Answer:
a. The margin for Alyeska Services Company: 35.23%
b. The turnover for Alyeska Services Company: 0.49
c. The return on investment (ROI) for Alyeska Services Company: 17.22%
Explanation:
a. The profit margin reflects a company's overall ability to turn income into profit, is calculated by formula:
Profit margin = (Net operating income/Net sales ) x 100% = $6,200,000/$17,600,000 x 100% = 35.23%
b. Asset turnover helps investors understand how effectively companies are using their assets to generate sales. Asset turnover is calculated by using following formula:
Asset Turnover = Total Sales/ Average Total Assets = $17,600,000/$36,000,000 = 0.49
c. Return on investment (ROI) is calculated by using following formula:
ROI = Net income/Total investment x 100%
In Alyeska Services Company,
ROI = Net operating income/Average operating assets x 100% = $6,200,000/$36,000,000 x 100% = 17.22%
Suppose subway ridership in New York City declined by 10 percent after a fare increase of 25 cents to $2.75. Using the midpoint method, an estimate of the price elasticity of demand for subway rides is . True or False: According to your estimate, the Transit Authority's revenue rises when the fare increases. True False
Answer: Elasticity is 1.05
False
Explanation:
The Price Elasticity of Demand which measures how demand for goods change in relation to a change in price is calculated by the following formula,
Elasticity of demand = % change in Quantity ÷ % change in Prices
The Midpoint method is a method of estimating price percentage change by dividing the change in price by the AVERAGE of the new price and the old price.
The average of the changes are,
= (2.75 + (2.75 - 0.25))/2
= (2.75 + 2.5)/2
= 2.625
The Midpoint method gives a chance in price of,
= (2.75 - 2.65 )/ 2.625
= 9.5%
The Elasticity is therefore,
= Elasticity of demand = % change in Quantity ÷ % change in Prices
= 10% / 9.5%
= 1.05
According to this, the Transit Authority's revenue will not rise when Fair increases because the Elasticity is quite close to 1. An elasticity of 1 means that when fares increase, people using trains decrease by almost the same amount so revenue remains the same.
A registered investment adviser lives in State X. The adviser does business with 1 client in State A and 1 client in State B. The adviser gives seminars about investing to groups of potential customers in State C. The adviser is required to register in:
Answer:
State X and C
Explanation:
Remember, the clients themselves stay in state A and B, not the investment advisor. According to the requirements of the law, the investment advisor is to register in the state where he gives seminars–State C, and the state in which he resides–X.
Brooks Co. purchases debt investments as trading securities at a cost of $61,000 on December 27. This is its first and only purchase of such securities. At December 31, these securities had a fair value of $66,000.1. Prepare the December 27 entry for the purchase of debt investments.2. Prepare the December 31 year-end fair value adjusting entry for the trading securities' portfolio and the January 3 entry when Brooks sells a portion of its trading securities (costing $30,500) for $31,750 cash.
Answer:
Dr short-term investment-trading $61,000
Cr Cash $61,000
Dr fair value adjustment-trading $5,000
Cr unrealized gain $5,000
Dr cash $31,750
Cr short-term investment-trading $30,500
Cr realized gain on sale of short-term investment ($31,750-$30,500) $1,250
Explanation:
The cash paid for the purchase of trading securities would be credited with $61,000 while the debit goes to short-term investment-trading
The 31st December year-end fair value adjusting entry is $5,000 ($66,000-$61,000) unrealized gain which would be debited to fair value adjustment-trading securities while the credit goes to unrealized gain-trading securities.
