Answer:
Explanation:
To calculate the present value of a firm, first, determine the expected free cash flows over the specified time period. Next thing is to determine the present value factor for each year using the discount rate given. Next, multiply the respective discount factor by each year's cashflow. This will give you the Present value for each year. Lastly, sum up individual PVs to get the value of the firm.
A local finance company quotes an interest rate of 17.1 percent on one-year loans. So, if you borrow $20,000, the interest for the year will be $3,420. Because you must repay a total of $23,420 in one year, the finance company requires you to pay $23,420/12, or $1,951.67, per month over the next 12 months. Is the interest rate on this loan 17.1 percent?
a. What rate would legally have to be quoted? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the effective annual rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
The APR or legal interest rate quoted must be computed based on the present value of monthly payments, and it may differ from the advertised rate. The EAR, reflecting the actual cost of borrowing, accounts for the compounding of interest at this monthly rate over a year.
The question is asking whether the interest rate on a loan truly reflects the advertised rate when repayments are structured differently.
In this scenario, the finance company offers a one-year loan at 17.1% but requires monthly repayments that don't align directly with simple interest computations.
This involves calculating the actual annual percentage rate (APR) and the effective annual rate (EAR).
To calculate the APR, which is the legal rate that must be quoted, considering the monthly payments, we would have to solve for the interest rate that equates the present value of the loan (the amount borrowed) to the present value of the monthly payments.
However, since the actual numbers aren't provided, a generic formula would be:
Use the equation PV of loan = PV of annuity (monthly payments)
Apply the formula for the present value of an annuity:
Calculate the interest rate (i) that satisfies this equation.
To find the EAR, which measures the actual interest rate after considering compounding, we would:
Take the monthly rate calculated from the APR.
Convert it to an annual rate considering monthly compounding using the formula (1 + i)12 - 1, where i is the monthly rate.
The APR generally differs from the advertised rate when repayments are not in sync with the interest accrual period, leading to an EAR that reflects the true cost of borrowing.
Oriole Company built a warehouse for $524,700. It could have purchased the building for $614,800. The controller made the following entry. Buildings 614,800 Cash, Materials, Other Accounts 524,700 Profit on Construction 90,100 Prepare the entry that should have been made to record the acquisition.
Answer:
Building A/c Dr $524,700
To Cash A/c $524,700
(Being the acquisition of building is recorded)
Explanation:
The journal entry is shown below:
Building A/c Dr $524,700
To Cash A/c $524,700
(Being the acquisition of building is recorded)
Since the acquisition is made which increase the fixed asset so we debited the fixed assets account and credited the cash account because cash is gone for acquiring it
All other information which is mentioned is not important. Therefore, ignore d it
Students with learning disabilities typically have good organizational skills.a. Trueb. False
Answer:
false
Explanation:
Organisational skills are developed with experience and continuous learning. Likewise, students with learning disabilities are not very good at organisational skills, because developing organisational skills require learning. Students with learning disabilities can generate organisational skills, but to have good organisational skills is nearly unmanageable for disable students. This is why learning disable students don't get managerial roles in firms and organisations.
False. Students with learning disabilities typically do not have good organizational skills.
Explanation:False. Students with learning disabilities typically do not have good organizational skills. Learning disabilities are neurological disorders that affect a person's ability to receive, process, or communicate information effectively. These disabilities can impact various areas of learning, such as reading, writing, math, and organization. For example, students with dysgraphia may struggle with organizing their thoughts and writing legibly, while students with dyslexia may have difficulty with reading and spelling.
Shawna finally made it big in Nashville. She never expected the lack of privacy, criticism and demands that would follow. She finds herself unable to cope. According to Albrecht's nine variables, which one is now outside her comfort zone?
Answer and Explanation:
The factors that are influenced in Shawna's usual range of familiarity as indicated by Albrecht's factors are the lucidity of expected set of responsibilities and assessment criteria, work status and human contact. She's getting analysis that perhaps she was not set up for, which makes the assessment criteria of her business to be flimsy and difficult for her to satisfy inevitably. The status of her activity is too influenced by the analysis and the requests, and the human contact quality that she's having a direct result of her activity is a long way from the ideal in light of her absence of security.
This is a shallow perception as indicated by the verifiable depiction of the issues that Shawna is having, however it's the most precise sentiment as per the factors.
The payback method, unlike the net present value method, does not ignore cash flows after the point of cost recovery.
a. True
b. False
Answer:
Explanation:
The payback period measures the length of time it takes a project cash inflow s to recoup its cash outflows.
