Answer:
The adjusted balance is equal to the estimate of the uncollectible accounts receivable.
Explanation:
Receivable in economics is simply whenbusiness sells goods or services to another party on account usually on credit. It is also known as a monetary claim usually against a business or an individual.
Accounts receivable
Is simply defined as the power to the right to receive cash in the future from customers for goods or services performed. They can be called claim of right, exchange consideration, and a claim for the future.
The supplementary record that contains information on each customer is the accounts receivable ledger.
The goal for the accounts receivable methods is to adjust the Allowance for Doubtful Accounts balance making the adjusted balance is equal to the estimate of the uncollectible accounts receivable.
What would it cost an insurance company to replace a family's personal property that originally cost $25,000? The replacement costs
for the items have increased 15 percent.
Answer:
the replacement cost is $28,750
Explanation:
The computation of the replacement cost is shown below:
= Cost of the personal property × (1 + increased percentage)
= $25,000 × (1 + 0.15)
= $25,000 × 1.15
= $28,750
Hence, the replacement cost is $28,750
We simply applied the above formula so that the correct value of the replacement cost could come
Baiman, Inc. issues $1,000,000 of zero-coupon bonds that mature in 10 years. Compute the bond issue price assuming that the bonds' market rate is:
a. 10% per year compounded semiannually.
Round your answers to the nearest dollar.
Answer:
Zero-cupon bond= $376,889.48
Explanation:
Giving the following formula:
Face value= $1,000,000
Mature= 10*2= 20 semesters
Market rate= 0.1/2= 0.05
To calculate the price of the bond, we need to use the following formula:
Zero-cupon bond= [face value/(1+i)^n]
Zero-cupon bond= [1,000,000 / (1.05^20)]
Zero-cupon bond= $376,889.48
Sales promotions that provide consumers an incentive to buy a product, such as a cents-off coupons or a discount, are widely used, especially for the type of products we buy in the grocery store. For the company offering the discounts and coupons, one of the risks with such a strategy is that _______________.it is challenging to track usage of the couponsit will not provide a believable messageretailers are typically not interested in helping out with such campaignsconsumers who typically buy other brands will switch to the promoted brandit might only appeal to already loyal customers who stockpile the product when it is on sale for later consumption
Answer:
it is challenging to track usage of the coupons
Explanation:
Coupons are defined as an instrument that is used to obtain a discount or rebate when making a purchase.
Stores usually give out coupons to customers as an incentive to by products.
However there will be challenge of tracking the coupons as well as the discount on each coupon.
Coupons are given at different discount rates at different times, so it is cumbersome to track a particular coupon out of the many issued when customer wants to redeem it
On June 30, 2018, Streeter Company reported the following account balances:
Receivables $ 83,900 Current liabilities $ (12,900 )
Inventory 70,250 Long-term liabilities (54,250 )
Buildings (net) 78,900 Common stock (90,000 )
Equipment (net) 24,100 Retained earnings (100,000 )
Total assets $ 257,150 Total liabilities and equities $ (257,150 )
On June 30, 2021, Princeton Company paid $316,500 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $12,700 in legal fees. Princeton also agreed to pay $63,800 to the former owners of Streeter contingent on meeting certain revenue goals during 2022. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $20,100.
In determining its offer, Princeton noted the following pertaining to Streeter:
It holds a building with a fair value $43,100 more than its book value.
It has developed a customer list appraised at $25,200, although it is not recorded in its financial records.
It has research and development activity in process with an appraised fair value of $36,400. However, the project has not yet reached technological feasibility and the assets used in the activity have no alternative future use.
Book values for the receivables, inventory, equipment, and liabilities approximate fair values.
Prepare Princeton’s accounting entry to record the combination with Streeter. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. First Entry Record the acquisition of Streeter company.
