Answer:
9.83%
Explanation:
The computation of the total return on the stock is shown below:
As we know that
Share price = Next year dividend ÷ (Required rate of return - growth rate)
$45.65 = $3.30 ÷ (Required rate of return - 2.6%)
Let us assume the required rate of return be X
So,
$45.65 × X - 1.1869 = $3.30
$45.65 × X = $3.30 + $1.1869
So, the X is 9.83%
Hence, the total return on the stock is 9.83%
Cash flows of two mutually exclusive projects are as follows. Project A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year. Project B has initial cost of $120,000, an operating cost of $8,000 per year, and a $40,000 salvage value after its 3-year life. Assume the interest rate is 10% per year. Which of the following statements is true?A. Two projects have different life cycleB. Project A should be selected.C. The present worth of project A is -$143,252.17.D. The present worth of project B is -$109,842.22.
Answer:
C. The present worth of project A is -$143,252.17
Explanation:
Present worth can be calculated using a financial calculator
For method A ,
Cash flow in year 0 = $80,000
Cash flow in year 1 and 2 = $30,000
Cash flow in year 3 = $30,000 - $15,000 = $15,000
I = 10%
Present worth= $ 143,335.84
For method B,
Cash flow in year 0 = $120,000
Cash flow in year 1 and 2 = $8, 000
Cash flow in year 3 = $8,000 - $40,000 = $-32,000
I = 10%
Present worth = $130,157.78
Method b would is chosen because it worth less.
To find the present worth using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Prestige Manufacturing Corporation reports the following items in its statement of cash flows presented using the direct method. Indicate whether each item is disclosed in the operating activities (O), investing activities (I), or financing activities (F) section of the statement under GAAP or use (NA) if the item does not appear on the statement.1. Payment for equipment purchase. 2. Repayments of bank loan. 3. Dividends paid 4. Proceeds from issuance of stock. 5. Interest paid. 6. Receipts from customers.
Answer:
1. Payment for equipment purchase = investing activities (I)
2. Repayments of bank loan = financing activities (F)
3. Dividends paid = financing activities (F)
4. Proceeds from issuance of stock = financing activities (F)
5. Interest paid = operating activities (O)
6. Receipts from customers = operating activities (O)
Explanation:
Operating Activities are activities that generate cash in the ordinary course of business.
Investing Activities are activities that generate cash due to movement in capital expenditure balances
Financing Activities are activities that generate cash due to sourcing of funds or changes in ownership.
The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI’s capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 40%.
a. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Cost of equity capital %
b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
Answer:
Cost of equity is 11.2%
WACC is 8.74%
Explanation:
The formula for cost of equity is given below:
Cost of equity=risk free rate+(Beta *risk premium)
risk free rate is the treasury bill rate of 4%
Beta is 0.9
market risk premium is 8%
cost of equity=4%+(0.9*8%)=11.2%
WACC=Ke*E/V+Kd*D/V*(1-t)
Ke is the cost of equity of 11.2%
Kd is the cost of debt of 5%
t is the tax rate of 40% or 0.4
E is the equity weighting of 70% or 0.7
D is the debt weighting of 30% or 0.3
V is the E+D=0.7+0.3=1
WACC=11.20% *0.7/1+(5%*0.3/1*(1-0.4)
WACC=7.84% +0.90% =8.74%
Suppose the U.S. imports cars from the UK manufacturer, McLaren. Consider an appreciation of the pound. Which of the following statements correctly describe the effects of thischange?
A. Hold all other prices constant.
B. U.S. consumers pay more dollars for each McLaren car they import from the UK.
C. McLaren supplies a greater quantity of dollars to the foreign exchange market.
D. U.S. consumers increase their purchases of McLaren cars.
E. McLaren's dollar revenues fall.
To peg the pounds per dollar exchange rate at a level higher than the market clearing exchange rate, the UK government needs to:_________.
a. buy pounds and sell dollars
b. buy dollars and sell pounds
c. simple announce a target exchange rate
Answer:
b. and a
Explanation:
Answer:
b. and
Explanation:
Remember, when foreign exchange rates between two currencies of particular country rises (appreciates), it effects is experienced most by the country whose currency hasn't risen. In this case therefore, this would make U.S. consumers pay more dollars for each McLaren car they import from the UK.