Though it does not incorporate time value of money but it is a sure measure of a project's liquidity- it gives an idea of how soon it will take a project to recover its initial cost. In addition, it is very easy to calculate.
However, it suffers a number of setbacks. For example, it treats cash flows occurring at different periods in the project life as been the same- it ignores the time value of money concept.
Furthermore, it also excludes cash inflows coming up after the payback date in its computation. The date at which the accumulated cash inflows equals the initial cost is also known as point of cost recovery
The payback period is a method of investment appraisal which focuses on liquidity and not profitability. Yes, it is concerned about a project breaking even but investors are concerned about profitable.
In contrast, the net present value corrects some of the major pitfalls of the payback period method. For example, It uses the concept of time value of money as it involves calculating the present values of cash flows.
Also, all cash flows are included in the calculation of net present value.
Note that the question negates some of these points.
For example if a project costs $60,000 with a seires of annual cash inflows as follows Year 1- $20,000, year 2- $20,000, year 3 -$20,000 and year 4- $10.
The payback period is 3 year in this example of mine. The $10 of year 4 is excluded in the computation of the payback perod and does give an idea of whether the project is profibale
The payback method is defined as the time required to recoup the funds invested to reach the break-even point. The payback period is the initial investment done per year cash flow.
The given statement is False.
The payback method or period is the time taken to project the inflow of cash to recoup the outflow of cash.
The payback method can be calculated by the formula:
[tex]\text{Payback} &= \dfrac{\text{Initial Investment}} {\text{Cash flow per year}}[/tex]
In the payback period, after the payback point has been reached, the cash flows are ignored.
A payback period is an approach to capital budgeting, such that it understands the cash flow as an investment. The payback ignores the overall profitability of the investment, unlike the net present value.
Therefore, the given statement is False.
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A recent study on crime rates examines whether crime depends on sunshine. A researcher hypothesizes that sunshine makes people happy and thus reduces crime. She collects data from cities across the USA and their sunshine exposure, runs a regression, and finds the following:Dependent Variable: Number of Crimes per 100,000 people (higher scores mean more crime)DemocratsRepublicansIndependentSupport10300Oppose50100Don’t Care5020 R2 = .45Interpret the estimated slope, estimated intercept, and R2 from this regression. State whether the slope is statistically significant, how you reach
Answer and Explanation:
R-square measures whether the variation exists or how much dependence the independent variables on the dependent variables.
R2 = .45 which is quite low. This shows that there is not much variation. In order to increase the R2 the researcher can add more independent variables.
The below part is taken from the internet as the question was incomplete:
Sunny days = 0.5
Intercept = 2.1
The slope shows a positive relationship (direct relationship) with the dependent variable which is crime dependency.
Sunny days is the independent variable.
Intercept is also positive whereas there is significance in the p value which helps in concluding that we will reject the null hypothesis.
The company's adjusted trial balance as follows includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $59,000; Dividends, $2,000; Fees Earned, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. Prepare closing entry #1.
Answer:
Dr. Fees Earned $56,000
Cr. Income Summary $56,000
Explanation:
Prepare closing entry # 1
Close means to make the balance zero. From the Adjusted Trial Balance that Fees Earned Account has a credit balance of $56,000 and to make it zero we will credit it with Income Summary Account, as follows;
(+) Fees Earned $56,000
(-) Income Summary $56,000
To Close Fees Earned Account
Final answer:
The first closing entry for the company includes debiting Fees Earned for $56,000 and crediting Income Summary for $56,000, which zeroes out the Fees Earned and increases the Income Summary by the same amount.
Explanation:
Preparing closing entries in accounting is a step at the end of the accounting period to zero out temporary accounts and transfer their balances to permanent accounts. The first closing entry always involves closing revenue and expense accounts. In the given adjusted trial balance, the revenue account is Fees Earned and the expense accounts are Depreciation Expense and Salaries Expense.
The first closing entry will close the Fees Earned account and transfer its balance to an income summary account. The entry would typically be a debit to Fees Earned for $56,000 and a credit to Income Summary for $56,000, effectively reducing the Fees Earned to zero and increasing the Income Summary balance by the same amount. Then, the expense accounts (Depreciation Expense and Salaries Expense) are closed and their balances are transferred to the Income Summary account.