2. Second Entry Record the legal fees related to the combination.
Answer:
1. Dr Receivables $ 83,900
Dr Inventory $70,250
Dr Building (net) $122,000
Dr Equipment (net) $24,100
Dr Customer list $25,200
Dr Capitalized R&D $36,400
Dr Goodwill $41,900
Cr Current liabilities $12,900
Cr Long-term liabilities $54,250
Cr Contingent obligation performance $20,100
Cr Acquisition cost $316,500
2. Dr Combination expense (Legal fees) $12,700
Cr Cash $12,700
Explanation:
1. Preparation of the First Entry to Record the acquisition of Streeter company.
First step is to calculate Goodwill on Acquisition
Acquisition cost $316,500
Add Contingent obligation performance $20,100
Total Acquisition cost $336,600
Less Fair value of Streeter company:
Receivables $ 83,900
Inventory $70,250
Building (net) $122,000
($78,900+$43,100)
Equipment (net) $24,100
Customer list $25,200
Capitalized R&D $36,400
Current liabilities ($12,900 )
Long-term liabilities ($54,250 ) ($294,700)
Goodwill $41,900
($336,600-$294,700)
Now let prepare the First Entry to Record the acquisition of Streeter company.
Dr Receivables $ 83,900
Dr Inventory $70,250
Dr Building (net) $122,000
($78,900+$43,100)
Dr Equipment (net) $24,100
Dr Customer list $25,200
Dr Capitalized R&D $36,400
Dr Goodwill $41,900
Cr Current liabilities $12,900
Cr Long-term liabilities $54,250
Cr Contingent obligation performance $20,100
Cr Acquisition cost $316,500
(To record acquisition of Streeter Company)
2. Preparation of the Second Entry to Record the legal fees related to the combination
Dr Combination expense (Legal fees) $12,700
Cr Cash $12,700
(To record payment of Legal fees)
management must be applied according to the needs of the organization. This implies that management is .....
Answer:
Explanation:
Management is the coordination and management of tasks to achieve a goal. Such management activities include setting the organization's strategy and coordinating employees' efforts to achieve these goals using available resources. Management can also refer to the seniority structure of employees in the organization.
Lumpkin Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Lumpkin’s policy is to maintain an ending inventory balance equal to 10 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $40,000. Required Complete the inventory purchases budget by filling in the missing amounts.
Answer:
February.
Desired ending inventory = 10% of March Cost of goods(COGS):
= 10% * 35,000
= $3,500
Inventory needed = COGS + ending inventory
= 32,000 + 3,500
= $35,500
Beginning inventory = January ending inventory = $3,200
Required Purchases = Inventory needed - Beginning inventory
= 35,500 - 3,200
= $32,300
March
Desired ending inventory = 10% of April COGS:
= 10% * 40,000
= $4,000
Inventory needed:
= 35,000 + 4,000
= $39,000
Beginning inventory = February ending inventory = $3,500
Required purchases:
= 39,000 - 3,500
= $35,500
What do Media Salespeople do?
A. They sell space at sport events.
B. They sell advertising space to different companies.
C. They sell-media related products online.
D. They sell websites to media companies.
Answer:
correct answer is B-they sell advertisement space to different companies
Explanation:
Mongar Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:
Original Budget Actual Costs
Variable overhead costs:
Supplies $7,980 $8,230
Indirect labor 29,820 29,610
Total variable manufacturing overhead cost $37,800 $37,840
The original budget was based on 4,200 machine-hours. The company actually worked 4,350 machine-hours during the month and the standard hours allowed for the actual output were 4,190 machine-hours. What was the overall variable overhead efficiency variance for the month?
