Answer:
Federal Reserve increases the money supply in the hands of the public if it buys back issued securities from large banks.
Explanation:
Federal Reserve increases the money supply in the hands of the public if it buys back issued securities from large banks. Conversely, Federal Reserve decreases the money supply in the hands of the public if it sells securities. As a result, the money supply increases.
Federal reserve provides and maintains an effective and efficient payment system. It also regulates banking operations.
Saad was an employee at a chemical company called FGR Inc. He noticed that several of the security personnel at FGR allowed tankers to be filled over the legal limit with highly inflammable gases. Saad gathered ample evidence of such instances and presented it to senior management. A few months later, the company had not acted, and Saad contacted the Occupational Safety and Health Administration. Less than a week later, the company fired Saad. Assuming that Saad had not had disciplinary issues and wanted to file a claim alleging he was wrongfully discharged, what would be the strongest basis for his claim
Answer:
He was disciplined for doing what the law requires
Explanation:
This is disciplined to say that the law has a strong basis for her argument. As he followed this process, he first presented himself to senior management in the process, and it was only after the inactivity of senior management that he entered the occupational safety and health administration.so correct answer is He was disciplined for doing what the law requiresSuppose Billy Bud's Bucking Broncos employs 20 workers at a daily wage rate of $60 each. The average product of labor is 30 bucking broncos per day; the marginal product of the last worker is 12 bucking broncos per day; and total fixed cost is $3,600 for equipment. What is the marginal cost of the last bucking bronco produced?
a. $5.00
b. $240.00
c. $720.00
d. $0.20
Answer:
a. $5.00
Explanation:
Marginal cost is the cost of each extra unit sold or produced.
Average total cost is the average cost of all the units which is sold or produced during the period.
Marginal cost can be calculate by the total cost divided by the numbers of unit.
Marginal Cost of last bucking = Daily Wage / Marginal Product of Last worker
Marginal Cost of last bucking = $60 / 12 bucking
Marginal Cost of last bucking = $5 per bucking
Answer:
a
Explanation:
For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $984,000. Selected information for 2021 from Fidelity’s records follows: Interest income on municipal governmental bonds $ 40,000 Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement 64,000 Carrying amount of depreciable assets in excess of their tax basis at year-end 104,000 Warranty expense reported on the income statement 30,000 Actual warranty expenditures in 2021 20,000 Fidelity's income tax rate is 25%. At January 1, 2021, Fidelity's records indicated balances of zero and $10,000 in its deferred tax asset and deferred tax liability accounts, respectively. Required: 1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry. 2. What is Fidelity’s 2021 net income?
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
1).
Particular Amount ($) Tax rate Tax amount($)
Accounting income $984,000
Less-Interest income on municipal bond -$40,000
Income to taxation $944,000 $0.25 $236,000
Less-tax return in excess of depreciation -$64,000 0.25 $16,000
Warranty expenses($30,000-$20,000) $10,000 0.25 $2,500
Taxable income $890,000 0.25 $222,500
Now
Journal Entry
Income tax expense A/c Dr.$236,000
Deferred tax asset A/c Dr.$2500
To Deferred tax liability A/c $16,000
To Income tax payable A/c $222,500
(Being the income tax expense for 2021 is recorded )
2 .Net Income of Fidelity = Accounting Income - Income Tax Expense
= $984,000 - $236,000
= $784,000
Final answer:
The total income tax expense for Fidelity Engineering is $252,000, considering both permanent and temporary differences. The net income for the year ended December 31, 2021, is $732,000 when subtracting the tax expense from the pretax accounting income.
Explanation:
Calculating Income Taxes and Net Income for Fidelity Engineering:
To calculate the income taxes for 2021, we need to consider the temporary differences that will reverse in the future, such as the excess depreciation on the company's tax return and the difference in warranty expense reporting. Additionally, we need to consider the permanent difference from the interest income on municipal bonds, which is not taxable.
Here are the steps and journal entry for the income taxes:
Permanent difference adjustment: Subtract the interest income on municipal bonds from the pretax accounting income: $984,000 - $40,000 = $944,000.Temporary difference adjustment: Add the excess tax depreciation back to the adjusted pretax income: $944,000 + $64,000 = $1,008,000.Calculate the total tax expense at Fidelity's tax rate: $1,008,000 x 25% = $252,000.Record the tax expense: Debit Income Tax Expense $252,000, Credit Deferred Tax Liability $16,000 (difference between book and tax depreciation), Credit Taxes Payable $236,000.The net income for 2021 for Fidelity Engineering is then calculated as follows:
Pretax Accounting Income - Tax Expense = Net Income
$984,000 - $252,000 (calculated from step 3 above) = $732,000.
g On January 1, 2021, Tiny Tim Industries had outstanding $1,000,000 of 11% bonds with a book value of $966,500. The indenture specified a call price of $983,000. The bonds were issued previously at a price to yield 13% and interest payable semi-annually on July 1 and January 1. Tiny Tim called the bonds (retired them) on July 1, 2021. What is the amount of the loss on early extinguishment?
