Answer:
With the production 5000 units the plant will achieve it's break even point
Explanation:
Solution
The break even points is the point in a business when the total revenue is exactly the same to the equal expenditure.
The formula is given below:
D' = Cy/(p-cy)
Here
D' =the demand at break even point
p = the selling price
cy= the variable costs per unit
Cy = the total fixed cost
Thus
The total cost of the plant = $100,000
The variable costs = $140,000
The net sales = $280,000
The selling price per unit = $40
The total no units sold per year is given as :
Annual sale (units) = Total sales/Sale per unit
Now,
By the method of substitution we have the following.
Annual sale (units) = $280,000/40
=7000 units/year
The formula for variable cost per unit cy is
cy = Cy/Annual sale (units)
Now,
We substitute in the above equation the value of Cy as $140,000 and annual sale as 7000 units/per year
cy = $140,000/7000
=$20 units
For the demand at break even point D', we have the following:
D' = Cy/(p-cy)
We We substitute in the above equation the value of Cy as $100,000 and p as $40/unit and cy as $20 /unit
D' = 100000/(40 -20)
=5000 units/year
"In July, one of the processing departments at Okamura Corporation had beginning work in process inventory of $13,000 and ending work in process inventory of $18,000. During the month, the cost of units transferred out from the department was $148,000. In the department's cost reconciliation report for July, the total cost to be accounted for under the weighted-average method would be:"
Answer:
The total cost to be accounted for under the weighted-average method is $166,000
Explanation:
Okamura Corporation Partial Manufacturing Account
Particulars Amount
Cost of ending work in process inventory $18,000
Add: Cost of units transferred out $148,000
Total cost accounted for $166,000
The total cost to be accounted for under the weighted-average method is $166,000
The following transactions occur for Badger Biking Company during the month of June:
a. Provide services to customers on account for $36,000.
b. Receive cash of $28,000 from customers in (a) above.
c. Purchase bike equipment by signing a note with the bank for $21,000.
d. Pay utilities of $3,600 for the current month.
Required:
Analyze each transaction and indicate the amount of increases and decreases in the accounting equation.
Answer:
A pdf file is attached to show the effect of each transaction on accounting equation, Please find it.
Explanation:
Accounting equation is
Assets = Equity + Liabilities
a.
The services are performed on account means that the revenue of $36,000 is recorded against the receivable of the same value.
b.
Receiving cash will increases the cash balance as an asset and reduces the receivable value.
c.
Bike Equipment are assets and it will increase the value of assets and Note payable is a liability instrument which will increase the liabilities.
d.
Utilities payment will decrease the cash in the assets section and reduce the equity balance as an expense.
On January 1, 2020, Milwaukee Corporation issued $3,000,000 of its 20-year, 8% bonds payable at 96. Interest is payable annually on January 1. The entry to accrue interest on December 31, 2020 would include a
Answer:
It will include credit to discount on bonds payable for $6,000
Explanation:
Solution
Given that
Issue price of bond = $3,000,000 * 96%
Issue of bond =$ 2,880,000
Thus,
The discount of bond payable = $3,000,000 - $ 2,880,000
=$120,000
Amortization of discount of bond payable = $120,000/20
=$6,000
Now,
We prepare an entry to accrue interest which is given below:
Entry to accrue interest
Date Account Titles and Explanation Debit Credit
31-12-2020 Interest expense $246,000
discount of bond payable $6,000
Interest payable $240,000
(To record the interest accrued)
Some construction company has bought a product for $200,000 with a life of three years, and a salvage value of $10,000. Tabulate depreciation and book value using MACRS, Double Declining Balance and straight-line methods. Which method gives the company the largest depreciation after two years?
Answer:
The method that gives the company the largest depreciation after two years is MACRS.
Explanation:
According to given data Under MACS depreciation would be provided for 4 years and the salvage value of the asset would be reduced to zero .
Year depreciation rate Deprecation Book value at the end of the year
1 33.33% 66660 (33.33 % of 200000) 133340
2 44.45% 88900 (44.45 % of 200000) 44440
3 14.81% 29620 (14.81 % of 200000) 14820
4 7.41% 14820 (7.41 % of 200000) 0
Straight line method
The amount of depreciation remains same for three years. The depreciation amount is calculated as
=Original cost- Salvage value / life
= 200000-10000 /3
= 63333.3 $
Year Depreciation Book value at the end of the year
1 63333.33 136666.7
2 63333.33 73333.34
3 63333.33 10000.01
Double declining balance method
Under this method the depreciation is charged at double the rate of straight line method .