a. $130 Unfavorable
b. $950 Favorable
c. $1,440 Unfavorable
d. $1,310 Favorable
Answer:
c. $1,440 Unfavorable
Explanation:
Variable overhead efficiency variance = (Standard hours - Actual working hours) * Standard Rate
Variable overhead efficiency variance = ($4,190 hours - $4,350 hours)*($37,800/4,200 hours)
Variable overhead efficiency variance = ($4,190 hours - $4,350 hours)*$9 per hour
Variable overhead efficiency variance = 160 hours*$9 per hour
Variable overhead efficiency variance = $1,440 Unfavorable
Kim works for a clothing manufacturer as a dress designer. During 2020, she travels to New York City to attend five days of fashion shows and then spends three days sightseeing. Her expenses are as follows:
Airfare $1,800
Lodging (8 nights) 2,340
Meals (8 days) 2,160
Airport transportation 115
Assume lodging/meals are the same amount for the business and personal portion of the trip ($293 per day for lodging and $270 per day for meals).
Required:
a. Presuming no reimbursement, how much can kim deduct as to the trip?
b. Would the tax treatment of Kim's deduction differ if she was an independent contractor (rather than an employee)? Explain.
Answer: See explanation
Explanation:
a. Presuming no reimbursement, how much can kim deduct as to the trip?
Airfare = $1,800
Add: Lodging = $2340 × 5/8 = $1462.50
Add: Meals = $2160 × 5/8 × 50% = $675
Add: Airport transportation = $115
Total deduction = $4052.50
b. Would the tax treatment of Kim's deduction differ if she was an independent contractor (rather than an employee)? Explain
The tax treatment of Kim's deduction if she was an independent contractor will be:
Airfare = $1,800
Add: Lodging = $2340 × 5/8 = $1462.50
Add: Meals = $2160 × 5/8 × 50% = $675
Add: Airport transportation = $115
Total deduction = $4052.50
Therefore, the tax treatment of Kim's deduction still remains the same.
Polson Pool Company is involved in a number of competitive bidding situations. The following costs are anticipated for a project to be bid for Terrance Manufacturing:
Direct material $ 680,000
Direct labor 2,450,000
Allocated variable overhead 570,000
Allocated fixed cost 230,000
Which of these costs would be treated differently if Polson had either excess capacity or no excess capacity?
a. Allocated variable overhead, $570,000
b. Direct labor, $2,450,000
c. Allocated fixed cost, $230,000
d. Direct materials used, $680,000.
Answer: c. Allocated fixed cost, $230,000
Explanation:
The Allocated fixed cost is fixed based on a certain level of production. If Polson had excess capacity to produce more goods or no excess capacity, the allocated fixed costs would have to be treated differently to account for this.
The variable costs however would not have to change because they are already based on the quantity of goods produced so even if there is excess or no excess capacity, their cost per unit would not change.
A machine purchased three years ago for $306,000 has a current book value using straight-line depreciation of $190,000; its operating expenses are $38,000 per year. A replacement machine would cost $222,000, have a useful life of eleven years, and would require $10,000 per year in operating expenses. It has an expected salvage value of $76,000 after eleven years. The current disposal value of the old machine is $86,000; if it is kept 11 more years, its residual value would be $10,000. Required Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced
Answer:
A. Total Cost Old machine $424,000
Total Cost New machine $256,000
B. Yes
Explanation:
A..Calculation to determine the total costs in keeping the old machine and purchase a new machine.
OLD MACHINE NEW MACHINE
Opportunity cost/Purchase value=
(86,000-10,000) = $76,000 (222,000-76,000) = $146,000
Operating cost
(38,000*11) = 348,000 (10,000*11) = 110,000
Total Cost $424,000 $256,000
Old machine=($76,000+348,000=$424,000)
New machine=($146,000+$110,000=$156,000)
Therefore the total costs in keeping the old machine is $424,000 and purchasing a new machine is $256,000
