Answer:
1. The overall goal and/or purpose
The overall goal of this analysis is to determine if you would actually save money by purchasing the extended warranty.
2. The given information
You can calculate this by determining the present value of the expected repair costs that will be covered by the warranty and determine which is higher; the warranty or the repairs
3. A time-line for the expected repair costs covered by the warranty
initial investment -$1,800cash flow year 4 = $400cash flow year 5 = $500cash flow year 6 = $600cash flow year 7 = $8004. The present value for each of the repair costs
the discount rate is 7%, so the present value of each repair cost is:
PV cash flow year 4 = $400 / 1.07⁴ = $305PV cash flow year 5 = $500 / 1.07⁵ = $356PV cash flow year 6 = $600 / 1.07⁶ = $400PV cash flow year 7 = $800 / 1.07⁷ = $498total $1,5595. The present value of the warranty and the expected profit for the warranty company
the present value of the warranty is $1,800, so the car company is making $1,800 - $1,559 = $241 in profits by selling you the warranty
6. Your conclusion
You shouldn't buy the extended warranty (negative NPV)
The company has just hired a new marketing manager who insists that unit sales can be dramatically increased by dropping the selling price from $8 to $7. The marketing manager would like to use the following projections in the budget:
Data Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
Budgeted unit sales 45,000 70,000 105,000 70,000 90,000 100,000
Selling price per unit $7 per unit
a. What are the total expected cash collections for the year under this revised budget?
b. What is the total required the production for the year under this revised budget?
c. What is the total cost of raw materials to be purchased for the year under this revised budget?
d. What are the total expected cash disbursements for raw materials for the year under this revised budget?
e. After seeing this revised budget, the production manager cautioned that due to the current production constraint, a complex milling machine, the plant can produce no more than 80,000 units in any one quarter. Is this a potential problem?
Answer:
a. What are the total expected cash collections for the year under this revised budget?
65 + 236.25 + 78.75 + 367.5 + 122.5 + 551.25 + 183.75 + 367.5 = 1,972.5 x $1,000 = $1,972,500
b. What is the total required production for the year under this revised budget?
52.5 + 80.5 + 94.5 + 76 = 303.5 x 1,000 = 303,500 units
c. What is the total cost of raw materials to be purchased for the year under this revised budget?
237 + 367.5 + 507.5 + 360 = 1,472 x 1,000 = 1,472,000 pounds x $0.80 = $1,177,600
d. What are the total expected cash disbursements for raw materials for the year under this revised budget?
195.26 + 252.24 + 361.2 + 330.4 = 1,139.1 x $1,000 = $1,139,100
e. After seeing this revised budget, the production manager cautioned that due to the current production constraint, a complex milling machine, the plant can produce no more than 80,000 units in any one quarter. Is this a potential problem?
No, since total budgeted sales for the year are 303,500 units, which divided by 4 quarters = 75,875 units per quarter. All you need to do is increase quarter 1 production by 15,000 units, and that would satisfy quarters 2 and 3 needs.
Explanation:
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
unit sales 45 70 105 70 90 100
(in thousands)
total sales 315 490 735 490 630 700
(in thousands)
cash collected 65 78.75 122.5 183.75 122.5 157.5
(in thousands) 236.25 367.5 551.25 367.5 472.5 525
75% of sales are collected during this quarter and 25% are collected the next quarter
beginning $65,000
ending finished inventory 30% of budgeted sales for next quarter
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
beginning 13.5 21 31.5 21 27 30
ending 21 31.5 21 27 30 ?
quarter sales 45 70 105 70 90 100
production 52.5 80.5 94.5 76 93 ?
cost of raw materials = $0.80, 5 pounds per unit produced
beginning inventory of raw materials = 23,000 pounds
desired ending inventory of raw materials = 10% of next quarter's needs
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
beginning 23 35 52.5 35 45 50
ending 35 52.5 35 45 50 ?
quarter needs 225 350 525 350 450 500
raw materials 237 367.5 507.5 360 455 ?
60% of raw materials cost paid during the quarter, 405 paid the next quarter
beginning accounts payable 81.5
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
past q $ 81.5 75.84 117.6 162.4 112 114
next q $ 75.84 117.6 162.4 112 114 ?
quarter needs 189.6 294 406 280 360 ?
payments 195.26 252.24 361.2 330.4 358 ?
On January 1, Valuation Allowance for Available-for-Sale Investments had a zero balance. On December 31, the cost of the available-for-sale securities was $252,000, and the fair value was $258,890. Prepare the adjusting entry to record the unrealized gain or loss on available-for-sale investments on December 31. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
Dr Valuation Allowance for Available-for-Sale Investments $6890
Cr unrealized gain/(loss) on AFS investments $6890
Explanation:
The unrealized gain or loss on the available-for-sale securities is the difference between its cost of $252,000 and the fair value of $258,890 on 31st December.
