Answer:
Lester Company
The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be:______
c. $400,000.
Explanation:
Bonds issued at 103, 9% $1,000
Number of bonds issued = 400
Face value of bonds = $1,000 * 400 = $400,000
Proceeds from Bonds = $1,030 * 400 = $412,000
Premium from bonds issue = $12,000 ($412,000 - 400,000)
Carrying amount = $400,000
$400,000 is the bonds payable at maturity. The $12,000 bonds premium will be amortized with the interest expense. This implies that for the life of the bonds, part of the $12,000 will be deducted from the annual interest expense.
Debby’s Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of its aerobics dancing. The equipment will cost $24,500. Debby is not sure how many members the new equipment will attract, but she estimates that her increased annual cash flows for each of the next five years will have the following probability distribution. Debby’s cost of capital is 13 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods.
Cash Flow Probability
$ 3,840 0.4
5,280 0.2
8,110 0.3
10,370 0.1
a. What is the expected value of the cash flow? The value you compute will apply to each of the five years.
Expected Cash Flow $
b. What is the expected net present value? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places. )
Net Present Value $
c. Should Debby buy the new equipment?
Answer:
Cash Flow Probability Expected value
$3,840 0.4 $1,536
$5,280 0.2 $1,056
$8,110 0.3 $2,433
$10,370 0.1 $1,307
total 1 $6,332
a) the expected value of each yearly cash flow is $6,332
b) the present value of the expected cash flows = $6,332 x 3.5172 (PV annuity factor, 13%, 5 periods) = $22,270.91 ≈ $22,271
the NPV = -$24,500 + $22,271 = -$2,229
c) Debby should not buy the equipment since the project's NPV is negative.
The inventory of a large grocery store client is material, and it is the largest current asset on the balance sheet. The cost of inventory items ranges from very small amounts (like individual candy at the checkout line) to larger amounts (like prime meat and specialty deli items). Typical risks for a grocery store are theft and spoilage of inventory. During the second quarter, the client caught three employees in a scheme of stealing produce and meats from the store and selling them, at a discount, to friends and family. Based on an investigation by authorities and store management, the scheme had been operating for about two months.
Required:
Based on the information, evaluate which accounts and assertions are at risk of misstatement.
Answer:
The auditor of the large grocery store can identify the accounts at risk of misstatement to include Inventory account, Cost of Goods Sold account, and Accounts Payable account. They have some relationships. A misstatement in the Inventory account will lead to a misstatement in the Cost of Goods Sold, which eventually affects the Net Income.
The auditor should be aware that the assertions that are at risk of misstatement include existence, completeness, accuracy and valuation, and disclosure of Inventory. Assuming that the pilfering scheme had gone on for more months, the employees could have devised more sinister schemes.
Explanation:
The management of this large grocery store must attest to the assertions of existence, completeness, rights and obligations, accuracy and valuation, and presentation and disclosure with regard to the accuracy of the information contained in the financial statements: the balance sheet, income statement, and statement of cash flows. This implies that its management must declare that it has truthfully measured and presented the financial information about its activities.
You are considering starting a company that manufactures racing bicycles. You are planning on financing your firm 40% equity and 60% debt. You estimate that your upfront costs will be $5M, and that you will earn an EBIT of $1M per year for the next 12 years. Lightning Bolt Bikes makes racing bicycles similar to the ones that you wish to manufacture. They have a CAPM equity beta of 1.9 and a debt to equity ratio of 0.7. The tax rate for both firms is 35%, the riskless rate is 3%, and the expected return on the S&P500 is 15%. Cost of Debt is 6%
Part A (5 points). What is the asset beta of Lightning Bolt Bikes?
Part B (5 points). What is your unlevered cost of equity?
Part C (5 points). What is your firm’s equity beta?
Part D (10 points). What is your firm’s weighted average cost of capital?
Part E (5 points). What is the NPV of your proposed bicycle company using the WACC method?
Answer and Explanation:
1. Asset beta measures company's risk or volatility of return in assets without the effect of leverage financing or debt.
