Answer:
The current value placed on AXP is $ 45.08
Explanation:
Dividend currently paying = $ 0.80
Growth rate up to 5 years = 10.54%
Expected dividend for 1st year = $0.80 × 1.1054 = $0.88
Year Dividend amount Present Value at 15%
0 0.8
1 0.88 0.77
2 0.98 0.74
3 1.08 0.71
4 1.19 0.68
5 1.32 0.66
Growth rate = 13.21% from 6th year and onward
Expected dividend for 6th year = $1.32 × 1.1321 = $1.49
Value of the AXP at 5th year with constant growth at 13.21%
= $1.49 ÷ (0.15 - 0.1321)
= $83.51
Value of the AXP currently = P.V. of dividend payable in first 5 years + Present Value at 5th year at 15%
= $0.77 + $ 0.74 + $ 0.71 + $ 0.68 + $0.66 + ($83.51 × 0.4971 )
= $ 45.08
Assume the Macro Islands can produce 25 fishing boats or 150 jars of guava jelly in one hour. The Micro Islands can produce 30 fishing boats or 300 jars of guava jelly in the same time period. This data tells an economist that:________. a. the Macro Islands have an absolute advantage in producing fishing boats and the Micro Islands have an absolute advantage in producing guava jelly. b. the Micro Islands have an absolute advantage in producing fishing boats and the Macro Islands have an absolute advantage in producing guava jelly. c. the Macro Islands have a comparative advantage in producing fishing boats and the Micro Islands have a comparative advantage in producing guava jelly. d. the Micro Islands have a comparative in producing fishing boats and the Macro Islands have a comparative advantage in producing guava jelly. the Micro Islands have a comparative and absolute advantage in producing fishing boats.
Answer:
The correct answer is the option C: the Macro Islands have a comparative advantage in producing fishing boats and the Micro Islands have a comparative advantage in producing guava jelly.
Explanation:
To begin with the term of ''comparative advantage'' is refer to the quality of one country in comparison with another to produce in a better way, a more eficient way, a good. Therefore that when a country has a comparative advantage over another country it means that the first country can produce more of a good with less resources that the second country.
That is why, that the Macro Islands have a comparative advantage in producing fishing boats over the Micro islands due to the fact that there is a very little difference with the other country meanwhile the Micro Islands have a comparative advatange in the production of guava jelly due to the amount of goods that it can produce in the same amount of time with the great amount difference in comparison with the Macro Islands. Therefore that one country chooses to produce the good in which it is better in comparison with the other.
The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $55,000 $50,000 Useful life 12 years 15 years Estimated residual value $5,000 $6,000 Estimated total income over the useful life $57,600 $63,000 Determine the expected average rate of return for each project.
Answer:
Project Average rate of return
A 16%
Z 15%
Explanation:
The average rate of return (ARR) is the proportion of the average investment that is earned as profit.
Average rate of return(ARR) = average operating income/ Average investment
Project A=
Average income = 57,600/12 = 4800
Average investment = (55,000 + 5,000)/2 = 30000
ARR = 4,800/30,000 × 100 = 16%
Projecr Z
Average income = 63,000/15= 4200
Aveage investment = (50,000 + 6,000)/2= 28,000
ARR = 4,200/28,000× 100 = 15%
All of the following are part of comprehensive income except:
a. realized gains on sale of available-for-sale-securities.
b. unrealized holding gains on available-for-sale-securities.
c. a re-classification adjustment for gains included in net income.
d. all of these answer choices are correct.
Answer: d. all of these answer choices are correct
Explanation:
Available for sale securities are held by a firm with the intention of selling it before it reaches its maturity date.
So as not to report on the income statement wrongly, the Unrealized gains(losses) which are any fluctuations from the original price, throughout the Security's lifetime is posted to the Other Comprehensive Income account in the Equity section of the balance sheet. That along with the Realized gains when the security is sold.
Reclassification adjustments are also included to account for the reclassification of a security to either a profit or a loss.
All of the above are correct.
Martha was considering starting a new business. During her preliminary investigations, she incurred the following expenditures:
Salaries $22,000
Travel 18,000
Professional fees 13,000
Interest on a short-term note 4,000
Martha begins the business on July 1 of the current year. If Marth elects \SS 195 trearment, determine her startup expenditure deduction for the current year.