Gain/(loss)=$258,890-$252,000=$6890 unrealized gain
The amount would be credited to unrealized gain/(loss) on AFS investments while Valuation Allowance for Available-for-Sale Investments would be debited with the same amount
g The law of supply states that, other things equal, an increase in a. price causes quantity supplied to increase. b. price causes quantity supplied to decrease. c. quantity supplied causes price to increase. d. quantity supplied causes price to decrease.
Answer:
a. price causes quantity supplied to increase.
Explanation:
The law of supply states that, other things equal, an increase in price causes quantity supplied to increase. An increase in price causes the supply curve to slope upward, thus, giving producers of goods and service providers, an incentive to supply more quantity of their products and vice-versa.
Also, the demand for goods and services has an effect on the quantity of goods and services provided by the producers or suppliers. Hence, an increase in the demand for a product would result in an increase in price, thereby causing the producers to supply more quantity in order to maximize profits.
For instance, an electronic gadget company will manufacture more television sets if the price of those television increases.
During the most recent month, the following activity was recorded:_______.
a. Eleven thousand six hundred pounds of material were purchased at a cost of $2.90 per pound.
b. The company produced only 1,160 units, using 10,440 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
c. 564 hours of direct labor time were recorded at a total labor cost of $6,768.
Answer:
7000
Explanation:
What are the advantages and disadvantages to Qantas’s international cooperative alliances?
Answer:
Qantas's International cooperative alliance is a strategic move by Quanta with respect to acquiring the best business opportunities and growth.
The advantages and disadvantages are listed below:
Advantages:1) It will develop a strong base for Quanta in international market.
2) It will help Qantas to reach more costumers and expand their business, providing huge profit and growth to Qantas.
3) It will help Quanta in enhancing their cost base, aircraft utilization and redesigning Quanta's network to high growth in international market.
Disadvantages:1) Qantas i highly focused on Asia, putting their 50% efforts towards Asian market. If their prediction goes wrong, they'll suffer a huge loss.
2) Qantas has multiple partners, and making them agree on the same thing can be a difficult task. Huge conflicts among them can result in huge losses.
3) As each partner has equal importance, they may have different views. This can effect Qantas's decision making policies.
a. On February 15, paid $130,000 cash to purchase GMI's 90-day short-term notes at par, which are dated February 15 and pay 6% interest (classified as held-to-maturity).
b. On March 22, bought 1,000 shares of Fran Inc. common stock at $35 cash per share. Cancun's stock investment results in it having an insignificant influence over Fran.
c. On May 15, received a check from GMI in payment of the principal and 90 days' interest on the notes purchased in part a.
d. On July 30, paid $39,000 cash to purchase MP Inc.'s 5% , six-month notes at par, dated July 30 (classified as trading securities).
e. On September 1, received a $0.42 per share cash dividend on the Fran Inc. common stock purchased in part b.
f. On October 8, sold 500 shares of Fran Inc. common stock for $41 cash per share.
g. On October 30, received a check from MP Inc. for three months’ interest on the notes purchased in part d.
Prepare journal entries to record the above transactions involving both the short-term and long-term investments of Cancun Corp., all of which occurred during the current year. (Use 360 days in a year. Do not round your intermediate calculations. Round your answers to the nearest whole dollar.)
Answer:
a. On February 15, paid $130,000 cash to purchase GMI's 90-day short-term notes at par, which are dated February 15 and pay 6% interest (classified as held-to-maturity).
Dr Investment in GMI's notes - HTM 130,000
Cr Cash 130,000
b. On March 22, bought 1,000 shares of Fran Inc. common stock at $35 cash per share. Cancun's stock investment results in it having an insignificant influence over Fran.
Dr Investment in Fran inc. stocks 35,000
Cr Cash 35,000
c. On May 15, received a check from GMI in payment of the principal and 90 days' interest on the notes purchased in part a.
Dr Cash 131,950
Cr Investment in GMI's notes - HTM 130,000
Cr Interest revenue 1,950
d. On July 30, paid $39,000 cash to purchase MP Inc.'s 5% , six-month notes at par, dated July 30 (classified as trading securities).
Dr Trading securities - MP Inc.'s notes 39,000
Cr Cash 39,000
e. On September 1, received a $0.42 per share cash dividend on the Fran Inc. common stock purchased in part b.
Dr Cash 420
Cr Dividends revenue 420
f. On October 8, sold 500 shares of Fran Inc. common stock for $41 cash per share.
Dr Cash 20,500
Cr Investment in Fran inc. stocks 17,500
Cr Gain on investment 3,000
g. On October 30, received a check from MP Inc. for three months’ interest on the notes purchased in part d.
