Answer:
5.05
Explanation:
Inventory turnover is computed as
= Cost of goods sold / Average inventory
Given that;
Cost of goods sold = $67,800
Average inventory = $13,432
Then,
Inventory turnover ratio is
= $67,800 / $13,432
= 5.05
For financial reporting purposes, the total amount of product costs incurred to make 6,800 units is closest to:
Answer:
a. $98,260
Explanation:
Note: The full question is attached as picture below
Fixed manufacturing overheads = 6800*$2.50
Fixed manufacturing overheads = $17,000
Total variable costs = (Direct materials + Direct labor + Variable manufacturing overhead) * 6800 units
Total variable costs = ($6.70 + $3.80 + $1.45) * 6800 units
Total variable costs = $11.95 * 6800 units
Total variable costs = $8,1260.
So, total product costs = Total variable costs + Fixed manufacturing overheads = $81,260 + $17,000 = $98,260
You win a lottery that pays $10,000 each year for the next 5 years beginning next year. How much are your winnings worth today
Answer:
$43,294.77
Explanation:
Here is the full question used in answering this quetion :
You win a lottery that pays $10,000 each year for the next 5 years beginning next year. How much are your winnings worth today if the market interest rate is 5%?
Present value is the sum of discounted cash flows
PV can be calculated with a financial calculator
Cash flow in year 1 - 5 = $10,000
i = 5%
PV = $43,294.77
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
what are the problems encountered in dealing with the depreciation of non-current assets?
Answer:
The causes of depreciation are: Wear and tear. Any asset will gradually break down over a certain usage period, as parts wear out and need to be replaced. Other assets, such as buildings, can be repaired and upgraded for long periods of time. Non-current assets are usually valued by deducting the accumulated depreciation from the original purchase cost. For example, if a business bought a computer for $2100 two years ago, this is a non-current asset and it's subject to depreciation.
Explanation:
Vaughn Manufacturing purchased equipment for $39200. Sales tax on the purchase was $2352. Other costs incurred were freight charges of $588, repairs of $343 for damage during installation, and installation costs of $657. What is the cost of the equipment
Answer:
the cost of the equipment is $42,979
Explanation:
The computation of the cost of the equipment is as follows:
= Purchase value of an equipment + sales tax on the purchase + other cost incurred + installation cost
= $39,200 + $2,352 + 588 + $657
= $42,979
Hence, the cost of the equipment is $42,979
Suppose now the same client as in the previous problem prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 20%. What is the maximum investment proportion, y, for the risky portfolio
Answer:
P = 74.07%
Explanation:
Note: An important data is missing in this question to solve for the maximum investment proportion y for the risky portfolio. I have found the similar question on the internet and I am including that missing data to complete this question in order to solve for the sack of understanding and concept.
Required: Maximum investment proportion y for the risky portfolio.
Let's denote this requirement as P for proportion.
Given Data:
Standard Deviation of investor's portfolio = 20% = 0.20
According to the formula to calculate the proportion of investment that investor wants to do in the risky portfolio, we need to have standard deviation of the risky portfolio, which is missing in this question. I have found it on the internet
Standard Deviation of the risky portfolio = 27% = 0.27
So, the formula is:
Standard deviation of the investors portfolio = Investment Portfolio x Standard deviation of the risky portfolio.
Let's suppose,
[tex]SD_{IP}[/tex] = Standard deviation of the investors portfolio
[tex]SD_{RP}[/tex] = Standard deviation of the risky portfolio.
P = Investment Proportion
So,
[tex]SD_{IP}[/tex] = P x [tex]SD_{RP}[/tex]
Solving for P
P = [tex]SD_{IP}[/tex]/[tex]SD_{RP}[/tex]
Plugging in the values.
P = 0.20/0.27
P = 0.7407 x 100
P = 74.07%
Hence, we can conclude that, investor can invest 74.07% of his investment in the risky portfolio for not exceeding the standard deviation 20% of the investor portfolio.
Suppose that a sales consulting firm notices a correlation between the sale of house paint and number of home sales in an area. As the number of home sales increases, the sale of house paint increases, and vice versa. The consulting firm concludes that buying a home causes the new owners to purchase house paint. What method did the consulting firm use in drawing this conclusion
Answer:
The consulting firm used reasoning to draw the conclusion.
Explanation:
Reasoning refers to the process of using information that we are given (sale of house paint), compare it to what we already know (the number of home sales in an area), and then come up with a conclusion, like "buying a home causes the new owners to purchase house paint." It is sometimes described as deductive reasoning.