Depreciation rate under SLM = 100% / 3 = 33.33 %
DDB method rate = 2* 33.33% = 66.66%
Year Book value at the beginning Depreciation Book value at the end
1 200000 133320 (66.66% of 200000) 66680
2 66680 44448.89 (66.66% of 66680) 22231.11
3 22231.11 14819.26 (66.66% of 22231.11) 7411.853
The largest depreciation is given by MACRS method after two years which is 88900
During 2021, a company sells 500 units of inventory for $95 each. The company has the following inventory purchase transactions for 2021:Calculate cost of goods sold and ending inventory for 2021 assuming the company uses the weighted-average cost method
Answer:
cost of goods sold = $36,285
ending inventory = $1,742
Explanation:
when you use the weighted average cost method you have to calculate the COGS using the total number of units and the total amount paid for them.
beginning inventory = 71 units for $5,325
purchase 1 = 262 units for $18,864
purchase 2 = 187 units for $13,838
total 524 units for $38,027
cost per unit = $38,027 / 524 units = $72.57
cost of goods sold = 500 units x $72.57 = $36,285
ending inventory = 24 units x $72.57 = $1,741.68 ≈ $1,742
A company uses a process costing system. Its Welding Department completed and transferred out 100,000 units during the current period. The ending inventory in the Welding Department consists of 30,000 units (75% complete with respect to direct materials and 40% complete with respect to conversion costs). Determine the equivalent units of production for the Welding Department for direct materials and conversion costs assuming the weighted average method.
Answer and Explanation:
The computation of equivalent units of production for direct materials and conversion costs is shown below:-
Direct material Conversion
Completed 100,000 100,000
Ending Work in progress
Direct material 22,500
(30,000 × 0.75)
Conversion 12,000
(30,000 × 0.40)
Equivalent Units of
Production 122,500 112,000
So, to reach the equivalent units of production of direct material we simply added the completed and transferred out units with direct material and for conversion we added the completed and transferred out units with conversion units.
Askew Company uses a periodic inventory system. The June 30, 2018, year-end trial balance for the company contained the following information: Account Debit Credit Merchandise inventory, 7/1/17 32,800 Sales 388,000 Sales returns 12,800 Purchases 248,000 Purchase discounts 6,800 Purchase returns 10,800 Freight-in 18,600 In addition, you determine that the June 30, 2018, inventory balance is $40,800. Required: 1. Calculate the cost of goods sold for the Askew Company for the year ending June 30, 2018. 2. Prepare the year-end adjusting entry to record cost of goods sold.
Answer and Explanation:
a. The computation of the cost of goods sold is shown below:
Beginning inventory $32,800
Add: Net purchase
Purchase $248,000
Less: Purchase discount -$6,800
Less: Purchase returns -$10,800
Add: Freight in $18,600
Total net purchased $249,000
Less: ending inventory -$40,800
Cost of goods sold $241,000
2. The year end adjusting entry is
Cost of goods sold Dr $241,000
Ending inventory Dr $40,800
Purchase discount Dr $6,800
Purchase returns Dr $10,800
To Beginning inventory $32,800
To Purchase $248,000
To freight in $18,600
(Being the cost of goods sold is recorded)
Suppose your company reports $160 of net income and $40 of cash dividends paid, and its comparative balance sheet indicates the following. Beginning Ending Cash $ 35 $ 205 Accounts Receivable 75 175 Inventory 245 135 Total $ 355 $ 515 Salaries and Wages Payable $ 10 $ 50 Common Stock 100 100 Retained Earnings 245 365 Total $ 355 $ 515 Required: Prepare the operating activities section of the statement of cash flows, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Answer and Explanation:
The preparation of the operating activities section of the cash flow statement using the indirect method is shown below:
Cash flow from operating activities
Net income $160
Add or less adjustments made
Less Increase in account receivable $100 ($175 - $75)
Add: Decrease in inventory $110 ($245 - $135)
Add: Increase in salaries and wages payable $40 ($50 - $10)
Net cash provided by operating activities $210
The cash inflow represents in a positive sign and cash outflow represents in negative sign
The operating activities section of the statement of cash flows, using the indirect method is $210.
Cash flow from operating activities
Net income $160
Increase in account receivable ($100)
($175 - $75)
Decrease in inventory $110
($245 - $135)
Increase in salaries and wages payable $40
($50 - $10)
Net cash flow from operating activities $210
Inconclusion the operating activities section of the statement of cash flows, using the indirect method is $210.
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Solve accepted a 60-day, 9 percent note from Pete Houghton in settlement of his past-due account for $6,000. On April 9, Westwood Company discounted the note at the First National Bank. The bank charged a discount rate of 12 percent. What is the amount of the proceeds
Missing information:
The note was accepted on March 10
Answer:
$6,029.10
Explanation:
in order to answer the question, I assumed a 360 day year, so 60 days = 2/12 of a year
the note's value on maturity date = principal + accrued interest = $6,000 + ($6,000 x 9% x 2/12) = $6,000 + $90 = $6,090
bank charges = note's value on maturity date x discount rate x 30 days = $6,090 x 12% x 1/12 = $60.90
net proceeds = $6,090 - $60.90 = $6,029.10
If a perpetual inventory system is in use _____. a physical inventory count is not required because the Inventory account is updated for each purchase and sale. a physical inventory count is not required because the Inventory account is updated every time a transaction or event occurs. a physical inventory count should be taken at least annually. a physical inventory count is required because the Inventory account is not updated when inventory is purchased or sold.