Dr Cash 487.50
Cr Interest revenue 487.50
N
Select the correct answer.
Which type of investment offers both capital gains and interest income?
OA
property
OB.
CDs
C. stocks
OD
bonds
Reset
Next
Which type of investment offers both capital gains and interest income
Answer:
Stocks is the type of investments that offers both capital gains and interest income.
Question:
Compare the capital gains from investing in the three stocks with the interest income on a one-year CD. Which would have been a more profitable investment—the stocks or a one-year CD? Explain your reasoning.
Answer:
The one-year CD rate during the past year ranged from 1 percent to 1.3 percent. This rate of return is much lower than the returns on the J C Penney and Apple stocks. Therefore, these two stocks would have been better investment options than a one-year CD. However, the CD would be a better investment than the Ford Motor Company stock, which gave a negative return over the past year.
Explanation: edmentum sample answer
Ronald, Inc. had the following balances and transactions during 2017: What is the amount of the company's Merchandise Inventory, as disclosed in the December 31, 2017 balance sheet, using the periodic weighted-average inventory costing method
Answer: $707
Explanation:
Using the Periodic System means that inventory is updated per period. This means that using the Weighted Average method, Ending Inventory prices will be calculated on the basis of all inventory in the period.
Weighted Average Method aims to ascribe a single price to all the inventory units sold by a company and so divides the entire cost by the number of units.
Number of Units bought in 2017,
Opening Balance = 12 units
June 10 = 24 units.
= 12 + 24
= 36 units.
Cost of the the 36 units
= (12 * 91) + (24 * 87)
= $3,180
Weighted Average Cost,
= 3,180/36
= $88.33
During the year they sold 28 units (10 + 18) meaning that 8 units (36 - 28) were left.
The closing Inventory on the 12/31/2020 therefore is,
= 8 * 88.33
= $706.66
= $707
Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to a. increase by 2.5%, and X is an inferior good. b. decrease by 2.5% and X is a normal good. c. increase by 10% and X is an inferior good. d. decrease by 10% and X is a normal good.
Answer:
a. increase by 2.5%, and X is an inferior good.
Explanation:
The income elasticity of demand is the ratio between the percentage change in demand and the percentage change in income.
The change in demand caused by a 5% decrease in income is:
[tex]-0.5=\frac{\%\ change\ demand}{\%\ change\ income} \\-0.5=\frac{D}{-5\%} \\D=+2.5\%[/tex]
Demand will increase by 2.5%. A good whose demand increases when consumer income decreases is called an inferior good.
Therefore, the answer is a. increase by 2.5%, and X is an inferior good.
Carmen Camry operates a consulting firm called Help Today, which began operations on August 1. On August 31, the company's records show the following accounts and amounts for the month of August Cash Accounts receivable office supplies Land office equipment Accounts payable Dividends $25,370 Consulting fees earned 27,010 9,570 5, 620 880 530 102,100 22,370 Rent expense 5,260 Salaries expense 44,010 Telephone expense 20,020 Miscellaneous expenses 10,540 Common stock 6,020 Exercise 2-17 Preparing a statement of retained earnings LO P3 Use the above information to prepare an August statement of retained earnings for Help Today,(
Answer:
Help Today
Statement of Retained Earnings
For the Month Ended on August 31, 202X
Retained earnings at the beginning of the period: $0
Net Income: $10,410
Dividends: ($6,020)
Retained earnings at the end of the period $4,390
Explanation:
First we must organize the numbers and prepare an income statement:
Consulting fees earned $27,010
Rent expense ($9,570)
Salaries expense ($5,620)
Telephone expense ($880)
Miscellaneous expenses ($530)
Net income: $10,410
then a balance sheet:
Balance Sheet
Assets:
Cash $25,370
Accounts receivable $22,370
Office supplies $5,260
Land $44,010
Office equipment $20,020
Total assets: $117,030
Liabilities and Equity:
Accounts payable $10,540
Common stock $102,100
Total liabilities and equity: $112,640
+ Retained earnings $4,390
Total: $117,030
Dividends 6,020
two ways to determine retained earnings:
Retained earnings ⇒ assets - (liabilities + equity) = $117,030 - $112,640 = $4,390Another way to calculate retained earnings = net income - dividends = $10,410 - $6,020 = $4,390Researchers have identified the tendency for increasing diversity among team members to create difficulties even as it offers improved potential for problem solving is known as the __________.
a. positive-negative dilemma
b. enhancement-enactment dilemma
c. upside-downside dilemma
d. good news-bad news dilemma
e. diversity-consensus dilemma
Answer:
. diversity-consensus dilemma
Explanation:
Even though it is important to have diverse people in a group to provide varying opinions
and perspectives, sometimes this diversity leads to conflicts among group members and this can hinder decision making even though the potential to make better decisions are improved. This is known as diversity-consensus dilemma.
