Black Sparrow Aviation, Inc. is concerned they are not maintaining adequate liquidity. The accounting department has provided you, the newly hired finance manager, with the following ratios:
1. Current ratio 4.5 Industry norm 4.0
2. Quick ratio 2.0 Industry norm 3.1
3. Inventory turnover 6.0 Industry norm 10.4
4. Average collection period 73 days Industry norm 52 days
5. Average payment period 31 days Industry norm 40 days
Discuss · In your opinion, what do these ratios indicate about Black Sparrow Aviation, Inc.?
A. What recommendations would you make based on these ratios?
B. What results do you think you can achieve if your recommendations are followed?
C. Why might your recommendations not be effective?

Answers

Answer 1

Answer:

Black Sparrow Aviation, Inc.

1. Indications from ratios about Black Sparrow Aviation:

The current ratio of 4.5 is higher than the industry's norm of 4.0.  This indicates that working capital elements are not being managed properly.  This is supported by the the remaining four ratios.  Inventory level is not optimal.  More inventory is held without being sold to customers.  Obviously, from the inventory turnover of 6.0 translating to approximately 61 days that it takes the company to sell its inventory as against the industry average of 35 days, it shows that the marketing and sales forces lack stamina.  Debt collection from customers is over-delayed, showing poor credit policy and management.  Perhaps, it takes the company many days to issue invoices.  More time than necessary is allowed to customers to pay compared to the industry norm.  In addition, payments are made to suppliers 11 days earlier than the industry average.  Advantage is not being taken of trade credit offered by suppliers.   Trade credit is an important source of funding operations, which every company should utilize to the maximum.

2A.  Based on the above ratios, I would recommend:

1. Minimum inventory should be maintained.

2. Sales efforts should be intensified, so that more sales are made each year than it is currently the case.

3. Debt collection is an important activity for every company that sells on account.  This activity should be taken seriously.  Credit extension to customers should not exceed 50 days.

4. Payments to suppliers can be delayed by more 10 days without offending suppliers.

2B. Results from Recommendations:

1. Working capital is not tied in inventory.

2. More debts are recovered from customers and on time.  Delay increases credit default.

3. More sales are made to customers, increasing the turnover.  The profit is always in the frequency of turnover.

4. Short-term financing is obtained from suppliers, which strengthens liquidity.

Explanation:

Liquidity management is a financial management tool, which describes a company's ability to meet financial obligations through cash flow, funding activities, and capital management in order to minimize the risks associated with illiquidity.

Calculation, analysis, comparison of ratios are some of the ways to make informed decisions on liquidity management.  Ratios should be compared over many periods, with best performing competitors, and the industry norm to ascertain the position of the reporting entity.


Related Questions

Consumption (household sector) spending is the largest component of:_______


a. Aggregate output
b. Aggregate income
c. Aggregate employment
d. Aggregate supply
e. Aggregate demand

Answers

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

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.

Answers

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

A 22-year old, unmarried, new customer contacts you, explaining that he just inherited $10,000,000 and wishes to invest the money aggressively to produce superior returns. He is risk-tolerant and understands the use of leverage and shorting as ways of enhancing returns. For this client, the best recommendation would be a: A hedge fund B fund of hedge funds C growth fund D value fund

Answers

Answer:

B fund of hedge funds

Explanation:

The motive of the investor is to maximizing the return and minimizing the risk

The hedge fund refers to that fund in which the portfolio of investment is protected from the uncertainty of the market and at the same time it also generates the positive return when the market is at recession or in boom period

While on the other hand, the fund of the hedge fund is a portfolio or mix of hedge funds shares in which it is applied to any type of investment fund

According to the given situation, the new customers invest his money to generate high returns moreover he is also risk tolerant and finds the number of ways for enhancing the returns so for this situation, the best option fit is option B.

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.

Answers

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.

Discount-Mart issues $19 million in bonds on January 1, 2021. The bonds have a seven-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 17,233,953 06/30/2021 $ 950,000 $ 1,034,037 $ 84,037 17,317,990 12/31/2021 950,000 1,039,079 89,079 17,407,069 06/30/2022 950,000 1,044,424 94,424 17,501,493 12/31/2022 950,000 1,050,090 100,090 17,601,583 What is the market annual rate of interest on the bonds

Answers

Answer: 12%

Explanation:

The semi annual market rate of interest on the bonds will be the interest expense divided by the carrying value i.e issue price of bond which is then multiplied by 100%. This will be mathematically expressed as:

= 1,034,037/17,233,953 × 100

= 0.06 × 100

= 6%

This implies that the semi annual market interest rate is 6%.