Answer: a physical inventory count should be taken at least annually
Explanation: That an inventory is perpetual does not discount the need for taking physical inventory at least once a year. This is important because it helps in the identification of shrinkage or shortages and to also test the accuracy of the perpetual records under use. Now, a perpetual inventory is a kind of inventory that tracks and records continuously, items as they are added to or subtracted from the inventory thus keeping it updated and aids in keeping the track of the cost of goods bought and sold.
Andrew Manufacturing held an average inventory of $1.1 million (raw materials, work-in-process, finished goods) last year. Its sales were $8.0 million, and its cost of goods sold was $5.8 million. The firm operates 260 days a year. What is the inventory day’s supply? What target inventory level is necessary to reach a 20- and 10-day inventory days supply during the next two years?
Answer:
The Inventory day's supply is 49.3 days supply
The Target inventory level to reach a 20-day inventory days supply is $ 0.446 million
The Target inventory level to reach a 10-day inventory days supply is $ 0.223 million
Explanation:
In order to calculate the inventory day’s supply we would have to calculate the following:
Inventory day's supply = (Average inventory / Cost of goods sold) * 260 days a year
Inventory day's supply = 1.1/5.8)*260
Inventory day's supply = 49.3 days supply
To calculate the target inventory level necessary to reach a 20- and 10-day inventory days supply during the next two years we would have to calculate the following:
Target inventory level to reach a 20-day inventory days supply = (20/260)*5.8 = $ 0.446 million
Target inventory level to reach a 10-day inventory days supply = (10/260)*5.8 = $ 0.223 million
Two different forecasting techniques (F1 and F2) were used to forecast demand for cases of bottled water. Actual demand and the two sets of forecasts are as follows:
PREDICTED DEMAND
Period Demand F1 F2
1 68 63 62
2 75 66 61
3 70 73 70
4 74 65 71
5 69 71 73
6 72 69 73
7 80 70 76
8 78 72 80
a.
Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate? (Round your answers to 2 decimal place.)
MAD F1
MAD F2
(Click to select)F1F2None appears to be more accurate.
b.
Compute the MSE for each set of forecasts. Given your results, which forecast appears to be more accurate? (Round your answers to 2 decimal places.)
MSE F1
MSE F2
(Click to select)F1F2None appears to be more accurate.
c.
In practice, either MAD or MSE would be employed to compute forecast errors. What factors might lead a manager to choose one rather than the other?
Either one might already be in use, familiar to users, and have past values for comparison. If (Click to select)control chartstracking signals are used, MSE would be natural; if (Click to select)tracking signalscontrol charts are used, MAD would be more natural.
d.
Compute MAPE for each data set. Which forecast appears to be more accurate? (Round your intermediate calculations to 2 decimal places and and final answers to 2 decimal places.)
MAPE F1
MAPE F2
Answer:
a. Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate?
I used an excel spreadsheet (attached as MAD).
F1 seems to be more accurate.
b. Compute the MSE for each set of forecasts.
I used an excel spreadsheet (attached as MSE).
F2 seems to be more accurate.
c. In practice, either MAD or MSE would be employed to compute forecast errors. What factors might lead a manager to choose one rather than the other?
Either one might already be in use, familiar to users, and have past values for comparison.
If control charts are used, MSE would be natural; if tracking signals are used, MAD would be more natural.d. Compute MAPE for each data set. Which forecast appears to be more accurate?
I used an excel spreadsheet (attached as MAPE).
F2 seems to be more accurate.
Explanation:
Period Demand F1 F2
1 68 63 62
2 75 66 61
3 70 73 70
4 74 65 71
5 69 71 73
6 72 69 73
7 80 70 76
8 78 72 80
A man turns 40 today and wishes to provide supplemental lifetime retirement income of 3,000 at the beginning of each month starting on his 65th birthday. Starting today, he makes monthly contribution of X to a fund for 25 years. The fund earns a nominal rate of 8% compounded monthly. Every 9.65 of lifetime income paid at the beginning of each month starting at age 65 will cost 1,000 to purchase. Calculate x.
Answer:
324.72
Explanation:
To get an income of $1, the man needs [tex]\frac{1000}{9.65}[/tex], therefore to get an income of $3000, the man needs [tex]\frac{1000*3000}{9.65}=310880.83[/tex].
Interest (i)= 8%/12 = 0.08/12 = 0.00667
Number of periods (N) = 12 months/year × 25 years = 300
Using actuarial notation:
[tex]Xs_{300/0.006667}=310880.83\\Where:\\s_{300/0.006667}=(1+0.006667)\frac{(1+0.006667)^{300}-1}{0.00667} =957.366[/tex]
Therefore:
[tex]957.366X=310880.83\\X=\frac{310880.83}{957.366} =324.72[/tex]
The topic of email is written in _________________.
a) CC Box
b) BCC Box
c) Subject Box
d) None of these
Answer:
the subject box is where you write your topic of email
Answer:
C. Subject box
Explanation:
The CC box is the carbon copy box. This is where you put other people's emails. They will receive a copy of the email, and they will be able to see who else received the copy.