Answer:
The loss on early extinguishment is $8677.5
Explanation:
First of all,one needs to compute the carrying value of the bond as at the date of the call in order to determine the loss on early redemption.
carrying value =book value+interest expense-coupon payment
book value is $966,500
interest expense=$966,500*13%*6/12=$62,822.50
coupon payment=$1000,000*11%*6/12=$55,000
carrying value=$966,500+$62,822.50-$55,000=$ 974,322.50
Loss on redemption =call price -carrying value of the bond
call price is $983,000
loss on early redemption=$983,000-$974,322.50 =$8,677.5
American Chemical Company manufactures a chemical compound that is sold for $56 per gallon. A new variant of the chemical has been discovered, and if the basic compound were processed into the new variant, the selling price would be $80 per gallon. American expects the market for the new compound variant to be 8,700 gallons initially and determines that processing costs to refine the basic compound into the new variant would be $139,200.
Required:
a. What would be the effect on total profit if American produces the new compound variant?
b. Should American produce the new compound variant?
Answer:
Further processing gives additional net income of $69,600
It is highly recommended that American Chemical Company should produce the new compound variant
Explanation:
The below incremental income analysis would help us decide whether producing the new variant is worthwhile.
Sales price of the new variant $80
less:sales price of chemical compound ($56)
incremental sales price $24
Total incremental revenue($24*8700) $ 208,800
less:incremental processing costs ($139,200)
incremental net income $ 69,600
By processing the old chemical to give the new compound variant American Chemical Company would record increase in net income of $ 69,600,hence it would be unwise if the company refuse to produce the new compound variant
Calvin purchased a 40% partnership interest for $43,000 in February 2017. His share of partnership income in 2017 was $22,000, in 2018 was $25,000, and in 2019 was $12,000. He made no additional contributions to or withdrawals from the partnership. On December 18, 2019, Calvin sold his partnership interest for $103,000. What is his gain or loss on the sale of his partnership interest?
Answer:
Calvin would have a long-term capital gain of $1000.
Explanation:
Calvin's contributions towards partnership is as below
Beg $43,000
2010 income $22,000
2011 income $25,000
2010 income $12,000
Total contribution $102,000
Total amount Calvin realized by selling his partnership interest = $103,000.
Therefore, Calvin would have a long-term capital gain of $1000 (amount Calvin realized - Calvin's contributions = $103,000 - $102,000).
Jan is 62 and is considering retiring soon. She has $680,000 in a fund paying interest at an annual rate of 4.2% compounded continuously. She would like to withdraw a fixed amount continuously after she retires, and have a balance of $80,000 when she is 90 years old. Assume a continuous money flow, then she can spend $ _______ each month. (Round the answer to an integer at the last step.)
Answer:
She can spend $ 3,323 each month
Explanation:
Jan's current age = 62 years, Retirement age = 90 years, n = 90 - 62 = 28 years
The total amount of balance she should have at 90 years = $80,000
PV is Present Value
PV of this amount = 80,000 x e-r x n = 80,000 x e-4.2% x 28 = 24,680.83
PV of amount available for withdrawal = 680,000 - 24,680.83 = $ 655,319.17
Effective monthly rate, rm = er x 1/12 - 1 = e4.2% x 1/12 - 1 = 0.3506%
If Q is the amount she can spend each month till 28 years i.e. 28 x 12 = 336 months, then PV of Q as annuity = $ 655,319.17
Q / rm x [1 - (1 + rm)-336] = Q / 0.3506% x [1 - (1 + 0.3506%)-336] = 655,319.17
Q x 197.2229383 = 655,319.17
Q = 3,322.73
Therefore, she can spend $ 3,322.73 each month
Abril has developed a plan for her team to reach their yearly goal of increased productivity. She has put together a variety of charts and diagrams to help the team visualize her plan. The team resides in the main company building so she can assemble them in the conference room to go over her plan. What is the best communication channel for her to use to convey her plan to her team?
Answer:
A presentation.
Explanation:
Presentation can be defined as a process of dispensing information about a particular topic to a group of audience. This type of communication channel helps to inform and inspire individuals about a new idea.
Presentation is used to engage the audience about new projects and strategies that should be carried out to ensure the overall growth of the business.