Asset beta= Equity beta / 1+(1-tax rate) *debt / equity
2. Unlevered cost of equity measures the returns on assets without the effect of debt
Unlevered cost of equity = Risk free return + Asset Beta * (Expected market return - Risk free return)
3. Equity beta measures security prices' volatility to change in the market
4. Weighted average cost of capital is the weighted average cost or average cost of all capital sources employed by the company in financing it's assets
Weighted Average cost of capital = Cost of Equity * proportion of equity + Cost of debt after tax rate * proportion of debt
Expected return in CAPM= Risk free return +asset beta *market return -risk free return
Robert needs his daily fix of coffee in the mid-afternoon and visits different coffee shops that will give him as much utility as possible, given his $20/month food budget. On Monday, the Blue Coffee Shop was selling espresso shots for $3 each and Robert added 3 shots to his cappuccino. By Friday, the Purple Coffee Shop offered espresso shots for $2 each, while all other prices remained the same, so Robert was bold and added 4 espresso shots to his hot beverage.
Required:
Given this information, plot Robert's demand curve for espresso shots.
Answer:
I drew Robert's demand curve for espresso shots assuming that it was a linear curve since the information contained in the question is limited to that.
A demand curve generally is downward sloping, since an increase in price will usually result in a higher quantity demanded (at least for normal goods).
Which components should Enterprise Free Cash Flows include? I. Capital expenditures II. Financing costs III. Taxes IV. Working capital requirements
Answer:
I , III and IV
Explanation:
The free cash flow is the cash flow in which the cash is left after paying off the operating expenses and the capital structure
Free cash flow is
= EBIT × (1 - tax rate) + depreciation & Amortization - changes in net working capital - capital expenditure
Therefore, the correct option is I, III and IV and the same is to be considered
If national income is $5,000 billion, compensation of employees is $1,105 billion, proprietors’ income is $1,520 billion, corporate profits are $490 billion, and net interest is $128 billion, then rental income is equal to
Answer:
Rental income = $1,757 billion
Explanation:
National income is defined as the value of goods and services that a nation produces within a financial year.
Therefore it is made up of all economic actives that the nation is involved in.
The gross domestic product is a measure of the national income.
The formula for national income is given below
National income = employees compensation + proprietors' income + corporate profits + rental income +net interest
5,000 billion = 1,105 billion + 1,520 billion + 490 billion + rental income + 128 billion
Rental income = 5,000 billion - 3,243 billion
Rental income = $1,757 billion
The following model is a simplified version of the multiple regression model used by Biddle and Hamermesh (1990) to study the tradeoff between time spent sleeping and working and to look at other factors affecting sleep:
sleep = β0 + β1totwrk + β2educ + β3age + u,
where sleep and totwrk (total work) are measured in minutes per week and educ and age are measured in years. (See also Computer Exercise.)
(i) If adults trade off sleep for work, what is the sign of β1?
(ii) What signs do you think β2 and β3 will have?
(iii) Using the data in SLEEP75.RAW, the estimated equation is
= 3,638.25 - .148 totwrk - 11.13 educ + 2.20 age n = 706, R2 = .113.
If someone works five more hours per week, by how many minutes is sleep predicted to fall? Is this a large tradeoff?
(iv) Discuss the sign and magnitude of the estimated coefficient on educ.
(v) Would you say totwrk, educ, and age explain much of the variation in sleep? What other factors might affect the time spent sleeping? Are these likely to be correlated with totwrk?
Use the data in SLEEP75.RAW from Biddle and Hamermesh (1990) to study whether there is a tradeoff between the time spent sleeping per week and the time spent in paid work. We could use either variable as the dependent variable. For concreteness, estimate the model
sleep =β0+ β1totwrk+u, where sleep is minutes spent sleeping at night per week and totwrk is total minutes worked during the week.
(i) Report your results in equation form along with the number of observations and R2. What does the intercept in this equation mean?
(ii) If totwrk increases by 2 hours, by how much is sleep estimated to fall? Do you find this to be a large effect?
Answer:
1. I²1 will have a negative sign
This is because the more work the adults do, the less sleep they will utilize.
2. The sign of i²2 is likely to be negative. This is because due to the demands placed on them, more educated people are likely to sleep less. Also, general as age increases some people sleep less. While some others sleep more as it increases. So i²3 is a bit complicated to judge.
3. Using the data
^sleep = 3638.24-0.148toteork-11.13educ + 2.20age
N = 706 r² = 0.113
We will convert 5 hours to minutes = 60x5 = 300
Coefficient of totwork = 0.148
O.148x300 = 44.4 minutes
In a week approximately 45 minutes of less sleep is not too much a change.
4. We are to discuss the sign and magnitude of estimated education
More education indicates less sleeping time. This is obvious given the sign of the variable educ. It is negative, but it's effect is quite small. Magnitude is -11.13.