The BCC box is the blind carbon copy box. This is also where you can put other people's emails. They will receive a copy, but they can't see the others who also got the copy, hence the name blind carbon copy.
The subject box is where you write the subject or topic of the email. This tells the recipients what the email is about, before they begin reading it.
Therefore, the best choice is C: subject box.
Cold Goose Metal Works owns 207,500 shares in the Fat Fox Smelting Corp.. If Fat Fox Smelters has 250,000 shares of common stock outstanding, can Cold Goose file a single income tax return that reports the incomes and expenses of both companies? No, because Cold Goose Metal Works’s ownership stake in Fat Fox Smelters is less than or equal to 49%, whereas 50% or more is required by the U.S. Tax Code. Yes, because Cold Goose Metal Works’s ownership stake in Fat Fox Smelters is greater than or equal to 60%, as required by the U.S. Tax Code. Yes, because Cold Goose Metal Works’s ownership stake in Fat Fox Smelters is greater than or equal to 80%, as required by the U.S. Tax Code.
Answer:
Cold Goose Metal Works and Fat Fox Smelting Corp.
Yes, because Cold Goose Metal Works’s ownership stake in Fat Fox Smelters is greater than or equal to 80%, as required by the U.S. Tax Code.
Explanation:
The total percentage of shares owned by Cold Goose Metal Works is 83% (207,500/250,000 x 100). This is more than 80% required.
The relevant section supporting the above is
"Section (2) 80-per cent voting and value test: The ownership of stock of any corporation meets the requirements of this paragraph if it—
(A)possesses at least 80 per cent of the total voting power of the stock of such corporation, and
(B)has a value equal to at least 80 per cent of the total value of the stock of such corporation."
The following account balances are taken from the December 31, 2018, financial statements of ABZ Advertising Company. The company uses accrual basis accounting. Advertising Revenue $ 46,482 Cash 41,516 Accounts Receivable 7,296 Interest Expense 2,299 Accounts Payable 5,000 Operating Expenses 37,460 Deferred Revenue 1,178 Equipment 18,048 Income Tax Expense 2,326 The following activities occurred in 2019: Performed advertising services on account, $55,000. Received cash payments on account, $10,400. Received deposits from customers for advertising services to be performed in 2020, $2,500. Made payments to suppliers on account, $5,000. Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year. Which of the following is the journal entry that will be used to record activity #3? Multiple Choice Debit Cash and credit Accounts Receivable for $2,500. Debit Deferred Revenue and credit Advertising Revenue for $2,500. Debit Deferred Revenue and credit Receivable for $2,500. Debit Cash and credit Deferred Revenue for $2,500.
Answer:
Debit Cash and credit Deferred Revenue for $2,500.
Explanation:
Deferred revenue can be described as an advance payment thta is received a business for services to be performed or goods to be delivered in the future.
This type of revenue will not be reported in the income statement but it will be reported as a liability under the current liabilities in the balance sheet, after debiting the cash account, until when the services are performed or goods are delivered.
For this question, $2,500 deposits received in 2018 from customers for advertising services to be performed in 2020 will not be reported in the 2018 income statement but it will continue to be reported as a liability under the current liabilities in the balance sheet till 2020 when the services are performed.
Thereofe, the correct journal entry that will be used to record activity #3 is Debit Cash and credit Deferred Revenue for $2,500.
Required Information
The following information applies to the questions displayed below) Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $13. At the start of January 2018, VGC's income statement accounts had zero balances and its balance sheet account balances were as follows:________.
Cash $1,600,000
Accounts Receivable 174,000
Supplies 15,100
Equipment 930,000
Buildings 510,000
Land 2,050,000
Accounts Payable 113,000
Deferred Revenue 74,800
Notes Payable (due 2025) 94,800
Common Stock 2,500,000
Retained Earnings 2,498,100
In addition to the above accounts, VGC's chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. The following transactions occurred during the January month:________.
A. Received $57,750 cash from customers on 1/1 for subscriptions that had already been earned in 2017.
B. Purchased 10 new computer servers for $41,500 on 1/2; paid $11,500 cash and signed a three-year note for the remainder owed.
C. Paid $14,300 for an Internet advertisement run on 1/3.
D. On January 4, purchased and received $5,300 of supplies on account.
E. Received $150,000 cash on 1/5 from customers for service revenue earned in January.
F. Paid $5,300 cash to a supplier on January 6.
G. On January 7, sold 19,900 subscriptions at $13 each for services provided during January. Half was collected in cash and half was sold on account.
H. Paid $380,000 in wages to employees on 1/30 for work done in January.
I. On January 31, received an electric and gas utility bill for $6,260 for January utility services. The bill will be paid in February.