The balance sheet of Hidden Valley Farms reports total assets of $810,000 and $945,000 at the beginning and end of the year, respectively. The return on assets for the year is 15%. What is Hidden Valley's net income for the year
Answer:
$131,625
Explanation:
The computation of the net income for the year is shown below:
As we know that
Return on assets = net income ÷ average assets
0.15 = net income ÷ ($810,000 + $945,000) ÷ 2
0.15 = net income ÷ $877,500
So, the net income is
= $877,500 × 0.15
= $131,625
hence, the net income for the year is $131,625
We simply applied the above formula
The Converting Department of Osaka Napkin Company uses the average cost method and had 2,000 units in work in process that were 60% complete at the beginning of the period. During the period, 25,200 units were completed and transferred to the Packing Department. There were 1,100 units in process that were 30% complete at the end of the period.
a. Determine the number of whole units to be accounted for and to be assigned costs for the period.
b. Determine the number of equivalent units of production for the period.
Answer:
Equivalent Units
Material cost = 26,560
Conversion Cost= 25,540
Explanation:
We would assume the company uses weighted average method of valuation.
Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.
Equivalent units = Degree of completion (%) × Number of units
Material cost
Item Unit Equivalent unit
Completed 25,200 100% ×25200 = 25,200
Closing WIP 1,360 100%× 1,360 1360
Total equivalent units 26,560
Conversion Cost
Item Unit Equivalent unit
Completed 25,200 100% ×25200 = 25,200
Closing WIP 1,360 25%× 1,360 340
Total equivalent units
The Converting Department of Osaka Napkin Company uses the average cost method and had 2,000 units in work in process that were 60% complete at the beginning of the period.
A. To determine the number of whole units to be accounted for and to be assigned costs for the period, let's calculate the total equivalent units of production.
Whole units at the beginning of the period = 2,000 unit
Units started and completed during the period = 25,200 units
Whole units in process at the end of the period = 1,100 units
Total whole units to be accounted for:
= Whole units at the beginning + Units started and completed during the period + Whole units in process at the end
= 2,000 units + 25,200 units + 1,100 units
= 28,300 units
B. To determine the number of equivalent units of production for the period, we need to consider the percentage of completion for the units in process at the beginning and the units in process at the end.
Equivalent units of production for units in process at the beginning:
= Whole units at the beginning × Percentage of completion at the beginning
= 2,000 units × 60%
= 1,200 equivalent units
Equivalent units of production for units in process at the end:
= Whole units in process at the end × Percentage of completion at the end
= 1,100 units × 30%
= 330 equivalent units
Total equivalent units of production for the period:
= Equivalent units of production for units in process at the beginning + Equivalent units of production for units in process at the end + Units started and completed during the period
= 1,200 equivalent units + 330 equivalent units + 25,200 units
= 26,730 equivalent units
Therefore, the number of equivalent units of production for the period is 26,730 units.
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Someone claiming to be an employee of the employer for whom Bernie works has been handing out flyers denigrating the employer at a local shopping mall. Bernie's employer had its security force search all of the employees' lockers to see if they had any of the flyers. Bernie can file an action against his employer under the 4th amendment if
Answer:
1 if employer is the federal government
2. If employer is the state or local government
Explanation:
Under the 4th amendment, Bernie can file an action against his employer if the employer is a state or local government and also if his employer is a federal government. Bernie can do this because the 4th amendment only applies to government employers and not private employers.
Rosewood Company made a loan of $16,000 to one of the company's employees on April 1, 2020. The one-year note carried a 6% rate of interest. Principal and interest will be paid at the end of the term of the loan. The amount of interest revenue that Rosewood would report in 2020 and 2021, would be?
Answer:
loan interest revenue for 2020 is $720
loan interest revenue for 2021 is $240
Explanation:
The loan interest revenue in the year 2020 is for 9 months out of the total loan tenure of twelve months:
interest revenue for 2020=$16,000*6%*9/12=$720.00
This would be debited to interest receivable and credited to interest revenue account.
interest revenue for 2021=$16,000*6%*3/12=$240.00
Answer:
The answer is $720 and $240
Explanation:
Solution
Recall that:
Rosewood company made a loan of =$16,000
One year note carried an interest of =6%
Now,
We solve for the amount of interest revenue that rosewood would report
Report is given below:
$16,000 * 6% * 9/12 = $720 Interest revenue in April to December, 2020
$16,000 * 6% * 3/12 = $240 interest revenue in January - March, 2021
Therefore the interest revenue for Rosewood report/feedback in 2020 and 2021 is $720 and $240 respectively.