2. Yes based on the above calculation the old machine should be replaced as the cost is higher.
1. A part is produced in lots of 1,000 units. It is assembled from two components worth $50 total. The value added in production (for labor and variable overhead) is $60 per unit, bringing total costs per completed unit to $110. The average lead time for the part is 6 weeks and annual demand is 3,800 units, based on 50 business weeks per year. a. How many units of the part are held, on average, in cycle inventory
Answer:
A. Average cycle inventory 500 units
Value of cycle inventory $55,000
B. Average pipeline inventory 456 units
Value of the pipeline inventory $36,480
Explanation:
a. Calculation to determine How many units of the part are held, on average, in cycle inventory
Calculation for Average cycle inventory
Average cycle inventory=1000/2
Average cycle inventory=500 units
Therefore the Average cycle inventory is 500 units
Calculation for Value of cycle inventory
Value of cycle inventory=(500 units) *($50+$60)
Value of cycle inventory=(500 units*$110)
Value of cycle inventory=$55,000
Therefore the Value of cycle inventory is $55,000
b. Calculation to determine Avarage Pipeline inventory and Value of the pipeline inventory
First step is to calculate the unit cost using this formula
Unit cost = Material + 50%of labor and variable overhead
Let plug in the formula
Unit cost=$50+(50%*$60)
Unit cost= $50 + $30
Unit cost= $80
Now let calculate the Average pipeline inventory
Average pipeline inventory = = [(3800 units/year)/(50wks/yr)] x (6 weeks)
Average pipeline inventory= 456 units
Therefore Average pipeline inventory is 456 units
Calculation to determine Value of the pipeline inventory
Value of the pipeline inventory = (456 units) x ($50+$30)
Value of the pipeline inventory=456 units×$80
Value of the pipeline inventory= $36,480
Therefore the Value of the pipeline inventory is $36,480
Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. The investment costs $45,300 and has an estimated $7,500 salvage value.
Assume Peng requires a 15% return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.)
Peng Company is considering an investment expected to generate an average net income after taxes of $2,000 for three years. The investment costs $45,300 and has an estimated $7,500 salvage value.
Assume Peng requires a 15% return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.)
Cash Flow Select Chart Amount x PV Factor = Present Value
Annual cash flow Present Value of an Annuity of 1 =
Residual value Present Value of 1 =
Net present value
Answer:
$-7033.54
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow = net income + deprecation
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($45,300 - $7,500) / 3 = $12,600
Cash flow = $12,600 + $2000 = $14,600
Cash flow in year 0 = $-45,300
Cash flow in year 1 = $14,600
Cash flow in year 2 = $14,600
Cash flow in year 3 = $14,600 + $7,500 = $22,100
I = 15%
NPV = $-7033.54
To find the NPV using a financial calculator:
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
Assigning manufacturing overhead costs and other indirect costs is called a:
Answer:
Cost allocation
Explanation:
Cost allocation means the process where the identification, aggregation, and the allocating of the cost is made to the various cost objects. It plays an important role as the cost i.e. incurred for generating a particular product or rendering a service would be determined
So if the manufacturing overhead cost assigned and the other indirect cost so this we called cost allocation
Russell Retail Group begins the year with inventory of $65,000 and ends the year with inventory of $55,000. During the year, the company has four purchases for the following amounts. Purchase on February 17 $ 220,000 Purchase on May 6 140,000 Purchase on September 8 170,000 Purchase on December 4 420,000 Required: Calculate cost of goods sold for the year.
Answer:
COGS= $960,000
Explanation:
Giving the following information:
Beginning inventroy= $65,000
Ending inventory= $55,000
Total Purchase= 220,000 + 140,000 + 170,000+ 420,000= $950,000
To calculate the cost of goods sold, we need to use the following formula:
COGS= beginning inventory + cost of goods purchased - ending inventory
COGS= 65,000 + 950,000 - 55,000
COGS= $960,000
According to the standard cost card, each helmet should require 0.52 kilograms of plastic, at a cost of $8.00 per kilogram. Required: 1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,400 helmets? 2. What is the standard materials cost allowed (SQ × SP) to make 3,400 helmets? 3. What is the materials spending variance? 4. What is the materials price variance and the materials quantity variance?