Answer:
Cash 57,750 debit
Account receivables 57,750 credit
--------------------------------------------
Equipment 41,500 debit
cash 11,500 credit
note payable 30,000 credit
--------------------------------------------
Advertising Expense 14,300 debit
cash 14,300 credit
--------------------------------------------
supplies 5,300 debit
account payables 5,300 credit
------------------------------------------
cash 150,000 debit
service revenue 150,000 credit
-------------------------------------------
account payables 5,300 debit
cash 5,300 credit
---------------------------------------------
cash 129,350 debit
account receivables 129,350 debit
services revenue 258,700 credit
---------------------------------------------
wages expense 380,000 debit
cash 380,000 credit
--------------------------------------------
utilities expense 6,260 debit
account payable 6,260 credit
Explanation:
To make thge jounral entries we must follow the basic principles:
debit = credit
and one value per account
Is important to comment that A state the income has been earned so we deduct from account recievables
then. we again receive cash for service earned
In none ofthe case we are doing the recognition of hte deferred revenue so this, stays untouched.
G) 19,900 x $13 each = $258,700
half cash-half credit : 258,700 / 2 = 129,350
Restaurants do a large volume of business by credit and debit cards. Suppose Spring Garden Salads restaurant had these transactions on January 28, 2016: National Express credit card sales $10,500 ValueCard debit card sales 6,000 Requirements 1. Suppose Spring Garden Salads' processor charges a 3% fee and deposits sales net of the fee. Journalize these sales transactions for the restaurant. 2. Suppose Spring Garden Salads' processor charges a 3% fee and deposits sales using the gross method. Journalize these sales transactions for the restaurant.
Answer and Explanation:
The journal entries are shown below:
1. Processor charges - Credit card expense Dr ($10,500 × 3%) $315
Cash Dr $10,185
To Sales Revenue $10,500
(Being the credit card expense is recorded)
For recording this we debited the cash and expenses as it increased the asset and expenses and credited the sales revenue as it also increased the revenue
Processor charges - debit card expense Dr ($6,000 × 3%) $180
Cash Dr $5,820
To Sales Revenue $6,000
(Being the debit card expense is recorded)
For recording this we debited the cash and expenses as it increased the asset and expenses and credited the sales revenue as it also increased the revenue
2. Cash Dr $10,500
To Sales Revenue $10,500
(Being the cash receipt is recorded)
For recording this we debited the cash as it increased the asset and credited the sales revenue as it also increased the revenue
Cash Dr $6,000
To Sales Revenue $6,000
(Being the cash receipt is recorded)
For recording this we debited the cash as it increased the asset and credited the sales revenue as it also increased the revenue
How is each of the following likely to be affected by a recession:
a. the natural unemployment rate.
b. the cyclical unemployment rate.
c. the inflation rate.
d. the poll ratings of the president
Each of the following likely to be affected by a recession is the cyclical unemployment rate. The correct option is b.
What is a recession?The term "recession" is used in economics to describe the economic downturn brought on by a reduction in supply or demand. The production, employment, and income of domestic economies generally diminish, which in turn results in additional drops in demand and investment, lengthening the recessive process.
Because of this, when demand or production falls, the recession tends to last longer, deepen, and speed up, signaling that the affected nation's domestic economy will be in decline.
A recession is a time in the economy when growth is generally slow, yet inflation is also high. It is crucial that market forces operate independently, without interference from the government, in order to prevent a recession.
Therefore, the correct option is b. the cyclical unemployment rate.
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The statement of owner's equity shows a. only net income, beginning capital, and withdrawals b. only net income, beginning and ending capital c. only total assets, beginning and ending capital d. beginning and ending capital and all the changes in the owner's capital as a result of net income (loss), and withdrawals
Answer:
d. beginning and ending capital and all the changes in the owner's capital as a result of net income (loss), and withdrawals
Explanation:
The statement of owner's equity is a financial report that is prepared to indicate the changes in the owner's capital as a result of withdrawals, contributions, and net income or net loss. The structure of this report is beginning capital plus contributions plus net income less withdrawals which is equal to the ending capital. According to this, the answer is that the statement of owner's equity shows beginning and ending capital and all the changes in the owner's capital as a result of net income (loss), and withdrawals.
The common stock and debt of Northern Sludge are valued at $62 million and $38 million, respectively. Investors currently require a 16.8% return on the common stock and a/an 7.2% return on the debt. If Northern Sludge issues an additional $21 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change in capital structure does not affect the interest rate on Northern’s debt and that there are no taxes.
Answer:
the expected return on the stock will decrease
Explanation:
total firm's value $100 million
equity $68 milliondebt $32 millionrequired rate of return:
cost of equity 16.8%cost of debt 7.2%if the firm issues new stock and retires debt:
equity $89 milliondebt $11 millionThe return on equity (ROE) measures how much money a company earns per dollar invested, ROE formula = net income / total equity
now let's suppose that the firm's net income is $10 million:
under the old capital structure ROE = $10 / $68 = 14.7%
now under the new capital structure net income will increase by the amount of interests saved = $21 x 7.2% = 1.512
new net income = $11.512
new ROE = $11.512 / $89 = 12.9%
following this example, the new ROE will be 12.2% lower than before because the cost of debt was much lower than the cost of equity.
as the weight of equity increases, the company's WACC will increase also:
old WACC = (68/100 x 16.8%) + (32/100 x 7.2%) = 11.424 + 2.304 = 13.728%old WACC = (89/100 x 16.8%) + (11/100 x 7.2%) = 14.952 + 0.792 = 15.744%You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2.3 million Czech koruna today in exchange for a year's supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 2.8 million Thai baht today. If the current competitive market exchange rates are 25.49 koruna per dollar and 39.31 baht per dollar, what is the value of this deal?