Also, to peg the pounds per dollar exchange rate at a level higher than the market clearing exchange rate, the UK government needs to buy pounds and sell dollars, because reducing the supply of pounds in the exchange market creates an opportunity for higher exchange prices.
On August 2, 2018, Wendy purchased a new office building for $3,800,000. On October 1, 2018, she began to rent out office space in the building. On July 15, 2022, Wendy sold the office building. If required, round your answers to the nearest dollar.
a. What MACRS convention applies to the new office building?
b. What is the life of the asset for MACRS?
c. Wendy's cost recovery deduction for 2018 is $_________ and for 2022 is ____________$ .
Answer:
a. Mild Month MACRS convention applies to the new office building
b. The life of the asset under MACRS is 39 years
c. The cost recovery deduction for 2018 is $20,330
The cost recovery deduction for 2022 is $52,776
Explanation:
a. According to the given data Mild Month MACRS convention is applicable here because real property is placed in service in the middle of the month in which acquired.
b. The life of the asset under MACRS is 39 years
c. cost recovery deduction for 2018= $3,800,000*0.535%
cost recovery deduction for 2018=$20,330
cost recovery deduction for 2022= $3,800,000*2.564%
cost recovery deduction for 2022= $52,776
The market for plywood is characterized by the following demand and supply equations: QD = 800 – 10P and QS = 50P – 1,000, where P is the price per sheet of plywood and Q measures the quantity of plywood. What is the size of the deadweight loss if the government imposes a price ceiling of $25 per sheet of plywood?
Answer: Dead weight loss-= $3750
Explanation:
QD = 800 – 10P
QS = 50P – 1,000,
At equilibrium, quantity demanded is equal to quantity supplied , so we have that, equating the two equations becomes
800 - 10p = 50p - 1000.
800 + 1000 = 50p + 10p
1800 = 60p
p = $30.
QD= QS= 800 - 10*30 = 500 units
QD= QS= 50x30 -1000= 500 units
Qd = Qs = 500 units.
When P = $25 by government putting a price ceiling, which is below the equilibrium price,it will lead to more demand than supply in the market
QD = 800 – 10P
QD= 800-10X25
QD=800-250= 550units
QS = 50P – 1,000,
Qs = 50 X25 - 1000
= 1,250-1000
QS = 250 units.
When quantity demanded =250units as a result of Quantity supplied at 250units. we will have our new price to be
QD = 800 – 10P
250 = 800 - 10p
10p = 800 -250
10p = 550
p = $55.
To calculate Dead weight Loss, we use the formulae,
0.5 x (P2 - P1) x (Q1 - Q2) where P1 and P2 are old and new prices and Q1 AND Q2 are old and new quantities
DWL = 0.5 x (55-25) X (500-250)
= 0.5 x 30x 250
Dead weight loss = $3750.
Kenzie is a research scientist in Tallahassee, Florida. Her spouse Gary stays home to take care of their house and two dogs. Kenzie's total wages for 2019 were $60,500 from which $5,900 of federal income tax was withheld. Calculate the income tax due or income tax refund on Kenzie and Gary's 2019 individual income tax return. Use the tax formula for individuals and show your work.
Answer:
tax due 1,848 (presenting head of household)
Explanation:
They will use Head of household
As Gary do not work and this will report the better tax-burden for them
Tax bracket table for the year ended December 31th 2019
10% $ 0 to $13,850
12% $13,851 to $52,850
22% $52,851 to $84,200
13.850 x 10% = 1,385
(52,850 - 13,850) x 12% = 4,680
(60,500 - 52,850) x 22% = 1,683
Total tax: 7.748
tax due 7,748 - 5,900 = 1,848
Gena Manufacturing Company has a fixed cost of $259,000 for the production of tubes. Estimated sales are 153,400 units. A before tax profit of $126,034 is desired by the controller. If the tubes sell for $22 each, what unit contribution margin is required to attain the profit target?
Answer:
$2.51
Explanation:
Gena Manufacturing Company calculation for contribution margin unit
Using this formula
Fixed cost + Tax profit/Estimated sales units
Let plug in the formula
Where:
Fixed cost =$259,000
Tax profit=$126,034
Estimated sales units=153,400
Hence:
(259,000 + 126,034) / 153,400
=$385,034/153,400
= $2.51
Therefore the contribution margin that is required to attain the profit target will be $2.51
Jeremy has been dissatisfied in his job. He has revised his resume, updated his LinkedIn profile, and accepted an invitation to interview with a competitor firm. Which response to dissatisfaction is Jeremy engaging in?
