The Fisher Effect equation can be used to determine the real interest rate. Use this equation to determine the answer to the question. If the nominal interest rate is 0.1100.110 , and the inflation rate is 0.0250.025 , what is the real interest rate
Answer:
0.075%
Explanation:
Interest rate is the rate earned on deposits or the rate charged on loans.
Interest rate could be real or nominal
Nominal interest rate is real interest rate plus inflation rate
Real interest rate is interest rate that has been adjusted for inflation
Fisher effect equation : ( 1 + nominal interest rate) = (1 + real interest rate) x (1 + inflation rate)
(1 + 0.001) = (1 + real interest rate) x (1 + 0.00025)
1.001 = (1 + real interest rate) x (1.00025)
1.001 / (1.00025) = (1 + real interest rate)
1.00075 = (1 + real interest rate)
real interest rate = 1.00075 - 1
= 0.00075 = 0.075%
Elm Corporation is a merchandising company. The year began with inventory of $21,000, Purchases for the year were $46,000, and the Ending Inventory was $8,000. What is the Cost of Goods Sold that would be reported on the income statement
Answer:
$59,000
Explanation:
Calculation to determine the Cost of Goods Sold that would be reported on the income statement
Using this formula
Cost of Goods Sold=Purchases for the year+beginning Inventory)-Ending Inventory
Let plug in the formula
Cost of Goods Sold=($46,000+$21,000) - $8,000
Cost of Goods Sold=$67,000-$8,000
Cost of Goods Sold=$59,000
Therefore the Cost of Goods Sold that would be reported on the income statement is $59,000
Calculating the Direct Materials Price Variance and the Direct Materials Usage Variance Guillermo's Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 24 minutes and 6.2 quarts of oil are used. In June, Guillermo's Oil and Lube had 980 oil changes. Guillermo's Oil and Lube Company provided the following information for the production of oil changes during the month of June:
Actual number of oil changes performed: 980
Actual number of quarts of oil used: 6,020 quarts
Actual price paid per quart of oil: $5.10
Standard price per quart of oil: $5.05
Required:
a. Calculate the direct materials price variance (MPV) and the direct materials usage variance (MUV) for June using the formula approach.
b. Calculate the total direct materials variance for oil for June.
Answer:
Results are below.
Explanation:
To calculate the direct material price variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (5.05 - 5.1)*6,020
Direct material price variance= $301 unfavorable
To calculate the direct material quantity variance, we need to use the following formula:
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (6,076 - 6,020)*5.05
Direct material quantity variance= $282.8 favorable
Standard quantity= 980*6.2= 6,076
Finally, the total direct material variance:
Total direct material variance= Direct material quantity variance - Direct material price variance
Total direct material variance= 282.8 - 301
Total direct material variance= $18.2 unfavorable
Joss is a marketing consultant. Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report. Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose that the opportunity cost of Joss's time is $1,200. Assume that Iris and Daphne do not know each other. Which of the following statements is true?
a. only Iris will purchase Joss's services and Joss will undertake the job for her.
b. only Daphne will purchase Joss's services and Joss will undertake the job for her.
c. both Iris and Daphne will purchase Joss's services and Joss will undertake the job.
d. both Iris and Daphne will want to purchase Joss's services but Joss will not be willing to undertake the job.
Answer: d. both Iris and Daphne will want to purchase Joss's services but Joss will not be willing to undertake the job.
Explanation:
Iris will want Joss's services but they will be unable to afford them as Iris is only willing to pay $500 whereas Joss wants $1,200 for the job.
The same goes for Daphne who is only willing to pay $800.
Both of them will therefore want to hire Joss but will be unable to.
Joss could however charge both of them their willingness to pay and then sum the cash up and give them both the research whilst still making a profit.
The following monthly data are available for Waterway Industries. which produces only one product: Selling price per unit, $54; Unit variable expenses, $14; Total fixed expenses, $42000; Actual sales for the month of June, 2000 units. How much is the margin of safety for the company for June
Answer:
Margin of safety= 950 units
Explanation:
First, we need to calculate the break-even point in units:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 42,000 / (54 - 14)
Break-even point in units= 1,050
Now, the margin of safety in units:
Margin of safety= (current sales level - break-even point)
Margin of safety= 2,000 - 1,050
Margin of safety= 950 units
Total direct operating margin less indirect expenses equals
Answer:
Total operating income.