Answer:
Please find the complete question in the attached file and its solution can be defined as follows:
Explanation:
The standard kgs permitted[tex]= 3100 \times 0.62 = 1922[/tex]
Current production Standard cost permitted [tex]=1922\times 7= 13454[/tex]
Variance of materials for expenditure [tex]= 13708-13454= 254 \ \ \ U[/tex]
Outlined various of materials [tex]= 13708-(2077\times 7)= 831 \ \ \ F[/tex]
Variability of additional channel [tex]= 7\times (2077-1922)= 1085\ \ \ U[/tex]
Wildhorse Corporation factors $266,800 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2020. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments.
Assume that the conditions are met for the transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2014, for Beyoncé to record the sale of receivables, assuming the recourse liability has a fair value of $4,650. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date Account Titles and Explanation Debit Credit August 15, 2014
Answer:
Denit Cash for $250,792; Debit Due from factors for $10,672; Debit Loss on Sale of receivables for $9,986; Credit Recourse liability for $4,650; and Credit Accounts receivable for $266,800.
Explanation:
The following are calculated first before preparing the journal entry:
Cash received = Factored amount * (100% - Finance charge percentage - Percentage reserved for probable adjustments) = $266,800 * (100% - 2% - 4%) = $250,792
Due from factors = Factored amount * Percentage reserved for probable adjustments = $266,800 * 4% = $10,672
Loss on Sale of receivables = (Factored amount * Finance charge percentage) + Fair value of recourse liability = ($266,800 * 2%) + $4,650 = $9,986
The journal entry will now appear as follows:
Date Account Titles and Explanation Debit ($) Credit ($)
15 Aug 2014 Cash 250,792
Due from factors 10,672
Loss on Sale of receivables 9,986
Recourse liability 4,650
Accounts receivable 266,800
(To record the sale of receivables.)
If you could start your own business, WHAT type of business would you start and WHY? Be sure your idea is a business and not a charity (animal shelter, helping homeless, etc.) The goal of your business should be to make a profit. Please answer in 3-4 sentences. "Henry Ford wanted to produce cars more efficiently; Oprah Winfrey wanted to help people make their lives better; Steve Jobs wanted to provide customers with user- friendly personal computers and new entertainment ideas." I А.
Eastwood Enterprises offers horseback riding lessons. During the month of June, the company provides lessons on account totaling $5,100. By the end of the month, the company received on account $4,500 of this amount. In addition, Eastwood received $500 on account from customers who were provided lessons in May. Determine the amount of operating cash flows Eastwood will report as received from customers in June.
Answer:
$5,000
Explanation:
Calculation to Determine the amount of operating cash flows Eastwood will report as received from customers in June.
Using this formula
Operating cash flows=Receipts for lessons in June+Receipts for lessons in May
Let plug in the formula
Operating cash flows=$4,500+$500
Operating cash flows=$5,000
Therefore the amount of operating cash flows Eastwood will report as received from customers in June is $5,000
Park Co. is considering an investment that requires immediate payment of $27,215 and provides expected cash inflows of $8,400 annually for four years. Assume Park Co. requires a 8% return on its investments. 1-a. What is the net present value of this investment
Answer:
the net present value is $606.64
Explanation:
The computation of the net present value is shown below:
But before that the present value of annual cash inflows is to be determined i.e.
Present value = annual cash flows × PVIFA(8%,4years)
= $8,400 × 3.3121
= $27,821.64
Now
Net present value = Present value of cash flows - initial investment
= $27,821.64 - $27,215
= $606.64
Hence, the net present value is $606.64
Essence of Skunk Fragrances, Ltd., sells 5,750 units of its perfume collection each year at a price per unit of $445. All sales are on credit with terms of 1/10, net 40. The discount is taken by 35 percent of the customers.
Required:
What is the amount of the company's accounts receivable?
Answer:
The amount of the company's accounts receivable is $2,558,750.
Explanation:
Accounts Receivables are amounts owed to the company. They are measured at amounts that the company expects to be entitled to after a sale.