Answer:
$19,002.77
Explanation:
The computation of the value of deal is shown below:
The value of the deal = Sales revenue - purchase cost
where,
Sales revenue is
= 2,300,000 ÷ 25.49 koruna per dollar
= $90,231.46
And, the purchase cost is
= 2,800,000 ÷ 39.31 baht per dollar
= $71,228.69
So, the value of the deal is
= $90,231.46 - $71,228.69
= $19,002.77
hence, the value of the deal is $19,002.77
Pitchfork, Inc. is preparing its 2020 financial statements. The company's accountant calculated Income from Continuing Operations to be $1,700,000, but upon further review is not certain this number is accurate. Pitchfork has a corporate income tax rate of 30%. Additionally, the company reports only one year of financial data on the face of the financial statements. All amounts listed are pretax unless otherwise noted. After reviewing the following information, determine the appropriate adjustments, if any, to Income from Continuing Operations. Once you have determined the CORRECT Income from Continuing Operations, complete the remainder of the Income Statement for reporting EPS.
1. On January 1, 2017, Pitchfork purchased a machine for $180,000 with a salvage value of $20,000 and useful life of eight years which was depreciated using the straight-line method. During 2020, Pitchfork decided to change to double-declining-balance method. The $1,700,000 Income from Continuing Operations had already been calculated using the straight-line depreciation method.
Determine the correct ADJUSTMENT to Income from Continuing Operations (ICO) for Depreciation Expense in 2020.
Adjustment for Depreciation Expense (2020):___________
Continuing with the information presented in #1 above, Pitchfork has ICO of $1,700,000 and a corporate tax rate of 30%. Determine if ICO should be adjusted based on the following information:
2. Pitchfork had an unrealized loss from foreign currency translation adjustments of $120,000 (pretax) that was included in calculating the $1,700,000 income from continuing operations.
Adjustment to I.C.O. for Translation Loss from Foreign Currency: __________
Continuing with the information presented in #1 above, Pitchfork Inc has Income from Continuing Operations (ICO) of $1,700,000 and a corporate tax rate of 30%. Determine if ICO should be adjusted based on the following information:
3. During 2020, Pitchfork closed one of its stores for a pre-tax loss of $150,000. This store closure did not qualify as a component of the entity, nor did it create a strategic shift in the operations of the entity. Therefore, it should not be treated as Discontinued Operations. The $150,000 restructuring charges were excluded in determining the $1,700,000 income from continuing operations.
To correct I.C.O., the Adjustment for Restructuring Charges would be $ _________
Continuing with the information presented in #1 above, Pitchfork has Income from Continuing Operations (ICO) of $1,700,000 and a corporate tax rate of 30%. Determine if ICO should be adjusted based on the following information:
4. On April 1, 2019 Pitchfork paid $24,000 for two years rent on office space and at the time debited Rent Expense. No adjusting or correcting entries were made for this transaction in 2019 or 2020.
a. To correct I.C.O for 2020, the correct Rent Expense (after tax) would be: $ _________
b. Determine the amount of the Prior Period Adjustment to be reported on the Retained Earnings Statement to correct the Beginning Balance at Jan 1, 2020: ______
5. Pitchfork sold investments during the year that resulted in a pre-tax loss of $18,000. The company also had unrealized gains on Available for Sale securities of $20,000 (pre-tax). Both of these transactions were excluded in determining the $1,700,000 Income from Continuing Operations calculation.
To correct I.C.O. for 2020, the adjustment for gains/losses on investments would be: $_________
6. Using the adjustments you made in items 1-5 above, determine the CORRECTED Income From Continuing Operations _________
7. Referring to the information presented above in questions 1-6, determine Pitchfork's Comprehensive Income as of year-end: $_________
Answer:
1.)19,600
2.) 84,000
3.) 105,000
4a) 8400
4b) 10500
5) 12,600
6) 1668500
7) 1739900
Explanation:
Kindly check attached picture
Byer, a plastics processor, is considering the purchase of a high-speed extruder as one option. The new extruder would cost $50,000 and would have a residual value of $3000 at the end of its 6-year life. The annual operating expenses of the new extruder would be $5000. The other option that Byer has is to rebuild its existing extruder. The rebuilding would require an investment of $30,000 and would extend the life of the existing extruder by 6 years. The existing extruder has annual operating costs of $13,000 per year and does not have a residual value. Byer's discount rate is 12%. Using net present value analysis, which option is the better option and by how much? Present Value of $1 Periods 12% 14% 16% 6 0.507 0.456 0.410 8 0.404 0.351 0.305 10 0.322 0.270 0.227 12 0.257 0.208 0.168Present Value of Annuity of $1 Periods 12% 14% 16% 6 4.111 3.889 3.685 8 4.968 4.639 4.344 10 5.650 5.216 4.833 12 6.194 5.660 5.197
Answer:
Option of the new extruder is better by $14,411.16
Explanation:
The present value of each option needs to be determined in order that the cheaper option in present value terms can be recommended.