You are considering working for United Way upon graduation. Explain how the marketing goals, strategies, and markets for the nonprofit differ from a for-profit organization
Explanation:
Remember, the term 'marketing', could be defined in general terms as the activities carried out by a company (non-profit or for-profit) in other to promote their cause (which can be their products or services).
For example, unlike a for-profit company which may have a marketing goal of achieving a set amount of sales in the first half of the year, a non-profit on the other hand may have a marketing goal of raising the needed amount to fund their school feeding program.
Also, in terms of strategies used, while a for-profit company may use paid marketers, a non-profit may solicit the help of volunteers.
Okaboji Manufacturing Company reported the following materials data for the month ending November 30: Materials purchased $176,700 Materials inventory, November 1 55,800 Materials inventory, November 30 46,500 Determine the cost of direct materials used in production by Okaboji during the month ended November 30.
Answer:
Direct material used= $186,000
Explanation:
Giving the following information:
Materials purchased= 176,700
Materials inventory, November 1= 55,800
Materials inventory, November 30= 46,500
To calculate the direct material used, we need to use the following formula:
Direct material used= beginning inventory + purchases - ending inventory
Direct material used= 55,800 + 176,700 - 46,500
Direct material used= $186,000
An argument for ______________________________________________ is that this may be a more efficient way of maintaining and growing a business than just trying to attract new customers.
Answer:
Relationship marketing.
Explanation:
A marketing mix is made up of the four (4) Ps;
1. Products: this is typically the goods and services that gives satisfaction to the customer's needs and wants. They are either tangible or intangible items.
2. Price: this represents the amount of money a customer buying goods and services are willing to pay for it.
3. Place: this represents the areas of distribution of these goods and services for easier access by the potential customers.
4. Promotions: for a good sales record or in order to increase the number of people buying a product and taking services, it is very important to have a good marketing communication such as advertising, sales promotion, direct marketing etc.
Relationship marketing is more focused on providing satisfaction to the customers of a business firm, as well as retention of customers in the long-run.
An argument for relationship marketing is that, this may be a more efficient way of maintaining and growing a business than just trying to attract new customers.
Hence, the main purpose of relationship marketing is to achieve substantial level of customer satisfaction as well as using the organization's limited financial resources efficiently in order to boost the effective promotion and sales of its products.
Bob works for Allies Electronics making switches. He is paid $0.40 per switch. Last week he made 635 switches on regular time and 126 switches during overtime. Find his gross earnings for the week if time-and-a-half per switch is paid for overtime.
Answer:
Total earnings= $329.6
Explanation:
Giving the following information:
He is paid $0.40 per switch. Last week he made 635 switches on regular time and 126 switches during overtime.
We need to calculate the total earnings:
Regular time= 635*0.4= $254
Overtime= 126*(0.4*1.5)= $75.6
Total earnings= $329.6
Manchester Company sells equipment on June 1, 2021, for $222,400 cash. Manchester incurred $1,280 of removal and selling costs on disposal. The equipment cost $400,000 when it was purchased on January 2, 2018. Its estimated residual value and useful life were $64,000 and 10 years, respectively. Manchester uses straight-line depreciation and records annual depreciation on each December 31.
Required:
a. Prepare the journal entries needed to record the asset disposal on June 1, 2021.
b. Record the journal entries if the equipment were abandoned (zero fair value) on June 1, 2021.
Answer and Explanation:
The journal entries are as follows:
But before that the accumulated depreciation for 3 years is as follows:
Cost $400,000
Less: Residual value $64,000
Depreciable cost $336,000
Divide by Useful life 10
Annual Depreciation $33,600
Accumulated depreciation for 3 years $100,800 ($33,600 × 3 years)
Now the journal entries are as follows:
a.
On June 1, 2021
Depreciation expense $14,000 ($33,600 × 5 months ÷ 12 months)
To Accumulated Depreciation $14,000
(Being depreciation expense is recorded)
On June 1,2021
Accumulated Depreciation $114,800 ($100,800 + $14,000)
Cash $221,120 ($222,400 - $1,280)
Loss on Disposal $64,080
To Equipment $400,000
(Being the disposal of an asset is recorded)
b.