The sale journal is :
Debit : Accounts Receivables (5,750 units x $445) $2,558,750
Credit : Sales Revenue (5,750 units x $445) $2,558,750
Calculate the contribution to total performance from currency, country, and stock selection for the manager in the example below. All exchange rates are expressed as units of foreign currency that can be purchased with 1 U.S. dollar. (Do not round intermediate calculations. Round your answers to 2 decimal places. Input all amounts as positive values.) EAFE Weight Return on Equity Index E1/E0 Manager's Weight Manager's Return Europe 0.6 15 % 1 0.6 12 % Australasia 0.3 16 1.4 0.1 17 Far East 0.1 20 1.2 0.3 17
Answer:
A. Currency selection 4% loss relative to EAFE
B. Country Selection 1.80% loss relative to EAFE
C. Stock Selection -2.6%loss relative to EAFE
Explanation:
Calculation to determine the contribution to total performance from currency, country, and stock selection for the manager in the
A. Calculation for CURRENCY SELECTION
Using this formula
EAFE / Manager weight * Currency appreciation ( E1 / E0 - 1 )
Let plug in the formula
EAFE =[ 0.6 * ( 1 - 1 ) ] + [ 0.3 * ( 1.4 - 1 ) ] + [ 0.1 * ( 1.2- 1 ) ]
EAFE= 0+0.12+0.02
EAFE=14%
Manager =[ 0.6 * ( 1- 1 ) ] + [ 0.1 * ( 1.4 - 1 ) ] + [ 0.3 * ( 1.2- 1 ) ]
Manager=0+0.04+0.06
Manager=10%
Loss relative to EAFE=(10%-14%)
Loss relative to EAFE=4%
4% loss relative to EAFE
B. Calculation for COUNTRY SELECTION
Using this formula
EAFE/ Manager weight × Return on Equity Index
Let plug in the formula
EAFE = [ 0.6 * 15% + 0.3 * 16% + 0.1* 20% ]
EAFE = 0.09+0.048+0.02
EAFE = 15.8%
Manager = [ 0.6 * 12% + 0.1 * 17% + 0.3 * 17% ] Manager =0.072+0.017+0.051
Manager =14%
Loss relative to EAFE=15.8%-14%
Loss relative to EAFE=1.80%
1.80% loss relative to EAFE
C. Calculation for STOCK SELECTION
Using this formula
Stock Selection=( Manager’s return - Return on Equity Index ) × Manager weight
Let plug in the formula
Stock Selection=[ ( 12% - 15% ) * 0.6 ] + [ ( 17% - 16% ) * 0.1 ] + [ ( 17% - 20% ) * 0.3 ]
Stock Selection=-0.018+0.001+-0.009
Stock Selection=-2.6%
-2.6% loss relative to EAFE
Diamond Company manufactures two models of cassette recorders: VCH and MTV. Based on the following production data for April, prepare a production budget.
VCH MTV
Estimated inventory (units), April 1 2,900 4,000
Desired inventory (units), April 30 6,900 5,250
Expected sales volume (units):
Eastern zone 12,500 12,960
Midwest zone 19,000 19,800
Western zone 14,500 9,840
Answer and Explanation:
The preparation of the production budget is presented below:
Particulars VCH MTV
Expected Sales:
Eastern zone 12500 12960
Midwest zone 19000 19800
Western zone 14500 9840
Add: Desired inventory 6900 5250
Less: Opening inventory (2900) (4000)
Production in units 50,000 43,850
Edith Carolina is president of the Deed Corporation. The company is decentralized, and leaves investment decisions up to the discretion of the division managers. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%. The company's minimum required rate of return is 8%. If the Deed Corporation evaluates managerial performance using residual income based on the corporate minimum required rate of return of 8%, what decision would be preferred by Edith Carolina and Michael Sanders?