Answer:
$3,700
Explanation:
The computation of startup expenditure deduction for the current year is shown below:-
According to the section 195, the tax payer is eligible for an immediate deduction of startup expenditure or 5,000 decreased amount that exceeds $50,000
The amount left over of start up expense is eligible for amortization over 180 months starting from the month when the tax payer business started
Immediate deduction = $5,000 - Start up cost in excess of $50,000
= $5,000 - $3,000
= $2,000
The $3,000 come from
= $53,000 - $50,000
= $3,000
now,
Amortized deduction = ((Total start up cost - Immediate deduction) ÷ 180 months) × Total number of months from beginning July to ending December
= (($53,000 - $2,000) ÷ 180) × 6 months
= 283.33 × 6
= $1,700 approx
and
Start up cost = Salary expenses + Travel expenses + Professional fees
= $22,000 + $18,000 + $13,000
= $53,000
finally
Total deduction in the current year = Immediate deduction + Amortized deductions
= $2,000 + $1,700
= $3,700
On June 1, Kareem sends Fatima an e-mail offering to build her a new garage for $20,000. In his e-mail, Kareem wrote, "acceptance by certified mail is advisable." On June 2 at 8 a.m., Kareem sends Fatima a certified letter attempting to revoke the offer. At 2 p.m. the same day, Fatima mails Kareem a letter via certified mail attempting to accept his offer. Under these circumstances, _____.
Answer:
B. Fatima's acceptance is effective upon dispatch
Explanation:
The option B is correct as it is mentioned in the question that acceptance by certified mail is advisable that implies if the parties have mail each other than the contract should be accepted
Therefore in the given case, the certified mail is accepted when it is dispatched that results into an acceptance of Fatima i.e tp be effective
Hence, the second option is correct
Inventory records for Dunbar Incorporated revealed the following: Date Transaction Number of Units Unit Cost Apr. 1 Beginning inventory 490 $ 2.49 Apr. 20 Purchase 410 2.72 Dunbar sold 600 units of inventory during the month. Ending inventory assuming FIFO would be
Answer:
$816
Explanation:
Calculation for Dunbar Incorporated Ending inventory
Formula for Ending inventory units using FIFO method:
Ending inventory units = Beginning balance + Purchase -sales
Leg plug in the formula
490+410 - 600
= 300units
Calculation for Ending inventory
Ending inventory = 300*2.72
= $816
Therefore the Ending inventory assuming FIFO method is use would be $816
Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold 13,000 Selling price per unit $ 16 Variable selling expense per unit $ 2 Variable administrative expense per unit $ 3 Total fixed selling expense $ 21,000 Total fixed administrative expense $ 15,000 Beginning merchandise inventory $ 11,000 Ending merchandise inventory $ 25,000 Merchandise purchases $ 88,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.
Answer:
1. Gross margin is $134,00; and Net profit is $33,000.
2. Contribution margin is $69,000; and Net profit is $33,000.
Explanation:
To prepare the statements, the following calculations are done first:
Sales revenue = Number of units sold * Selling price per unit = 13,000 * $16 = $208,000
Variable selling expenses = Number of units sold * Variable selling expense per unit = 13,000 * $2 = $26,000
Total selling expenses = Variable selling expenses + Total fixed selling expense = $26,000 + $21,000 = $47,000
Variable administrative expense = Number of units sold * Variable administrative expense per unit = 13,000 * $3 = $39,000
Total administrative expense = Variable administrative expense + Total fixed administrative expense = $39,000 + $15,000 = $54,000
Cost of goods sold = Beginning merchandise inventory + Merchandise purchases - Ending merchandise inventory = $11,000 + $88,000 - $25,000 = $74,000
The statements are now prepared as follows:
1. Prepare a traditional income statement.
The purpose of the traditional income statement is to obtain the gross margin and the net profit. These can be obtained as follows:
Cherokee Inc.
Traditional income statement
Details $
Sales 208,000
Cost of goods sold (74,000)
Gross margin 134,000
Selling and Admin. Expenses:
Selling expenses (47,000)
Administrative expense (54,000)
Net profit 33,000
2. Prepare a contribution format income statement
The purpose of the contribution format income statement is to obtain the contribution margin and the net profit. These can be obtained as follows:
Cherokee Inc.