Here is how the first closing entry would look:
Debit Fees Earned for $56,000Credit Income Summary for $56,000Since the question specifies to prepare only closing entry #1, we focus on closing the revenue (Fees Earned) account in this step.
On March 1, Terrell & Associates provides legal services to Whole Grain Bakery regarding some recent food poisoning complaints. Legal services total $10,700. In payment for the services, Whole Grain Bakery signs a 10% note requiring the payment of the face amount and interest to Terrell & Associates on September 1.
Required:For Terrell & Associates, record the acceptance of the note receivable on March 1 and the cash collection on September 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Final answer:
Terrell & Associates records the acceptance of a note receivable on March 1 by debiting Notes Receivable and crediting Legal Services Revenue. Upon collection on September 1, they debit Cash and credit Notes Receivable along with Interest Revenue for the principal amount and accrued interest.
Explanation:
On March 1st, Terrell & Associates accepts a note receivable in exchange for legal services provided to Whole Grain Bakery. The journal entry to record the acceptance of the note receivable would be a debit to Notes Receivable for the amount of the legal services provided, $10,700, and a credit to Legal Services Revenue for the same amount:
Debit Notes Receivable: $10,700Credit Legal Services Revenue: $10,700On September 1st, when the note is due, Whole Grain Bakery pays the face value plus interest. Over six months, the 10% annual interest rate accrues $535 on the principal ($10,700 * 10% * 6/12). The journal entry to record the cash collection would include a debit to Cash for the total amount received ($11,235), a credit to Notes Receivable for the principal amount ($10,700), and a credit to Interest Revenue for the interest earned ($535):
Debit Cash: $11,235Credit Notes Receivable: $10,700Credit Interest Revenue: $535In January 2001, the euro/dollar exchange rate was 1.10, and in January 2002, the euro/dollar exchange rate was 1.120. What happend to the exchange rate during this period?
A. Euro depreciated against the dollar
B. Euro appreciated against the dollar
C. Dollar appreciated against the euro
D. Both B and C
Answer:
B. Euro appreciated against the dollar
Explanation:
Depreciated means a decrease in value. Therefore, option A is incorrect. Since the exchange rate of Euro increases, the dollar cannot be appreciated at the same time. So, C cannot be the answer. If "C" is incorrect, both "B" and "C"; it means "D" is incorrect.
Hence, option "B" is correct because the foreign exchange rate of Euro increases relative to the exchange rate of the dollar in 2002. If there is an increase of a currency relative to others, the increased currency is said to be appreciated.
George Johnson recently inherited a large sum of money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fund has two investment options: (1) a bond fund and (2) a stock fund. The projected returns over the life of the investments are 6% for the bond fund and 10% for the stock fund. Whatever portion of the inheritance George finally decides to commit to the trust fund, he wants to invest at least 30% of that amount in the bond fund. In addition, he wants to select a mix that will enable him to obtain a total return of at least 7.5%. Formulate a linear programming model that can be used to determine the percentage that should be allocated to each of the possible investment alternatives. If required, round your answers to three decimal places. Value of optimal solution is %
Answer:
Return on investment
X * 0.06 + (1-X)*0.1 = 0.075
where:
1>X >0.30
X is the percentage invest on bond fund
It needs to invest 62.5% in the bond fund
and 37.5% in the stock und to achieve 7.5% return
Explanation:
We have a certain amount divided into two option.
being X the bond fund the rmainder (1 - X) will be invested in the stock fund
We want at least an X of 30%
and achieve 7.5% return
0.06X + 0.1 - 0.1X = 0.075
0.1-0.075 = 0.04X
X = 0.025/0.04 = .625 = 62.5%
An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of production volumes and total cost data for a manufacturing operation. Production Volume (units) Total Cost ($) 400 4000 450 5000 550 5400 600 5900 700 6400 750 7000 What is the variable cost per unit produced?
Answer:
The answer is $7.6
Explanation:
We have to build up the regression equation to predict the total cost at a given production level to find out the estimated amount of variable cost per unit.
Denote the equation as: y = ax + b; where: a is the variable cost per unit; x is the units produced; b is fixed cost; y is total production cost at x units produced.