So as education increases by 1 year, expected sleeping time decreases by 11.13 minutes weekly.
5. R² is 0.113. the 3 predictor variables gives us 11.3% of total variations in sleep and rest. 88.7% is unexplained.
Some factors that might also affect it are general health, number and age of children are factors that could correlate with totwork
If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) ________ change in the quantity demanded for Good A. Group of answer choices
Answer:
INCREASE
There are no options available, but since the cross price elasticity of demand is positive, that means that goods A and B are substitute products. An increase in the price of good B will increase the quantity demanded for good A. If the cross price elasticity had been negative, then they would be complement goods, and an increase in the price of one of them would decrease the quantity demanded of both.
"The​ ________ includes all international economic transactions with income or payment flows occurring within the year."
Answer:
Current account
Explanation:
The current account is the account that involves all the transactions deals in an economic way and have international transactions. This shows the income generated and the flows of payment arise within the year or for the present period.
It could be in terms of trading of goods, trading of services, income, present transfers
Therefore the given situation represent the current account
In, & Sons, a small environmental-testing firm, has a small environmental-testing firm, performed 11,400 radon tests for $260 each and 15,000 lead tests for $210 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 12% next year. However, awareness of radon-related health hazards is expected to result in a 5% increase in radon-test volume each year in the near future. Jim Hart feels that if he lowers his price for lead testing to $200 per test, he will have to face only a 4% decline in lead-test sales in 2018.
Required:
a. Prepare a 2018 sales budget for Hart & Sons assuming that Hart holds prices at 2017 levels.
b. Prepare a 2018 sales budget for Hart & Sons assuming that Hart lowers the price of a lead test to $200.
c. Should Hart lower the price of a lead test in 2018 if the company’s goal is to maximize sales revenue?
Answer:
A. $5,884,200
B. $5,992,200
C. If the company's aim and objective is for them to maximize their sales revenue then they should go ahead and lower the selling price of lead tests in 2018
Explanation:
a. Preparation of 2018 sales budget for Hart & Sons assuming that Hart holds prices at 2017 levels
Sales budget
For the year ended December 31, 2018
Selling price Units sold Total Revenue
Radon tests
$260 *11,970 =$3,112,200
(11,400 x 1.05 = 11,970)
Lead tests $210*13,200= $2,772,000
(15,000 x 0.88 = 13,200)
(100%-12%=88%)
Total $5,884,200
$3,112,200+$2,772,000
b. Preparation of 2018 sales budget (lower price)
Sales budget
For the year ended December 31, 2018
Selling price Units sold Total Revenue
Radon tests
$260 *11,970 =$3,112,200
(11,400 x 1.05 = 11,970)
Lead tests $200*14,400= $2,880,000
(15,000 x 0.96 = 14,400)
(100%-4%=96%)
Total $5,992,200
$3,112,200+$2,880,000
C. If the company's aim and objective is for them to maximize their sales revenue then they should go ahead and lower the selling price of lead tests in 2018
Cascade Company was started on January 1, 2016, when it acquired $60,000 cash from the owners. During 2016, the company earned cash revenues of $35,000 and incurred cash expenses of $18,100. The company also paid cash distributions of $4,000.
Required:
Prepare a 2016 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions.
a. Cascade is a sole proprietorship owned by Carl Cascade.
b. Cascade is a partnership with two partners, Carl Cascade and Beth Cascade. Carl Cascade invested $24,000 and Beth Cascade invested $36,000 of the $60,000 cash that was used to start the business. Beth was expected to assume the vast majority of the responsibility for operating the business. The partnership agreement called for Beth to receive 60 percent of the profits and Carl to get the remaining 40 percent. With regard to the $4,000 distribution, Beth withdrew $2,400 from the business and Carl withdrew $1,600.
c. Cascade is a corporation. It issued 5,000 shares of $5 par common stock
for $60,000 cash to start the business.