In the scenario above, Abril needs to use a presentation to communicate to her team the strategies she wants to employ inorder to increase productivity.
g "Slack, Inc. had an IPO on June 1, 2019 and sold 275m shares with par value of $0.03 for $37.50/share. What is the journal entry Slack records on June 1, 2019? Group of answer choices DR Common Stock $8.25m; DR PIC-Common Stock $10,304.25m; CR Cash $10,312.50m DR Cash $10,312.50m; CR Common Stock $8.25m; CR PIC-Common Stock $10,304.25m DR Cash $10,312.50m; CR Common Stock $10,312.50m DR Common Stock $10,312.50m; CR Cash $10,312.50"
Answer:
The correct option here is the second one,DR Cash $10,312.50m; CR Common Stock $8.25m; CR PIC-Common Stock $10,304.25m
Explanation:
The cash realized from the initial public offer(IPO)=275 m shares*$37.50=$10,312.5 million
The par value of the 275 million shares=275 million*$0.03=$8.25 million
The paid capital in excess of par value=($37.50-$0.03)*275 million=$10,304.25 million
The appropriate accounting entries would to debit cash with total proceeds of $10,312.5 million
Credit common stock with $8.25 million
As well as crediting paid-in capital in excess of par value with $10,304.25
Which of the following best represents deep-level similarity? employees who seek challenges in assignments and like to work collaboratively employees in their mid-thirties with 10 years' work experience in the publishing industry employees who speak Spanish and share similar religious values colleagues who both hail from the same neighborhood in Alabama employees who are college graduates with a degree in business management
Answer:
Employees who seek challenges in assignments and like to work collaboratively.
Explanation:
Deep-Level similarities can be defined as similarities in personal characteristics such as personality, values, and attitudes. These similarities differ from the surface-level similarities and are more powerful. Deep-level similarities are more psychological based than physical.
From the given options the one that exemplifies the deep-level similarity is the first option. The similarity is based on the psychological or personal characteristics of the employee. The quality of seeking challenges in assignments and working collaboratively reveals the personality of the employee, thus, it is the correct answer.
So, the correct answer is the first option.
Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments (Mixing Department & Packaging Department.) Annapolis uses a step allocation method where the Computer Operations Department is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Computer Operations has costs of $140,000 and Maintenance Services has costs of $115,000 before any allocations. What amount of Maintenance Services total cost is allocated to the Mixing Department? (round to closest whole dollar) Employees are: Computer Operations 4 Maintenance Services 4 Mixing Department 5 Packaging Department 8
Answer:
$56,900
Explanation:
Compt. Maint. Mixing Packaging
Dept Cost 140,000 115,000
Cost allocation 32941 41177 65882
(Computer)
Cost allocation
(Maintenance) 56900 91041
Total 98077 156923
Workings.
Computer department cost allocation
Maintenance department = 4/17*140000 =32941
Mixing department = 5/17*140000 =41177
Packaging department = 8/17*140000= 65882
Maintenance department cost allocation
Total cost allocated = 147941
Mixing department = 5/13*147941 = 56900
Packaging department = 8/13*147941 =91041
The Mixing Department of the Annapolis Company will be allocated approximately $44,231 of the total Maintenance Services cost, based on the proportion of its employees to the total number of employees in the production departments.
Explanation:The Maintenance Services costs will be divided equally between the Mixing Department and the Packaging Department as those are the two production departments. Given that there are 5 employees in the Mixing Department and 8 in the Packaging Department, this constitutes a total of 13 production employees.
Each department's allocation will be based on the proportion of its employees to the total number of employees. For the Mixing Department, this is 5/13 or about 38.4615% (rounded to the nearest tenth of a percent). Therefore, the Mixing Department will be allocated about 38.4615% of the total Maintenance Services cost of $115,000.
Applying this percentage to the total cost, the allocation for the Mixing Department is approximately $44,231 (rounded to the nearest whole dollar).
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Common stock, $1 par value Shares outstanding, 1/1/2021 60,000 2-for-1 stock split, 4/1/2021 Shares issued, 7/1/2021 30,000 Preferred stock, $10 par value, 6% cumulative Shares outstanding, 1/1/2021 12,000 How many shares should Tb use to calculate 2021 basic earnings per share?
Answer:
75,000 shares
Explanation:
earnings per share (EPS) = (net income - preferred dividends) / weighted average shares outstanding
net income = ???preferred dividends = $10 x 6% x 12,000 = $7,200weighted average shares outstanding = [60,000 + (120,000 x 9/12)] / 2 = (60,000 + 90,000) / 2 = 75,000 sharesSince the shares split to 120,000 on April, their relative weight at the end of the year is 9/12 x 120,000 = 90,000. That is why the average shares = (beginning number of outstanding shares + ending number of outstanding shares) / 2 = 75,000
Answer:
120,000 shares
Explanation:
We will use weighted average numbers of outstanding shares.
Outstanding numbers of shares are those share which are issued in the market by the company and still being traded in the market. Treasury stock is excluded from the total issued share to calculate the total outstanding numbers of share.
Stock split increase the numbers of shares with a specific given ratio but the common equity value remains same that's why the par value of the share decreases with respective ratio.