Explanation:
Costing is the measurement of the cost of production of goods and services by assessing the fixed costs and variable costs associated with each step of production.
In Financial accounting, a direct cost can be defined as any expense which can easily be connected to a specific cost object such as a department, project or product. Some examples of direct costs are cost of raw materials, machineries or equipments.
On the other hand, any cost associated with the running, operations and maintenance of a company refers to indirect costs. Some examples of indirect costs are utility bill, office accessories, diesel etc.
In Financial accounting, the total operating income can be defined as the sum total of the profit of a business firm (company) after its regular, recurring costs and expenses have been deducted. Thus, it's the amount of revenue generated by a business firm (company) after subtracting all operating expenses and cost of goods sold (COGS).
Mathematically, the total operating income of a business is calculated by subtracting the indirect expenses incurred by the business firm from its total direct operating margin.
This ultimately implies that, total direct operating margin less indirect expenses equals total operating income.
ABC Company uses the allowance method for estimating bad debts. Record the following journal entries:
12/31 ABC Company estimates that $5,000 of accounts receivable will be uncollectible.
3/5 ABC Company wrote off a $1,200 account of a customer, B. Brown.
Answer:
Date Account titles and Explanations Debit Credit
31 Dec Bad debts expense $5,000
Allowance for uncollectible accounts $5,000
(To record bad debts expense recorded)
5 Mar Allowance for uncollectible accounts $1,200
Accounts receivable $1,200
(To record account written off)
Unlike a stock dividend, a stock split _____. multiple choice is always recorded at market value does not change total stockholders' equity reduces the par value of the stock increases the total number of shares outstanding
Answer:
reduces the par value of the stock.
Explanation:
A stock is also referred to as equity and it can be defined as a security that represents a stockholder's ownership of a fraction of a corporation.
The par value of a stock is its face value and it comprises of its total dollar amount as well as its maturity value. Also, the par value of a stock gives the basis on which periodic interest is paid.
A stock is issued at par value when the market rate of interest is the same as the contract rate of interest. This simply means that, a stock would be issued at par (face) value when the stock's stated rated is significantly equal to the effective or market interest rate on the specific date it was issued.
Stockholders' equity can be defined as the amount of assets remaining or the residual interest of assets in a business after all liabilities are settled or deducted. A stockholders' equity is calculated by deducting or subtracting the value of liabilities from the value of assets on the balance sheet of a company.
Additionally, statement of changes in stockholders' equity is a financial statement that illustrate a summary of the changes in shareholders' equity (gains and losses that increase or decrease stockholders' equity respectively) over the reporting period.
In Trading and securities, a stock split reduces the par value of the stock whereas a stock dividend increases the par value of a stock.
Sandhill, Inc. has a unit selling price of $920, variable cost per unit of $510, and total fixed costs of $280,850. Compute the break-even sales units and sales dollars.
Answer:
(A) 685 UNITS
(B) 630,200 DOLLARS
Explanation:
Variable cost + Fixed cost = Total Cost
The break-even sales units would be the number of units Sandhill Inc. will sell in order to break even; that is, in order for their total cost to equal their total revenue.
If break-even point is the point where TR = TC then it is the same point at which PROFIT = 0
Recall that profit is the positive difference between total revenue and total cost. The negative difference (that is when TR < TC) is called loss.
Let X be = the break-even quantity or number of units, then we have
920x = 510x + 280850
Remember that VC varies or increases with the number of units produced, and so it has the x attached to it in this equation. FC on the other hand remains the same, regardless of the number of units produced.
So the left hand side of the equation has the total revenue, while the right hand side of the equation has the total cost.
Solving algebraically.
920x - 510x = 280850
410x = 280850
x = 280850 ÷ 410 = 685
ANSWER 1
The break-even sales units is 685 units.
The second computation is Sales in Dollars; at break-even sales units.
This revenue or sales is derived thus: Price per unit x Number of units
$920 x 685units = $630,200
ANSWER 2
The break-even total sales or total revenue is $630,200
KUDOS!
Exercise 8-19 Amortization of intangible assets LO P4 Milano Gallery purchases the copyright on a painting for $418,000 on January 1. The copyright is good for 10 more years. The company plans to sell prints for 11 years. Prepare entries to record the purchase of the copyright on January 1 and its annual amortization on December 31.
Answer:
Jan 01
Dr Copyright $418,000
Cr Cash $418,000
Dec 31
Dr Amortization expense—Copyright $41,800
Cr Accumulated amortization—Copyright $41,800
Explanation:
Preparation of entries to record the purchase of the copyright on January 1 and its annual amortization on December 31.