Answer:
the income statement is the same for all types of businesses:
Revenues $35,000
Expenses ($18,100)
Net income $16,900
a. Cascade is a sole proprietorship owned by Carl Cascade.
statement of equity
Carl Cascade, capital beginning balance $0
paid in capital, Carl Cascade $60,000
net income $16,900
subtotal $76,900
Carl Cascade, drawings (4,000)
Carl Cascade, capital ending balance $72,900
balance sheet
Assets
Cash $72,900
Equity
Carl Cascade, capital $72,900
statement of cash flows
Cash flow from operating activities $16,900
Cash flow from financing activities:
Paid in capital $60,000
Drawings ($4,000)
net cash from financing activities $56,000
net cash increase $72,900
beginning cash balance $0
ending cash balance $72,900
b. Cascade is a partnership with two partners, Carl Cascade and Beth Cascade.
statement of equity
Carl Cascade, capital beginning balance $0
Beth Cascade, capital beginning balance $0
paid in capital, Carl Cascade $24,000
paid in capital, Beth Cascade $36,000
net income $16,900
subtotal $76,900
Carl Cascade, drawings (1,600)
Beth Cascade, drawings (2,400)
Carl Cascade, capital ending balance $29,160
Beth Cascade, capital ending balance $43,740
balance sheet
Assets
Cash $72,900
Equity
Carl Cascade $29,160
Beth Cascade $43,740
total equity $72,900
statement of cash flows
Cash flow from operating activities $16,900
Cash flow from financing activities:
Paid in capital $60,000
Drawings ($4,000)
net cash from financing activities $56,000
net cash increase $72,900
beginning cash balance $0
ending cash balance $72,900
c. Cascade is a corporation.
statement of equity
Common stock beginning balance $0
Common stock issued (5,000 stocks) $25,000
Additional paid in capital $35,000
net income $16,900
subtotal $76,900
Dividends (4,000)
Common stock ending balance $25,000
Additional paid in capital ending balance $35,000
Retained earnings $12,900
balance sheet
Assets
Cash $72,900
Equity
Common stock $25,000
Additional paid in capital $35,000
Retained earnings $12,900
total equity $72,900
statement of cash flows
Cash flow from operating activities $16,900
Cash flow from financing activities:
Common stocks issued $25,000
Additional paid in capital $35,000
Dividends ($4,000)
net cash from financing activities $56,000
net cash increase $72,900
beginning cash balance $0
ending cash balance $72,900
The premium on a three-year insurance policy expiring on December 31, 20x11, was paid in total on January 1, 20x9. The original payment was initially debited to a prepaid asset account. The appropriate journal entry has been recorded on December 31, 20x9. The balance in the prepaid asset account on December 31, 20x9 should be Select one: a. The same as the original payment b. The same as it would have been if the original payment had been debited initially to an expense account c. Higher than if the original payment had been debited initially to an expense account d. Zero Check
Answer:
b. The same as it would have been if the original payment had been debited initially to an expense account
Explanation:
We can use an example to explain this:
original journal entry to record a 3 year insurance policy on January 1 is:
Dr Prepaid insurance 3,600
Cr Cash 3,600
Adjusting entry on December 31
Dr Insurance expense 1,200
Cr Prepaid insurance 1,200
balance of prepaid insurance = $3,600 - $1,200 = $2,400
If instead of recording prepaid insurance on January 1, you recorded insurance expense:
Dr Insurance expense 3,600
Cr Cash 3,600
Adjusting entry on December 31
Dr Prepaid insurance 2,400
Cr Insurance expense 2,400
balance of prepaid insurance = $2,400
Last month Empire Company had a $35,280 profit on sales of $287,000. Fixed costs are $68,040 a month. By how much would sales be able to decrease for Empire to still break even
Answer:
sales might decrease by $287,000 - $189,000 = $98,000 and the company will still break even
Explanation:
gross profit = net income + fixed costs = $35,280 + $68,040 = $103,320
COGS = total sales - gross profit = $287,000 - $103,320 = $183,680
contribution margin ratio = $103,320 / $287,000 = 36%
break even point in $ = $68,040 / 36% = $189,000
sales might decrease by $287,000 - $189,000 = $98,000 and the company will still break even
A machine was purchased for $35,500, having a useful life of 10 years, and a residual value of $6,000. Compute the annual depreciation expense using the straight-line method.
Answer:
Annual depreciation= $2,950
Explanation:
Giving the following information:
A machine was purchased for $35,500, having a useful life of 10 years, and a residual value of $6,000.
To calculate the depreciation expense under the straight-line method, we need to use the following formula:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (35,500 - 6,000) / 10
Annual depreciation= $2,950
Larkspur Incorporated factored $124,300 of accounts receivable with Cullumber Factors Inc. on a without-recourse basis. Cullumber assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable for possible adjustments.
Required:
Prepare the journal entry for Larkspur Incorporated and Cullumber Factors to record the factoring of the accounts receivable to Cullumber.