I hope my answer helps you
Answer:
E
Explanation:
Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cecile sold the stock for $40,000 a month after receiving it. In addition, Casper is required to pay Cecile $1,500 a month in alimony. He made five payments to her during the year.What are the tax consequences for Casper and Cecile regarding these transactions?
Answer:
According to IRS, the party making the payments is entitled to cancel the alimony & separate maintenance fees in a divorce situation while the party accepting the payment is obliged to include the amounts received in their gross revenue. Any transfer of property in respect of a divorce other than cash, however, is not taxable.The party receiving the property also does not recognize income and include the item on cost basis equal to basis of the party making transfer.
Explanation:
Luis and Amy are programmers employed by X Corp. They work in cubicles next to each other. Both have M.Sc. degrees in computer science (Luis also has a Ph.D. in philosophy). They are about the same age, and have been with the company since its birth. Luis codes games, while Amy codes a variety of projects. Although their work is different, both jobs require the same skill level. Luis makes $100,000 a year, while Amy makes $80,000. If Amy sues X Corp. because of the pay differential, what must she show? What might the company argue in defense? Who should win?
Answer:
If Amy sues X Corp. because of the pay differential, what must she show?
The Equal Pay Act of 1963 prohibits discrimination in payment on the basis of gender (and race and origin also). In this case, Amy must prove that her work requires the same skills as Luis's and that it provides the same value to the company. They both have a master's degree in computer science, but she must also show that Luis's Ph.D. is not important to their work.
What might the company argue in defense?
The company might argue two things:
That Luis has a higher education degree, since he has a Ph.D. That Luis's work is more specialized since he codes games, while Amy codes different projects. They would have to prove that the games that Luis codes are much more profitable and valuable to the company than the work Amy does.Who should win?
If their work is similar, then Amy should win. If they are basically both doing the same job and require the same skills, therefore, the salary should be the same.
But if Luis's work is much more relevant and profitable for the company, then Amy would lose. If this is true, they might have to change Luis's compensation and reduce his salary but increase bonus compensation. This is true in all companies (or the vast majority of), e.g. the quarterback receives the highest salary since his job is more important for the team.
1. Identify each account as asset (A), liability (L), or equity (E).2. Identify whether the account is increased with a debit (DR) or credit (CR).3. Identify whether the normal balance is a debit (DR) or credit (CR).a. Interest Revenueb. Accounts Payablec. Common Stockd. Office Suppliese. Advertising Expensef. Unearned Revenueg. Prepaid Renth. Utilities Expensei. Dividendsj. Service Revenue Requirements
Answer: Please refer to Explanation
Explanation:
.a. Interest Revenue. This is EQUITY. It increase with a CREDIT. Normal Balance is CREDIT.
Interests Revenue is earned like revenue and as such is credited. In the balance sheet it will be with Equity as it increases the Retained Earnings of a firm.
b. Accounts Payable. LIABILITY.
Increases by CREDIT.
Normal Balance is CREDIT.
Accounts Payable are the result of buying goods on account meaning the firm owes the entities in question. It is credited to show an increase.
c. Common Stock. EQUITY.
Increases by CREDIT.
Normal Balance is CREDIT.
As a Capital balance, common stock is credited to show and increase and debited to show a decrease because it signifies that the business owes the holders/owners.
d. Office Supplies. ASSET
Increase by DEBIT.
Normal Balance is CREDIT.
As an asset, Office Supplies is recorded in the debit section and is debited to show increase.
e. Advertising Expense. EQUITY.
Increases by DEBIT.
Normal Balance is DEBIT.
Increases by DEBIT.
Advertising as an expense is taken from the Revenue. This makes it am Equity item. When it is debited, it increases and this normal Balance reflects a debit balance.
f. Unearned Revenue. LIABILITY.
INcrease is CREDITED
Normal Balance is CREDIT.
Unearned Revenue is a liability because the company owes performance to an entity for work that they have already been paid for. As such it's balance is increased by a Credit.
g. Prepaid Rent. ASSET.
Increase by DEBIT.
Normal Balance is DEBIT.
Prepaid rent means that the company paid for rent in advance and so it owed till the rent can be apportioned to a particular period. For this reason it is an asset and increases by DEBIT.
h. Utilities Expense. EQUITY.
Increases by DEBIT.
Nomal Balance is DEBIT.
As an expense that goes from the revenue it is an equity item and increases by debit. Normal Balance is also debit.
i. Dividends. EQUITY.
Increases by DEBIT.
Normal Balance is DEBIT.
Dividends are paid from Retained Earnings and as such belong in the Equity section. Dividends increase by being debited.
j. Service Revenue. EQUITY.
Increase by CREDIT.
Normal Balance is CREDIT.