Answer:
The response to dissatisfaction is Exit
Explanation:
Since He has revised his resume, updated his LinkedIn profile, and accepted an invitation to interview with a competitor firm, this symbolizes Exit
Exit has to do with leaving an organization, transferring to another work unit, or at least trying to get away from the unsatisfactory situation. Jeremy is already searching for better work opportunities elsewhere
The response to dissatisfaction is Jeremy engaging in is Exit
Information regarding dissatisfaction:Since He has revised his resume, updated his LinkedIn profile, and accepted an invitation to interview with a competitor firm, this represents Exit. Here Exit means leaving an organization, transferring to another work unit. Also, Jeremy is already searching for better work opportunities elsewhere
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A company would like to produce 5000 products per week for 30 weeks. The Direct Material Cost for the raw materials used in the product is $1.50 per product. After producing 500 products, the company must stop production to replace a filter on the machine (the filter is replaced after producing every 500 products). The filter costs $50.00. What is the Total Cost Per Product
Answer:
Total Cost Per Product is $1.60
Explanation:
From the question the following information are derived:
Direct raw material cost per product = $1.50
The cost of the filter for producing 500 products = $50
Hence, the cost of the filter per product = $(50 / 500) = $0.10
In this question, No cost of labor is given, we can now decide the following
Total Cost per product = $(1.50 + 0.10)
= $1.60
Total Cost Per Product in this account is $1.60
If a company would like to produce 5000 products per week for 30 weeks. The Direct Material Cost for the raw materials used in the product is $1.50 per product. The Total Cost Per Product is $1.60.
Using this formula
Total cost per product=Direct raw material cost per product +( Filter costs/Production)
Where:
Direct raw material cost per product = $1.50
Costs of filter =$50
Production=500
Let plug in the formula
Total cost per product=$1.50+($50 / 500)
Total cost per product=$1.50+$0.10
Total cost per product=$1.60
Inconclusion if a company would like to produce 5000 products per week for 30 weeks. The Direct Material Cost for the raw materials used in the product is $1.50 per product. The Total Cost Per Product is $1.60.
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American Corporation has the following financial information. Year 1 Year 2 Cash $ 202.95 $ 245.90 A/R 398.02 485.34 Inventory 785.12 648.54 If Year 1 is the base year, what is the percentage increase/decrease of each current asset amount
Answer: The answer is given below
Explanation:
Since Year 1 has been given as the base year, the percentage change will be:
(Year 2 - Year 1)/Year 1 × 100
Cash:
= (245.90 - 202.95)/202.95 × 100
= 42.95/202.95 × 100
= 0.21 × 100
= 21% Increase
A/R:
= (485.34 - 398.02)/398.02 × 100
= 87.32/398.02 × 100
= 0.22 × 100
= 22% Increase
Inventory:
= (648.54 - 785.12)/785.12 × 100
= -136.58/785.12 × 100
= -0.17 × 100
= 17% decrease
An investor is deciding whether to build a retail store. If she invests in the store and it is successful, she expects a return of $100,000 in the first year. If the store is not successful, she will suffer a loss of $80,000. She guesses that the probability that the store will be a success is 0.6. To remove some of the uncertainty from this decision, the investor tries to establish more information, but this market research will cost $20,000. If she spends this money, she will have more confidence in her investment. There is a 0.6 probability that this information will be favorable; if it is, the likelihood that the store will be a success increases to 0.9. If the information is not favorable, the likelihood that the store will be a success reduces to only 0.2. Of course, she can elect to do nothing.
A) Draw the associated decision tree.
B) What do you recommend?
C) How much is the information worth?
Replace all the monetary values with the following utilities
Monetary Value Utility
$100,000 1.00
$80,000 0.40
$0 0.20
-$20,000 0.10
-$80,000 0.05
-$100,000 0.00
A) What do you recommend, based on expected utility?
B) Is the investor a risk soeker or a risk avoider?
