 should be allocated to the office furniture.
= $110,422.
Sales total 50,000 units a year. The statues are finished either rough or polished, with an average demand of 60% rough and 40% polished. Iron ingots, the direct material, costs $5 per pound. Processing costs are $300 to convert 30 pounds into 60 statues. Rough statues are sold for $17 each, and polished statues can be sold for $19 or engraved for an additional cost of $5. Polished statues can then be sold for $23.50. How much would the profits/unit increase by if the Company should engrave the statues?
Answer:
It is more profitable to not engrave the statues.
Explanation:
Giving the following information:
Sales= 50,000 units
Polished= 40% of sales
Direct material= $5 per pound
Processing= $300 to convert 30 pounds in 60 statues
Polish= $19 per unit
Engraved= $5 per unit
New selling price= $23,5
We need to determine whether it is more convenient to sell the units engraved or not.
First, we need to calculate the unitary cost of a polished unit.
The total cost of 60 units= 5*30 + 300= $450
Unitary cost (normal)= 450/60= $7.5
Unitary cost (engraved)= 7.5+5= $12.5
Total sales= 50,000*0.4= 20,000 units
Now, we can determine the total contribution margin of both options:
Sell as-is:
Total contribution margin= 20,000*(19-7.5)= $230,000
Engrave:
Total contribtuion margin= 20,000*(23.5 - 12.5)= $220,000
It is more profitable to not engrave the statues.
The Work-in-Process inventory account of a manufacturing firm shows a balance of $4,090 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $570 and $370 for materials, and charges of $600 and $800 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of: Multiple Choice 43%.
Answer:
125%
Explanation:
The computation of predetermined overhead rate is shown below:-
Manufacturing overhead = $4,090 - ($570 + $370 + $600 + $800)
= $4,090 - $2,340
= $1,750
Total direct labor = $600 + $800
= $1,400
Manufacturing overhead = Predetermined overhead rate × Direct labor
Predetermined overhead rate = Manufacturing overhead ÷ Direct labor
= $1,750 ÷ $1,400
= 125%
Therefore for computing the predetermined overhead rate we simply divide the manufacturing overhead by direct labor.
Northern purchased the entire business of Southern including all its assets and liabilities for $600,000. Below is information related to the two companies Northern Fair value of assets $1,050,000 $800,000 575,000 Fair value of liabilities 300,000 Reported assets 800,000 650,000 Reported liabilities 500,000 250,000 Net Income for the year 50,000 60,000 How much goodwill did Northern pay for acquiring Southen?
A) $300,000.
B) $200,000
C) $150,000.
D) $100,000
Answer:
D) $100,000
Explanation:
As per the given question the solution of goodwill is provided below:-
To reach at goodwill first we need to find out the fair value of net assets which is here below:-
Fair value of Net assets = Fair value of assets - Fair value of liabilities
= $800,000 - $300,000
= $500,000
Goodwill = Price paid - Acquired Fair value of net assets
= $600,000 - $500,000
= $100,000
So, we have calculated the goodwill by deducting the acquired Fair value of net assets from price paid.
Mia Breen Corp. produces and sells wind-energy-driven engines. To finance its operations, Mia Breen issued $22,000,000 of 20-year, 4% callable bonds on May 1, 20Y5, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 20Y5 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 20Y9 Nov. 1 Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.) If an amount box does not require an entry, leave it blank. Issued the bonds for cash at their face amount.
Answer and Explanation:
The Journal entry is shown below:-
Cash Dr, $22,000,000
To Bonds payable $22,000,000
(Being issuance of bonds is recorded)
2. Interest expenses Dr, $440,000
($22,000,000 × 4% × 6 ÷ 12)
To cash $440,000
(Being payment of interest is recorded)
3. Bonds payable Dr, $22,000,000
To Cash $21,560,000
To Gain on Retirement on bonds, plug $440,000
(Being the retirement of bonds is recorded)
The journal entries for the transactions related to the bonds issued by Mia Breen Corp. involve the bonds issuance, semi-annual bond interest payments, and the bond redemption.
Explanation:The first part of this problem involves recording the bond issuance. Since Mia Breen Corp issued bonds for cash at face value, we simply recognize cash inflow and liability from bonds. The journal entry would look like this:
Debit: Cash $22,000,000Credit: Bonds Payable $22,000,000On November 1, 20Y5, the corporation pays the semi-annual interest on these bonds. We know that the annual interest is 4%, so the amount is:
($22,000,000 X 4%) / 2 = $440,000
The journal entry would look like this:
Debit: Interest Expense $440,000Credit: Cash $440,000Lastly, on November 1, 20Y9, the bonds are being called at 97% of face value. This means the corporation pays back:
$22,000,000 X 97% = $21,340,000
The journal entry would look like this:
Debit: Bonds Payable $22,000,000Credit: Cash $21,340,000Credit: Gain on Redemption of Bonds $660,000Learn more about Accounting for Bond Transaction here:https://brainly.com/question/31943598
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Santos Co. is preparing a cash budget for February. The company has $18,000 cash at the beginning of February and anticipates $66,000 in cash receipts and $116,000 in cash disbursements during February. What amount, if any, must the company borrow during February to maintain a $5,000 cash balance? The company has no loans outstanding on February 1. (Negative cash balances, if any, should be indicated with minus sign.)
Answer:
$5,000
Explanation:
The computation of Ending Cash balance is shown below:-
Financing
Preliminary cash Balance = Beginning cash balance + Cash receipt - Cash Disbursement + Financing
= $18,000 + $66,000 - $116,000
= -$32,000
Financing = Preliminary cash Balance + Minimum Cash Balance Required
= $32,000 + $5,000
= $37,000
Ending cash balance = Financing - Preliminary cash Balance
= $37,000 - $32,000
= $5,000
Michael's, Inc., just paid $1.85 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.1 percent. If you require a rate of return of 8.3 percent, how much are you willing to pay today to purchase one share of the company's stock?
Answer:
$45.85
Explanation:
Price today = Next year dividend / (Rate of return - Dividend growth rate)
Next year dividend = $1.85 * 1.041% = $1.92585
Therefore, we have:
Price today = $1.92585 / (8.3% - 4.1%) = $45.85
Therefore, you will be willing to pay $45.85 today to purchase one share of the company's stock.
The inflation rate for a given year can be found by __________. Select the correct answer below: taking the percentage change in the Consumer Price Index (CPI) from the previous year to the given year in question calculating the absolute change in the Consumer Price Index (CPI) from the previous year to the given year in question taking the difference in the price levels as measured by the Consumer Price Index (CPI) of the two years none of the above
Answer:
none of the above
Explanation:
To calculate the inflation rate, the most commonly used formula is:
Consumer price index = ( CPI in given year / CPI in base year ) x 100
The base year being any particular year that the calculating authority selects, not necessarily the previous year.
Therefore, none of the answers in the question are correct.