DR Cash 115,599
Due from Factor (Cullumber) 6,215
Loss on Sale of Receivables 2,486
CR Accounts Receivable 124,300
Working
Due from Factor = 5% * 124,300
= $6,215
Loss on sale of receivables = 2% * 124,300
= $2,486
Cash = 124,300 - 6,215 - 2,486
= $115,599
Cullumber Factors Inc.DR Accounts Receivable 124,300
CR Due to Larkspur 6,215
Financing Revenue 2,486
Cash 115,599
What are the 2 main sources of data
Answer:
internal and external source
Explanation:
Answer:
There are two sources of data. they are:
1. Internal Source.
2. External Source.
Explanation:
Internal Source. When data are collected from reports and records of the organision itself, it is known as the internal source.
External Source. When data are collected from outside the organition, it is known as the external source.
For each of the procedures described in the table below, identify the audit procedure per formed and classification of the audit procedure using the following:
Audit Procedures: Classification of Audit Procedure
(I) Analytical procedure (9) Substantive procedures
(2) Confirmation (I0) Test of controls
(3) Inquiry
(4) Inspection of recordsordocuments
(5) Inspection of tangible assets
(6) Observation
(7) Recalculation
(8) Reperformance
Procedure Audit Procedure Classification of Audit Procedure
a. Requested responses directly from customers as to amounts due.
b. Compared total bad debts this year with the totals for the previous two years.
c. Questioned management about likely total uncollectible accounts.
d. Watched the accounting clerk record the daily deposit of cash receipts.
e. Examined invoice to obtain evidence in support of the ending recorded balance of a customer.
f. Compared a sample of sales invoices to credit files to determine whether the customers were on the approved customer list.
g. Examined a sample of sales invoices to see if they were initialized by the credit manager indicating credit approval.
Answer:
a. Requested responses directly from customers as to amounts due.
Audit Procedure: Confirmation
Classification of Audit Procedure: Substantive procedures
b. Compared total bad debts this year with the totals for the previous two years.
Audit Procedure: Analytical procedure
Classification of Audit Procedure: Substantive procedures
c. Questioned management about likely total uncollectible accounts.
Audit Procedure: Inquiry
Classification of Audit Procedure: Substantive procedures
d. Watched the accounting clerk record the daily deposit of cash receipts.
Audit Procedure: Observation
Classification of Audit Procedure: Test of controls
e. Examined invoice to obtain evidence in support of the ending recorded balance of a customer.
Audit Procedure: Inspection of records or documents
Classification of Audit Procedure: Substantive procedures
f. Compared a sample of sales invoices to credit files to determine whether the customers were on the approved customer list.
Audit Procedure: Reperformance
Classification of Audit Procedure: Test of controls
g. Examined a sample of sales invoices to see if they were initialized by the credit manager indicating credit approval.
Audit Procedure: Inspection of records or documents
Classification of Audit Procedure: Test of controls
Bramble Corp. sells MP3 players for $60 each. Variable costs are $30 per unit, and fixed costs total $120000. How many MP3 players must Bramble sell to earn net income of $300000?
Answer:
Break-even point in units= 14,000 units
Explanation:
Giving the following information:
Selling price= $60
Variable costs are $30 per unit
Fixed costs total $120,000.
Desired profit= $300,000
To calculate the number of units to be sold, we need to use the following formula:
Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit
Break-even point in units= (120,000 + 300,000) / 30
Break-even point in units= 14,000 units
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $3 million.
Required:
a. Determine the present value of the lease payments at June 30, 2021 that Georgia-Atlantic uses to record the right-of-use asset and lease liability.
b. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021
Answer:
1. $3,000,000
2. Liability $1,996,041
Asset$2,500,000
Explanation:
1. Calculation to Determine the present value of the lease payments at June 30, 2021
Present value of lease payments will be calculated as : $562,907 × 5.32948
(Present value of an annuity due of $1:
n = 6, i = 5% is 5.32948)
Present value of lease payments = $3,000,000
Therefore the Present value of lease payments will be $3,000,000
2. Calculation to Determine the pretax amounts related to the lease that Georgia-Atlantic would report in its balance sheet at December 31, 2021
Liability at December 31, 2021
Initial balance, June 30, 2021 3,000,000
June 30, 2021 Reduction(562,907)
Dec. 31, 2021 reduction (441052)
[562,907-(3,000,000-562,907)*5%]
December 31, 2021 NET LIABILITY $1,996,041
ASSETS at December 31, 2021
Initial balance, June 30, 2021 3,000,000
Accumulated depreciation at Dec. 31, 2021 (500,000)
(3000000/3*1/2)
December 31, 2021 ASSETS $2,500,000
Therefore the pretax amounts related to the lease that Georgia-Atlantic would report in its balance sheet at December 31, 2021 will be : Liability $1,996,041
Asset$2,500,000
On August 20th, one of your employees comes to you with a vacation request. The employee’s available vacation time expires on September 1st, however she wants to take her vacation between September 20th through the 25th.