Answer:
Explanation:
Given that,
expects a return of $100,000 in the first year
loss of $80,000
probability that the store will be a success is 0.6
research will cost $20,000
0.6 probability that this information will be favorable
store will be a success increases to 0.9
store will be a success reduces to only 0.2
a) Decision tree is attachedEMV= (payoff of first outcome) * (probability of first outcome) + (payoff of second outcome) * (probability of second outcome) + (payoff of third outcome) * (probability of third outcome)
EMV(node 1) = EMV(new store)
= ($100,000 * 0.6) + (-80,000 * 0.4)
=$28,000
EMV (node 2) = EMV (no store)
= $0
EMV (node 3) = EMV ( new store and favourable research)
= ($100,000 * 0.9) + (-80,000 * 0.1)
=$82,000
EMV (node 4) = EMV ( no store and favourable research)
= $0
EMV (node 5) = EMV ( new store and unfavourable research)
= ($100,000 * 0.2) + (-80,000 * 0.8)
= -$44,000
EMV (node 6) = EMV ( no new store and unfavourable research)
= $0
B) Here we compare EMV of not conducting the market research ans EMV of conducting the market research and the maximum EMV shall be taken for decision making
Here the EMV of conducting the market research is higher than not conductingHence, the investor can go to market research test. If result is positive, she can invest in the store, if negative she can stop the proposal.
Which of the following situations would preclude an accountant from issuing a review report on a company's financial statements in accordance with Statements on Standards for Accounting and Review Services (SSARS)?
a. Finished-goods inventory does not include any overhead amounts.
b. The accountant was engaged to review only the balance sheet.
c. The owner of a company is the accountant's father.
d. Land has been recorded at appraisal value instead of historical cost.
Answer:
c. The owner of a company is the accountant's father.
Explanation:
Standard for Accounting and Review services (SSARS) is used for an entity that is not required to file financial statements with a regulatory body for sale of its securities in the public market.
It is concerned with unaudited financial statements and other unaudited information.
According to the SSARS when the accountant is exposed to bias by being related or having vested interest in the company he is precluded from issuing a review report on the companie's financial statements.
The graph shows excess demand. A graph titled Excess supply has quantity on the x-axis and price on the y-axis. A line with positive slope represents supply and a line with negative slope represents demand. The lines intersect at the point of equilibrium (p star, Q star). A point on the demand line is (P 2, quantity demanded) and a point on the supply line is (P 2, quantity supplied). Both points are lower than the point of equilibrium. Excess demand is indicated between the 2 points. Which needs to happen in order to stop disequilibrium from occurring? Q needs to be coordinated with supply. Q needs to be coordinated with demand. The price of goods needs to be increased. The price of goods needs to be decreased.
Answer:
The price of goods needs to be increased.
Explanation:
Excess demand occurs when the quantity demanded is higher than the quantity supplied. This happens when the price of the good is lower than the equilibrium price. This can happen naturally in the market, or can happen if the government imposes a binding price floor.
The best way to solve excess demand is to raise the price, in order to reach equilibrium. Once in equilibrium, the price will coordinate the quantity supplied and the quantity demanded so that they're roughly equal.
Association between the number of goods the producers wants to sell at a specific value to that of quantity the purchaser wants to buy is called demand and supply.
The correct answer is:
Option C. The cost of goods needs to be raised.
This can be explained as:
When there is more need for the product than it is supplied or created is excess demand.This problem arises when the value of the goods and commodities is lower.This can arise intrinsically or due to any trade or governmental policies.The excess demand can be solved by increasing the price of the product.Therefore, the price of the goods should be increased.
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At the beginning of a semester, a group of five students (Marcus, Gerard, Penelope, Zendaya, and Duane) are asked to order a snack that the teacher will deliver to the students free of charge before the first class of the tenth week of the semester. The three choices are an apple, a banana, or a Snickers candy bar. The teacher collects the orders and finds that two students have ordered an apple, two students have ordered a banana, and one student has ordered a Snickers candy bar. The four students who ordered either an apple or a banana cite health consciousness as the reason for their choice. Immediately before the orders are scheduled to be delivered, the teacher informs the students that they can switch their choice and order something else from the original menu if they wish, or they can receive what they originally ordered. Which of the following scenarios is the best example of inconsistent intertemporal decision-making?A. Gerard ordered a banana and switched to an apple when prompted.