4/1/2021
Shares after stock split
Outstanding numbers of shares = 60,000 shares x 2 / 1 = 120,000
7/1/2021
Shares after issuance
Outstanding numbers of shares = 120,000 shares + 30,000 shares = 150,000 shares
Now calculate the weighted average numbers of shares
1/1/2021-3/31/2021 60,000 x 3/12 = 15,000
4/1/2021-6/30/2021 120,000 x 3/12 = 30,000
7/1/2021-12/31/2021 150,000 x 6/12 = 75,000
Weighted average outstanding shares 120,000
Jonathan owns 20 percent of Moment Corporation, a partnership, for $200,000 cash on January 1, 2018. During the year, Moment Corporation reports a loss of $120,000 and pays cash dividends to shareholders of $10,000. During 2019, Moment Corporation has income of $400,000 and pays cash dividends of $80,000. Jonathan's basis in the Moment Corporation stock at the end of 2019 is:
Answer:
$238,000
Explanation:
Using an equity approach where the worth of one's investment is computed by taking initial amount invested,then add the share of profit from the business(deduct share of losses) as well as deducting the amount received in cash dividends,Jonathan's basis in the Moment Corporation stock can be computed thus:
Jonathan's Basis in 2018:
Opening basis $200,000
share of reported losses($120,000*20%) ($24,000)
Share of dividends($10,000*20%) ( $2,000)
ending basis $174,000
Jonathan's basis in 2019
Opening basis $174,000
share of net income($400,000*20%) $80,000
share of dividends($80,000*20%) ($16,000)
ending basis $238,000
A company is projected to have a free cash flow of $261 million next year, growing at a 7% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.0% in perpetuity. The company's cost of capital is 11.7%. The company owes $64 million to lenders and has $33 million in cash. If it has 111 million shares outstanding, what is your estimate for its stock price
Answer:
Stock Price = 26.08 USD per Stock.
Explanation:
Free cash flow in next year = 261 million USD
Free cash flow in year 2 (including the growth rate) = 261 + 18.27 = 279.27 million USD (7% growth rate)
Free Cash flow in year 3 = 279.27 + 19.55 = 298.81 million USD (7% growth rate)
Free Cash flow in year 4 (2% in Perpetuity) = 298.81 + 5.97 = 304.78 million USD
Now, we have to calculate the terminal value in year 3:
Terminal value in year 3 = Free cash flow in year 4 / (Cost of Capital - Perpetual Growth)
Terminal value in year 3 = 304.78/ (0.117 - 0.02) = 3142.06 million USD.
In order to calculate the stock price of the company, we need to find the value of the firm first.
Value of Firm:
[tex]\frac{261}{1.117}[/tex] + [tex]\frac{279.27}{(1.117)^{2} }[/tex] + [tex]\frac{298.81}{(1.117)^{3} }[/tex] + [tex]\frac{3142.06}{(1.117)^{3} }[/tex]
233.66 + 223.82 + 214.40 + 2254.52
Value of the firm = 2926.4 million USD
Now, it is time to calculate the stock price of the company.
Stock price = (Value of the firm - Debt + Cash ) ÷ Number of Shares
Stock Price = (2926.4 - 64 + 33) ÷ 111
Stock Price = (2895.4) ÷ 111
Stock Price = 26.08 USD per Stock.
Kane Company’s employees earn vacation time at the rate of 1 hour per 40-hour work period. The vacation pay vests immediately (that is, an employee is entitled to the pay even if employment terminates). During 2021, total salaries paid to employees equaled $880,000, including $17,000 for vacations actually taken in 2021 but not including vacations related to 2021 that will be taken in 2022. All vacations earned before 2021 were taken before January 1, 2021. No accrual entries have been made for the vacations. No overtime premium and no bonuses were paid during the period. The adjusting entry for vacations earned but not taken in 2021 will:
Answer and Explanation:
The Journal entry is shown below:-
Vacation Benefits Expense Dr, $4,575
($21,575 - $17,000)
To Vacation Benefits Payable $4,575
(Being benefit earned but not taken is recorded)
Working Note
The total wages earned excluded benefit paid
= $880,000 - $17,000
= $863,000
Actual vacation benefit
= $863,000 × 1 ÷ 40
= $21,575
Bridgeport Company is presently testing a number of new agricultural seeds that it has recently harvested. To stimulate interest, it has decided to grant to five of its largest customers the unconditional right of return to these products if not fully satisfied. The right of return extends for 4 months. Bridgeport estimates returns of 15%. Bridgeport sells these seeds on account for $1,390,000 (cost $764,500) on January 2, 2017. Customers are required to pay the full amount due by March 15, 2017.
Prepare the journal entry for Bridgeport at January 2, 2017.