Contribution format income statement
Details $
Sales 208,000
Variable expenses:
Cost of goods sold (74,000)
Selling expenses (26,000)
Administrative expense (39,000)
Contribution margin 69,000
Fixed expenses:
Selling expenses (21,000)
Administrative expense (15,000)
Net profit 33,000
Note:
Note that under both methods, the net profit is the same. This always holds no matter the method used.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Amount Number of units sold 13,000
Selling price per unit $16
Variable selling expense per unit $2
Variable administrative expense per unit $3
Total fixed selling expense $21,000
Total fixed administrative expense $15,000
Beginning merchandise inventory $11,000
Ending merchandise inventory $25,000
Merchandise purchases $88,000
First, we need to calculate the cost of goods sold:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
COGS= 11,000 + 88,000 - 25,000= 74,000
1) Traditional income statement:
Sales= 13,000*16= 208,000
COGS= (74,000)
Gross profit= 134,000
Total selling expense= (2*13,000) + 21,000= (47,000)
Total administrative expense= (3*13,000) + 15,000= (54,000)
Net operating income= 33,000
2) Contribution format income statement:
Total variable cost= (3 + 2)*13,000 + 74,000= $139,000
Sales= 208,000
Total variable cost= (139,000)
Contribution margin= 69,000
Total fixed selling expense= (21,000)
Total fixed administrative expense= (15,000)
Net operating income= 33,000
Concord Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $36500. During 2020, it wrote off $30500 of accounts and collected $8600 on accounts previously written off. The balance in Accounts Receivable was $780000 at 1/1 and $940000 at 12/31. At 12/31/20, Concord estimates that 5% of accounts receivable will prove to be uncollectible. What should Concord report as its Allowance for Doubtful Accounts at 12/31/20
Answer:
$32,400
Explanation:
According to the situation for computation of Allowance for Doubtful Accounts at 12/31/20 first we need to find out the actual balance which is shown below:-
Actual balance = Beginning Balance of Allowance + Amount reinstated - Amount written off + Uncollectible account expenses
= $36,500 + $8,600 - $30,500
= $14,600
Ending balance of Allowance = Balance of accounts receivables × Accounts receivable percentage at 12/31 - Actual balance
= $940,000 × 5% - $14,600
= $47,000 - $14,600
= $32,400
Therefore for reaching the ending balance of allowance we simply applied the above formula.
Software Distributors reports net income of $48,000. Included in that number is depreciation expense of $6,500 and a loss on the sale of land of $4,300. A comparison of this year's and last year's balance sheets reveals a decrease in accounts receivable of $18,000, a decrease in inventory of $11,500, and an increase in accounts payable of $38,000.
Required:Prepare the operating activities section of the statement of cash flows using the indirect method.
Answer:
Net cash from operating activities is $126,300.
Explanation:
Statement of cash flows
(Operating activities section only)
Details $
Net income 48,000
Adjustment to reconcile net income:
Depreciation expense 6,500
Loss on the sale of land 4,300
(Increase) decrease in current assets:
Decrease in accounts receivable 18,000
Decrease in inventory 11,500
Increase (decrease) in current liabilities:
Increase in accounts payable 38,000
Net cash from operating activities 126,300
Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,200. What is the bond's nominal yield to maturity
Answer:
10%
Explanation:
This can be calculated using the nominal yield to maturity (YTM) formula as follows:
Yield to maturity = [C + ((F - P) / n)] / [(F + P) / 2] ........ (1)
Where;
F = Face or par value = $1,000
C = Coupon or interest payment = $1,000 * 13% = $130
P = quoted price = $1,200
n = Years to maturity = 10
Substituting the values into equation (1), we have:
Yield to maturity = [130 + ((1,000 - 1,200) / 10)] / [(1,000 + 1,200) / 2] = 0.10, or 10%.
Ben lives in an apartment building next to a children’s park. He is in his apartment when a baseball flies in through the window and lands in his room. Which of the following statements is true of this scenario?
1. Ben must return the baseball to the owner immediately as it is not an object of great value.
2. Ben can keep the baseball because of the rule of first possession.
3. The owner of the apartment building must take the final decision as the baseball landed on his premises.
4. The owner of the baseball can exercise his right of eminent domain and claim the baseball.
5. The baseball must be turned over to police and can only be claimed after a week has passed.
Answer:
1. Ben must return the baseball to the owner immediately as it is not an object of great value.
Explanation:
The owner of the baseball is still the rightful owner because he was the one who purchased the item. He does not lose ownership of the baseball simply because it landed on Ben's apartment.
Ben has not right to claim ownership of the baseball, and he must return it to the owner immediately.
Journalize the following five transactions for Nexium & Associates, Inc. Omit explanations.
March 1 - Bills are sent to clients for services provided in February in the amount of $800.
March 9 - Corner Office, Inc. delivers office furniture ($1,060) and office supplies ($160) to Nexium leaving an invoice for $1,220.