She asks you to submit her vacation request to the corporate office for the week prior to September 1st, and wants you to not schedule her for the days between the 20th and 25th, and she wants her "vacation" pay for those days.
Would you do it? Why? or Why Not?
Answer:
No
Explanation:
Her vacation is expired and therefore invalid. Also she is requesting for a pay during this period which counters Amy form of sympathy for this employee. However, depending on the relationship the employee has with her employer, there might be a compromise especially if the employee really does need the vacation as she may be burned out or may have postponed vacation till expiration for the interest of the company
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 48,000 mini refrigerators, of which 44,000 were sold. Operating data for the month are summarized as follows:
1 Sales $8,800,000.00
2 Manufacturing costs:
3 Direct materials $3,360,000.00
4 Direct labor 1,344,000.00
5 Variable manufacturing cost 816,000.00
6 Fixed manufacturing cost 528,000.00 6,048,000.00 7
Selling and administrative expenses:
8 Variable $528,000.00
9 Fixed 352,000.00 880,000.00
Required:
a. Prepare an income statement based on the absorption costing concept.
b. Prepare an income statement based on the variable costing concept.
c. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
Answer:
Part a.
Income statement based on the absorption costing concept.
Sales $8,800,000.00
Less Cost of Sales
Beginning Inventory $0
Add Manufacturing Cost $6,048,000.00
Less Ending Inventory ($504,000.00) ($5,544,000.00)
Gross Profit $3,256,000.00
Less Expenses :
Selling and administrative expenses:
Variable $528,000.00
Fixed $352,000.00 ($880,000.00)
Net Income/(loss) $2,376,000.00
Part b.
Income statement based on the variable costing concept.
Sales $8,800,000.00
Less Cost of Sales
Beginning Inventory $0
Add Manufacturing Cost $5,520,000.00
Less Ending Inventory ($460,000.00) ($5,060,000.00)
Contribution $3,740,000.00
Less Expenses :
Fixed manufacturing cost $528,000.00
Selling and administrative expenses:
Variable $528,000.00
Fixed $352,000.00 ($1,408,000.00)
Net Income/(loss) $2,332,000.00
Part c.
Reason : Fixed Costs deferred in Ending Inventory in Absorption Costing has resulted in a higher Income.
Explanation:
Units in Ending Inventory Calculation :
Production 48,000
Less Sales (44,000)
Ending Inventory 4,000
Absorption Costing Calcs
Variable Manufacturing Costs
Direct materials $3,360,000.00
Direct labor $1,344,000.00
Variable manufacturing cost $816,000.00
Fixed manufacturing cost $528,000.00
Total $6,048,000.00
Ending Inventory = $6,048,000.00 × 4,000 / 48,000
= $504,000
Variable Costing Calcs
Variable Manufacturing Costs
Direct materials $3,360,000.00
Direct labor $1,344,000.00
Variable manufacturing cost $816,000.00
Total $5,520,000.00
Ending Inventory = $5,520,000.00 × 4,000 / 48,000
= $460,000
Lahey Advertising Company’s trial balance at December 31 shows Supplies $8,800 and Supplies Expense $0. On December 31, there are $1,100 of supplies on hand.
Required:
Prepare the adjusting entry at December 31.
Answer: See attachment
Explanation:
The adjusting entries for Lahey Advertising Company has been solved and attached. It should be noted that the supplies expenses was calculated as:
= $8800 - $1100
= $7700
Kindly check the attachment for further analysis.
Carving Creations jointly produces wood chips and sawdust used in agriculture. The wood chips and sawdust are actually by-products of the company’s core operations, but Carving Creations accounts for them just like normally produced goods because of their large volumes. One jointly produced batch yields 3,000 cubic yards of wood chips and 10,000 cubic yards of sawdust, and the estimated cost per batch is $21,400. However, the joint production of each good is not equally weighted. Management at Carving Creations estimates that for the time it takes to produce 10 cubic yards of wood chips in the joint production process, only 2 cubic yards of sawdust are produced.