Answer:
1/2/2017
Dr Accounts Receivable $1,390,000
Cr Sales Revenue $1,390,000
Dr Cost of Goods Sold $764,500
Cr Inventory $764,500
Explanation:
Bridgeport Company Journal entry
1/2/2017
Dr Accounts Receivable $1,390,000
Cr Sales Revenue $1,390,000
Dr Cost of Goods Sold $764,500
Cr Inventory $764,500
Zero Corp. suffered a loss having a material effect on its financial statements as a result of a customer’s bankruptcy that rendered a trade receivable uncollectible. This bankruptcy occurred suddenly because of a natural disaster 10 days after Zero’s balance sheet date but 1 month before the issuance of the financial statements and the auditor’s report. Under these circumstances, theA.Financial Statement should be adjusted B.No action C.Events require footnote disclosure, but not adjustment to financial statements D.Auditor report should be modified for a lack of consistency
Answer:
Events require footnote disclosure, but not adjustment to financial statements.
Explanation:
A balance sheet is the statement of the financial position of a business at a particular period in time. So in this scenario if the balance sheet has already been prepared and bankruptcy occurred suddenly because of a natural disaster 10 days after Zero’s balance sheet date but 1 month before the issuance of the financial statements and the auditor’s report.
This requires a disclosure of the event after the balance sheet date. The event is a subsequent occurence and as such does not affect the balance sheet report.
The exception is when a subsequent event provides additional evidence of financial position as at the balance sheet date.
This is not the case here so only disclosure will be made.
Answer:
C. Event require footnote disclosure, but not adjustment to financial statement
Explanation:
IAS 10 represents the accounting standard that govern the scenario under analysis - events after the reporting date.
Zero Corp suffered a loss having a material effect on their books, owning to customers bankruptcy. However, this bankruptcy erupted suddenly after the balance sheet date, but one month before the issuance of the financial statements and the auditor's report.
The scenario under consideration is a non adjusting event simply because it existed just after the balance sheet date. Going by IAS 10 stipulations, a non adjusting event only require a disclosed, especially seeing that the implications have s material effect on the going concern of the organization. Thus, the disclosure in this case, will ensure a description of:
1. The nature of the event
2. The effect on the financial statement.
The organization will do well to update its disclosure requirements, and ensure it take cognizance of any other conditions that existed after the balance sheet date, but before issuance.
MC Qu. 47 Chang Industries has... Chang Industries has 1,800 defective units of product that have already cost $13.80 each to produce. A salvage company will purchase the defective units as they are for $4.80 each. Chang's production manager reports that the defects can be corrected for $6.20 per unit, enabling them to be sold at their regular market price of $20.60. The incremental income or loss on reworking the units is: Multiple Choice $17,280 loss. $25,920 income. $11,160 loss. $28,440 income. $17,280 income.
Answer:
The correct answer is:
$17,280 income
Explanation:
First, let us lay out the relevant information:
Total defective units = 1800
salvage company price per unit = $4.80
Total income expected from salvage company = 4.8 × 1800 = $8,640
Reworking cost per unit = $6.20
selling price per unit after reworking = $20.60
Net selling price per unit after reworking = selling price - reworking cost
= 20.60 - 6.20 = $14.40
∴ Total income from selling after reworking = 14.4 × 1800 = $25,920
To calculate for the increment or loss on the income gotten from both options, we will calculate the difference between both options as follows:
Increment or loss on income from reworking = total income from reworking - total income from salvage company
= 25,920 - 8,640 = $17,280 income. (note that a loss is not made from reworking because the total income from reworking is greater than that gotten from the salvage company)
Alpha Company began operations on January 1 with cash of $75,000. All of January's $150,000 sales were on account. During January no customer collections occurred. Cost of goods sold was $40,000, and there was no ending inventories or any accounts payables.
Required:
1. Use this information to determine the ending balance of cash on hand for January. (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)
Answer:
$35,000
Explanation:
From then information given, all sales were on account and no customer collections occurred in January, yet goods at a cost of $40,000 were sold. This means that the profit made in January
= $150,000 - $40,000
= $110,000
Since inventory and accounts payable are nil balances, it means the goods sold were purchased with cash. Hence the ending balance of cash on hand is the difference between the beginning cash balance and the amount of cash spent in the purchase of goods sold.
ending balance of cash on hand
= $75,000 - $40,000
= $35,000
MC Qu. 112 A company is considering... A company is considering the purchase of new equipment for $105,000. The projected annual net cash flows are $41,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 8% return on investment. The present value of an annuity of $1 for various periods follows: Period Present value of an annuity of $1 at 8% 1 0.9259 2 1.7833 3 2.5771 What is the net present value of this machine assuming all cash flows occur at year-end
Answer:
Net Present Value = $660.98
Explanation:
The Net present value (NPV) is the difference between the Present value (PV) of cash inflows and the PV of cash outflows. A positive NPV implies a good and profitable investment project and a negative figure implies the opposite.