One-year Treasury securities yield 4.15%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 4.4%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities
Answer:
The yield today for 2-year Treasury securities is 4.27%
Explanation:
In order to calculate the yield today for 2-year Treasury securities we would have to calculate the following formula:
2-year treasury yield = [(1 + 1-yr treasury yield) * (1 + 1-yr treasury yield, 1 year from now)]1/2 - 1
= [(1 + 0.0415) * (1 + 0.044)]∧1/2 - 1
= [1.0873]∧0.5 - 1
= 1.0427 - 1 = 0.0427, or 4.27%
The yield today for 2-year Treasury securities is 4.27%
Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:
Fixed Element Variable Element Actual Total
per Month per Customer Served for May
Revenue $5,000 $160,000
Employee salaries and wages $50,000 $1,100 $88,000
Travel expenses $600 $19,000
Other expenses $36,000 $34,500
When preparing its planning budget, the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.
Required:
1. What amount of revenue would be included in Adger's flexible budget for May?
2. What amount of employee salaries and wages would be included in Adger's flexible budget for May?
3. What amount of travel expenses would be included in Adger's flexible budget for May?
4. What amount of other expenses would be included in Adger's flexible budget for May?
5. What net operating income would appear in Adger's flexible budget for May?
Answer:
1. Total Revenue in May $ 175,000
2. Total Salaries & wages For May $ 88500
3. Total Travel Expenses for May $21,000
4. Other Expense $ 36,000
5. Operating Income $ 65,500
Explanation:
Given
Adger Corporation
Fixed Element Variable Element Actual Total
per Month per Customer Served for May
Revenue $5,000 $160,000
Employee Salaries
& wages $50,000 $1,100 $88,000
Travel expenses $600 $19,000
Other expenses $36,000 $34,500
There were 35 customers.
Revenue = $5000 per customer
We can easily calculate as we have been given the number of customers and the variable element of expense per customer.
1. Total Revenue in May = 5000 * 35= $ 175,000
Variable Salaries & wages = $ 1100 per customer
Total Variable Salaries & wages = $ 1100 *35= $ 38500
2. Total Salaries & wages For May = Variable + Fixed
= $ 38500 + $50,000= $ 88500
Travel expenses = $600per customer
3. Total Travel Expenses for May = $ 600 *35= $21,000
4. Other Expense = Fixed Expenses = $ 36,000 ( there are no variable expenses)
5. Operating Income= Revenue - Employee Salaries - Travel Expenses
= $ 175,000- $ 88500 - $ 21,000= $ 65,500
Other expenses are included in the net income statement not operating income statement.
Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments of $10,500 beginning one year from today. The interest rate on the note is 5%.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What amount did Canliss borrow
Answer:
The amount that Canliss borrowed is $45,459.51
Explanation:
The amount borrowed is the present value of $10,500 for five years using the discount factor applicable to each to each year as shown below
The formula for discount factor=1/(1+r)^n
r is the rate of interest on the loan which is 5%
n is the year relating to each cash flow ,for instance 1 for year one
present value of the loan=$10,500/(1+5%)^1+$10,500/(1+5%)^2+$10,500/(1+5%)^3+$10,500/(1+5%)^4+$10,500/(1+5%)^5=$45,459.51
Gearty and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows
Property Adjusted Basis Fair Market Value Percentage of The Worthington Corp. Stock Acquired
Gearty Building $80,000 $164,000 60%
Olinto Land 10,000 96,000 40%
The building was subject to a $20,000 mortgage that was assumed by The Worthington Corp. What was The Worthington Corp.'s basis in the building?
Answer:
$80,000
Explanation:
Since Worthington Corp. assumed the the $20,000 mortgage which the building was subject to, the Worthington Corp.'s basis in the building is the adjusted basis of the building.