Present value of new extruder=$50,000/(1+12%)^0+$5000/(1+12%)^1+$5000/(1+12%)^2+$5000/(1+12%)^3+$5000/(1+12%)^4+$5000/(1+12%)^5+$5000/(1+12%)^6-$3000/(1+12%)^6=$ 69,037.14
The discount factor each year=1/(1+r)^n where is 12% discount rate and n is the year
resent value of old extruder=$30,000/(1+12%)^0+$13,000/(1+12%)^1+$13000/(1+12%)^2+$13000/(1+12%)^3+$13000/(1+12%)^4+$13000/(1+12%)^5+$13000/(1+12%)^6=$ 83,448.30
The first option is better since it has a lower preset value of costs of $ 69,037.14
Difference in PVs= 83,448.30-69,037.14=$14,411.16
Lisa loves her job as an executive recruiter for a large hospital located in Dallas, Texas. Part of Lisa's job requires her to gather industry information, collaborate with partners, compare competitors, and tap into the knowledge of prospective employees, partners, and customers. Which of the below would Lisa use to perform her job?
A. Interactivity metrics
B. Source code
C. Network effect
D. Collective intelligence
Answer:
D. Collective intelligence.
Explanation:
Collective intelligence is a concept under sociology, it refers to the process whereby groups of individuals or employees act or work collectively in ways that seem intelligent.
This simply means that, when intellectuals interact and sometimes compete with their colleagues, qualitative information are shared among the team and thus, they solve problems collectively as team members.
Hence, collective intelligence accords the team a greater chance to proffer solutions to problems, than they would have done if they were working independently and individually.
Since, Lisa's job requires her to gather industry information, collaborate with partners, compare competitors, and tap into the knowledge of prospective employees, partners, and customers.
Lisa should use collective intelligence to perform her job.
Identify whether each of the following examples belongs to Money aggregates (M1 or M2). If an example belongs in both, be sure to write it down.
a. Sean has $30,000 in a money market account.
b. Musashi has a roll of quarters that he just withdrew from the bank to do laundry.
c. Yvette has $7,000 in a two-year certificate of deposit (CD).
Any type of money that falls into the M2 category is, by definition, part of M1 as well.
a. True
b. False
Answer: 1. a) M2
b) M1 and M2
c) M2
2. b. False
Explanation:
1.
M1 is a type of definition of money by economists that seek to explain the circulation of money in the economy. It includes cash and cash equivalents that are easy to convert into cash. This includes actual physical cash as well as Demand Deposits.
M2 is the definition that follows after M1. M2 by definition includes all the types of cash in M1 as well as deposits less than $100,000, non Institutional Money Market Fund investments and savings deposits. It isn't as liquid as M1 but is very important in forecasting inflation.
The classifications therefore are,
a) M2. This is M2 as it is a Non Institutional Money Market investment by Sean.
b) M1 and M2. This is physical cash and as such is part of M1 and as stated, anything part of M1 is part of M2 as well.
c) M2. As a deposit less than $100,000, the $7,000 that Yvette has in the CD classifies as M2.
2. False.
Money that is part of M2 is not automatically part of M1. M1 includes only physical cash as well as Demand Deposits while M2 has other forms such as savings deposits and small time deposits. Money that is part of M1 is automatically part of M2 and not the other way around.
For the item below, determine whether the amount would be disclosed in the cash flow statement under: Operating (CFO), Investing (CFI), or Financing (CFF), as well as if would be a net increase (+) or decrease (-) in cash or cash equivalents:
A. Principal payments on long-term borrowings
B. Decrease in accounts receivable
C. Proceeds from long-term borrowings
D. Increase in deferred income tax net liability
E. Net earnings
F. Increase in prepaid expenses
G. Increase in merchandise inventories
H. Cash dividends paid
I. Proceeds from issuance of common stock
J. Increase in accrued salaries, wages, and related benefits
K. Payments for repurchase of common stock
L. Capital Expenditures
M. Increase in accounts payable
N. Depreciation and amortization expenses
Answer:
Explanation:
Operating Cashflows have to do with the transactions dealing with the day to day activities of the business including calculations of net income and revenue and expenses.
Investing Cashflow has to do with the transactions involving fixed assets such as Property, Land and Equipment since these are Capital Expenditure. Also included are stock ownership and bond holding of other entities.
Financing Cashflows refer to transactions relating to the provision of capital for the business through loans or Equity.
A. Principal payments on long-term borrowings.
FINANCING - decrease (-)
This is a financing transaction that deals with long term loans. It will decrease the cash or cash equivalents held.