Jan 01
Dr Copyright $418,000
Cr Cash $418,000
(To record purchase of copyright )
Dec 31
Dr Amortization expense—Copyright $41,800
Cr Accumulated amortization—Copyright $41,800
($418,000/10 years)
(To record amortization expense of copyright )
The company has net sales revenue of $3.6 million during 2018. The company's records also included the following information: Assets 12/31/17 12/31/18 Property, plant and equipment $ 2.3 million $ 2.5 million Licensing agreements $ 0.5 million $ 0.4 million Goodwill $ 0.3 million $ 0.3 million Investments $ 0.4 million $ 0.5 million What is the company's fixed asset turnover ratio for 2018
Answer:
1.5
Explanation:
Calculation to determine the company's fixed asset turnover ratio for 2018
Average Net Fixed Assets=3,600,000/ [(2,300,000 + 2,500,000)/2]
Average Net Fixed Assets=3,600,000/(4,800,000/2)
Average Net Fixed Assets=3,600,000/2,400,000
Average Net Fixed Assets = 1.5
Therefore the company's fixed asset turnover ratio for 2018 is 1.5
Lennon, Inc. is considering a five-year project that has an initial outlay or cost of $80,000. The respective future cash inflows from its project for years 1, 2, 3, 4 and 5 are: $15,000, $25,000, $35,000, $45,000, and $55,000. Lennon uses the internal rate of return method to evaluate projects. What is Lennon's IRR
Answer:
26.16%
Explanation:
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
IRR can be determined using a financial calculator
CO = -80,000
C1 = $15,000
C2 = $25,000
C3 = $35,000,
C4 = $45,000
C 5 = 55,000
IRR = 26.16
To determine IRR 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 IRR button and then press the compute button.
Wages of 8,000 are earned by workers but not paid as of december 31
Answer:
huh i dont understand that question no choosing letter
Read the argument below and determine the underlying principle that was used to come to the conclusion presented: A free college education for every citizen is important because it helps the United States create the best-educated workforce in the world. European countries like Germany are able to provide a free college education to their citizens, and the United States should as well. Which other argument uses the same underlying principle as the argument above?
a. Children should get free dental care, even if they drink a lot of soda which causes cavities.
b. Children should get free dental care because it will help prevent more serious issues later on and reduces future healthcare costs.
c. Every child should get free dental care, even if they can afford to pay for it.
Answer:
1. The underlying principle is
to create the best-educated workforce in the world.
2. The argument that uses the same underlying principle as the argument 1 above is:
b. Children should get free dental care because it will help prevent more serious issues later on and reduces future healthcare costs.
Explanation:
The underlying principle is a general rule which can be applied to different situations. It shows the reason for doing something or embarking on a program. For example, to offer free college education for every U.S. citizen, the underlying principle is to "create the best-educated workforce in the world."
Sanford Co. sells $500,000 of 10% bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. Give entries through December 31, 2021.
Required:
Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end.
Answer:
Sanford Co.
Bond Amortization Schedule
Period PV PMT Interest FV
1 $468,951.03 $25,000.00 $28,137.06 $472,088.09
2 $472,088.09 $25,000.00 $28,325.29 $475,413.38
Year #1 end
3 $475,413.38 $25,000.00 $28,524.80 $478,938.18
4 $478,938.18 $25,000.00 $28,736.29 $482,674.47
Year #2 end
5 $482,674.47 $25,000.00 $28,960.47 $486,634.94
6 $486,634.94 $25,000.00 $29,198.10 $490,833.04
Year #3 end
7 $490,833.04 $25,000.00 $29,449.98 $495,283.02
8 $495,283.02 $25,000.00 $29,716.98 $500,000.00
Year #4 end
Explanation:
a) Data and Calculations:
Face value of bonds = $500,000
Proceeds from bonds = $468,951
Bonds Discounts = $31.049
Coupon interest rate = 10%
Effective interest rate = 12%
N (# of periods) 8
I/Y (Interest per year) 12
PMT (Periodic Payment) 25000
FV (Future Value) 500000
Results
PV = $-468,951.03
Sum of all periodic payments $200,000.00
Total Interest $231,048.97
XYZ expects to sell 28,000 pools in 2019. It budgets the beginning inventory of Direct Materials, Work-in-process, and Finished goods to be 26,000; 0; 1,300 units; AND ending inventory to be 26,000; 0; 2,800 units. How many pools need to be produced
Answer:
the no of pools need to be produced is 29,500 units
Explanation:
The computation of the no of pools need to be produced is given below:
= Ending finished goods inventory units + number of units sold - beginning finished goods inventory units
= 2800 + 28000 - 1300
= 29500 units.