NPV of an investment:
NPV = PV of Cash inflows - PV of cash outflow
PV of cash inflow = A× (1- (1+r)^(-n))/r
A- annul cash inflow, r- 8%, n- 3
PV of cash inflow= 41,000× (1- 1.08^(-3))/0.08
= 105,660.98
Initial cost = 105,000
NPV = 105,660.98 - 105,000
= $ 660.98
Staley Inc. reported the following data: Net income $300,200 Depreciation expense 76,000 Loss on disposal of equipment 20,600 Increase in accounts receivable 27,600 Increase in accounts payable 10,100 Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
Answer:
Explanation:
The Preparation of Cash Flows from Operating Activities is shown below:-
Net income $300,200
Depreciation expense $76,000
Loss on disposal of equipment $20,600
Increase in accounts receivable -$27,600
Increase in accounts payable $10,100
Net cash provided by
operating activities $379,300
An FI has a $100 million portfolio of six-year Eurodollar bonds that have an 8 percent coupon. The bonds are trading at par and have a duration of five years. The FI wishes to hedge the portfolio with T-bond options that have a delta of −0.625. The underlying long-term Treasury bonds for the option have a duration of 10.1 years and trade at a market value of $96,157 per $100,000 of par value. Each put option has a premium of $3.25 per $100 of face value. a. How many bond put options are necessary to hedge the bond portfolio? b. If interest rates increase\
Answer:
A. 823.74
B.$4,614,028.00 gain
C.-$4,629,629.63
D.$2,678,000
Explanation:
a.
Np= Bond Portfolio Value/δ*B*D
=$100,000,000/-0.625*-10.1*$96,157
=823.74
Approximately 824 Contract
b.
A $100,000 20-year, eight percent bond selling at $96,157 implies a yield of 8.4 percent.
∆P = ∆p * Np= 824 * -0.625 * -10.1/1.084 * $96,157 * 0.01 = $4,614,028.00 gain
c.
∆PVBond= -5 * .01/1.08 * $100,000,000 = -$4,629,629.63
d.
The price quote of $3.25 is per $100 of face value. Hence the cost of one put contract will be $3,250 while the cost of the hedge
= 824 contracts * $3,250 per contract
= $2,678,000.
Final answer:
The bond's present value is calculated using discounted cash flows and decreases if the market interest rates rise. If the discount rate rises from 8% to 11%, the bond's value decreases from its face value to less than that, meaning the purchaser would pay less than the bond's face value. Similarly, for a bond worth $1,000 in a market with 12% interest rate, the maximum price to be paid would be $964.29.
Explanation:
To determine the present value (PV) of a bond, we apply the present value formula to each cash flow (interest and principal repayment) and sum them up. For a bond paying an annual interest rate of 8% with face value $3,000, the yearly interest payment is $240 (8% of $3,000). The bond also repays the principal of $3,000 at the end of year two.
If the discount rate is the same as the bond's coupon rate (8%), the bond is worth its face value, which in this case is:
PV of first-year interest = $240 / (1 + 0.08) = $222.22
PV of second-year interest plus principal = ($240 + $3,000) / (1 + 0.08)^2 = $2,777.78
Total PV = $222.22 + $2,777.78 = $3,000
If interest rates rise to 11%, the bond's value decreases as future cash flows are discounted at a higher rate. The new calculation is:
PV of first-year interest = $240 / (1 + 0.11) = $216.22
PV of second-year interest plus principal = ($240 + $3,000) / (1 + 0.11)^2 = $2,630.63
Total PV = $216.22 + $2,630.63 = $2,846.85
Therefore, with an interest rate increase, the present value of the bond decreases from $3,000 to $2,846.85, which is less than the face value of the bond. This indicates that you would pay less than $3,000 to purchase the bond after the rate increase.
For a bond originally worth $1,000, with an expected payment of $1,080 a year from now and a market interest rate of 12%, the price you should be willing to pay would not exceed the sum that would grow to $1,080 in one year at that interest rate. So, the maximum price would be:
PV = $1,080 / (1 + 0.12) = $964.29 (rounded to two decimal places)
Therefore, the bond's price would be less than its face value when market interest rates are above the bond's coupon rate.
The common stock of Eddie's Engines, Inc., sells for $36.83 a share. The stock is expected to pay a dividend of $2.80 per share next year. Eddie's has established a pattern of increasing their dividends by 4.9 percent annually and expects to continue doing so. What is the market rate of return on this stock
Answer:
12.53%
Explanation:
To find the market rate of return, we divide the expected dividend of the stock ($2.80) and divide it by the price of the share ($36.83), we then sum the result with the expected percentage increase of the dividend (4.9% or 0.049)
2.8 / 36.83 + 0.049 = 0.1253
= 12.53%
Village Bank has $350 million worth of assets with a duration of 12 years and liabilities worth $301 million with a duration of six years. In the interest of hedging interest rate risk, Village Bank is contemplating a macrohedge with interest rate T-bond futures contracts now selling for 103-22 (30nds). The T-bond underlying the futures contract has a duration of nine years. If the spot and futures interest rates move together, how many futures contracts must Village Bank sell to fully hedge the balance sheet
Answer:
-2591.