March 15 - Payment is made to Corner Office, Inc. for the furniture and office supplies delivered on March 9.
March 23 - A bill for $430 for electricity for the month of March is received and will be paid on its due date in April.
March 31 – Salaries of $850 are paid to employees.
For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".
Answer:
Nexium & Associates Journal entries
March 1
Dr Accounts Receivable800
Cr Service Revenue 800
March 9
Dr Office Furniture1,060
Cr Office Supplies 160
Cr Accounts Payable1,220
March 15
Dr Accounts Payable1,220
Cr Cash1,220
March 23
Dr Electricity Expense430
Cr Accounts Payable430
March 31
Dr Salaries Expense850
Cr Cash850
Explanation:
The details given about Nexium & Associates are straight forward and required no further
adjustment.
Answer:
Explanation:
Journal to record the five transactions for Nexium and Associates, Inc.
Account Particulars Debit Credit
March 1
Accounts Receivable $800
Services Revenue $ 800
March 9
Office Furniture $1,060
Office Supplies 160
Accounts Payable 1,220
March 15.
Accounts Payable 1,220
Cash 1,220
March 23.
Electricity Expense $430
Accounts Payable $430
March 31
Salaries Expense $850
Cash $850
SCC Co. reported the following for the current year:
Net sales $ 59,000
Cost of goods sold $ 48,800
Beginning balance in inventory $ 3,100
Ending balance in inventory $ 9,100
Compute (a) inventory turnover and (b) days’ sales in inventory.
Hint: Recall that inventory turnover uses average inventory, and days’ sales in inventory uses the ending balance in inventory."
Answer:
a. The inventory turnover is 8.00 times
b. The days’ sales in inventory is 68 days
Explanation:
a. In order to calculate the inventory turnover we would have to use the following formula:
inventory turnover=cost of goods sold/average inventory
inventory turnover=$ 48,800/($3,100+$ 9,100)/2
inventory turnover=8.00 times
b. In order to calculate thedays’ sales in inventory we would have to use the following formula:
days’ sales in inventory=(Ending invenory/cost of goods sold)*365
days’ sales in inventory=($9,100/$48,800)*365
days’ sales in inventory=68 days
You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 16 % over the current amount of 102 comma 000 units. If your sales price is $ 19 per unit, what are the incremental revenues next year from the upgrade?
Answer:
$310,080
Explanation:
Incremental revenue refers to the additional revenue generated by a certain project or activity. In this case, your sales should increase by 16% from 102,000 units to 118,320 units. Total revenue will increase from $1,938,000 (= 102,000 x $19) to $2,248,080 (= 118,320 x $19).
The incremental revenue = $2,248,080 - $1,938,000 = $310,080
An end-of-aisle price promotion changes the price elasticity of a good from −2 to −3. Suppose the normal price is $34, which equates marginal revenue with marginal cost at the initial elasticity of –2. What should the promotional price be when the elasticity changes to –3? (Hint: In other words, what price will equate marginal revenue and marginal cost?)
Answer:
MC = $17
P = $25.5
Explanation:
We proceed as follows;
Firstly calculate MC when e = -2, where MR = MC
(P-MC) / P = 1 / IeI
Here P = $34 and e = -2
(34 - MC) / 34= 1/ I-2I
(34 - MC) / 34= 1 / 2
78-2MC = 34
2MC = 34
MC = 34/2
MC = 17
Now, as we have MC, we will calculate the new price when e = -3
(P-MC) / P = 1 / IeI
(P - 17) / P = 1 / I-3I
(P - 17) / P = 1 / 3
3P -51 = P
2P = 51
P = 51/2
P = 25.5
The annual premium for a $ 15 comma 000 15,000 insurance policy against the theft of a painting is $ 300 300. If the (empirical) probability that the painting will be stolen during the year is 0 . 03 .03, what is your expected return from the insurance company if you take out this insurance?
Answer:
P(x)=0.97
E(x)=$150
Explanation:
The expected return from the insurance company if the I nsurance is taken out will be:
A.Let assume x is the random variable for the amount received from the Insurance company.
Therefore:
x =$300-$0
=$300-$15,000
P(x)=1-0.03=0.97
P(x)=0.03
B.
E(x)=0.97×$300-$14,700×0.03
=$291-$441
=$150
The price of coffe beans use to make coffee has decreased. At the same time, the price of cream (a compliment good) has increased. Given these two effects, what will happen to the current equilibrium quantity and price of coffee?