Apply the formula in Least Squares Regression, we have:
a = (n*Σ(x*y) - Σx * Σy) / [n*Σ(X^2) - (ΣX)^2], in which n = 6 observations: x0 denote production volume and y denote total cost at an x0 production volume. Thus, we have the below calcualtion:
Σ(x*y) = 400 * 4000 + 450 * 5000 +... + 750 *7000 = 20,090,000;
Σx = 400 + 450 + ...+ 750 = 3,450; (Σx)^2 = 11,902,500
Σy = 4,000 + 5,000 +...+7,000 = 33,700
Σx^2 = 400^2 + 450^2 + ... + 750^2 = 2,077,500
=> a = (6*20,090,000 - 3,450*33,700) / ( 6*2,077,500 - 11,902,500) = 7.6
So, variable cost per unit produced is $7.6.
If a contractor is producing missiles for the Navy, and the contractor fails to deliver them on time, the Navy has the right to: [Contrast the difference between termination for convenience, termination for default, and termination for cause.]
A. Terminate the contract for default
B. Terminate the contract for convenience
C. Terminate the contract for cause
D. All of the answers are correct
Answer:
The correct answer is letter "A": Terminate the contract for default.
Explanation:
A termination for default takes place when one party on a contract is not able to fulfill the agreement conditions. The party who failed to fulfill the contract obligations can be sued and could be found liable for all the damages caused as a result of the breach of the agreement.
Firms from which country lead the way in "direct foreign investment" in the United States?A. JapanB. IndiaC. ChinaD. United Kingdom
Answer:
D. United Kingdom.
Explanation:
Direct Foreign Investment are long-term investments (usually not related with stock exchange market). The UK accounted for the 15.2% of total foreign direct investments in USA in 2017. This was the higher share per country that year followed by Japan 11.8%, Germany 10.1% and Ireland 8.1%
Your firm purchased a warehouse for $335,000 six years ago. Four years ago, repairs were made to the building which cost $60,000. The annual taxes on the property are $20,000. The warehouse has a current book value of $268,000 and a market value of $295,000. The warehouse is totally paid for and solely owned by your firm. If the company decides to assign this warehouse to a new project, what value, if any, should be included in the initial cash flow of the project for this building?
Answer:$295,000
Explanation:
6 years ago, the purchase price of the warehouse was $335,000 and the current warehouse market worth is $295,000 and the book value is $268,000. If the company decides to assign this warehouse to a new project, it should include its current market worth as the initial cash flow for the building because if the company does not use the warehouse for project purposes, the company receives a cash flow of $295,000, market worth as cash flow.
The firm must place a market worth of $295,000 as the initial cash flow for the project.
An accrual-basis C corporation that prepared its financial statements based on GAAP recorded $800,000 of bad debt expense. The total amount of bad debts that actually became worthless was $930,000. In respect to bad debt expense, what type of disclosure should the corporation show on Schedule M-3
Complete Question:
A.A permanent bad debt expense difference of $130,000.
B.A temporary difference in which book deductions exceed tax deductions by $130,000.
C.A temporary difference in which tax deductions exceed book deductions by $130,000.
D.No difference between bad debt expense per income statement and deduction per tax return.
Answer:
C.A temporary difference in which tax deductions exceed book deductions by $130,000.
Explanation:
As the book bad debt was $800,000 and the actual bad debt was $930,000. One can clearly see a difference of $130,000 and this is the amount which the book bad debt is increasing by. In this case of tax, bad debts becomes worthless in the year they are announced collectible.
Griffen Corporation uses a standard costing system. Information for the month of May is as follows: Actual manufacturing overhead costs ($26,000 is fixed) $80,000 Direct labor: Actual hours worked 12,000 hrs. Standard hours allowed for actual production 10,000 hrs. Average actual labor cost per hour $18.00 The overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows: Variable overhead $48,000 Fixed overhead 24,000 Total overhead $72,000 What is the fixed overhead spending variance for Griffen?
Answer:
Fixed overhead spending variance $
Budgeted fixed overhead cost (12,000 hrs x $2) 24,000
Less: Actual fixed overhead cost 26,000
Fixed overhead spending variance 2,000(A)
Explanation:
In this case, we need to calculate the standard fixed overhead application rate, which is the ratio of Budgeted fixed overhead cost to budgeted direct labour hours (normal capacity). Fixed overhead spending variance is the difference between budgeted fixed overhead cost and actual fixed overhead cost. Budgeted fixed overhead cost is budgeted hours multiplied by standard fixed overhead application rate.
The fixed overhead spending variance for Griffen Corporation is $56,000.
To calculate the fixed overhead spending variance for Griffen Corporation, we need to compare the actual fixed overhead costs incurred with the budgeted (standard) fixed overhead costs.