Hence, the no of pools need to be produced is 29,500 units
Cochran's Furniture Outlet is issuing 25-year, 9 percent callable bonds. These bonds are callable in 4 years with a call premium of $45. The bonds are being issued at par and pay interest semi-annually. What is the yield to call
Answer:
a. Nper = 30
Explanation:
PMT = 45
FV = `1000
Price Pv = -1180
Rate (YTM) = ?
Using the MsExcel Rate function to derive YTM
Nominal annual yield to maturity = Rate(Nper, Pmt, -Pv, Fv) * 2
Nominal annual yield to maturity = Rate(30, 45, -1180, 1000) * 2
Nominal annual yield to maturity = 7.04%
b. Nper = 10
PMT = 45
Call Price = 1090
Price Pv = -1180
Rate (YTC) = ?
Using the MsExcel Rate function to derive YTM
Nominal annual yield to call = Rate(Nper, Pmt, -Pv, Fv) * 2
Nominal annual yield to call = Rate(10, 45, -1180, 1090) * 2
Nominal annual yield to call = 6.31%
C. Yes, the bond issue should call because the YTC is less than the YTM.
Assume that a firm had shareholders' equity on the balance sheet at a book value of $1,500 at the end of 2010.During 2011 the firm earns net income of $1,900,pays dividends to shareholders of $200,and issues new stock to raise $500 of capital.The book value of shareholders equity at the end of 2011 is:_______.
A) $2,750
B) $250
C) $1,450
D) $3,700
Answer:
The book value of shareholders equity at the end of 2011 is:_______.
D) $3,700.
Explanation:
a) Data and Calculations:
Beginning shareholders equity book value = $1,500
Net income during 2011 = 1,900
Dividends paid to shareholders (200)
Issuance of new stock 500
Ending shareholders equity book value = $3,700
b) The book value of equity at the end of 2011 is equal to the book value at the beginning of 2011 plus net income generated during 2011, issuance of new stock, minus dividends paid to shareholders.
The purpose of rough cut capacity planning is to: Select one: a. place a time fence around the MPS. b. determine a production schedule that offers a rough order of magnitude. c. cut excess capacity from the MPS. d. assess the feasibility of the MPS. e. govern the length of the execution cycle.
Answer:
The answer is "Option d".
Explanation:
To compute the estimated work on master capacity planning, the objective of basic resource allocation is utilized. It is then contrasted to a proven ability that enhances organizational MPS feasibility.
It verifies that you have enough ability at your disposal that satisfy the needs of your master's programs. It is a tool in long-term production scheduling for marketing and production to accomplish the ratio of the capacity required and accessible and to manage changes in the plan and/or looking.
Lopez Company has a single employee, who earns a salary of $60,000 per year. That employee is paid on the 15th and last day of each month. On January 15, based, in part, on the information set forth in the accounting records, the following must be withheld from the employee's pay: FICA—Social Security Taxes (at 6.2%), FICA—Medicare Taxes (at 1.45%), Employee Federal Income Taxes (in the amount of $400), Employee State Income Taxes (in the amount of $25), and Employee Medical Insurance (in the amount of $100). (The employee‘s paycheck has not yet been prepared.) Entries to prepare the January 15 journal entry for Lopez would include:
Answer:
Debit Salaries Expense $2,500
Credit FICA—Social Security Taxes Payable $155
Credit FICA—Medicare Taxes Payable $36.25
Cedit Employee Federal Income Taxes Payable $400,
Credit Employee State Income Taxes Payable $25
Credit Employee Medical Insurance Payable r $100
Credit Salaries Payable $1,783.75
Explanation:
Preparation of the January 15 journal entry for Lopez
January 15
Debit Salaries Expense $2,500
Credit FICA—Social Security Taxes Payable $155
(6.2%*$2,500)
Credit FICA—Medicare Taxes Payable $36.25
(1.45%*$2,500)
Cedit Employee Federal Income Taxes Payable $400,
Credit Employee State Income Taxes Payable $25
Credit Employee Medical Insurance Payable r $100
Credit Salaries Payable $1,783.75
($2,500-$155-$36.25-$25-$100)
Imagine you are a manager at Trader Dan's grocery store. You've been tasked with analyzing the checkout lines to see if anything needs to be changed from the current set-up. Complete the following problems.