A. Equilibrium quantity will increase, equilibrium price will increase.
B. Equilibrium price will increase; the effect on quantity is ambiguous.
C. Equilibrium quantity will decrease; the effect on price is ambiguous.
D. Equilibrium price will decrease; the effect on quantity is ambiguous.
Answer:
The correct answer is:
Equilibrium price will decrease; the effect on quantity is ambiguous. (D)
Explanation:
First, note that if the price of coffee beans, used in the manufacture of coffee decreases, the price of coffee sold to consumers will decrease, because it takes a lesser amount in manufacturing than it used to, therefore this reduction in manufacturing costs is reflected in the selling price.
Next, it is hard to tell whether this reduction in equilibrium price will affect quantity demanded, because, at the same time, the price of cream ( a complementary good) increases, and since both goods are complementary, they are bought together, and the effect of the reduction in the price of coffee might not necessarily caused an increase in the quantity demanded because this effect is cancelled out by the increase in the price of cream, hence the effect on quantity is ambiguous.
Isabella files her income tax return 35 days after the due date of the return without obtaining an extension from the IRS. Along with the return, she remits a check for $40,000, which is the balance of the tax she owes.Note: Assume 30 days in a month.Disregarding the interest element, enter Isabella's failure to file penalty and and failure to pay penalty.
Answer:
a. Failure to pay penalty = 400
b. Failure to file penalty = $4,000
Explanation:
The monthly rate for failure to pay penalty is 0.5% while the failure to file penalty.
Since it is assumed that there are 30 days in a month, the 35 days after the due date of the return without obtaining an extension from the IRS is will be counted as 2 months regardless of the fact that the second month is just 5 files when she filed.
Therefore, we have:
a. Failure to pay penalty = $40,000 * 0.5% * 2 = 400
b. Failure to file penalty = ($40,000 * 5% * 2) = $4,000
c. Total penalties = (Failure to file penalty - failure to pay penalty for the same period) + Failure to pay penalty = ($4,000 - $400) + $400 = $4,000.
Therefore, the total penalty Isabella will pay is $4,000.
Suppose that an issuing bank pays on documents that are conforming to the requirements of the letter of credit, but the seller has shipped worthless goods to the buyer. Which of the following statements, if any, are true?
a. As long as the documents strickly comply with the letter of credit requirements, the bank will not have to reimburse the buyer
b. If there is fraud in the transaction, the bank will have to reinburse the buyer and seek its remedies against the seller
c. The strick compliance insulates the bank from liability, since it assures the bank that the underlying contract between the buyer and seller is entirely independent from the letter of credit contract
d. A and B
Answer:
the answer C
Explanation:
As long as the documents strickly comply with the letter of credit requirements, the bank will not have to reimburse the buyer
b. If there is fraud in the transaction, the bank will have to reinburse the buyer and seek its remedies against the seller
c. The strick compliance insulates the bank from liability, since it assures the bank that the underlying contract between the buyer and seller is entirely independent from the letter of credit contract
Larkspur, Inc. purchased a delivery truck with a $44000 list price. The company was given a $4200 cash discount by the dealer and paid $2200 sales tax. Annual insurance on the truck is $1000. As a result of the purchase, by how much will Larkspur, Inc. increase its truck account
Answer:
Larkspur Inc. will increase its truck account by: $43,000.
Explanation:
Step I
To arrive at the above, we need to make the necessary additions and deductions:
Purchase Price = $44,000
Less cash discount of $4,200. Therefore, the final offer is
$44,000-$4,200 = $39,800.
Step II - Calculate the final value truck by applying Sales Tax
Final sales value amount plus sales tax
$39,800 + $2,200 = $ 42 000
Step III - Calculate Total cost to company by adding cost of insurance of the vehicle.
$ 42 000 + $1,000 = $ 43,000
Therefore the total cost of the truck the company is $43,000.
Cheers!
Terry's father loaned her $15,000 for college expenses. Terry agreed to repay the $15,000 in a lump sum 5 years after graduation. No interest was to be charged. Terry, who is now a senior, has the prospects of marrying a rather wealthy man and wishes to repay the loan on graduation day. Assuming that father can invest the money at 12% interest, how much should he be willing to accept on graduation day rather than waiting 5 years for his money
Answer:
PV= $8,511.40
Explanation:
Giving the following information:
Final value= 15,000
Number of years= 5 years
Interest rate= 12%
We need to calculate the present value of the $15,000. We will use the following formula:
FV= PV*(1+i)^n
Isolating PV:
PV= FV/(1+i)^n
PV= 15,000/1.12^5
PV= $8,511.40
Joe operates a business that locates and purchases specialized assets for clients, among other activities. Joe uses the accrual method of accounting but he doesn’t keep any significant inventories of the specialized assets that he sells. Joe reported the following financial information for his business activities during year 0.