On June 1, 2021
Depreciation expense $14,000 ($33,600 × 5 months ÷ 12 months)
To Accumulated Depreciation $14,000
(Being depreciation expense is recorded)
On June 1,2021
Accumulated Depreciation $114,800 ($100,800 + $14,000)
Loss on Disposal $285,200 ($221,120 + $64,080)
To Equipment $400,000
(Being the disposal of an asset is recorded)
Kennedy is working two summer jobs, making $16 per hour lifeguarding and making $10 per hour walking dogs. In a given week, she can work a maximum of 13 total hours and must earn no less than $150. Also, she must work at least 8 hours lifeguarding. If x represents the number of hours lifeguarding and y represents the number of hours walking dogs, write and solve a system of inequalities graphically and determine one possible solution.
Answer:
The answer is below
Explanation:
Let x represent the 9number of hours spent by Kennedy lifeguarding and let y represent the number of hours spent by Kennedy walking dogs.
Given that Kennedy can work a maximum of 13 hours, hence:
x + y ≤ 13 (1)
Also, she makes $16 per hour lifeguarding and making $10 per hour walking dogs. She must earn no less than $150. Therefore:
16x + 10y ≥ 150 (2)
Lastly, she must work at least 8 hours lifeguarding.
x ≥ 8 (3)
Also, y > 0
The inequalities are plotted using geogebra online graphing calculator.
We have the following points:
(8, 2.2), (8, 5)
Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs on the basis of sales value at split-off. Processing 4,600 gallons of product A and 1,000 gallons of product B to the split-off point costs $5,500. The sales value at split-off is $3.00 per gallon for product A and $32.20 for product B. Product B requires an additional separable process beyond split-off at a cost of $2.10 per gallon before it can be sold.Required: What is the company's cost to produce 1,000 gallons of product B?
Answer:
The company's cost to produce 1,000 gallons of product B is $7,131.25.
Explanation:
This can be calculatd as follows:
Product B share of joint cost = (Product B sales value / (Product B sales value + Product A sales value)) * Cost to split-off point = ($32.20 / ($32.20 + $3.00)) * $5,500 = 0.914772727272727 * $5,500 = 5,031.25
Product B total additional separable process beyond split-off = Additional cost per gallon * Number of gallons of product B produced = $2.10 * 1,000 = $2,100
Therefore, we have:
Company's cost to produce 1,000 gallons of product B = Product B share of joint cost + Product B total additional separable process beyond split-off = 5,031.25 + $2,100 = $7,131.25
Therefore, the company's cost to produce 1,000 gallons of product B is $7,131.25.
What is your assessment of the strength of competitive pressures stemming from the threat of entry of new competitors into the North American wholesale club market
Incomplete question. Assumed you are referring to this article;
Six years after turning the leadership of Costco Wholesale over to the then- president, Craig Jelinek, Jim Sinegal, Costco’s co-founder and chief executive officer (CEO) from 1983 until year-end 2011, had ample reason to be pleased with the company’s ongoing revenue growth and competitive standing as one of the world’s biggest and best consumer goods merchandisers. Sinegal had been the driving force behind Costco’s 35-year evolution from a startup entrepreneurial venture into the largest retailer in the United States, the seventh-largest retailer in the world, and the undisputed leader of the discounted warehouse and wholesale club segment of the North America retailing industry. Since January 2012, when Craig Jelinek took reins as Costco Wholesale’s president and CEO, the company had prospered growing from annual revenue of $89 billion and 598 membership warehouse at year-end fiscal 2011 to annual revenues of $126.2 billion and 741 membership warehouse at year-end fiscal 2017. Costco’s growth continued in the first nine months of fiscal 2018. 9-month revenue was $95.0 billion, up 12.0 percent over 9 months of fiscal 2017, and the company had opened four additional warehouses. As of June 2018, Costco ranked as the second-largest retailer in both the United States and the world.
Explanation:
Note, the threat arising from new competitors into a particular market refers to the likelihood that this company or business would overtake existing ones in their market share.
However, recall that we are told that Costco has been in the business for up to 35 years, and has become "the undisputed leader of the discounted warehouse and wholesale club segment of the North America retailing industry," this fact alone makes us and the new competitors weary of how difficult to acquire part of the market. This thus puts Costco at a competitive advantage.
A preferred stock that pays an annual dividend of $10, has a par value of $100, and has a required return of 5% will be valued at $200. Group of answer choices True False
Answer:
The answer is true
Explanation:
Vo = D/Kp
Vo is the value of preferred stock/shares
D is the dividend
Kp is the cost of preferred stock/share
To confirm whether the value of stock is actually $200, we perform the following:
D = $10
Kp = 5% or 0.05
10/0.05
=$200.