Carolina Sanders
A) accept reject
B) reject accept
C) accept accept
D) reject reject
A. Choice A.
B. Choice B.
C. Choice C.
D. Choice D.
Answer: A. Choice A.
Explanation:
When using the residual income based on a corporate minimum required rate of return, an investment that provides a return higher than the required return should be accepted.
Edith Carolina would therefore accept this investment as it offers an ROI of 12% which is higher than the company required rate of return of 12%.
Michael Sanders would however reject it as it falls short of the 14% ROI that he expects his division to maintain.
Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement:
CLIFF CONSULTING
Contribution Income Statement
For the Year Ended September 30
Sales revenue $ 1,200,000
Variable costs
Cost of services $ 480,000
Selling and administrative 60,000 540,000
Contribution margin 660,000
Fixed Costs -selling and administrative 440,000
Before-tax profit 220,000
Income taxes (21%) 46,200
After-tax profit $ 173,800
(a) Determine the annual break-even point in sales revenue.
(b) Determine the annual margin of safety in sales revenue.
(c) What is the break-even point in sales revenue if management makes a decision that increases fixed costs by $80,000?
(d) With the current cost structure, including fixed costs of $440,000, what dollar sales revenue is required to provide an after-tax net income of $250,000?
(e) Prepare an abbreviated contribution income statement to verify that the solution to requirement (d) will provide the desired after-tax income.
Answer:
Cliff Consulting
a) Annual Break-even point in sales revenue is:
= $800,000
b) Annual margin of safety is:
= $400,000
c) If fixed costs increases by $80,000, the break-even point in sales revenue
= $945,455
d) Dollar Sales Revenue required to provide an after-tax net income of $250,000 is:
= $1,375,375
e) Abbreviated Contribution Income Statement
Sales revenue $1,375,375
Variable costs = 618,919
Contribution = $756,456
Fixed costs 440,000
Before tax income 316,456
Income tax (21%) 66,458
After-tax income $249,998
equivalent to $250,000
Explanation:
a) Data and Calculations:
CLIFF CONSULTING
Contribution Income Statement
For the Year Ended September 30
Sales revenue $ 1,200,000
Variable costs
Cost of services $ 480,000
Selling and administrative 60,000 540,000
Contribution margin 660,000
Fixed Costs -selling and administrative 440,000
Before-tax profit 220,000
Income taxes (21%) 46,200
After-tax profit $ 173,800
Break-even point in sales revenue = Fixed costs/Contribution margin ratio
= $440,000/0.55
= $800,000
Annual margin of safety = normal sales revenue minus break-even sales revenue
= $1,200,000 - $800,000
= $400,000
Contribution margin ratio = contribution margin/sales revenue * 100
= $660,000/$1,200,000 * 100 = 55%
If fixed costs increases by $80,000, the break-even point in sales revenue
= ($440,000 + $80,000)/0.55 = $520,000/0.55 = $945,455
To achieve after-tax net income of $250,000, the required dollar sales revenue:
Net income after-tax = $250,000
Tax rate = 21%
Net income before tax = $250,000/1-21%
= $250,000/0.79 = $316,456
Sales dollars to achieve target profit = (Fixed costs + Target Profit/1 - 0.21)/Contribution margin
= ($440,000 + ($250,000/0.79))/0-55
= ($440,000 + $316,456)/0.55
= $756,456/0.55
= $1,375,375
Abbreviated Contribution Income Statement
Sales revenue $1,375,375
Variable costs = 618,919
Contribution = $756,456
Fixed costs 440,000
Before tax income 316,456
Income tax (21%) 66,458
After-tax income $249,998
After-tax income is equivalent to $250,000
On January 5, Barnaby, Inc., purchased a patent costing $100,000 with a useful life of 20 years. The company records its adjusting entries at the end of each year on December 31.
Complete the necessary adjusting entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.