Determine the effect of each of the following transactions on the taxable business income. (Select "No Effect" from the dropdown if no change in the taxable business income.)
a. Joe has signed a contract to sell gadgets to the city. The contract provides that sales of gadgets are dependent upon a test sample of gadgets operating successfully. In December, Joe delivers $13,950 worth of gadgets to the city that will be tested in March. Joe purchased the gadgets especially for this contract and paid $9,750.
No effect? Amount of deduction? Amount of income ?
b. Joe paid $305 for entertaining a visiting out-of-town client. The client didn’t discuss business with Joe during this visit, but Joe wants to maintain good relations to encourage additional business next year.
No effect? Amount of deduction? Amount of income ?
c. On November 1, Joe paid $650 for premiums providing for $65,000 of "key man" insurance on the life of Joe’s accountant over the next 12 months.
No effect? Amount of deduction? Amount of income ?
d. At the end of year 0, Joe’s business reports $12,750 of accounts receivable. Based upon past experience, Joe believes that at least $2,750 of his new receivables will be uncollectible.
No effect? Amount of deduction? Amount of income ?
e. In December of year 0, Joe rented equipment to complete a large job. Joe paid $6,750 in December because the rental agency required a minimum rental of three months ($2,250 per month). Joe completed the job before year-end, but he returned the equipment at the end of the lease.
No effect? Amount of deduction? Amount of income ?
f. Joe hired a new sales representative as an employee and sent her to Dallas for a week to contact prospective out-of-state clients. Joe ended up reimbursing his employee $550 for airfare, $600 for lodging, $500 for meals, and $400 for entertainment (Joe provided adequate documentation to substantiate the business purpose for the meals and entertainment). Joe requires the employee to account for all expenditures in order to be reimbursed.
No effect? Amount of deduction? Amount of income ?
g. Joe uses his BMW (a personal auto) to travel to and from his residence to his factory. However, he switches to a business vehicle if he needs to travel after he reaches the factory. Last month, the business vehicle broke down and he was forced to use the BMW both to travel to and from the factory and to visit work sites. He drove 245 miles visiting work sites and 96 miles driving to and from the factory from his home. Joe uses the standard mileage rate to determine his auto-related business expenses. (Round your answer to whole number. Use standard mileage rate.)
No effect? Amount of deduction? Amount of income ?
h. Joe paid a visit to his parents in Dallas over the Christmas holidays. While he was in the city, Joe spent $175 to attend a half-day business symposium. Joe paid $450 for airfare, $150 for meals during the symposium, and $95 on cab fare to the symposium.
No effect? Amount of deduction? Amount of income ?
Answer: Please refer to Explanation
Explanation:
a. No Effect on Taxable Income.
First off Joe's income is only dependent on if the test is successful. Even if it were, the test would only be conducted in year 1 March not in year 0 which is the focus of this question. Taxes are only paid when cash is received.
b. No Effect on Taxable Income.
Had there been a business discussion, Joe would have been able to claim a 50% deduction in Tax. However since there was none, there is no effect on Tax.
c. No effect on Taxable Income
The insurance is not tax deductible.
d. $12,750 in taxable income.
Even Joe believes that $2,750 of income might not be collected, he cannot deduct this from taxes until it actually happens therefore his increase in income is $12,750.
e. $2,250 reduction in taxable income
The $6,750 was paid for 3 months. Joe uses Accrual accounting however meaning that expenses have to be recorded for the period they are incurred. $2,250 was incurred for December and so that is the amount that will be deducted as an expense for the year.
f. $1,600 reduction in Taxable income.
If the representative brings back receipts that are in order, Joe can be able to reimburse her for $1,600 in expenses. This includes $550 for airfare, $600 for lodging and for food and entertainment, the maximum he can claim as deductible in tax is 50% of each which means $250 for meals and $200 for entertainment. Adding all that up will give $1,600.
g. $139.15 reduction in Taxable income
Joe drove 96 miles to and fro the factory to his house. This is not tax deductible and considered personal. He however drove 245 miles visiting company sites. This is tax deductible.