As Revenue for the business it belongs in the EQUITY section. It is added to retained earnings and as it is revenue, it increases when it is credited.
Pearson Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 14.50%. What is Pearson's cost of common equity
Answer:
21.45%
Explanation:
Pearson motors has a target capital structure of 45% debt and 55% common equity
The yield to maturity is 10%
Tax rate is 40%
WACC is 14.50%
First of all we have to find the tax cost of debt
Tax cost of debt= Yield to maturity×(1-tax rate)
= 8×(1-25/100)
= 8×(1-0.25)
= 8×0.75
= 6%
The next step is to calculate the common equity
Therefore, the common equity can be calculated as follows
WACC= Respective cost×Respective weight
14.50= (6×0.45)+(0.55×common equity)
14.50= 2.7+(0.55×common equity)
14.50-2.7= (0.55×common equity)
11.8= (0.55×common equity)
Common equity= 11.8/0.55
Common equity= 21.45%
Hence Pearson's cost of common equity is 21.45%
Several studies indicate that the use of collaborative research agreement (between several firms, research centers, suppliers, competitors, universities, etc.) is increasing around the world. What are some reasons collaborative research is becoming more prevalent?
Answer & Explanation: Collaborative research refers to a research or study done by different independent bodies. Take for instance a scientist intends to undertake a study, he sorts the collaboration of a university.
Several benefits exist in collaborative research some of which includes;
1). It creates opportunity for an individual to develop as a scholarly author. This is because in working together the work gets more attention and recognition.
2). It makes the work to be done reduced. Considering the fact that people will handle different aspects of the research, the work per person will be less.
3). There will be variety of techniques. Having people work on same research enhances the research as different techniques are bound to be used to achieve result.
4). It gives room for more creativity. Because of the increased number of people working on the same tasks, diverse ideas will be brought forward, there will be knowledge sharing and this in turn will improve the creativity.
Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Debit Credit a. Interest revenue $ 14,500 b. Depreciation expense—Equipment $ 34,500 c. Loss on sale of equipment 26,350 d. Accounts payable 44,500 e. Other operating expenses 106,900 f. Accumulated depreciation—Equipment 72,100 g. Gain from settlement of lawsuit 44,500 h. Accumulated depreciation—Buildings 175,500 i. Loss from operating a discontinued segment (pretax) 18,750 j. Gain on insurance recovery of tornado damage 29,620 k. Net sales 1,003,500 l. Depreciation expense—Buildings 52,500 m. Correction of overstatement of prior year’s sales (pretax) 16,500 n. Gain on sale of discontinued segment’s assets (pretax) 36,500 o. Loss from settlement of lawsuit 24,250 p. Income tax expense ? q. Cost of goods sold 487,500 Assume that the company’s income tax rate is 40% for all items. Compute the tax effects and after-tax amounts of the three items labeled pretax. 2a. What is the amount of income from continuing operations before income taxes? 2b. What is the amount of the income tax expense? 2c. What is the amount of income from continuing operations?
Answer:
2a) 330,500
2b) 132,200
2c) 198,300
Explanation:
Loss from operating a discontinued segment (pretax) 18,750
Correction of overstatement of prior year’s sales (pretax) 16,500
Gain on sale of discontinued segment’s assets (pretax) 36,500
What eventually happens to non-market “command” economies?
Answer:
From the historical references, we can say that the two leading command economies of the world, China and the Soviet Union both made the transition to the mixed economy.
Explanation:
A command economy refers to the economic system where all significant facets of the economy and economic production are controlled by the Government. In the command economy, it is the government that makes the decision of what to produce, how to produce, and how to distribute the manufactured products and services within the economy. It establishes a very dominant government which restricts the rights of its citizen to seek economic goals. It inevitably creates an environment in which governments will expand their influence over certain aspects of human life. Most command economies, including the Soviet Union, started making the transition to a mixed economy from the 1980s onward. This entailed a privatization process and price deregulation.
Prepare three income statements for the year assuming that revenue is to be recognized when:_________.
1. Crocodiles have been caught (i.e. production complete).
2. Crocodiles have been sold and delivered
3. Cash collections are complete
Answer:
3
Explanation:
The right answer is "cash collections are complete"
Revenue can only be recognized when the amount of earning of whole year completes basically it's the total amount of money which is earned by the customer and income is the profit which can be calculated by subtracting the revenue and what remains after the expenses.
You are attempting to value a call option with an exercise price of $100 and one year to expiration. The underlying stock pays no dividends, its current price is $100, and you believe it has a 50% chance of increasing to $120 and a 50% chance of decreasing to $80. The risk-free rate of interest is 10%.Based upon your assumptions, calculate your estimate of the the call option's value using the two-state stock price model.