Therefore, Worthington Corp.'s basis in the building is $80,000 which is the adjusted basis of the building.
Nikki, the design and development manager at Holden Outerwear, says she likes "taking something everyone does every day and doing it slightly different." A workplace that provides the freedom that Nikki promotes has a
Answer:
Democratic leadership style
Explanation:
Based on the information provided it seems that Nikki's workplace has a Democratic leadership style. This refers to a type of leadership style in which the members of the group take a participative role in the decision-making process. The phrase "taking something everyone does every day and doing it slightly different." shows that the company allows it's employees to make their own decisions as long as they get the desired results.
State Street Beverage Company issues $805,000 of 9%, 10-year bonds on March 31, 2017. The bonds pay interest on March 31 and September 30. Which of the following statements is true?
A) If the market rate of interest is 10%, the bonds will issue at a premium.
B) If the market rate of interest is 10%, the bonds will issue at a discount.
C) If the market rate of interest is 10%, the bonds will issue at par.
D) If the market rate of interest is 10%, the bonds will issue above par.
Answer:
Option (B) If the market rate of interest is 10%, the bonds will issue at a discount
Explanation:
Interest rate risk is defined as the risk changing which, interest rates will affect bond prices. When current interest rates are greater than a bond's coupon rate, the bond will be sold below its face value at a discount. When interest rates are less than the coupon rate, the bond can be sold at a premium--higher than the face value.
Martha was considering starting a new business. During her preliminary investigations, she incurred the following expenditures:
Salaries $22,000
Travel 18,000
Professional fees 13,000
Interest on a short-term note 4,000
Martha begins the business on July 1 of the current year. If Marth elects \SS 195 trearment, determine her startup expenditure deduction for the current year.
Answer:
$3,700
Explanation:
The computation of startup expenditure deduction for the current year is shown below:-
According to the section 195, the tax payer is eligible for an immediate deduction of startup expenditure or 5,000 decreased amount that exceeds $50,000
The amount left over of start up expense is eligible for amortization over 180 months starting from the month when the tax payer business started
Immediate deduction = $5,000 - Start up cost in excess of $50,000
= $5,000 - $3,000
= $2,000
The $3,000 come from
= $53,000 - $50,000
= $3,000
now,
Amortized deduction = ((Total start up cost - Immediate deduction) ÷ 180 months) × Total number of months from beginning July to ending December
= (($53,000 - $2,000) ÷ 180) × 6 months
= 283.33 × 6
= $1,700 approx
and
Start up cost = Salary expenses + Travel expenses + Professional fees
= $22,000 + $18,000 + $13,000
= $53,000
finally
Total deduction in the current year = Immediate deduction + Amortized deductions
= $2,000 + $1,700
= $3,700
An inexperienced accountant for Riverbed Corp showed the following in the income statement: income before income taxes $258,000 and unrealized gain on available-for-sale securities (before taxes) $94,900. The unrealized gain on available-for-sale securities and income before income taxes are both subject to a 34% tax rate. Prepare a correct statement of comprehensive income.
Answer:
Kindly check attached file for the Comprehensive report
The net income reported on the income statement for the current year was $261000. Depreciation was $39900. Account receivable and inventories decreased by $11800 and $34900, respectively. Prepaid expenses and accounts payable increased, respectively, by $1100 and $8300. How much cash was provided by operating activities?
Answer:
$ 354,800.00
Explanation:
The net cash amount provided by operating activities in the year is determined by adding depreciation to net income as well as the decrease in both accounts receivable and inventories.
There is also the need to to deduct increase in prepaid expenses and add the increase in accounts payable as done below:
net cash provided by operating activities=$261,000+$39,900+$11,800+$34,900-$1,100+$8,300=$354,800.00
A university spent $1.3 million to install solar panels atop a parking garage. These panels will have a capacity of 200 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 30%, that electricity can be purchased at $0.30 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero.
Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first.
Approximately how many hours per year will the solar panels need to operate to enable this project to break even?
Answer:
It will take 6,534.31 hours per year for the solar panels to operate to enable this project to break even
Explanation:
Discount rate = 30% = 0.3
Looking at one hour of operation in each year = 200 kW x $0.30 Kw/hr
= $60 value of electricity per year
Compound interest factor for a discount rate of 30% = 3.3158
(taken from compound interest factor table or computed using formula ∑1/(1+r)^t , where r = 30%, and t = 1 to 30)
Present value of operating the solar panels for 1 hour per year = 60 × 3.3158 = $ 198.95
For break even it would need to run = 1.3 million ÷ 198.95
= 6,534.31 hours per year
Laser World reports net income of $620,000. Depreciation expense is $47,000, accounts receivable increases $11,000, and accounts payable decreases $27,000. Calculate net cash flows from operating activities using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)
Answer:
$629,000
Explanation:
The net cash flow from operating activities is the net income plus depreciation, minus the increase in accounts receivable as well as the decrease in accounts payable.
Net income is $620,000
depreciaton expense $47,000
Increase in accounts receivable ($11,000)
decrease in accounts payable ($27,000)
Net cash flow from operations $629,000
The increase in accounts receivable denies the business of additional cash,hence it is deducted ,the same applies to increase in accounts payable
You would like to invest in one of the profitable business units of a multinational corporation. In a meeting with management, you explain that you'll only consider a unit categorized, according to the BCG matrix, as a question mark. Here are your choices:Unit A has revenue of $27 billion and a profit of $6 billion. While its product is based on a new technology that is rapidly increasing in sales, the product currently lags the market share of competitors.Unit B has revenue of $30 billion and a profit of $7 billion. Its market share is strong and growing. While its product is based on an outdated technology, the product has a loyal following for now.Which of the corporation's two profitable units meets your criterion?
Answer:
Unit A has revenue of $27 billion and a profit of $6 billion. While its product is based on a new technology that is rapidly increasing in sales, the product currently lags the market share of competitors.
Explanation:
According to the BCG Matrix, question marks are business units that operate in rapidly growing markets but currently only possess a low market share.
This results in a lot of cash being consumed by the business unit, but also the possibility of high growth. It is called a question mark because it is uncertain if the business unit will be successful or not. This means that they are very risky investments.
Following are transactions for Valdez Services, a company owned by Brina Valdez. Brina Valdez invested $20,000 cash in the company in exchange for common stock. The company provided services to a client and immediately received $900 cash. The company received $10,000 cash from a client in payment for services to be provided next year. The company received $3,500 cash from a client in partial payment of accounts receivable. The company borrowed $5,000 cash from the bank by signing a note payable.
Required:
Prepare general journal entries for the above transactions of Valdez Services.
The concept of risk and return is subjective for different people, as well as for corporations.
Read and assess the following financial decisions. Keeping everything else constant, are the following actions good financial decisions? Base your decisions on the understanding of risk and return, solely from a theoretical finance perspective.
Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.
Good Financial Decision?
Yes
No
Marcie works for an educational technology firm that recently launched its employee stock option plan (ESOP). Marcie allocated all her investments in the ESOP.
Good Financial Decision?
Yes
No
Erin wants to invest in a hedge fund that has had a very strong performance track record. The hedge fund has given its investors a return of over 60% for the past five years. Although Erin is tempted to put her money in the fund, she decides to conduct due diligence on the hedge fund’s assets, because she is aware that past performance is no guarantee of future results.
Good Financial Decision?
Yes
No
Answer:
Risk and Return
1. Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.
Good Financial Decision?
Yes
No
2. Marcie works for an educational technology firm that recently launched its employee stock option plan (ESOP). Marcie allocated all her investments in the ESOP.
Good Financial Decision?