The standard rate for 2020 according to the IRS is 57.5 cents per mile so 245 * 57.5 cents per mile will give $139.15.
h. $345 reduction in taxable income
Joe spent $175 to attend to symposium. He also paid $95 in taxi fare to get to the symposium. He ate meals worth $150 during the symposium not which 50% is deductible. 50% being $75. Adding all these together is,
= 175 + 95 + 75
= $345.
This is the taxable reduction.
Real-Balances Effect Household Expectations Interest-Rate Effect Personal Income Tax Rates Profit Expectations National Incomes Abroad Government Spending Answer the question based on the accompanying list of factors that are related to the aggregate demand curve. Changes in which two of the factors would most likely cause a shift in aggregate demand due to a change in consumer spending.
Answer: Household Expectations
Personal Income Tax Rates
Explanation:
The Aggregate Demand curve can shift as a result of Consumer Spending, Government Spending, Investment Spending or Net Export spending.
When the AD shifts due to a change in Consumer Spending, the reasons are usually related to individuals in the economy including Households.
One of the reasons there may be a shift is due to changes in Household Expectations.
If a Household expects an Economic variable such as Inflation to change in the future, it might inspire them to act now to take advantage of it. For example, if a Household expects that car prices will rise in future, they may decide to buy a car now instead so as not to pay a higher amount in future thus increasing demand and shifting the AD curve Right.
Another reason could be the Personal Income Tax rate. Taxes reduce the amount that people have after they are paid. A change in personal income tax rates therefore is a change in people's income. If Personal Tax rates were to reduce for instance, that would mean that people would have more money to spend and they might consume this extra money. This would increase Consumption and therefore shift the AD curve Right.
The stock of Nogro Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely.
A. Assuming the current market price of the stock reflects its value, what rate of return do Nogro’s investors require?
B. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested?
C. What is the PVGO for this company?
D. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price?
E. What did you notice about the relationship between Nogro’s dividend payout policy and its price?
F. What do you think is the reason for such relationship?
Answer:
Check below for the solution.
Explanation:
A) Earning Per Share, EPS = $2
Dividend Pay out ratio = 50%
Required rate of return = (Expected Dividend next year / Current selling price) + Growth Rate
Expected Dividend per share next year = EPS x Dividends pay-out ratio
Expected Dividend per share next year = $2 x 50% = $2 * 0.5
Expected Dividend per share next year = $1
Return on Equity, ROE = EPS / Current selling price
ROE = $2 / $10 = 0.20 = 20%
Growth Rate = ROE x (1-Dividend pay-out ratio)
Growth Rate = 0.20 x (1-0.50) = 0.10 = 10%
Required Rate of Return = (Expected Dividend next year / Current selling price) + Growth Rate
Required Rate of Return = ($1 / $10) + 0.10 = 0.20 = 20%
B) If all the earnings are paid as dividends, there won’t be any amount left to invest for growth and hence there won’t be any growth in the company. Also, since the required Rate of Return is equal to its ROE, there won’t be any changes.
C) Present Value of Growth Opportunity (PVGO) = 0
This is because with all earnings paid out as dividends, there won’t be any growth and the required rate of return will be equal to the ROE.
D) Since the ROE is equal to required rate of return, there won’t be any impact of cutting down the dividends pay-out. The residual income with lesser pay-out ratio will be invested by the company in available projects that is expected to earn 20% and ROE is also same. Since, there is no changes in the earnings figures, the stock price would remain $10.
E) There is no relationship between Nogro’s dividend payout policy and its price as no impact is experienced in its share prices due to change in its dividend policy.
F) This is because the ROE and the required rate of return are equal.
A new equipment has been proposed by engineers to increase the productivity of a welding operation of a local fabrication plant. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $10,000 per year after operating costs have been subtracted from the revenue generated by the additional production. If MARR is 12%, is investing in this equipment feasible
Answer:
NPV =$13,884.89
Investing the the equipment id feasible because it has a positive NPV, thus implies that it will increase the wealth of the company by $13,884.8963
Explanation:
The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite.
NPV of an investment:
NPV = PV of Cash inflows - PV of cash outflow
Initial cost = 25,000
Present value of the cash inflow
PV of annuity= 1 -(1+r)^(-n)/r × Annual cash flow
A-10,000, r- 12%, n- 5
PV of annual cash inflow = 10,0000× (1- (1.12^(-5)/0.12=36,047.762
Present Value of Scrap value
PV = S×× (1+r)^(-n)
S- scrap value , n- 5, r 12%
PV of scrap Value = 5,000 × (1.12)^(-5)= 2,837.13
NPV= 36047.76202+ 2837.134279 - 25,000= 13,884.89
NPV =$13,884.89
Investing the the equipment id feasible because it has a positive NPV, thus implies that it will increase the wealth of the company by $13,884.8963
The standard deviation from investing in the asset is: (Round to the nearset hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.))