Explanation:
From the question, we are given that Village Bank's assets,A = $350 million, duration for the assets,DA = 12 years, Village Bank's liabilities,L = $301 million, duration for the liabilities,DL = six years and the interest rate T-bond futures contracts now selling for 103-22 (30nds) and T-bond underlying the futures contract has a duration of nine(9) years.
The numbers of futures contracts must Village Bank sell to fully hedge the balance sheet is;
= - [ DA - (L/A) DL × A].
= - [ 12 - (301/350) × 6] × 350,000,000.
= - [ 12 - (0.86 × 6] × 350,000,000.
= - [ 12 - 5.16] × 350,000,000.
= - 2394000000.
Also, T-bond underlying the futures contract duration × price of future contract.
[ price of future contract = 100000 × 102 (20/30) = 102666.66667].
= 9 × 102666.66667 = 924000.00003.
Then, the numbers of futures contracts must Village Bank sell to fully hedge the balance sheet is;
= - 2394000000 ÷ 924000.00003.
= -2590.90909082497.
= - 2591.
Jamison Company developed the following reconciling information in preparing its June bank reconciliation: Cash balance per bank, 6/30 $13,000 Note receivable collected by bank 4,000 Outstanding checks 7,000 Deposits-in-transit 2,500 Bank service charge 35 NSF check 1,900 Using the above information, determine the cash balance per books (before adjustments) for the Jamison Company. a. $8,065 b. $10,565 c. $15,065 d. $6,435
Final answer:
The cash balance per books for Jamison Company before adjustments is $10,565. It is found by adjusting the cash balance per bank of $13,000 with deposits in transit, note receivable collected by the bank, outstanding checks, bank service charges, and an NSF check.
Explanation:
To determine the cash balance per books (before adjustments) for the Jamison Company, we need to use the reconciling information provided to adjust the cash balance per bank. We start with the cash balance per bank and make the necessary deductions and additions based on the reconciling items.
The cash balance per bank on 6/30 is $13,000. We need to add any deposits that are in transit since these have been recorded by the company but are not yet reflected in the bank balance. We also add any notes receivable collected by the bank as these increase the company's cash balance. On the other hand, we must subtract any outstanding checks, bank service charges, and NSF (non-sufficient funds) checks, as these will decrease the company's cash balance.
Thus, we calculate the cash balance per books as follows:
Cash balance per bank: $13,000
Add: Deposits-in-transit: $2,500
Add: Note receivable collected by bank: $4,000
Subtract: Outstanding checks: -$7,000
Subtract: Bank service charges: -$35
Subtract: NSF check: -$1,900
Therefore, the cash balance per books (before adjustments) is:
$13,000 + $2,500 + $4,000 - $7,000 - $35 - $1,900 = $10,565
During the current year, High Corporation had 4.8 million shares of common stock outstanding. $7,725,000 of 16% convertible bonds were issued at face amount at the beginning of the year. High reported income before tax of $5.8 million and net income of $4.8 million for the year. The bonds are convertible into 805,000 shares of common. What is diluted EPS (rounded)?
Answer:
$1.07 per share
Explanation:
As we know
Earning per share = Net Income / Outstanding numbers of shares
Tot calculate the diluted EPS we need to add diluted income in the net income and diluted numbers of shares in outstanding numbers of share.
Formula for Diluted EPS
Diluted EPS = Total Income / Diluted Numbers of share
Tax for the period = Income before tax - Income after tax = $5.8 million - $4.8 million = $1 million
Tax rate = ($1 million / 5.8 million) x 100 = 17.24%
Total Income = Net Income after tax + Diluted income = $4.8 million + ( 7,725,000 x 16% x ( 1 - 17.24%) = $4,800,000 + 1,022,914 = $5,822,914
Diluted Numbers of share = Common stock outstanding + Diluted shares = 4,800,000 + 625,000 = 5,425,000 shares
Placing value in the formula
Diluted EPS = $5,822,914 / 5,425,000
= $1.07 per share
Money, Inc., a calendar year S corporation in Denton, Texas, has two unrelated shareholders, each owning 50% of the stock. Both shareholder record a $400,000 stock basis as of January 1. At the beginning of the tax year, Money reports balances in AAA of $300,000 and AEP of $600,000. During the year, Money generates operating income of $100,000. At the end of the year, Money distributes securities worth $1,000,000, with an adjusted basis of $800,000. The two shareholders consent to an AAA bypass election. What is the Federal income tax effects of these transactions for the shareholders? If an amount is zero, enter "0". Each shareholder receives a $ taxable distribution and a $ tax-free distribution from AAA. The AAA is $ at the end of the year, and each shareholder's basis is $ . AEP is reduced to $ .