Since we are told to calculate the market annual rate of interest on the bonds, we multiply the value of 6% by 2 since 12 months make a year and we used 6 months for the calculation above which is semi annual. This will be:

= 6% × 2

= 12%

Therefore, the market annual rate of interest on the bonds is 12%

Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2017 Estimated Overhead Expected Use of Cost Drivers per Activity Activity Cost Pools Ordering and receiving Food processing Packaging $94,582 479,085 13,100 orders 61,500 machine hours 1,395,280 428,000 labor hours For 2017, the company had 11,300 orders and used 51,200 machine hours, and labor hours totaled 491,000 Calculate the overhead rates for each activity. (Round answers to 2 decimal places, e.g. 12.25.) Overhead Rates Ordering and receiving Food processing Packaging 7.22 per order 7.79 per machine hour 3.26 per labor hour
What is the total overhead applied?
Total overhead applied $

Answers

Answer:

Total allocated overhead= $2,081,094

Explanation:

Giving the following information:

For 2017, the company had 11,300 orders and used 51,200 machine hours, and labor hours totaled 491,000

Overhead rates for each activity:

Ordering and receiving= $7.22 per order

Food processing= $7.79 per machine hour

Packaging= $3.26 per labor hour

To allocate overhead, we need to use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Ordering and receiving= 7.22*11,300= $81,586

Food processing= 7.79*51,200= $398,848

Packaging= 3.26*491,000= $1,600,660

Total overhead= $2,081,094

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?

Answers

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

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

Answers

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.

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:

Answers

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.

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

Answers

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%

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.

Answers

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.

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?

Answers

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.

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

Answers

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.

Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $5.80 per standard direct labor-hour and fixed manufacturing overhead should be $3,087,000 per year.
The company’s product requires 4 pounds of material that has a standard cost of $12.50 per pound and 1.5 hours of direct labor time that has a standard rate of $13.90 per hour.The company planned to operate at a denominator activity level of 315,000 direct labor-hours and to produce 210,000 units of product during the most recent year. Actual activity and costs for the year were as follows:
Number of units produced 252,000
Actual direct labor-hours worked 409,500
Actual variable manufacturing overhead cost incurred $ 1,351,350
Actual fixed manufacturing overhead cost incurred $ 3,276,000
Required:
1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.(Round your answers to 2 decimal places.)
Predetermined Overhead Rate = $15.60 per DLH
Variable Rate = $5.80 per DLH
FIxed Rate = $9.80 per DLH
3a. Compute the standard direct labor-hours allowed for the year’s production.
3b. Complete the following Manufacturing Overhead T-account for the year:
4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answers

Answer:

1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.

total standard overhead rate = $15.60standard variable overhead rate = $5.80standard fixed overhead rate = $9.80

3a. Compute the standard direct labor-hours allowed for the year’s production.

1.5 direct labor hours x 252,000 units = 378,000 hours

3b. Complete the following Manufacturing Overhead T-account for the year:

                                    Manufacturing overhead

Debit                                                       Credit

Actual variable cost $1,351,350            Applied variable cost $2,192,400

Actual fixed costs $3,276,000              Applied fixed costs $3,704,400

                                                                $1,269,450

Adjustment for over applied

overhead expense $1,269,450                                                                  

0                                                              0

4. Determine the reason for the underapplied or overapplied overhead from (3)

two different factors affected the overhead costs:

Actual labor hours were higher than budgeted, since 378,000 should have been used to produce the 252,000 units, but 409,500 were used instead. That results in an unfavorable variance of 31,500 labor hours (8.3% variance). Even though labor hour variance was unfavorable, the actual overhead costs incurred were much lower than expected. The favorable variance regarding overhead costs was much larger than the unfavorable variance in labor hours. The actual total overhead per labor hour = $11.30 vs. $15.60 (standard), which represents a 27.6% favorable variance.

Explanation:

variable overhead $5.80 per direct labor hour

fixed overhead $3,087,000

each unit requires:

4 pounds of materials at standard cost of $12.50 per pound

1.5 direct labor hours at standard rate of $13.90 per hour

fixed overhead per direct labor hour = $9.80

total budgeted production 210,000 units

total budgeted direct labor hours 315,000

actual units produced 252,000

actual direct labor hours 409,500

actual variable manufacturing $1,351,350

actual fixed manufacturing $3,276,000

applied variable cost = $5.80 x 378,000 labor hours = $2,192,400

applied fixed costs = $9.80 x 378,000 labor hours = $3,704,400

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.

Answers

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

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

Answers

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."

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.

Answers

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.

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?

Answers

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.

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.

Answers

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

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

Answers

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  

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?

Answers

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.

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?

Answers

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.

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.

Answers

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)

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.

Answers

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 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?

Answers

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  

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.)

Answers

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

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

Answers

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

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

Answers

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.

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

Answers

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.

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.

Answers

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