B. Duane ordered a Snickers candy bar and did not change his choice when prompted.
C. Penelope ordered an apple and switched to a banana when prompted.
D. Zendaya ordered a banana and switched to a Snickers candy bar when prompted.
E. Marcus originally ordered an apple and did not change his choice when prompted.
Answer:
THIS IS LONG
Explanation:
it is a long question
Answer:
E
Explanation:
A company has invested $60,000 in machinery with a 5-year useful life. The machinery will have no salvage value, as the cost to remove it will equal its scrap value. The annual benefits from the machinery are $15,000. The firm has a tax rate of 45% and will use the sum-of-years.. digits depreciation, compute the after-tax rate of return. The company uses a MARR of 7%.
Answer:
19.7%
Explanation:
initial cost $60,000
depreciation expense:
5 + 4 + 3 + 2 + 1 = 15
Year 1: 5/15 = 33% = $19,800
Year 2: 4/15 = 27% = $16,200
Year 3: 3/15 = 20% = $12,000
Year 4: 2/15 = 13% = $7,800
Year 5: 1/15 = 7% = $4,200
yearly benefits:
Year 1 = ($15,000 - $19,800) x 45% tax credit = $2,160 deferred tax benefit
Year 2 = ($15,000 - $16,200) x 45% tax credit = $540 deferred tax benefit
Year 3 = $15,000 - $12,000 = $3,000 ⇒ $1,350 in taxes are offset by the previous deferred tax benefits x 45% tax = $2,160 - $1,350 = $810 remaining tax benefits
Year 4 = $15,000 - $7,800 = $7,200 - $3,240 in taxes + $810 in deferred tax benefits = $4,770
Year 5 = ($15,000 - $4,200) x (1 - 45%) = $5,940
this investment yields 3 positive benefits during years 3-5, if we discount them to find the present value = $3,000/1.07 + $4,770/1.07² + $5,940/1.07³ = $2,803.74 + $4,166.30 + $4,848.81 = $11,818.85
after-tax rate of return = $11,818.85 / $60,000 = 19.7%
e Department of Traffic Security of a city is considering the purchase of a new drone for aerial surveillance of traffic on its most congested streets. A similar purchase 4 years ago cost $950,000. At an interest rate of 7% per year, what is the equivalent value today of the previous $950,000 expenditure?
Answer:
The equivalent value of the expenditure today is = $1,245,256.21
Explanation:
The equivalent today of the 950,000 would be the future value compounded at 7% per year.
FV = PV × (1+r)^n
FV - ?, PV - value 4 years ago, n- number of years, r- rate of return
PV - 950,000, n- 4, r-7%
FV = 950,000 ×(1.07^4)= 1,245,256.21
The equivalent value of the expenditure today is = $1,245,256.21
Vertical Analysis of Income Statement The following comparative income statement (in thousands of dollars) for two recent fiscal years was adapted from the annual report of Speedway Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways. Current Year Previous Year Revenues: Admissions $100,694 $100,798 Event-related revenue 146,980 146,849 NASCAR broadcasting revenue 217,469 207,369 Other operating revenue 31,320 29,293 Total revenues $496,463 $484,309 Expenses and other: Direct expense of events $104,303 $102,196 NASCAR event management fees 133,682 128,254 Other direct expenses 19,541 18,513 General and administrative 177,926 194,120 Total expenses and other $435,452 $443,083 Income from continuing operations $61,011 $41,226 a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. (Note: Due to rounding, amounts may not total 100%). Round your percentages to one decimal place.
Answer:
Speedway Motorsports, Inc.,
Vertical Analysis of Income Statement
Current Year Previous Year
Revenues:
Admissions 20.28≅ 20.3 20.81 ≅20.8
Event-related revenue 29.61 ≅ 29.6 30.32≅30.3
NASCAR broadcasting revenue 43.80≅ 43.8 42.82≅42.8
Other operating revenue 6.31 ≅ 6.3 6.05≅6.1
Total revenues 100% 100%
Expenses and other:
Direct expense of events 21.01 ≅ 21.0 21.10≅ 21.1
NASCAR event management fees 29.61≅ 29.6 26.48≅ 26.5
Other direct expenses 3.94 ≅ 3.9 3.82≅3.8
General and administrative 35.84 ≅ 35.8 40.08≅40.1
Total expenses and other 87.72 ≅ 87.7 91.49≅ 91.5
Income from continuing operations 12.23% 8.51%
Explanation:
Vertical Analysis =(Income Statement Item/ Sales )*100
We prepared a comparative income statement for these two years in vertical form, stating each item as a percent of revenues.