Answer:
$13.64
Explanation:
Given:
Exercise price,X = $100
Current price = $100
Value when price is up, uS = $120
Value when price is down, dS= $80
Risk free interest rate = 10%
First calculate hedge ratio, H:
[tex] H = \frac{C_u - C_d}{uS - dS} [/tex]
Where,
Cu = uS - X
= 120 - 100
= $20
[tex] H = \frac{20 - 0}{120 - 80} = \ftac{1}{2}[/tex]
A risk free portfolio involves one share and two call options.
Find cost of portfolio:
Cost of portfolio = Cost of stock - Cost of the two cells.
= $100 - 2C
This portfolio is risk free. The table below shows that
_______________
Portforlio 1:
Buy 1 share $80; Write 2 calls: $0; Total: ($80 + 0) $80
____________________
Portforlio 2:
Buy 1 share: $120; Write 2 calls: -$40; Total: ($120 - $40) $80
Check for oresent value of the portfolio:
Present value [tex] = \frac{80}{1 + 0.10} = 72.73 [/tex]
Value = exercise price - value of option
$72.73 = $100 - 2C
Find call option, C
[tex] C = \frac{100 - 72.73}{2} = 13.64 [/tex]
Call option's value = $13.64
The Prospect Company estimates that its overhead costs will amount to $602,000 and the company's manufacturing employees will work 86,000 direct labor hours during the current year. Overhead costs are allocated based on direct labor hours. If actual overhead costs for the year amounted to $619,000 and actual labor hours amounted to 87,000, then overhead cost would be:___________.
A- underapplied by $10,000.
B- overapplied by $4,000.
C- underapplied by $17,000.
D- overapplied by $10,000.
Answer:
The correct answer is A.
Explanation:
Giving the following information:
Estimated:
Overhead= $602,000
Direct labor hours= 86,000
Actual:
Overhead= $619,000
Direct labor hours= 87,000
First, we need to calculate the estimated overhead rate:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 602,000/86,000= $7 per direct labor hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH=7*87,000= $609,000
Finally, we determine the over/under allocation:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 619,000 - 609,000
Under/over applied overhead= 10,000 underallocated
Dusan is a member of the Tonda LLC, and all members have equal interests in capital and profits. The LLC has made an optional adjustment-to-basis election. Dusan's interest is sold to Adele for $35,000. The balance sheet of the LLC immediately before the sale shows the following:
Basis FMV
Cash $40,000 $40,000
Depreciable assets 80,000 100,000
$120,000 $140,000
Dusan, capital $30,000 $35,000
Randal, capital 30,000 35,000
Thom, capital 30,000 35,000
Erin, capital 30,000 35,000
$120,000 $140,000
a. How much is the 754 adjustment?
b. What is the amount of Adele's basis in the acquired interest?
c. Which partner receives deductions related to the step-up?
Answer: a. $5000 b. $35000 c. Adele
Explanation:
The balance sheet is a report which summarizes all of an entity's assets, the liabilities, and the equity at a given point in time.
Based on the balance sheet in the question, the following can be calculated:
a. The 754 adjustment will be the difference in the sale of interest and Susan's capital balance. This will be:
= Sale of interest - Dusan's capital balance
= $35,000 - $30,000
= $5000
b. Adele's basis in the acquired interest will be the value at which she acquired the interest. This will be = $35,000
c. Adele is the partner who receives deductions related to the step-up
The following data relate to the accounts of LIK Cooperation. Prepare the necessary adjusting journal entries indicated by each item for the year ended December 31, 2018.
A. A four-year insurance policy was purchased on April 1, 2018. The $96,000 insurance premium was fulaid on that date and a debit to prepaid insurance was recorded.
B. Unpaid salaries at year-end amount to $200,550.
C. Pruitt Corp. rents out some of its office space to Alliance Corp at $2,400 per month. On November 1, 2018, Pruitt Corp. recorded a credit to Rent Revenue for receipt of a rent payment of $7,200 from Alliance Corp. to cover rent from November 1, 2018 to January 31, 2019.
D. Pruitt Corporation holds bonds of another corporation. The bonds were purchased by Pruitt on June 30, 2018. Interest in the amount of $1,100 is received each year every June 30th.
1. Prepare any necessary adjusting entries on December 31, 2018.
2. Prepare the journal entry to record the receipt of interest on June 30, 2019.
Answer:
See the entries for (1) and (2) below.
Explanation:
1. Prepare any necessary adjusting entries on December 31, 2018.
SN Details Dr ($) Cr ($)
A. Insurance expenses (W. 1) 18,000
Prepaid Insurance 18,000
(To record insurance expenses for 2018.)
B. Salaries expenses 200,550
Accrued expenses - Salaries 200,550
(To record unpaid salaries).
C. Rent revenue 2,400
Advance revenue - Rent 2,400
(To record liability for rent received for Jan. 31, 2019)
D. Accrued interest income (W.2) 550
Interest income 550
(To record accrued interest income for 2018).