Fixed Overhead Spending Variance = Actual Fixed Overhead Costs - Budgeted (Standard) Fixed Overhead Costs
Actual Fixed Overhead Costs = $80,000 (given)
Budgeted (Standard) Fixed Overhead Costs = $24,000 (given in the standard cost data)
Now, let's calculate the fixed overhead spending variance:
Fixed Overhead Spending Variance = Actual Fixed Overhead Costs - Budgeted (Standard) Fixed Overhead Costs
Fixed Overhead Spending Variance = $80,000 - $24,000
Fixed Overhead Spending Variance = $56,000
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On January 1, 2016, Wasson Company purchased a delivery vehicle costing $50,710. The vehicle has an estimated 8-year life and a $4,700 residual value. Wasson uses the units-of-production depreciation method and Wasson estimates that the vehicle will be driven 107,000 miles. What is the vehicle's book value as of December 31, 2017 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,700 miles during 2016 and 18,700 miles during 2017? (Do not round your intermediate calculations.)
A. $34,508.
B. $38,068.
C. $33,368.
D. $39,208.
Answer:
Book value= $33,008
Explanation:
Giving the following information:
On January 1, 2016:
Purchase cost= $50,710.
Residual value= $4,700
Wasson uses the units-of-production depreciation method.
The vehicle will be driven 107,000 miles.
2016= 10,700 miles
2017= 18,700
First, we need to calculate the depreciation of 2016 and 2017, using the following formula:
Annual depreciation= [(original cost - salvage value)/useful life of miles]*miles
2016= [(50,710 - 4,700)/107,000]*10,700= $4,601
207= 0.43*18,700= $8,401
Book value= depreciable value - accumulated depreciation
Book value= 46,010 - (4,601 + 8,401)= $33,008
The Chemco Company uses a highly toxic chemical in one of its manufacturing processes. It must have the product delivered by special cargo trucks designed for safe shipment of chemicals. As such, ordering (and delivery) costs are relatively high, at $3600 per order. The chemical product is packaged in 1-gallon plastic contain- ers. The cost of holding the chemical in storage is $50 per gallon per year. The annual demand for the chemical, which is constant over time, is 7000 gallons per year. The lead time from time of order place- ment until receipt is 10 days. The company operates 310 working days per year. Compute the optimal order quantity, total minimum inventory cost, and the reorder poin
Answer:
Annual demand (D) =7,000 gallons
Ordering cost per order (Co) = $3,600
Holding cost per item per annum (H) = $50
EOQ = √2DCo
H
EOQ = √2 x 7,000 x $3,600
$ 50
EOQ = 1,004 units
Q = 1,004
Total minimum inventory cost
= Total ordering cost + Total holding cost
= DCo + QH
Q 2
= 7,000 x $3,600 + 1,004 x $50
1,004 2
= $25,099.60 + $25,100
= $50,199.60
Re-order point
= Maximum usage per day x Maximum lead time
= 7,000 gallons x 10 days
310 days
= 226 units
Explanation:
EOQ is a function of square root of 2 multiplied by annual demand and ordering cost per order divided by holding cost per item per annum.
Total minimum inventory cost is the aggregate of total ordering cost and total holding cost.
Re-order point is the product of maximum usage per day and maximum lead time.
Maximum usage per day is annual demand divided by the number of working days in a year.
The optimal order quantity is approximately 7106 gallons. The total minimum inventory cost is $180,326.87. The reorder point is 226 gallons.
Explanation:To determine the optimal order quantity, total minimum inventory cost, and the reorder point for Chemco Company, we can use the Economic Order Quantity (EOQ) model. The formula for EOQ is:
EOQ = sqrt((2 * D * S) / H)
Where D is the annual demand, S is the ordering cost, and H is the holding cost. Substituting the values given in the question:
EOQ = sqrt((2 * 7000 * 3600) / (50))
EOQ = sqrt(50400000)
EOQ = 7105.85 gallons (rounded to the nearest gallon)
The total minimum inventory cost can be calculated as:
Total Cost = ((D * S) / EOQ) + (H * (EOQ / 2))
Substituting the values:
Total Cost = ((7000 * 3600) / 7105) + (50 * (7105 / 2))
Total Cost = 2514.37 + 177,812.5
Total Cost = $180,326.87
The reorder point can be calculated as the lead time demand:
Reorder Point = (D * Lead Time) / Working Days
Substituting the values:
Reorder Point = (7000 * 10) / 310
Reorder Point = 225.81 (rounded up to the nearest gallon)
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Which is an attribute of an effective organiation structure?