Answer:
Both shareholder has $200,000 of dividend income resulting from the distribution.
Explanation:
Solution
Given that:
Now,
When the securities are issued, there will be a gain recognized of $200,000 to Money Inc. thus, The $200,000 = $1 million - $800,000.
The AAA will increase by $200,000.
This gain known will flow through to the two shareholders of Money Inc. as 50% is owned by both shareholders and the stock amount for each shareholder will be $200,000/2 = $100,000.
so, the basis of stock for each shareholder will increase by $100,000.
Now,
The distribution before AAA of securities the result will be = 300,000+100,000+200,000 = $600,000.
Then,
A $1 million distribution will be acted on first as coming first from AAA to the extent of $600,000.the amount balanced will be $1 million - $600,000 = $400,000. This will be serve as coming from AEP.
so,
The AAA is = 600,000 – 600,000 = 0.
The basis for each shareholder before distribution will be = 400,000+100,000+50,000 = 550,000.
The portion of non taxable of the above distribution = 300,000 from AAA.
Hence,the basis = 550,000 – 300,000 =250,000
Therefore, each shareholder has $200,000 of dividend income resulting from the distribution.
Journalize the following transactions for Shelton, Inc (a) Incurred direct labor costs of $23,200 for 3,410 hours. The standard labor cost was $24,041. (b) Assigned 3,410 direct labor hours costing $23,200 to production. Standard hours were 3,580. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 125.) No. Account Titles and Explanation Debit Credit (a) (b)
Final answer:
The transactions for Shelton, Inc involve journalizing the direct labor costs incurred and accounting for the labor variance between actual and standard costs. No additional entry is needed for assigning the labor hours to production.
Explanation:
The question pertains to journalizing direct labor costs for Shelton, Inc, as presented in two parts, (a) and (b). It involves analyzing the incurred direct labor costs and the standard labor costs for the number of hours worked to perform the task, and how these hours are assigned to production, considering both actual and standard hours.
Journal Entry for part (a):
Work in Process (Debit): $23,200
Labor Variance (Debit/Credit): Amount to reconcile with standard cost ($24,041 - $23,200)
Wages Payable (Credit): $23,200
If the actual cost is lower than the standard, the variance is credited; if higher, it is debited.
Journal Entry for part (b):
There is no additional journal entry needed for part (b) since the costs have already been assigned to production in part (a).
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) The term "plant assets" refers to long-lived assets acquired for use in business 1) operations, rather than for resale to customers. 2) If a piece of equipment is dropped and damaged during installation, the cost of 2) repairing the damage should be added to the cost of the equipment. 3) Sales tax on equipment is not part of the acquisition cost and should not be 3) capitalized. 4) To "capitalize" an expenditure means to charge it to an asset account. 4) 5) A revenue expenditure is recorded in an expense account. 5)
Answer:
1. T
2. T
3. F
4. T
5. T
Explanation:
Cost of equipment usually contains the cost in acquiring the equipment and the cost accumulated in putting the equipment into work( such include installation and an repairs done during that).
Sale tax is a part of acquisition cost.
item are usually capitalized when it is recorded as an asset, instead of an expense. What this shows is that expenditure would be in the balance sheet, instead on the income statement.
Answer: 1. True
2. False
3. False
4. True
5. True
Explanation:
1) The term "plant assets" refers to long-lived assets acquired for use in business operations, rather than for resale to customers.
- True.
These are fixed assets that are to be used in the business for operations and not assets to be sold to the public.
2) If a piece of equipment is dropped and damaged during installation, the cost of repairing the damage should be added to the cost of the equipment.
- False
Only expenses related to the Acquisition and Installation of the asset should be capitalized as well as extraordinary repairs. Every other expense should be treated as revenue Expenditure and taken to the income statement.
3) Sales tax on equipment is not part of the acquisition cost and should not be capitalized.
- False
Sales Tax should be capitalized as it is considered a cost of Acquisition as it is part of the money a company pays for an asset.
4) To "capitalize" an expenditure means to charge it to an asset account.
-True
When an expenses is said to be Capitalized, it is to be charged or rather debited to an asset account as part of the asset.
5) A revenue expenditure is recorded in an expense account.
- True
Revenue Expenditure are meant to serve an asset for a short period of time and as such are expensed in the period they are incurred. They are expensed normally and put into an Expense account.
23. In an interest rate swap between AAA who wants to convert fixed rate loan to floating-rate loan and BBB who wants to convert floating-rate loan to fixed-rate loan: A) AAA Will pay floating rate and receive fix rate for the term of the swap contract B) AAA Will pays fix rate and receive floating rate for the term of the swap contract C) BBB Will pay floating rate and receive fix rate for the term of the swap contract D) BBB Will receive fix rate and pay floating rate for the term of the swap contract
Answer:
d
Explanation:
i just got it right