Yes
No
3. rin wants to invest in a hedge fund that has had a very strong performance track record. The hedge fund has given its investors a return of over 60% for the past five years. Although Erin is tempted to put her money in the fund, she decides to conduct due diligence on the hedge fund’s assets, because she is aware that past performance is no guarantee of future results.
Good Financial Decision?
Yes
No
Explanation:
1. Joe's decision to invest in stock B is a good financial decision. Since both investments have the same returns, the decision on which investment to take shifts to the standard deviation of the returns, which specifies the variability of the returns. Invariably, the investment with less standard deviation should win the vote. Therefore, Joe's decision is a good financial decision because investment in B has a standard deviation of 9% unlike A's 12%.
2. Putting all eggs in one market as Marcie had done by allocating all her investments in the ESOP is not a good financial decision, theoretically. It is always best to spread the risks, though higher-yielding investments (returns) bear higher risks.
3. The decision of Erin to conduct due diligence on the hedge fund's assets, despite its past performance is a good financial decision. Due diligence reveals some behind-the-scene information that are instrumental in making sound business decisions. Who are the present managers of the fund? What systems are in place in the entity to guarantee similar future performance, all things being equal? What market's sentiments and information are available for consideration? These questions, and many others can be answered through a due diligence. Surely, "past performance is no guarantee of future results."
Stansfield Corporation had the following activities in 2012.
1. Payment of accounts payable: $770,000
2. Issuance of common stock: $250,000
3. Payment of dividends: $350,000
4. Collection of note receivable: $100,000
5. Issuance of bonds payable: $510,000
6. Purchase of treasury stock: $46,000
Compute the amount Stansfield should report as net cash provided by financing activities in its 2012 statement of cash flows.
Answer:
Net cash provided by financing activities in 2012 is $364,000
Explanation:
Computation of net financing activity.
Particular Amount
Issuance of common stock $250,000
Issuance of bonds payable $510,000
$760,000
Less: Payment of dividends $350,000
Less: Purchase of treasury stock $46,000
Net cash provided $364,000
Net cash provided by financing activities in 2012 is $364,000
Mifflin Co. reported the following for the current year.
Net sales $60,000
Cost of goods sold $38.000
Beginning balance in accounts receivable $14.000
Ending balance in accounts receivable $ 6,000
Compute (a) accounts receivable turnover and (b) days’ sales uncollected. Hint: Recall that accounts receivable turnover uses average accounts receivable, and days’ sales uncollected uses the ending balance in accounts receivable.
Can an object accelerate if it's moving with constant speed? Yup! Many people find this counter-intuitive at first because they forget that changes in the direction of motion of an object—even if the object is maintaining a constant speed—still count as acceleration.Acceleration is a change in velocity, either in its magnitude—i.e., speed—or in its direction, or both. In uniform circular motion, the direction of the velocity changes constantly, so there is always an associated acceleration, even though the speed might be constant. You experience this acceleration yourself when you turn a corner in your car—if you hold the wheel steady during a turn and move at constant speed, you are in uniform circular motion. What you notice is a sideways acceleration because you and the car are changing direction. The sharper the curve and the greater your speed, the more noticeable this acceleration will become. In this section we'll examine the direction and magnitude of that acceleration.The figure below shows an object moving in a circular path at constant speed. The direction of the instantaneous velocity is shown at two points along the path. Acceleration is in the direction of the change in velocity, which points directly toward the center of rotation—the center of the circular path. This direction is shown with the vector diagram in the figure. We call the acceleration of an object moving in uniform circular motion—resulting from a net external force—the centripetal acceleration
Match the term within the parantheses that best matches each of the following description.