Current Year Previous Year
Revenues:
Admissions $100,694 $100,798
Event-related revenue 146,980 146,849
NASCAR broadcasting revenue 217,469 207,369
Other operating revenue 31,320 29,293
Total revenues $496,463 $484,309
Expenses and other:
Direct expense of events $104,303 $102,196
NASCAR event management fees 133,682 128,254
Other direct expenses 19,541 18,513
General and administrative 177,926 194,120
Total expenses and other $435,452 $443,083
Income from continuing operations $61,011 $41,226
Agatha's Inc. is about to introduce a new product in the market, but is not sure as to how it should price the product. The company is facing intense competition from five other companies. In such a situation, what should be Agatha’s Inc. pricing objective
Answer and Explanation:
There are two main pricing objective and strategy i.e competitive pricing and penetrative pricing which are explained below:
1. Competitive pricing :
In this Agatha's Inc, all five rivals should evaluate pricing models for a related kind of product. If your product has a little more value added than your collegaues, then you can establish a target price target that is higher than the competitors.
Now to do that, it's necessary to send the customer a message that they're purchasing value for a price.
2. Penetrative pricing :
When the target price is set on the basis of the competitive pricing model , it is important to obtain the product favourably from the consumer and to do so you can start selling a little lower than the target price and sell the goods as a discount or promotional deal.
If the initial sales are strong and buyers like the product then return the product to target pricing and do intensive marketing to sell the message that the product 's cost is a bargain for the value provided by the company.
The mixture of the above two pricing strategies would ensure a better positioning of Agatha's Inc product with better profitability.
Assume that the public in the small country of Sylvania does not hold any cash. Commercial banks, however, hold 10 percent of their checking deposits as excess reserves, regardless of the interest rate. In the questions that follow, the "money multiplier" is given by 1 / (RR + ER ).
Where
RR = the percentage of deposits that banks are required to keep as reserves
ER = the percentage of deposits that banks voluntarily hold as excess reserves
Consider the balance sheet of one of several identical banks:
Assets Liabilities and Net Worth
Reserves 400 Checking Deposits 2,000
Loans 1,600 Net Worth 0
Total Assets 2,000 Liabilities and Net Worth 2,000
The required reserve ratio in this economy is _________%. (Enter your response as an integer.)
If the total money stock (supply) is $600,000, the total amount of reserves held in the banking system is_____ $
Answer and Explanation:
The computation is shown below:
(1) The required reserve ratio is
= Required reserves ÷ Checkable deposit
where,
Required reserves
= Total reserves - Excess reserves
= 400 - 2,000 × 10%
= $400 - $200
= $200
And, the checkable deposit is $2,000
So, the required reserve ratio is
= $200 ÷ $2,000
= 10%
(2) Now the total amount of reserves is
But before that first we have to determine the money multiplier is
Money multiplier (MM) = 1 ÷ (ER + RR)
= 1 ÷ (0.10 + 0.10)
= 1 ÷ 0.20
= 5
Now
Monetary base (MB) is
= Money stock ÷ Money multiplier
= $600,000 ÷ 5
= $120,000
And as we know that
Monetary base = Currency + Reserves, and Currency (i.e held by public) = 0
So,
Reserves = Monetary base = $120,000
Although the "Great Recession" that began in late 2007 ended officially in the summer of 2009, the U.S. economy had staged only a modest recovery as we moved through the middle of 2015. Some economists have pointed out that this is typical of a _____________ recession.
Answer: balance sheet
Explanation: The modest recovery of the U.S. economy after the Great Recession has been described by economists as typical of a balance sheet recession which is characterized by great savings, reduction in debts by individuals or companies collectively, as opposed to spending or investing which serve as stimulants for economies. This is usually attributed to high levels of private sector debts and as a result, there is general economic decline or slow growth.