Given this information, allocate the joint costs of production to each product using the weighted average method.
Joint Product Allocation
Sawdust _____$
Wood chips _____
Totals _____ $
Answer:
Carving Creations
Joint Product Allocation
Sawdust _____$ 12,840 ($0.428 * 30,000)
Wood chips _____ $8,560 ($0.428 * 20,000)
Totals _____ $21,400
Explanation:
a) Data and Calculations:
Wood chips = 3,000 cubic yards
Sawdust = 10,000 cubic yards
Estimated batch cost = $21,400
Weight assigned to wood chips production = 10
Weight assigned to sawdust production = 2
Weighted Allocation of the joint costs:
Wood chips = 3,000 * 10 = 30,000
Sawdust = 10,000 * 2 = 20,000
Total weighted units = 50,000
Allocation rate based on weights = $21,400/50,000
= $0.428
Joint Product Allocation
Sawdust _____$ 12,840 ($0.428 * 30,000)
Wood chips _____ $8,560 ($0.428 * 20,000)
Totals _____ $21,400
Jane is planning to go on a camping trip. She purchases a bottle of mineral water, a pack of biscuits, a small tube of toothpaste, and a toothbrush from the supermarket near her house. The items that Jane has purchased from the supermarket are _____.
franchise
Explanation:
right granted to an individual or group to the market for a business goods or services within a certain area
Jane is planning to go on a camping trip. The items that Jane has purchased from the supermarket are non durable goods.
What do you mean by the non durable goods?The lifespan of consumer nondurable items, which are bought for immediate or nearly immediate consumption, ranges from minutes to three years. These frequently include things like meals, drinks, clothes, shoes, and gasoline.
Non-durable commodities are typically produced, delivered, and sold to consumers quickly.
These products are frequently used very rapidly as well, thus consumers require a constant supply in order to keep stocking up.
Therefore, Jane is planning to go on a camping trip. She purchases a bottle of mineral water, a pack of biscuits, a small tube of toothpaste, and a toothbrush from the supermarket near her house. The items that Jane has purchased from the supermarket are non durable goods.
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Determine the selling price PV, per $1,000 maturity value, of the bond. HINT [See Example 8.] (Assume twice-yearly interest payments. Do not round those payments to the nearest cent. Round your selling price PV to the nearest cent.) 20-year, 4.225% bond, with a yield of 4.23%
Answer:
$999.60
Explanation:
For computing the selling price i.e. present value we have to use the present value function i.e. shown below:
Given that
NPER = 20 × 2 = 40
PMT = $1,000 × 4.225% ÷ 2 = $21.125
RATE = 4.23% ÷ 2 = 2.115%
FV = $1,000
the formula is shown below:
PV =-PV(RATE;NPER;PMTFV;TYPE)
After applying the above formula, the present value is $999.60
What type of competition stems from new products, new processes, new markets, and new forms of business organization
Answer: Creative destruction
Explanation:
Creative destruction, just like the name suggest is used to refer to the creation of new products and processes. Or an innovative mechanism by which new production units are produced. this are used to replace outdated or obsolete ones. This usually results in the production of new products, process, and markets.
If 60% of the population is female and 30% of females buy physical therapy services, and 70% of men buy physical therapy services, is there more demand for physical therapy from women or men?
Answer:
Men.
Explanation:
Well, 70% of 40% (100% - 60%) = 28% total population demand.
30% of 60% = 18%
28% > 18%
Clearly, men have more demand for physical therapy as compared with women.
What is the importance of population distribution?Multiple uses can be made of population distribution data among administrative areas. They often serve as the foundation for choosing the electoral districts. They offer fundamental information for population estimates and are helpful in relation to social, economic, and administrative planning.
Because out of the total 40% population of men 70% required therapy which is greater than, the total 60% of women population 30% required therapy.
Physical therapists are experts in the movement who enhance patients' quality of life by giving them individualized treatment plans, providing direct care, and educating them. Physical therapists provide diagnosis and care for patients of all ages, including those nearing the end of their lives.
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Alan inherited $100,000 with the stipulation that he "invest it to financially benefit his family." Alan and his wife Alice decided they would invest the inheritance to help them accomplish two financial goals: purchasing a Park City vacation home and saving for their son Cooper’s education.