a. After extensive observation, you've determined that there are normally 11 customers coming into the store per hour. When analyzing your cashiers, you've found that they can checkout a single customer in 0.9 minutes. Calculate the utilization rate of your cashier assuming you only have one cashier working. Report your answer in decimal form with two decimals, rounding to the nearest hundredth.
b. You now need to plan for the holiday rush! When the holidays hit, Trader Dan's has a massive increase in customers coming to the store. If during these holidays you have 4.2 customers per minute coming in and your cashiers can handle 1.16 customers per minute, how many cashier lines should you have open to handle these customers? Report the minimum number of cashiers needed.
c. Dan himself came to your store and wanted to know how long customers were waiting in line (this is very important to Dan!). Report the time customers wait in your queue if you have 4 cashiers open, 62 customers come into the store per hour and your cashiers take 2.8 minutes per customer to ring them up.
Answer: answer is 2.5
Explanation:
Hudson Manufacturing is an MNE based in the United States with operations in Asia. The firm is considering expansion into the European Union. Executives at the firm are debating whether central Europe or Eastern Europe would be best for the firm. Which of the following best supports a decision to establish operations in Eastern Europe?
a. Hudson wants to implement high performance work system.
b. Hudson plans to staff the foreign facility with local managers.
c. Hudson wants to minimise costs by keeping wages low.
e. Hudson recently lost money in a joint venture Explain each point to the executives as you decide on which point to support
In the question only "option a" is correct which can be defined as follows:
East Europe has also been able to build an industrial engine thanks to its entrepreneurial spirit. Several large companies have chosen the area as a location to produce their products.The decision benefits everyone, not just commercially, even though their motives may differ because of its highly-skilled, but cost-competitive labor force, many countries offer products of exceptional quality.East European workshops adhere to high moral standards of behavior. East European nations offer tremendous potential for organizations with strong ethical standards, particularly in light of Asian labor issues. This brand can offer 'Made in Europe' goods at a competitive rate because of the lower production costs which are retained.Firms can easily access all the gear & supplies they need for the area while lowering its transport costs & spending time on the road. The manufacturers can therefore probably deal with the finest and most established countries in terms of the quality of the products.Several East European workshops are eager to provide high standards and are not afraid to go the extra mile. In addition to other benefits, production in East Europe is financially stable.As just a result, not only is the labor force in Asia cheaper than in the West and more qualified than in Asia, but corporations can also save a lot on commuting costs. Reduced shipping times from factories result in lower costs, and also increased versatility.It's not just a matter of dealing with companies that are already in existence. To attract potential investors to foster the creation of new enterprises, Eastern Countries offer a variety of advantages.The wrong choices can be defined as follows:
In "option b", it is wrong because, To expand within the European Union, Hudson doesn't quite intend to hire local executives for the international plant.In "option c", To minimize costs, Hudson must maintain high pay; thus it is wrong.In "option e", It's the first joint venture wherein Hudson has not lost money. That is why it is bad, and you must explain each position to both the executives as you pick which one to support.Learn more:
Operations in Eastern Europe: brainly.com/question/4101962
Andy contracts with Susan to feed his dog while he is Europe during the month of July. Andy calls and revokes on July 1st after Susan has gone out and purchased the necessary products to perform but has not yet feed the dog once. A court will likely:
Answer: D. Enforce the contract.
Explanation:
This falls under the doctrine of Promissory estoppel. This posits that when a party to a contract has invested their money into procuring the necessary tools to fulfil their part of the contract, the other party may not cancel the contract unless they pay the former party what they would have made from the contract.
This is because the party that used their money to procure tools (Susan in this case) would not have done so if the other party (Andy) had not made a promise to them in the contract that they would fulfil their part of the bargain.
The Courts would therefore enforce the contract.
Given the following information, prepare an income statement for the Dental Drilling Company.
Selling and administrative expense $90,000
Depreciation expense 75,000
Sales 621,000
Interest expense 46,000
Cost of goods sold 231,000
Taxes 50,000
Answer:
Results are below.