An effective organization structure attribute is the balance between hierarchical levels and span of control, with flat structures offering more autonomy and taller structures providing closer supervision.
An attribute of an effective organization structure that contributes to a company's effectiveness and innovativeness is the appropriate balance between hierarchical levels and span of control. Flat structures have a wider span of control, allowing managers to supervise more employees directly, which can lead to increased employee autonomy and satisfaction. On the other hand, tall structures have more levels and a narrower span of control, potentially providing more opportunities for close supervision and a greater sense of job security for the employees. Both structures have their benefits and challenges, and the effectiveness of each depends on the company's specific context and goals.
ason owns a small landscaping business called GreenScapes. When buying a new pickup truck for his landscaping business, Jason negotiated with Palmetto Dodge, a dealer, with the agreement that GreenScapes would be the service company Palmetto Dodge used for all of its landscaping needs. This is an example ofA) a new task purchaseB) a straight rebuyC) a modified rebuyD) reciprocityE) a straight purchase.
Answer: reciprocity
Explanation: In simple words, reciprocity refers to the agreement in which two parties exchange goods or services in such a way that both of them will gain benefit from such agreement.
In business it can achieved in many ways, for example by combining the efforts and resources or by providing each other some service in exchange for service from the other side.
In the given case, Jason made a deal with dodge to provide service to him in exchange for service by him. Hence we can conclude that the given case depicts reciprocity.
If there are 10 directors to be elected and a shareholder owns 100 shares, calculate the maximum number of votes that he or she can cast for a favorite candidate under each of the voting methods. MaximumNumber of Votes a. Majority voting b. Cumulative voting
Answer:
a. 100 votes
b. 1,000 votes
Explanation:
a.
Under Majority voting, the maximum number of votes which can be cast by shareholder will be 100 votes for a favorite candidate as owned 100 shares.
b.
Under Cumulative voting, the maximum number of votes can be cast by shareholder for the favorite candidate is as:
10 Candidates and owns 100 shares, so
= 10 × 100
= 1,000
Kaplan, Inc. produces flash drives for computers, which it sells for $27 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan? Select one:
a. $100
b. $2,700
c. $14,000
d. $8,400
Answer:
Break even sales will be $2700
So option (b) will be correct option
Explanation:
We have given fixed cost = $1400
Sells per unit = $27 each
And variable cost per unit = $13 each
So contribution margin ratio [tex]=\frac{sales\ per\ unit-variable\ cost\ perunit}{sales\ per\ unit}=\frac{27-13}{27}=0.5185[/tex]
We know that break even sales is given by
Break even sales [tex]=\frac{fixed\ cost}{contribution\ margin\ ratio}=\frac{1400}{0.5185}=$2700[/tex]
So option (b) will be correct answer
Brief Exercise 8-5 Blossom Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. Accounts receivable are $419,300 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,941.Prepare the adjusting journal entry to record bad debt expense for the year.
Answer:
The adjusting journal entry to record bad debt expense for the year:
Debit Bad debts expense $13,831
Credit Allowance for doubtful accounts $13,831
Explanation:
Blossom Company uses the percentage-of-receivables basis to record bad debt expense.
At the end of the year, Accounts receivable are $419,300 and 4% of accounts receivable will become uncollectible.
Estimated uncollectible = $419,300 x 4% = $16,772
Before adjusting, the allowance for doubtful accounts has a credit balance of $2,941.
Bad debts expense = $16,772 - $2,941 = $13,831
The adjusting journal entry:
Debit Bad debts expense $13,831
Credit Allowance for doubtful accounts $13,831
The Blossom Company estimates that 4% of their accounts receivable, totalling $419,300, will be uncollectible. This equates to a Bad Debt Expense of $16,772. The appropriate adjusting journal entry is to debit Bad Debt Expense and credit Allowance for Doubtful Accounts by the same amount.
Explanation:The Blossom Company anticipates that 4% of their accounts receivable, which currently amount to $419,300, will be uncollectible. This 4% represents the bad debt expense that the Blossom Company will need to account for. Calculating 4% of $419,300 gives us $16,772. This is the amount that the Blossom Company expects will not be paid by their debtors. To accurately reflect this anticipated loss in accounts receivable, they will need to make an adjustment to their accounts with an adjusting journal entry.