The text states, "Over sufficiently long time periods, net income equals cash inflows minus cash outflows, other than cash flows with owners." Demonstrate the accuracy of this statement in the following scenario: Two friends contributed $50,000 each to form a new business. The owners used the amounts contributed to purchase a machine for $100,000 cash. They estimated that the useful life of the machine was five years and the salvage value was $20,000. They rented out the machine to a customer for an annual rental of $25,000 a year for five years. Annual cash operating costs for insurance, taxes, and other items totaled $6,000 annually. At the end of the fifth year, the owners sold the equipment for $22,000, instead of the $20,000 salvage value initially estimated. (Hint: Compute the total net income and the total cash flows other than cash flows with owners for the five-year period as a whole.)
Answer:
Cash Equipment Common stock Net income
Cash contributed
by Owners $ 100,000 $ 100,000
Purchase of
machine for cash $ (100,000) $ 100,000
Recoginition of
rent revenue $125,000 $125,000
Recoginition of
operating
expense $(30,000) $(30,000)
Recoginition of
Depreciation $ (80,000) $(80,000)
Sale of Machine $ 22,000 $ (20,000) $ 2,000
Totals $ 117,000 $0 $100,000 $ 17,000
Explanation:
On January 1 of the current year, Jimmy's Sandwich Company, Inc. reported stockholders' equity totaling $122,500. During the current year, total revenues were $96,000 while total expenses were $85,500. Also, during the current year the business paid $20,000 to the stockholders. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $196,000, the change in stockholders' equity during the year was:
Answer:
The multiple choices are:
A decrease of $9,500.
An increase of $9,500.
An increase of $30,500.
A decrease of $30,500.
An increase of 73,500.
The correct option is a decrease of $9,500
Explanation:
The changes in stockholders' equity is in the form of the difference between inflow to stockholders and outflow to stockholders.
Inflow to stockholders is the earnings attributable to them in form of net income while outflow is the dividends paid to them.
net income=revenues-expenses=$96,000-$85,500=$10,500
Dividends were paid to the tune of $20,000
change in stockholders' equity=$10,500-$20,000=-$9,500
In essence ,the opening balance of stockholders' equity went down by $9,500 since the net income generated of $10,500 was not enough to fund dividend payment
Answer:
Explanation:a
Brief Exercise 233 Kinney Company purchased a truck for $66,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $8,000 at the end of that time. During the second year the truck was driven 27,000 miles. Compute the depreciation for the second year under each of the methods below and place your answers in the blanks provided.Units-of-activity $_________
Double-declining-balance $_________
Answer:
$15,660
$16,500
Explanation:
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1 / useful life)
2 x (1 / 4 ) = 0.5
The depreciation expense in the first year = 0.5 x $66,000 = $33,000
Book value = $66,000 - $33,000 = $33,000
The depreciation expense in the second year = 0.5 x $33,000 = $16,500
The Units of production method = (miles driven in the second year / estimated total miles that can be driven) x (Cost of asset - Salvage value)
(27,000 / 100,000) × ($66,000 - $8,000)
= 0.27 x $58,000 = $15,660
I hope my answer helps you
Determine whether each of the following goods is a private good, a public good, a common resource, or a club good.
1. A free weight station in a fitness room that is open to the public
2. A large, beautiful fountain in a town square
3. A new drum set for you to play in your friend's band
Answer:
1. A free weight station in a fitness room that is open to the public (common resource)
2. A large, beautiful fountain in a town square (public goods)
3. A new drum set for you to play in your friend's band (private good)
Explanation:
Before we look into the different types of goods, let us define the terms associated with goods:
Rival: A good is said to be rival, if its consumption by one consumer prevents simultaneous consumption by another consumer.
Excludable: An excludable good is one for which access is not provided by the owner or seller, to a consumer who has not paid for it or who has not met certain requirements for its use.
Now let us define the different types of goods:
a. Private goods: these goods are excludable and rival. This means that the owners can prevent certain individuals from using them and their use prevents simultaneous use by other consumers. These goods are usually limited in quantity. in our example, A new drum set for you to play in your friend's band meets these requirements. other examples include food, clothes et.
b. public good: these goods are non-excludable and non-rival. These goods can be used simultaneously by many individuals and restrictions to use are virtually absent on them. A large, beautiful fountain in a town square meets these criteria. other examples include air, street lights etc.
c. common resource: These products are non-excludable (restriction to use is absent) and rival (use by an individual can prevent simultaneous use by others). if an individual is using A free weight station in a fitness room that is open to the public, other individuals will have to wait for their turn, even if they do not pay for it.
d. club good: these goods or services are excludable (paid for before use) but non rival (multiple consumers can use them simultaneously). Examples include cable television, internet services, cinemas etc.