1. Expenditure on research and development
2. A bank loan
3. Listed on a stock exchange
4. Has limited liability
5. Responsible for bank relationships
6. Agency Cost
A. Investment decision
B. Financial asset
C. Public corporationd
D. Corporatione
E. The treasure
F. The cost resulting from conflicts of interest between managers and shareholders.
Answer:
The answer is
1. Expenditure on research and development (A. Investment decision)
2. A bank loan (B. Financial asset)
3. Listed on a stock exchange (C. Public corporation)
4. Has limited liability ( D. Corporation)
5. Responsible for bank relationships ( E. The treasure)
6. Agency Cost (F. The cost resulting from conflicts of interest between managers and shareholders)
Explanation:
1. Expenditure on research and development. (A. Investment decision. Investment decision relates to expenditure on a long-term goal.)
2. A bank loan (B. Financial asset. Businesses that obtain bank loans owns and controls it and makes the decision on how to use it)
3.Listed on a stock exchange( C. Public corporation. Companies that have their stocks traded on exchange are public companies.)
4. Has limited liability (D. corporation/partnership. No distinct separation between the owner and the business)
5. Responsible for bank relationships (E. The treasurer. This person maintains the relationship between the bank and business)
6. Agency Cost ( F. The cost resulting from conflicts of interest between shareholders and managers of the business. The managers of the business are known as the agents)
Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 10 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.)
Suppose the interest rate is 7 percent.
Using the rule of 70, the value of Bond A is approximately_______ , and the value of Bond B is approximately_______ .
Now suppose the interest rate increases to 14 percent.
Using the rule of 70, the value of Bond A is now approximately_________ , and the value of Bond B is approximately________ . Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a_______ percentage than Bond B's value. The value of a bond__________ when the interest rate increases, and bonds with a longer time to maturity are _________sensitive to changes in the interest rate.
Answer:
To find the value of bond, let's use the formula:
Value of bond = price of bond / (1 + interest rate)ⁿ
Here n represents number of years.
At 7% interest rate:
Value of bond A = [tex]\frac{8000}{(1+0.07)^2^0} = 2067.35[/tex]
Value of bond B = [tex]\frac{8000}{(1+0.07)^1^0} = 4066.79[/tex]
At 14% interest rate:
Value of bond A = [tex] = \frac{8000}{(1+0.14)^20} = 582.09 [/tex]
Value of bond B = [tex] = \frac{8000}{(1+0.14)^10} = 2157.95 [/tex]
The difference between bond A at 7% and 14%:
$582.09 - $2067.35 = -$1485.26
The difference between bond B at 7% and 14%:
$2157.95 - $4066.79 = -$1908.84
% decrease between bond A and B:
[tex] \frac{1908.84 - 1485.26}{1908.84} * 100 = 22.19 [/tex]
Therefore, from the above calculations, we have the following:
Suppose the interest rate is 7%, Using the rule of 70, the value of Bond A is approximately $2067.35, and the value of Bond B is approximately $4066.79 .
Now suppose the interest rate increases to 14 percent.
Using the rule of 70, the value of Bond A is now approximately $528.09 , and the value of Bond B is approximately $2157.95 .
Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a 22.19 percentage than Bond B's value.
The value of a bond decreases when the interest rate increases, and bonds with a longer time to maturity are more sensitive to changes in the interest rate.
Consumption (household sector) spending is the largest component of:_______
a. Aggregate output
b. Aggregate income
c. Aggregate employment
d. Aggregate supply
e. Aggregate demand
Answer:
a. Aggregate output
Explanation:
Aggregate output can also be referred to as GDP. Gross domestic product is the sum of all final goods and services produced in an economy within a given period which is usually a year.
GDP calculated using the expenditure approach:
GDP = Consumption spending + Investment spending by businesses + Government Spending + Net Export
Consumption spending usually represents 70% of aggregate output.