The adjusting journal entry to record the bad debt expense would be as follows:
Bad Debt Expense 16,772
Allowance for Doubtful Accounts 16,772
Here, the Bad Debt Expense is debited with the amount of $16,772, which represents the anticipated loss due to uncollectible accounts. On the other hand, the Allowance for Doubtful Accounts, which is a contra-asset account tied to Accounts Receivable, is credited with the same amount to show that a portion of the accounts receivable is expected to be uncollectible.
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Carolyn purchased a new office desk on July 23, 2018, at a cost of $2,474. She did not claim the bonus depreciation deduction. Using the half-year convention, Carolyn may claim 2018 depreciation in the amount of:__________a. $237 b. $339 c. $475 d. $791
Answer:
Depreciation under half-year convention is= 309.25
Explanation:
(Important Note: The information provided in the question are incomplete. In order to calculate depreciation expense using the half year convention we must have useful life of the new office desk and residual value, if any! Therefore we base the solution of this question by using some assumptions.)
Assuming that the useful life of the new office desk is 4 years and has no salvage value, the depreciation would be as follows:
Depreciation expense = $2474÷ 4
Depreciation expense = $618.5
But this is yearly expense and under the half-year convention it's assumed that the new office desk is being used for one-half or it's first year therefore the half year depreciation expense will be calculated and the remaining half of depreciation will be expensed out in the final year of depreciation.
So depreciation under half-year convention is= 618.5× 6÷ 12
depreciation under half-year convention is= 309.25
Gavin tells Rod that he will pay him $400 to paint his house. Rod starts to paint, intending to accept. Halfway through his paint job, Gavin tells Rod that he wants to revoke the offer. Under this scenario:Select one:a. Gavin is not allowed to revoke because the contract is unilateralb. Gavin is allowed to revoke, but is liable to Rod for the reasonable value of painting half the house c. Gavin may not revoke because the contract is bilaterald. d. Gavin is allowed to revoke if he finds Rod's efforts half-hearted
Answer:
d. Gavin is allowed to revoke if he finds Rod's efforts half-hearted
Explanation:
Either he accepts, or he does not accept the offer. Even if he started to paint without accepting the offer, and Gavin does not like his work, the offer can be revoked.
So the correct answer is:
d. Gavin is allowed to revoke if he finds Rod's efforts half-hearted
If some sellers exit a competitive market, how will this affect its equillibrium? Using the 3-point drawing tool, show the impact if some sellers enter a competitive market. Label your new curve appropriately. Using the point drawing tool, show the new equilibrium price and quantity. Label this point 'A'. Carefully follow the instructions above and only draw the required objects. According to your graph, when some sellers enter a competitive market, the equilibrium price_________ and the equilibrium quantity________.
Final answer:
When sellers enter a competitive market, the supply increases, causing the equilibrium price to decrease and the equilibrium quantity to increase. The new equilibrium point is indicated on the graph as point 'A'.
Explanation:
When sellers exit a competitive market, the supply curve shifts to the left, indicating a decrease in supply. This leads to a higher equilibrium price and a lower equilibrium quantity, as the point of intersection between supply and demand curves moves upwards along the demand curve. Conversely, when new sellers enter the market, the supply curve shifts to the right, indicating an increase in supply. This results in a lower equilibrium price and a higher equilibrium quantity, and the new intersection point on the graph is labeled as 'A'.
Following this analysis, when some sellers enter a competitive market, the equilibrium price decreases, and the equilibrium quantity increases. This is because the additional sellers cause more of the good to be available at each price, which, in turn, puts downward pressure on the price to the new equilibrium point.
Remember: The point where the supply curve (S) and the demand curve (D) cross is called the equilibrium, and the equilibrium price is the only price where the amount consumers are willing to buy is equal to the amount sellers are willing to sell, known as the equilibrium quantity.
Sunland Company had two issues of securities outstanding: common stock and an 9% convertible bond issue in the face amount of $15350000. Interest payment dates of the bond issue are June 30th and December 31st. The conversion clause in the bond indenture entitles the bondholders to receive forty shares of $20 par value common stock in exchange for each $1000 bond. On June 30, 2018, the holders of $2302500 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1200 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $980000. In applying the book value method, what amount should Sunland credit to the account "paid-in capital in excess of par," as a result of this conversion?