Explanation:
Giving the following information:
Selling and administrative expense $90,000
Depreciation expense 75,000
Sales 621,000
Interest expense 46,000
Cost of goods sold 231,000
Taxes 50,000
With the information listed above, we need to make an income statement following the structure below:
Sales= 621,000
COGS= (231,000)
Gross profit= 390,000
Selling and administrative expense= (90,000)
Depreciation expense= (75,000)
Interest expense= (46,000)
Eearning before taxes (EBT)= 179,000
Taxes= (50,000)
Net operating income= 129,000
Fruit Car Company manufactures 10 fruit themed cars per month. A compact media center is included in each car. Fruit Car Company manufactures the media center in-house but is considering the possibility of outsourcing this function. At present, the variable cost per unit is $275, and the fixed costs are $39,000 per month. The CEO, wishes to increase operating income by $5000. He has an offer from a foreign producer to provide the media centers at a contract cost of $325 per unit. The required savings in fixed costs in order to achieve his objective would be ________.
a. 52800.
b. $200.
c. 51200.
d. $1000.
Jason is faced with two choices: A BMW costing $40,000 gives him an additional 1005 units of utility, and a laser printer costing $1,000 gives him an additional 25 units of utility. Rational choice theory would predict that he would choose:
Answer:
either a BMW or a laser printer because they yield the same marginal printer
Explanation:
A rational consumer would choose the good that provides a higher utility
Marginal utility is the additional satisfaction received from consuming an additional unit of a good or service. Marginal utility is the additional utility derived from consuming one more unit of a good. the consumption decision is to consume more units of a good that gives the higher utility per good.
Marginal utility per good = marginal utility / price of the good
BMW = 1005 /40,000 = 0.025
Printer = 25 / $1000 = 0.025
A person can choose to work any amount from 0 to 52 weeks per year at a wage of $1000 per week.The government implements a welfare program in which the welfare system pays $5000 per year to people with no labor market earnings, but benefits are reduced by $0.50 for each $1 in labor market earnings that a person receives.
a. True
b. False
Answer:
False
Explanation:
If the reserve ratio is 8 percent, then an additional $1,000 of reserves can increase the money supply by as much as
a. $6,400.
b. $8,000.
c. $20,000.
d. $12,500.
Answer:
d. $12,500
Explanation:
Calculation to determine what an additional reserves can increase the money supply by
Using this formula
Increase in Money supply=1/Reserve ratio*Additional Reserves
Let plug in the formula
Increase in Money supply=1/.08* 1,000
Increase in Money supply=$12,500
Therefore an additional reserves can increase the money supply by $12,500
During its first month of operations, Purrfect Pets purchased 5,100 bags of dog food at a cost of $7 a bag and sold all 5,100 bags of dog food on account with payment terms of 1/10, n/30 for $11 each. A total of 2,100 of these bags were sold to customers who paid within the discount period; the other customers paid after the discount period had ended. Sales allowances totaling $220 were granted to customers whose dogs did not like the dog food. Required: Calculate the gross profit for the month. Calculate the gross profit percentage for the month.
Answer:
Purrfect Pets
The gross profit for the month is:
= $20,180.
The gross profit percentage for the month is:
= 36.11%.
Explanation:
a) Data and Calculations:
Quantity of dog food purchased = 5,100 bags
Cost per bag = $7
Quantity of dog food sold = 5,100 bags
Sales price per bag = $11
Sales revenue $56,100 ($5,100 * $11)
Less Sales allowances 220
Net Sales $55,880
Cost of goods (dog food) sold 35,700 (5,100 *$7)
Gross profit $20,180
Discounts (2,100 * $11 * 1%) 231
Net operating income $19,949
Gross profit percentage = Gross profit/Net Sales * 100
= $20,180/$55,880 * 100
= 36.11%
The issuance of equity for a firm with various financing alternatives signals that the firm has unfavorable prospects which it wants to share with new shareholders according to the signaling theory of capital structure.
a) true
b) false
Answer:
Option b) False
Explanation:
Capital structure
This is usually defined as a composition or the combination of debt and equity that are used to finance a firm.
Signaling theory
According to this theory, It states that actions are taken by a firm to send "signals" to shareholders. It states that firms that uses issue debt to raise funds are signaling or projecting that their future prospects are favorable.
In this theory, managers do have information about their firm's prospects than do outside investors. It is also referred to as an action taken by a firm's management that gives possible clues to investors about how management looks at the firm's capital prospects. It centers on the ability to borrow money at a reasonable cost when good investment opportunities comes their way.