2. Prepare the journal entry to record the receipt of interest on June 30, 2019.
SN Details Dr ($) Cr ($)
A. Cash 1,100
Interest income 550
Accrued interest income (W.2) 550
(To record the receipt of interest income.)
Workings:
W.1. Insurance expenses for 2018 (9 months: April 1 - December 31 = $96,000 * [9 months /(4 years * 12 months) = $18,000
W.1 Accrued interest revenue (July 1 to December 31) = $1,100 * (6 months / 12 months) = $550
According to the Fair Value framework and to the lecture, what should companies try to do?
a. Offer fair value on all three bundles.
b. Offer better than fair value on all three bundles.
c. Offer fair value on two bundles and offer better than fair value on the other bundle.
Answer:
c. Offer fair value on two bundles and offer better than fair value on the other bundle
Explanation:
According to the Fair Value framework companies should try to Offer fair value on two bundles and as well try to offer better than fair value on the other bundle which simply means that in a situation where their are two bundles companies should tend to offer fair value on them and they should as well offer something that is far better than fair value on other bundle.
Therefore Fair value can be seen as an estimated price in which either asset or liability can be sold out or settled to a third party under recent and current market conditions.
BJT Corporation is owned 40 percent by Bill, 30 percent by Jack, and 30 percent by the Trumpet Partnership. Bill and Jack are father and son. Jack has a 10 percent interest in Trumpet Partnership. What is Jack’s total direct and constructive ownership of BJT Corporation under Section 267?
Answer:
33%
Explanation:
By virtue of been having 10% interest in Trumpet Partnership, Jack has a 10% share out of 30 percent owned by Trumpet Partnership (0.10 * 30=3%).
Additionally, his own 30 percent is still pay of his direct and constructive ownership of BJT Corporation, thus making his total direct stand at 33%.
Elegant Limited sells restored classic cars. Most of its customers are private buyers who buy cars for themselves. However, some of them are investors who buy multiple cars and hold them for resale. All sales of Elegant Limited are for cash.
Depict the association and cardinality for the sales of cars at Elegant Limited based on REA model. (10 marks, maximum 300 words)
Answer:
Elegant Limited
Depiction of the Association and Cardinality for the sales of cars:
1. Association: At Elegant Limited, for a car to be sold, a relationship must be established between Elegant Limited and some of its customers (private buyers and investors). A sale of car involve the exchange of economic resources. While Elegant Limited exchanges the cars for cash receipts, the customers exchange their cash for cars. Two economic resources are involved in the sale of cars, which are exchanged between two economic agents (Elegant Limited and customers) in a business event.
2. Cardinality: In each of the economic events involving the sale of cars to customers and the receipt of cash from customers, two elements are involved, which are the exchanges of resources. Cars and Cash are the elements that show their cardinality in the economic event. These elements are known as economic resources.
Explanation:
a) The REA Model is a tool for modelling business processes. In the sales process, one event would be the “sales of cars,” occasioning the giving of cars for “cash receipt,” the other event. These two events are linked as a cash receipt occurs in exchange for a sale, and vice versa. The REA Model was originally proposed in 1982 by William E. McCarthy as a generalized accounting model, and contained the concepts of resources, events and agents, according to wikipedia.com.
b) Association refers to the relationship existing when an event takes place. At least, two persons are impacted by any event, the giver and the receiver. For an economic event involving the exchange of resources to happen, two economic agents are involved. Otherwise, no transaction can take place. The seller of cars (Elegant Limited) and the buyers (Customers both private and investors).
c) Cardinality refers to the elements that make up an economic event, for example. The sale of cars and receipt of cash are economic events happening in a business relationship between Elegant Limited and Customers. The elements that make up the events are the resources (cars and cash), which are exchanged.
2. The Fourth of July Company agreed to ship a quantity of fireworks to Behan. After Behan pays in full, he learns that state law prohibits this type of sale. Before the fireworks are sent, Behan calls to cancel this contract and to demand his money back. May he recover his money in court
Answer:
Behan will recover his amount.
Explanation:
The contract has not been formed as the contract is only enforceable if the contract is legally allowed which means that the selling of fireworks in this case scenario is not allowed and hence Behan and Fourth of July Company are both equally responsible for not committing to such type of agreements. So the company must payback the money as the contract is not enforceable in the jurisdiction.
You purchased GARP stock one year ago at a price of $67.67 per share. Today, you sold your stock and earned a total return of 18.79 percent. The stock paid dividends of$2.92 per share over the year. What was the capital gains yield on your investment
Answer:
14.48%
Explanation:
The capital gains yield on the investment is increase in share price divided by the initial price paid to acquire the share a year ago.