Answer:
$313,500
Explanation:
Applying the book value method,
Common stock:
= ($2,302,500 face value bonds ÷ $1000) × 40 shares × $20 par value
= 2,302.5 × 40 shares × $20 par value
= $1,842,000
Unamortized discount:
= ($2,302,500 face value bonds ÷ $15,350,000) × $980,000
= 0.15 × $980,000
= $147,000
Amount should Sunland credit to the account "paid-in capital in excess of par," as a result of this conversion:
= $2,302,500 face value bonds - Common stock - Unamortized discount
= $2,302,500 - $1,842,000 - $147,000
= $313,500
The potential benefits lost by taking a specific action when two or more alternative choices are available is known as a(n):________a. Alternative cost.b. Sunk cost.c. Out-of-pocket cost.d. Differential cost.e. Opportunity cost.
Answer:
The potential benefits lost by taking a specific action when two or more alternative choices are available is known as opportunity cost.
The correct answer is E
Explanation:
Opportunity cost is the potential lost as a result of selecting an alternative where alternative courses of action are involved. It is a relevant cost for decision-making.
Answer:
e. Opportunity cost
Explanation:
This is the perfect definition of opportunity cost.
Businesses mostly find themselves stuck in choosing between two different alternatives, especially when each alternative has a cost consequence. For example, as an employee I am faced with two alternatives, first, I can go on a one week holiday with my friends and chill (which would cost me $1500) but if I do so I would be loosing $200 (as my salary) daily for one week, the total of which would be $1400. If I choose to go with my friends on the holiday anyhow, the total cost of my holiday would not just be $1500 but the opportunity cost of $1400 would also be a part of my holiday cost because it's relevant and is being influenced by my decision.
So I would basically be loosing the potential benefits (salary in this case) if I choose to go on the holiday with my friends.
Alternative cost is the cost comparison of two alternatives aimed at choosing the most economically feasible option.
Sunk cost is cost that is already incurred and/or is committed to be incurred at a later date which can't be influenced by our decision.
Differential cost is the difference between the cost of two options.
Megan Johnson owns a kitchen and bathroom cabinet company. Her market research is telling her that she is taking business away from the large home improvement stores in her trade area. One thing that Megan is worried about is that the large stores might fight back by lowering their prices, which hurts everyone except the consumer. The day-to-day challenge of firm growth that this example is referring to is _______
Answer: Price war
Explanation:
Price war is a market strategy in which a firm lowers it's price in comparison to the prices of other seller's in the market in order to gain absolute control of the Consumers patronage.
Price war it's more prevalent in a market where the sellers sell differentiated products either through branding or qualities.
The firm also employed advertising to drag home the superiority of their products and cheap prices.
Interview Example:
• Client is a leading food company that wants to develop a fresh prepared meal business
• Trend among consumers is toward fresher food with no artificial preservatives or coloring
• Consumers are currently purchasing $5 0 billion of frozen meals—trendis toward more upscale products
• A fresh meal plate combining a protein, vegetable and starch is delicately arranged in a sealed plastic dome package
• Nitrogen gas flushing is used to extend shelf life
• Product is currently in limited consumer test at $5 50 to $850 per meal
• Shelf life of product is 14 days— product will spoil in 21 dayspotentially causing food poisoning
• Client wants to know if they can make money in this business
• Client wants to know if the market is big—
how will they keep competition out?
The client's goal to enter the fresh prepared meal market must address profitability, market saturation, consumer safety, and shelf life. Packaging and processing play a pivotal role in extending shelf life while maintaining food quality. The competitive landscape and consumer expectations present significant challenges to new market entrants.
The client, a leading food company, seeks advice on entering the fresh prepared meal market, given the consumer trend towards fresher food without artificial preservatives or coloring. They are testing nitrogen gas-flushed, sealed meals with a shelf life of 14 days and a $5.50 to $8.50 price range.
The business analysis must consider the profitability and competitiveness of this endeavor in an industry leaning towards upscale products. It is critical to ensure safety and shelf life via proper packaging and storage, balancing between preserving food quality and maintaining its marketability. Overcoming extensive market saturation is a considerable challenge that requires prioritizing customer satisfaction and product safety to ensure a viable business venture in the food industry.
The prepared food must remain safe, with concerns generally stemming from microbial contamination and the necessity for vigilant processing and packaging, such as using barrier films or active components to extend the product's shelf life. Consumer expectations dictate ready food availability, with increasing concerns over the health and sustainability implications of current food supply practices.
The success of a new product involves long-term development and overcoming regulatory and market hurdles, especially in the saturated food industry landscape characterized by established chains and vending machines.