B. Decrease in accounts receivable.
OPERATING - Increase +
This is an operating cashflow and it is an increase because Receivables reduce when they pay the business so cash increases.
C. Proceeds from long-term borrowings.
FINANCING - Increase +
This is a financing activity and the increase is due to money from Issuing Bonds or borrowing money coming into the business.
D. Increase in deferred income tax net liability.
OPERATING - Increase +
By reducing the amount that we pay in tax that means that less cash has been paid which also means that more cash is kept in the business which increases the Cash balance.
E. Net earnings.
OPERATING - Increase +
So long as the Net Earnings are positive, they go to the Operating Section and increase the amount of cash and cash equivalents.
F. Increase in prepaid expenses.
OPERATING - Decrease -
By increasing the amount of prepaid expenses, this means that the company used money to pay for expenses it hasn't incurred yet which reduces the cash in hand.
G. Increase in merchandise inventories.
OPERATING - Decrease -
By buying more Inventory, more cash was spent and this therefore reduces the cash and cash equivalents balance.
H. Cash dividends paid.
FINANCING - Decrease -
Dividends relate to equity and Equity is a Financing Cashflow Transaction. Paying Dividends means giving out cash so it reduces the cash and cash equivalents balance.
I. Proceeds from issuance of common stock.
FINANCING - Increase
Similar to proceeds from long term borrowings, Equity is a Financing activity as it finds the business, the proceeds received from here increase the cash and cash equivalents balance.
J. Increase in accrued salaries, wages, and related benefits.
OPERATING - Increase +
These are Operating Cashflow transactions and by withholding them, the business does not spend cash on them. That cash that was not paid is an increase to the cash and cash equivalents balance.
K. Payments for repurchase of common stock.
FINANCING - Decrease -
By repurchasing stock which is an Equity transaction, this goes to the Financing Section. The cash spent to repurchase the stock reduces the amount of cash and cash equivalents on hand.
L. Capital Expenditures.
INVESTING - Decrease -
By buying capital items or spending on Capital Investments, the company makes an investment and as such this goes to the Investment Section. The expenses are a reduction on cash.
M. Increase in accounts payable.
OPERATING - Increase +
Accounts Payable are an Operating Activity and when they are increased that means that the company paid less cash and bought more things on credit. That cash that wasn't paid is an increase in the cash balance.
N. Depreciation and amortization expenses.
OPERATING - Increase +
By including depreciation and amortization in the operating cashflow, these increase the Cashflow because they are non cash items. Even though they are recorded, no physical cash actually flows to them. This cash that was supposed to flow to them is in increase.
FOR BUS LAW I
Certain that Al Gore would emerge victorious from the post-election chaos, Melvin's Decorations ordered 50,000 "President Al Gore" medallions from Medallions, Inc. on December 1, 2000 for $5 per medallion. Delivery was to be on January 10, 2001. By that date, the value of the medallions had fallen to $1 per medallion. Melvin's Decorations refused to accept the medallions because it was clear that George Bush would keep the presidency, and Medallions, Inc. sued for Melvin’s breach. What can Medallions recover? (Assume that there was nothing wrong with the medallions and that Melvin's did breach the contract).
A.
Medallions' lost profit on the deal.
B.
The difference between the contract price and the market price.
C.
Either A or B.
D.
Neither A nor B.
Answer:
A. Medallions' lost profit on the deal.
Explanation:
Since Melvin's Decorations breached the contract they had with Medallions, the non breaching party is entitled to sue for compensatory monetary damages. Courts will generally assign compensatory damages that cover the losses incurred due to the contract breach, i.e. the amount of money that medallion would have made as a profit if Melvin's decoration had purchased and paid for the medallions.
Thorley Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC or negative, in both cases it will be rejected. Year 0 1 2 3 4 5 Cash flows -$1,100 $325 $325 $325 $325 $325 a. 15.18% b. 14.59% c. 11.24% d. 13.43% e. 16.20%
Answer:
b. 14.59%
Explanation:
The computation of Project IRR is Shown below:-
Year Cash Flow
0 -$1,100
1 $325
2 $325
3 $325
4 $325
5 $325
Project IRR 14.59%
For more clarification we attached the spreadsheet which shown the computation of Project IRR.
A university spent $1.3 million to install solar panels atop a parking garage. These panels will have a capacity of 200 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 30%, that electricity can be purchased at $0.30 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero.
Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first.
Approximately how many hours per year will the solar panels need to operate to enable this project to break even?
Answer:
It will take 6,534.31 hours per year for the solar panels to operate to enable this project to break even
Explanation:
Discount rate = 30% = 0.3
Looking at one hour of operation in each year = 200 kW x $0.30 Kw/hr
= $60 value of electricity per year
Compound interest factor for a discount rate of 30% = 3.3158
(taken from compound interest factor table or computed using formula ∑1/(1+r)^t , where r = 30%, and t = 1 to 30)
Present value of operating the solar panels for 1 hour per year = 60 × 3.3158 = $ 198.95
For break even it would need to run = 1.3 million ÷ 198.95
= 6,534.31 hours per year