Vacation Home Cooper’s Education
Initial investment $50,000 $50,000
Investment horizon 5 years 18 years
Alan and Alice have a marginal income tax rate of 32 percent (capital gains rate of 15 percent) and have decided to investigate the following investment opportunities.
Required:
Determine the two annual after-tax rate of return.
Answer:
the question is missing the information about potential investments, so I looked for a similar one:
5 Years 18 Years
Corporate bonds 5.75% 4.75%
(ordinary interest taxed annually)
Dividend-paying stock 3.50% 3.50%
(no appreciation and dividends are taxed at 15%)
Growth stock FV $65,000 FV $140,000
Municipal bond (tax-exempt) 3.20% 3.10%
Alan and Alice should invest in growth stocks since they yield the highest after tax return:
5 years:
FV of growth stocks = $65,000
taxable gain = $65,000 -$50,000 = $15,000 x 15% = $2,250
net gain = $15,000 - $2,250 = $12,750
to determine the yield rate we can use the future value formula:
62,750 = 50,000 x (1 + r)⁵
(1 + r)⁵ = 62,750 / 50,000 = 1.255
⁵√(1 + r)⁵ = ⁵√1.255
1 + r = 1.046
r = 4.6% after tax yield per year
18 years:
FV of growth stocks = $140,000
taxable gain = $140,000 -$50,000 = $90,000 x 15% = $13,500
net gain = $90,000 - $13,500 = $76,500
to determine the yield rate we can use the future value formula:
126,500 = 50,000 x (1 + r)¹⁸
(1 + r)¹⁸ = 126,500 / 50,000 = 2.53
¹⁸√(1 + r)¹⁸ = ¹⁸√2.53
1 + r = 1.053
r = 5.3% after tax yield per year
berkshire hathaway a corporation, owns Goldman Sachs preferred stock with a 12 dividend yield. What is Berthshire Hathaway's after-tax dividend yield on this preferred stock if their marginal tax rate is
Answer: 11.2%
Explanation:
Here is the completed question:
berkshire hathaway a corporation, owns Goldman Sachs preferred stock with a 12 dividend yield. What is Berthshire Hathaway's after-tax dividend yield on this preferred stock if their marginal tax rate is 21%?
The dividend yield that's not subject to tax will be:
= 12% × 70%
= 0.12 × 0.7
= 0.084
The dividend yield that's subject to tax will be:
= 12% × 30% × (1 - 21%)
= 0.12 × 0.3 × 0.79
= 0.02844
Berthshire Hathaway's after-tax dividend yield will now be:
= 0.084 - 0.02844
= 0.11244
= 11.2%
A real estate agent is considering changing her land line phone plan. There are three plans to choose from, all of which involve a monthly service charge of $20. Plan A has a cost of $.41 a minute for daytime calls and $.16 a minute for evening calls. Plan B has a charge of $.51 a minute for daytime calls and $.15 a minute for evening calls. Plan C has a flat rate of $80 with 300 minutes of calls allowed per month and a charge of $.38 per minute beyond that, day or evening.
a. Determine the total charge under each plan for this case: 120 minutes of day calls and 40 minutes of evening calls in a month. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Cost for Plan A $
Cost for Plan B $
Cost for Plan C $
b. If the agent will use the service for daytime calls, over what range of call minutes will each plan be optimal? (Round each answer to the nearest whole number.Include the indifference point itself in each answer.)
c. Suppose that the agent expects both daytime and evening calls. At what point (i.e., percentage of total call minutes used for daytime calls) would she be indifferent between plans A and B? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places. Omit the "%" sign in your response.)
Answer:
a. Determine the total charge under each plan for this case: 120 minutes of day calls and 40 minutes of evening calls in a month.
Cost for Plan A = ($0.41 x 120) + ($0.16 x 40) + $20 = $ 75.60Cost for Plan B = ($0.51 x 120) + ($0.15 x 40) + $20 = $ 87.20Cost for Plan C = $80 + $20 = $100b. If the agent will use the service for daytime calls, over what range of call minutes will each plan be optimal?
If the agent will use the service only for daytime calls, Plan A is better if the agent uses 195 minutes maximum. If the agent expects to use 196 or more minutes, then Plan C is better.c. Suppose that the agent expects both daytime and evening calls. At what point (i.e., percentage of total call minutes used for daytime calls) would she be indifferent between plans A and B?
Plan A charges 10¢ less per daytime minute, while plan B charges 1¢ less for evening minutes, that means that the proportion of daytime calls should be 1/11, while the proportion of evening calls should be 10/11.