I hope my answer helps you
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows: 1 Sales $10,800,000.00 2 Manufacturing costs: 3 Direct materials $6,400,000.00 4 Direct labor 1,600,000.00 5 Variable manufacturing cost 1,280,000.00 6 Fixed manufacturing cost 320,000.00 9,600,000.00 7 Selling and administrative expenses: 8 Variable $1,080,000.00 9 Fixed 180,000.00 1,260,000.00Required:
1. Prepare an income statement based on the absorption costing concept.*
2. Prepare an income statement based on the variable costing concept.*
3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
Answer:
Absorption Costing Net Income 1008,000
Variable Costing Net Income 976,000
Explanation:
Kodiak Fridgeration Company
Units Produced = 80,000
Units Sold = 72,000
Ending Inventory = 8000
Per Units Cost
Direct materials $6,400,000/80,000 = $ 80
Direct labor 1,600,000 /80,000= $ 20
Variable manufacturing cost 1,280,000/80,000= $ 16
Fixed manufacturing cost 320,000 /80,000 = $ 4
Absorption Manufacturing Cost per unit= 9,600,000/80,000= $ 120
Variable Manufacturing Costs per unit = $ 116
Kodiak Fridgeration Company
Income Statement
Absorption Costing
Sales $10,800,000
Manufacturing costs:
Direct materials $6,400,000
Direct labor 1,600,000
Variable manufacturing cost 1,280,000
Fixed manufacturing cost 320,000 9,600,000
Less Ending Inventory (8000*120) (960,000)
Cost of Goods Sold 86,40,000
Gross Profit 2160,000
Selling and administrative expenses:
Variable $ 72,000* 13.5= 972,000
Fixed 180,000
Net Income 1008,000
Kodiak Fridgeration Company
Income Statement
Variable Costing
Sales $10,800,000
Variable manufacturing cost
(80,000*116) 9280,000
Less Ending Inventory ( 8000*116) 928,000
Cost of Goods Sold 83,52,000
Gross Contribution Margin 2448,000
Variable Selling and administrative expenses
(72000 * $1,080,000/80,000) 972,000
Contribution Margin 1476,000
Less Fixed Expenses
Fixed manufacturing cost 320,000
Fixed 180,000 500,000
Net Income 976,000
3. The difference in absorption and variable costing income is because in absorption costing the fixed costs are treated as unit cost and in variable costs the fixed costs are treated as period costs. Also the fixed costs of the ending units is deducted in absorption costing where it is not deducted in variable costing.
TOMS is a shoe company that, since its inception, has given away one pair of shoes to someone in need for every pair purchased by a customer. They have expanded their philanthropy and now support programs designed to provide eye exams and glasses, clean drinking water, and safe birthing services to people in need in various parts of the world. Customers loyal to the TOMS brand believe the company is _____________, fill in the blank, through their participation in these charitable efforts.
Answer:
Socially responsible
Explanation:
A socially responsible company is one that seeks to identify as well as relieve the social needs in its business environment.
A major social problem or need around the world is the lack of clean drinking water and birthing services. Thus, by proffering solutions to this problem loyal customer of TOMS shoe company could notice that the company takes seriously its responsibility to the society.
Mindy, a manager at Savannah Grasse, observes that Mark is a slow learner and has not been able to grasp the nuances of his job responsibilities. She sees potential in Mark and decides to coach him. In this scenario, what role of a coach will Mindy be performing
Answer: Modelling
Explanation: By deciding to coach Mark, working one-on-one with him and teaching him the necessary skills required to perform his job well, Mindy is serving in the capacity of a role model to Mark. It has been known that modelling is often an effective way of coaching or teaching and reflection afterwards. It is much more than just showing as it allows for observation, collaboration and support.
Acme Products manufactures and markets a product called Grow Tall. Acme claims in its advertising that Grow Tall will make its users grow a minimum of six inches taller than their current height. The Federal Trade Commission (FTC) will likely find that the ad is
Answer: a. deceptive, and the FTC may issue a cease-and-desist order.
Explanation:
A product that can increase human height by 6 inches sounds highly improbable and so is deceptive to people.
The Federal Trade Commission in it's role as a protector of Consumers from.unfair and deceitful practices in Commerce can act against Acme to stop them from deceiving the consumer.
One of the ways that the FTC can do this is by issuing a Cease and Desist order to Acme and if they fail to do so, can then take them to Court.