Rebecca Reyher wrote (and copyrighted) a children’s book entitled My Mother Is the Most Beautiful Woman in the World. The story was based on a Russian folktale told to her by her own mother. Years later, the children’s TV show Sesame Street televised a skit entitled "The Most Beautiful Woman in the World." The Sesame Street version took place in a different locale and had fewer frills, but the sequence of events in both stories was identical. Has Sesame Street infringed Reyher’s copyright?
Answer:
The correct answer is: Initially, yes it did violated the law. But it depends.
Explanation:
To begin with, we need to understand that when it comes to the law of copyright the consequences of violating it depends on the particulary situation that the parties shared. Therefore that initially, Sesame Street would have violated the copyright law if they did not establish a contract that can allow them to use that story. However again, if in a first place the Reyher violated the law then Sesame Street will be out of charges becuase the first violation was caused by the writter and in other case it could also be seen as therewas no violation due to the fact that is a russian folktale and those stories have no copyright.
On January 1, the $3,000,000 par value bonds of Spitz Company with a carrying value of $3,000,000 are converted to 1,000,000 shares of $1 par value common stock. Record the entry for the conversion of the bonds.
Answer:
Dr bonds payable $3,000,000
Cr common stock $1,000,000
Cr paid in capital in excess of par val.-common stock($3m-$1m) $2,000,000
Explanation:
The conversion means that the bonds payable account is debited since the obligation has now been settled by a way of giving common stock in lieu.
The credit entries would comprise of par value of the conversion which is $1 par value multiplied by number of common stock of 1,000,000 which gives $1,000,000 while the remaining balance is credited to paid-in capital in excess-common stock
What are the benefits and risks of being acquired by a larger company?
Bartel Corporation produces bar stools for restaurants.
1. For each of the following, indicate whether the cost would typically be considered direct or indirect cost for the cost object given.
A. Lubricants used on the bar stool manufacturing equipment.
B. The factory supervisor's salary for the bar stool factory.
C. The production labor wages for the bar stool assemblers.
D. Nails and screws used in the production of the bar stools.
E. Manufacturing costs for wood and steel used in the bar stools.
2. For each of the following, indicate whether the cost would typically be considered product or period cost for the cost object given.
A. Electricity costs to run the factory.
B. Accountant salaries.
C. Selling costs for the period.
D. Delivery costs to take the bicycles to stores.
E. Tires for the bicycles.
Answer: The answers are provided below
Explanation:
1. Direct cost are the major part of cost and can be traced to a cost object while indirect cost are typically small cost and difficult to trace to a specific cost object.
A. Lubricants used on the bar stool manufacturing equipment - indirect cost
B. The factory supervisor's salary for the bar stool factory - indirect cost
C. The production labor wages for the bar stool assemblers - direct cost
D. Nails and screws used in the production of the bar stools - direct cost
E. Manufacturing costs for wood and steel used in the bar stools - direct cost.
2. A manufacturer's product costs are direct labor, direct materials, and the manufacturing overhead that are used in making its products while the period costs are written as expenses in an accounting period. Period costs are associated with passage of time and examples include the general and administrative expenses, like rent, office supplies, office depreciation, and utilities
A. Electricity costs to run the factory - product cost
B. Accountant salaries - period cost
C. Selling costs for the period - period cost
D. Delivery costs to take the bicycles to stores - period cost
E. Tires for the bicycle - product cost
The separate components highlight several features of return on investment not revealed by a single calculation:a.The importance of investment turnover as a key to income is stressed.b.The importance of revenues is explicitly recognized.c.The important components are expressed as ratios or percentages instead of dollarfigures. This form of expression often enhances comparability of different divisions,businesses, and time periods.d.The breakdown stresses the possibility of trading off investment turnover for incomeas a percentage of revenues so as to increase the average ROI at a given level ofoutput
Answer:
The options (a) (b) and (c) is correct.
Explanation:
From the question stated the features that highlights the return of investment is listed as follows.
The significance of investment turnover as a key to income is stressedThe importance import of revenues is explicitly recognizedThe significant components are expressed as ratios or percentages instead of dollar figures.Hence, the last option is not correct.