The answer is true
A consumer values a house at $525,000 and a producer values the same house at $485,000. If the transaction is completed at $510,000, what amount of tax may result in unconsummated transaction
Answer:
the options were missing:
a tax of $9,000a tax of $14,000a tax of $15,000a tax of $18,000the answer is a tax of $18,000
Explanation:
in this case, the seller surplus = $510,000 - $485,000 = $25,000, while consumer surplus = $525,000 - $510,000 = $15,000
Taxes decrease consumer surplus, but consumers are still willing to purchase goods if the price of the goods plus the taxes is equal or less to the maximum price that they are willing to pay. But $510,000 + $18,000 = $528,000 which is higher than $525,000
What is the total amount of current assets to be reported on XYZ Company's 12/31/X1 classified balance sheet
Answer:
$112,800
Explanation:
The computation of the total amount of current asset reported is as follows:
= Cash + account receivable + supplies + prepaid rent
= $53,000 + $15,000 + $8,800 + $36,000
= $112,800
Hence, the amount reported is $112,800
We simply added the above four items so that the current asset value could come
At the beginning of 2021, Artichoke Academy reported a balance in common stock of $153,000 and a balance in retained earnings of $53,000. During the year, the company issued additional shares of stock for $43,000, earned net income of $33,000, and paid dividends of $10,300. In addition, the company reported balances for the following assets and liabilities on December 31. Assets Liabilities Cash $ 52,900 Accounts payable $ 8,100 Supplies 11,200 Utilities payable 3,000 Prepaid rent 25,500 Salaries payable 3,800 Land 215,000 Notes payable 18,000 Required: Prepare a statement of stockholders’ equity. Prepare a balance sheet.
Answer:
STOCKHOLDERS EQUITY
Common Retained Stockholders
stock earnings equity
Beginning balance January 1 153.000 53.000 206.000
Issuance of common stock 43.000 43.000
Net income for the period 33.000 33.000
Cash Dividens (10.300) (10.300)
Ending balances December 31 196.000 75.700 271.700
BALANCE SHEET
Cash 52.900
Supplies 11.200
Prepaid Rent 25.500
Land 215.000
Total Assets 304.600
Account payable 8.100
Utilities payable 3.000
Salaries payable 3.800
Notes payable 18.000
Total liabilities 32.900
Common stock 196.000
Retained earnigs 75.700
Total stockholders 271.700
Liablities and
Stockholders 304.600
Explanation:
STOCKHOLDERS EQUITY
Common Retained Stockholders
stock earnings equity
Beginning balance January 1 153.000 53.000 206.000
Issuance of common stock 43.000 43.000
Net income for the period 33.000 33.000
Cash Dividens (10.300) (10.300)
Ending balances December 31 196.000 75.700 271.700
BALANCE SHEET
Cash 52.900
Supplies 11.200
Prepaid Rent 25.500
Land 215.000
Total Assets 304.600
Account payable 8.100
Utilities payable 3.000
Salaries payable 3.800
Notes payable 18.000
Total liabilities 32.900
Common stock 196.000
Retained earnigs 75.700
Total stockholders 271.700
Liablities and
Stockholders 304.600
Mcdale Inc. produces and sells two products. Data concerning those products for the most recent month appear below: Product I49VProduct Z50U Sales$45,000 $50,000 Variable expenses$13,300 $28,500 The fixed expenses of the entire company were $38,990. The break-even point for the entire company is closest to: Multiple Choice $80,790 $69,625 $38,990 $46,110
Answer:The break-even point for the entire company is closest to $69,625
Explanation:
Contribution margin =Sales-Variable costs
For Product I49V
Contribution margin=$45,000 - 13,300=$31,700
Product Z50U
Contribution margin=$50,000 - $28,500 =$21,500
Total Contribution margin of the two products =$31,700+$21,500=$53,200
Total sales of the two products =$45,000 + $50,000 =$95,000
Total Contribution margin ratio =Total Contribution margin / Total Sales
=$53,200 /$95,000 = 0.56
Therefore total breakeven point=Fixed costs/Contribution margin ratio
=$38,990/0.56
=$69,625
Cullumber Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $2150000 each quarter. The total contract price is $25800000 and Cullumber estimates total costs of $18350000. Cullumber estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2022, Cullumber Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18600000 due to unanticipated price increases. Cullumber Construction completes the remaining 25% of the building construction on December 31, 2023, as scheduled. At that time the total costs of construction are $19350000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Cullumber will recognize for the year ended December 31, 2023
Answer:
See bow
Explanation:
With regards to the above
the revenue to be recognized at the year end is
= 25% × $25,800,000
= $6,450,000
The cost to recognized is
= 25% × $19,350,000
= $4,837,500
Put the following steps of the problem solving process in correct order. Question 2 options: Implement the Model Identify what is the problem Develop the model / Acquire the data Do the results look right
Answer:
I. Identify what is the problem
II. Acquire the data
III. Develop the model
IV. Implement the Model.
V. Do the results look right.
Explanation:
The problem-solving process can be defined as the systematic approach used to identify and determine the solution to a particular problem.
The steps involved in the problem-solving process are;
1. Identify and define the problem: this is the first step to be taken in solving a problem. This is to ensure that, the focus is on the main issue or situation and all efforts is channeled in the right direction rather than the symptoms.
2. Gathering of information: this helps to consider the options available in solving a problem effectively.
3. Consider your options: this helps to compare the available and viable solutions to the problem.
4. Weigh disadvantages and evaluate a solution: you weigh the disadvantages of each solution, before choosing the one with the least disadvantages.
Hence, the fundamental steps of the problem solving process in the correct order are;
I. Identify what is the problem
II. Acquire the data
III. Develop the model
IV. Implement the Model.
V. Do the results look right.
Explain which information you would need to take into consideration when deciding to receive $5,000 today or $5,500 one year from today.
Answer:
You should take into consideration the time value of money, inflation rates, and real and nominal interest rates.
Explanation:
Money today tends to be more valuable than money in the future if it does not earn interest, because of inflation. $5,000 dollars today are worth more than $5,000 dollars 5 years from now.
You should also take into account inflation rates. As we can see, $5,500 is 10% higher than $5,000, so if inflation in one year is less than 10%, you will be obtaining more purchasing power by receiving the $5,500 in one year. However, if inflation ends up being higher than 10%, you will be better off with the $5,000 today.
Finally, nominal and real interest rates should also be taken into account. Nominal interest rate is the rate that is agreed upon the investment without taking into account inflation, while real interest rates is nominal interest rates minus inflation.
Zach sold a restaurant to Shane for $295,000. As part of the agreement, Zach promised not to open another restaurant business for three years within a 50-mile radius of the one sold. What is the name of this clause?
Answer:
Non-compete clause
Explanation:
The name of this clause is Non-compete clause. It is is a clause under which one party agrees not to enter into or start a similar profession or trade in competition against another party. By prudence of this non compete clause, the worker attempts and gives his acknowledgment to the state of the business that over the span of the work or significantly after the representative leaves the administrations/occupation of the business, he will not be the contender of the business in the structure and nature of the work of the business.
How many new retail accounts must the company acquire to break even on this tactic?
Question:
Tyson Foods is the largest U.S. beef and chicken supplier, processing more than 100,000 head of cattle and 40-plus million chickens weekly. Their primary distribution channels are supermarket meat departments. However, the company is now expanding distribution into convenience stores. There are almost 150,000 gas stations and convenience stores where the company would like to sell hot Buffalo chicken bites near the checkout. This is a promising channel, as sales are growing considerably at these retail outlets and pro´t margins on prepared foods are higher than selling raw meat to grocery stores. Tyson will have to hire 10 more sales representatives at a salary of $45,000 each to expand into this distribution channel because many of these types of stores are independently owned. Each convenience store is expected to generate an average of $50,000 in revenue for Tyson. Refer to Appendix 2: Marketing by the Numbers to answer the following questions.
1.If Tyson’s contribution margin is 30 percent on this product, what increase in sales will it need to break even on the increase in fixed costs to hire the new sales reps?
2.How many new retail accounts must the company acquire to break even on this tactic?
3. What average number of accounts must each new rep acquire?
Answer:
Tyson Foods
1. When the company breaks even the margin resulting from the increase in sales = salary of sales reps 0.30x = 10 * $45000 x= $150,0000.
Therefore, the increase in sales = $150,0000
2. The number of retail accounts
= Increase in sales/ revenue from one store
= 150,0000/50000
= 30 retail stores.
3. There are 10 reps, therefore the average number of accounts for each sales rep
= 30/10
= 3 accounts.