Answer and Explanation:
The adjusting entries are shown below
On Jan 1
Patent Dr $100,000
To Cash $100,000
(Being patent purchased on cash is recorded)
Here patent is debited as it increased the assets and credited the cash as it decreased the assets
On Dec 31
Amortization expense - Patent ($100,000 ÷ 20 years) $5,000
To Accumulated amortization - Patent $5,000
(being amortization expense is recorded)
Here amortization expense is debited as it increased the expense and credited the accumulated depreciation as it decreased the assets
What is a factor that does NOT go into an economic analysis?
1. marginal analysis
2. societal concerns
3 ethical concerns
4 sunk costs
Jensen Automotive produces alternators for American-made cars. They generally use a static budget with the following costs based on 8,000 units per month: indirect materials, $22,000; indirect labor, $25,000; utilities, $12,000; supervision, $4,000; depreciation, $18,000. If Jensen wanted to create a flexible budget for 9,000 units, what value would they record for variable costs
Answer:
the value that should be recorded for variable cost is $66,375
Explanation:
The computation of the value that should be recorded for variable cost is shown below:
= Total variable cost ÷ budgeted units × flexible budget units
= ($22,000 + $25,000 + $12,000) ÷ 8,000 units × 9,000 units
= $59,000 ÷ 8,000 units × 9,000 units
= $66,375
hence, the value that should be recorded for variable cost is $66,375
The above formula is used
ZIP Company owns 46,000 shares of the common stock of PIK Company. ZIP decided to divest itself of this investment by distributing the PIK shares in the form of a property dividend. The dividend ratio is one share of PIK for every four shares of ZIP common held by shareholders. ZIP has 184,000 common shares outstanding. On April 15, 2016, the date of declaration, PIK stock had a par value of $5 per share, a book value of $12.6 per share, and a market value of $17.6 per share.
Required:
1. Prepare any necessary journal entries. The shares were distributed on May 15, 2016, to stockholders of record on May 1, 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
2. Record appreciation of investment.
3. Record declaration of property dividend.
4. Record the entry on date of record.
5. Record the payment of the property dividend.
Answer and Explanation:
The journal entries are shown below:
2 On April 15,2016
Investment in PK common stock Dr (46,000 × ($17.6 - $12.6)) $230,000
To Gain on investment $230,000
(Being appreciation of investment is recorded)
3. On April 15,2016
Retained earnings Dr (184,000 ÷ 4 × $17.6) $809,600
To Property dividend payable $809,600
(Being declaration of property dividend)
4. No journal entry is required for date of record
5. Property dividend payable Dr $809,600
To Investment in PK common stock $809,600
(Being the payment of the property dividend is recorded)
You are the manager of a firm that sells a leading brand of alkaline batteries. Click on the link below to access data on the demand for your product. Specifically, the file contains data on the natural logarithm of your quantity sold, price, and the average income of consumers in various regions around the world. Use the information provided in the excel spreadsheet to perform a log-linear regression. Excel Data File Fill in your estimates below:
Instruction:
Enter a negative number if the coefficient estimate is negative, and round your response to two decimal places.
lnQ=C ____ + _____ InP+ _____ InM
Determine the likely impact of a 3 percent decline in global income on the overall demand of your product.
a. Demand will decline by approximately 0.1%, but since income elasticity isn't significantly different from zero, it likely won't fall at all.
b. Demand will fall by nearly 10%, and income elasticity is significantly less than zero.
c. Demand will fall by nearly 1%, and income elasticity is significantly less than zero.
d. Demand will decline by approximately 3%, but since income elasticity isn't significantly different from zero, it likely won't fall at all.
Answer:
lnQ=C 1.29 + -0.07 lnP + -0.03 lnM
c. Demand will fall by nearly 1% and income elasticity is significantly less than zero.
Explanation:
Income elasticity is a major factor which impact the demand of a product. It measures the change in quantity demanded due to change in income. In the given scenario the demand for product will decline due to change in income. The income elasticity is smaller there will not be major change in demand but there will be some impact observed on the quantity demanded.