Here is the complete question.
State of the Economy Probability of Percentage Returns
the States
Economic recession 25% 5%
Moderate economic growth 55% 10%
Strong economic growth 20% 13%
The standard deviation from investing in the asset is: (Round to the nearest hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.))
Answer:
standard deviation from investing in the asset is: 2.76
Explanation:
From the information given above; the main task to do is to calculate for the standard deviation from investing in the asset ,but in order to do that; we must first determine the expected return value and the variance.
The expected return can either be the profit or loss the investor predict to get after investing on an instrument. It can be determined by multiplying the potential outcomes by the chances of them occurring and then totaling these results.
Here;
the potential outcome = Probability of the States
chances of them occurring = Percentage Returns
∴
Expected return = (0.25 × 5%) + (0.55 × 10%) + (0.20 × 13%)
Expected return = (1.25 + 5.5 + 2.6)%
Expected return = 9.35%
Variance = 0.25 × (5% - 9.35%)² + 0.55 × (10% - 9.35%)² + 0.20 × (13% - 9.35%)²
Variance = 0.25 ( -4.35%)² + 0.55 (0.3575%)² + 0.20 (3.65%)²
Variance = 0.0473 + 0.0023 + 0.0266
Variance = 0.0763
Finally; the standard deviation = [tex]\sqrt{variance}[/tex]
standard deviation = [tex]\sqrt {0.0763[/tex]
standard deviation = 0.276
To the nearest hundredth percent and by answering in the percent format without including the % sign ; we have
standard deviation = 2.76
Constable Co. reported the following information at December 31, Year 1: Accounts Payable $ 6,750 Accounts Receivable 14,025 Cash 35,235 Common Stock 135,000 Equipment 74,250 Inventory 46,800 Notes Payable due December 31, Year 3 3,750 Retained Earnings, December 31, Year 1 21,135 Wages Payable 3,675 What is the amount of current assets on the classified balance sheet? Multiple Choice $123,255 $96,060 $170,310 $49,260
Answer:
$ 96,060
Explanation:
The current assets are accounts receivable,cash and inventory.
The are short term assets that are used in settling short term obligations such as accounts payable and salaries payable.
Accounts receivable amounted to $14,025
Cash amount is $35,235
Inventory is worth $46,800
Current assets value=$14,025+$35,235+$46,800=$ 96,060.00
The correct option is the second one with amount of $ 96,060 for current assets
Erosion can best be explained as the:
A. loss of current sales due to a new project being implemented.
B. loss of revenue due to employee theft.
C. additional income generated from the sales of a newly added product.
D. loss of revenue due to customer theft.
Answer:
A. loss of current sales due to a new project being implemented.
Explanation:
In business, erosion takes place when a new product or project competes with another product or project from the came company. This "internal" competition reduces the revenues and benefits from existing products or projects. It is basically a form of business cannibalization, where the left arm takes away from the right arm. E.g. newer smartphone models decrease the sales revenue from existing (older) models.
________ can track customer satisfaction directly, measure repurchase intention and also gauge a consumer's willingness to recommend the company and brand to others.
A) Periodic surveys
B) Mystery shoppers
C) Customer loss rates
D) Customer focus statements
E) Sales summary reports
Answer:
A) Periodic surveys
Explanation:
The periodic survey is the survey which takes place after delivering the product and services to the customer. It can be in the form of customer feedback with respect to the satisfaction level, repurchase intention, worth of mouth, etc
By maximizing the customer satisfaction the company can able to achieve their sales targets that results into capture a maximum share in the market
Hence, the first option is correct
A perfectly elastic demand function A. shows that a consumer is willing to pay any amount for the product. B. has a marginal revenue that is always decreasing. C. is characteristic of an individual firm operating in a perfectly competitive market. D. shows that the individual firm can increase sales by lowering the price of output.
Answer:
C. is characteristic of an individual firm operating in a perfectly competitive market.
Explanation:
Demand is perfectly elastic if the coefficient of elasticity is infinite. It means thay consumers would only buy at one price. Once that price changes, demand falls to zero.
A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply.
If a seller decides to increase the price of his good in a perfect competition, demand falls to zero and reducing price woild lead to losses.
I hope my answer helps you