Explanation:
Breakeven in sales dollars and units are achieved when the total cost = the total revenue. At this point, there is no loss and no profit. When the company achieves more sales above the break-even point, it makes a profit. If it does not reach the point, it incurs some loss.
A company purchased $2,600 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned $600 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:
Answer:
No options presented but the entry below should be right.
$2,600 worth of merchandise was purchased but $600 was returned so Net accounts receivable:
= 2,600 - 600
= $2,000
Company paid the full amount on July 12 which is within the 10 days required for a discount so they get a 3% discount:
= 2,000 * ( 1 - 3%)
= $1,940
Date Account details Debit Credit
July 12 Accounts Payable $2,000
Cash $1,940
Merchandise inventory $60
Alain Mire files a single tax return and has adjusted gross income of $314,000. His net investment income is $43,000. What is the additional tax that Alain will pay on his net investment income for the year
Answer:
$1,634
Explanation:
The computation of the additional tax to be paid is shown below:
Additional tax is
= Tax rate × net investment income
= 0.038 × $43,000
= $1,634
We simply multiplied the tax rate with the net investment income in order to determine the additional tax
Construction of new homes is considered part of: 2 points A. investment spending. B. consumption. C. government spending. D. private saving. E. the stock market.
Answer:
The answer is A.
Explanation:
Construction of new homes is counted as part of investment spending in computing the GDP because they can be rented or leased out for generation of income.
Option B is incorrect because this is not private spending.
Option C is incorrect because it has nothing to do with government
Option D is incorrect because this is not a form of private saving while the question has nothing to do with the stock market (option E)
Utility is the measure of surplus lost by producers when taxes are introduced to the market. surplus lost by consumers when taxes are introduced to the market. the satisfaction all consumers should receive from consuming a good or service. the relative satisfaction, enjoyment, or contentment a person receives from consuming a good or service.
Answer:
the satisfaction all consumers should receive from consuming a good or service
Explanation:
Utility is the satisfaction all consumers should receive from consuming a good or service.
This ultimately implies that, when consumers purchase a product or takes service from a service provider (business organization) they should get maximum value and satisfaction for the amount of money being spent.
For example, if a consumer buys an automobile, he should be satisfied with the use.
Machinery purchased for $64,200 by Sheridan Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,280 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2021, it is determined that the total estimated life should be 10 years with a salvage value of $4,815 at the end of that time. Assume straight-line depreciation.
Required:
a. Prepare the entry to correct the prior year's depreciation, if necessary
b. Prepare the entry to record depreciation for 2015
Answer:
Sheridan Co.
a. It is not necessary to correct the prior year's depreciation. Depreciation is an accounting estimate and does not require the adjustment of prior year's accounts when there is a correction in its estimates.
b. Entry to record depreciation for 2021:
Debit Depreciation Expense $4,387
Credit Accumulated Depreciation $4,387
To record the depreciation expense for the year.
Explanation:
a) Data and Calculations:
Purchase of machinery in 2016 = $64,200
Original estimated useful life = 8 years
Salvage value = $4,280
Depreciation amount = $59,920 ($64,200 - $4,280)
Depreciation expense per year = $7,490 ($59,920/8)
Accumulated depreciation for 5 years = $37,450
Net book value = $26,750 ($64,200 - $37,450)
Remaining estimated useful life = 5 years
Salvage value = $4,815
New depreciable amount = $21,935 ($26,750 - $4,815)
Depreciation expense per year = $4,387 ($21,935/5)
g The Morrit Corporation has $960,000 of debt outstanding, and it pays an interest rate of 8% annually. Morrit's annual sales are $6 million, its average tax rate is 25%, and its net profit margin on sales is 5%. If the company does not maintain a TIE ratio of at least 5 to 1, then its bank will refuse to renew the loan, and bankruptcy will result. What is Morrit's TIE ratio
Answer:
6.21%
Explanation:
The computation of the times interest earned ratio is given below:
As we know that
Times interest earned ratio = EBIT ÷ Interest
Now for determining this, following calculations must be done:
The interest is
= $960,000 × 8%
= $76,800
Net profit
= Annual sales × net profit margin
= $6,000,000 × 0.05
= $300,000
Now the pre tax income is
= net income ÷ ( 1 - tax rate)
= $300,000 ÷ (1 - 0.25)
= $400,000
Now the EBIT is
= Pre tax income + interest expense
= $400,000 + $76,800
= $476,800
So, the TIE ratio is
= $476,800 ÷ $76,800
= 6.21%