The total return formula can be used to figure the price the stock was when sold as below:
total return =P1-Po+D/Po
P1 is the current price which is unknown
Po is the initial price of $67.67
total return is 18.79%
D is the dividend of $2.92
0.1879=P1-67.67+2.92/67.67
0.1879*67.67=P1-64.75
12.72=P1-64.75
P1=12.72+64.75
P1=77.47
Capital gains yield=(77.47 -67.67)/67.67=14.48%
Journalize the following transactions that occurred in November 2018 for May's Adventure Park. Assume May's uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name
Julie's Fun World estimates sales returns at the end of each month.
Nov.
4 Purchased merchandise inventory on account from Vera Company, $5,000. Terms 3/10, n/EOM, FOB shipping point.
6 Paid freight bill of $100 on November 4 purchase.
8 Returned half the inventory purchased on November 4 from Vera Company
10 Sold merchandise inventory for cash, $1,100. Cost of goods, $400. FOB destination.
11 Sold merchandise inventory to Geary Corporation, $11,100, on account, terms of 2/10, n/EOM. Cost of goods, $6,105. FOB shipping point.
12 Paid freight bill of $20 on November 10 sale.
13 Sold merchandise inventory to Caldwell Company, $9,500, on account, terms of n/45. Cost of goods, $5,225. FOB shipping point.
14 Paid the amount owed on account from November 4, less return and discount
17 Received defective inventory as a sales return from the November 13 sale, $500. Cost of goods, $275
18 Purchased inventory of $3,600 on account from Rainman Corporation. Payment terms were 2/10, n/30, FOB destination.
20 Received cash from Geary Corporation, less discount.
26 Paid amount owed on account from November 18, less discount.
28 Received cash from Caldwell Company, less return.
29 Purchased inventory from Sandra Corporation for cash, $12,300, FOB shipping point. Freight in paid to shipping company,
$170.
Answer:
May's Adventure Park
Journal Entries for November 2018:
Nov. 4: Debit Inventory $5,000
Credit Accounts Payable (Vera Company) $5,000
Nov. 6: Debit Freight-in $100
Credit Cash $100
Nov. 8: Debit Accounts Payable (Vera Company) $2,500
Credit Inventory Returns $2,500
Nov. 10: Debit Cash Account $1,100
Credit Sales $1,100
Nov. 10: Debit Cost of Goods Sold $400
Credit Inventory $400
Nov. 11: Debit Accounts Receivable (Geary Corporation) $11,100
Credit Sales $11,100
Nov. 11: Debit Cost of Goods Sold $6,105
Credit Inventory $6,105
Nov. 12: Debit Freight-out $20
Credit Cash Account $20
Nov. 13: Debit Accounts Receivable (Caldwell Company) $9,500
Credit Sales $9,500
Nov. 13: Debit Cost of Goods Sold $5,225
Credit Inventory $5,225
Nov. 14: Debit Accounts Payable (Vera Company) $2,500
Credit Cash Discount $75
Credit Cash Account $2,425
Nov. 17: Debit Sales Returns $500
Credit Accounts Receivable (Caldwell Company) $500
Nov. 17: Debit Inventory $500
Credit Cost of Goods Sold $500
Nov. 18: Debit Inventory $3,600
Credit Accounts Payable (Rainman Corporation) $3,600
Nov. 20: Debit Cash Account $10,878
Debit Cash Discount $222
Credit Accounts Receivable (Geary Corporation) $11,100
Nov. 26: Debit Accounts Payable (Rainman Corporation) $3,600
Credit Cash Discount $72
Credit Cash Account $3,528
Nov. 28: Debit Cash Account $9,000
Credit Accounts Receivable (Caldwell Company) $9,000
Nov. 29: Debit Inventory $12,300
Credit Accounts Payable (Sandra Corporation) $12,300
Nov. 29: Debit Freight-in $170
Credit Cash Account $170
Explanation:
Journal entries are made to debit and credit the accounts involved in each business transaction. They are the first accounting records made to capture transactions after they have been analyzed to know the accounts affected and which accounts in the ledger will be debited or credited. They are usually accompanied with short explanations, e.g. the trade terms.
TOMS is a shoe company that, since its inception, has given away one pair of shoes to someone in need for every pair purchased by a customer. They have expanded their philanthropy and now support programs designed to provide eye exams and glasses, clean drinking water, and safe birthing services to people in need in various parts of the world. Customers loyal to the TOMS brand believe the company is _____________, fill in the blank, through their participation in these charitable efforts.
Answer:
Socially responsible
Explanation:
A socially responsible company is one that seeks to identify as well as relieve the social needs in its business environment.
A major social problem or need around the world is the lack of clean drinking water and birthing services. Thus, by proffering solutions to this problem loyal customer of TOMS shoe company could notice that the company takes seriously its responsibility to the society.
