Answer:
You need to save $4,012.45 each year
Explanation:
Pertiuty in 20 years is $50,000.
So the amount must be in account after 30 years saving to enough for above pertiuty is calculated as below:
= $50000/(1+8%)+ $50000/(1+8%)^2+......+$50000/(1+8%)^20
= $50,000 * Annuity Factor ( 1-20 years) of 8%
=$50000*9.818
= $490,907
To have $490,907 (FV) in account after 30 years (tenor), now you have save an amount each year (PMT) calculated as below:
$490,907 = PMT*(1+8%)^30+....PMT*(1+8%)^2 + PMT*(1+8%)
= PMT * Discount Factor ( 1-30 years) of 8%
$490,907 = PMT * 122.346
-> PMT = $490,907/ 122.346
= $4,012.45
A new equipment has been proposed by engineers to increase the productivity of a welding operation of a local fabrication plant. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $10,000 per year after operating costs have been subtracted from the revenue generated by the additional production. If MARR is 12%, is investing in this equipment feasible
Answer:
NPV =$13,884.89
Investing the the equipment id feasible because it has a positive NPV, thus implies that it will increase the wealth of the company by $13,884.8963
Explanation:
The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite.
NPV of an investment:
NPV = PV of Cash inflows - PV of cash outflow
Initial cost = 25,000
Present value of the cash inflow
PV of annuity= 1 -(1+r)^(-n)/r × Annual cash flow
A-10,000, r- 12%, n- 5
PV of annual cash inflow = 10,0000× (1- (1.12^(-5)/0.12=36,047.762
Present Value of Scrap value
PV = S×× (1+r)^(-n)
S- scrap value , n- 5, r 12%
PV of scrap Value = 5,000 × (1.12)^(-5)= 2,837.13
NPV= 36047.76202+ 2837.134279 - 25,000= 13,884.89
NPV =$13,884.89
Investing the the equipment id feasible because it has a positive NPV, thus implies that it will increase the wealth of the company by $13,884.8963
Assume that HotLap, Inc., a manufacturer of laptop computers, is considering a merger with SassyChips, a leading producer of computer chips. HotLap believes such a merger would benefit their business by giving them a guaranteed steady supply of the chips they need to make their laptops, and more control over the way those chips are designed. If this merger occurs, it would be an example of:____________.
1. contract manufacturing.
2. a vertical merger.
3. a conglomerate merger.
4. a franchise arrangement.
5. a horizontal merger.
6. a leveraged buyout.
Answer:
Option B
Explanation:
In simple words, vertical merger refers to the joining of the two separate entities that provide value to different level of supply chains. Such mergers are implemented by the entities to take advantage of realized synergies.
These mergers provide many benefits such as reduced cost or steady supply but the acquiring entity gets the burden to operate a separate entity and manage it.
Common stocks typically have which of the following that bonds do NOT have?
I. Voting rights
II. Fixed cash flows
III. Set maturity date
IV. Tax deductibility of cash flows to investors
a) i only
b) i,ii and iv only
c) ii,iii and iv only
d) iv only
e) i, ii,iii and iv
Answer:
The correct option is A, i only
Explanation:
The voting right attached to common stock means that common stockholders being the original owners of the company have the right to attend the company annual general meetings and vote on issues concerning the efficient running of the company as well as election of board of directors.
Fixed cash flows of annual or semiannual coupon interest, set maturity date including the tax deductibility of cash flows to investors are all features of bonds.
Prepare journal entries to record the December transactions in the General. Use the following accounts as appropriate: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation, Accounts Payable, Wages Payable, Common Stock, Retained Earnings, Dividends, Service Revenue, Depreciation Expense, Wages Expense, Supplies Expense, Rent Expense, and Insurance Expense.
1-Dec Began business by depositing $10500 in a bank account in the name of the company in exchange for 1050 shares of $10 per share common stock.
1-Dec Paid the rent for the current month, $950 .
1-Dec Paid the premium on a one-year insurance policy, $600 .
1-Dec Purchased Equipment for $3600 cash.
5-Dec Purchased office supplies from XYZ Company on account, $300 .
15-Dec Provided services to customers for $7200 cash.
16-Dec Provided service to customers ABC Inc. on account, $5200 .
21-Dec Received $2400 cash from ABC Inc., customer on account.
23-Dec Paid $170 to XYZ company for supplies purchased on account on December 5 .
28-Dec Paid wages for the period December 1 through December 28, $4480 .
30-Dec Declared and paid dividend to stockholders $200 .
Answer:
1-Dec
Cash $10500 (debit)
Common Stock $10500 (credit)
1-Dec
Rent Expense $950 (debit)
Cash $950 (credit)
1-Dec
Prepaid Insurance $600 (debit)
Cash $600 (credit)
1-Dec
Equipment $3600 (debit)
Cash $3600 (credit)
5-Dec
Supplies Expense $300 (debit)
Accounts Payable $300 (credit)
15-Dec
Cash $7200 (debit)
Service Revenue $7200 (credit)
16-Dec
Accounts Receivable $5200 (debit)
Service Revenue $5200 (credit)
21-Dec
Cash $2400 (debit)
Accounts Receivable $2400 (credit)
23-Dec
Accounts Payable $170 (debit)
Cash $170 (credit)
28-Dec
Wages Expense $4480 (debit)
Cash $4480 (credit)
30-Dec
Dividends $200 (debit)
Cash $200 (credit)
Explanation:
It is important to remember that Insurance paid in advance is an Asset hence, premium on a one-year insurance policy was recorded in Prepaid Insurance.
Macro-economiscs college level .
Answer/Explanation:
A. Increase in import WOULD NOT lead to a decrease in national income because it would lead to increase in revenue derived from import duties.
B. A decrease in interest (leakage) WOULD lead to decrease in national income because it will increase borrowing and reduces investment.
C. A decrease in money supply (money available in an economy) WOULD NOT lead to decrease in national income because it reduces inflational rate.
D. An increase in exchange rate WOULD lead to decrease in national income because it would encourage capital flight.
E. A decrease in foreign income WOULD lead to decrease in national income because it reduces revenue earnings.
Analyze the events chronologically, one transaction at a time, beginning with the transaction on the 5th. For each transaction that follows the transaction on the 5th, calculate the balance in each account after analyzing its effect on the accounting equation. After calculating the ending balance of each account on the 30th,
calculate total assets and total liabilities and equity.(Complete only the necessary answer boxes for your transaction lines. [Do not enter any zeros for your transaction lines.] Carry down all balances to the "Bal." line, including zero balanceaccounts, entering a "0" for any zero balances. Enter a decrease in an account with a minus sign or parentheses. Abbreviationsused: A/P = Accounts Payable; A/R = Accounts Receivable; Com.= Common; Contr. = Contributed; Div. = Dividends; Exp. = Expense; Furn. = Furniture; Liab = Liabilities; Rev. = Revenue; Sup. = Supplies; Util. = Utilities.)
QUESTION COMPLETION:
TRANSACTIONS:
April 5 Shaff deposited $40,000 in a new business bank account titled Apr. Abraham Shaff, CPA. The business issued common stock to Shaff.
April 6 Paid $200 cash for letterhead stationery for new office
April 7 Purchased office furniture for the office on account, $8,000.
April 10 Consulted with tax client and received $2,900 for services rendered. 11 Paid utilities, $280.
April 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, $8,000.
April 18 Paid office rent, $1,700.
April 25 Received amount due from client that was billed on April 12
April 27 Paid full amount of accounts payable created on April 7
April 30 Cash dividends of $2,500 were paid to stockholders.
Answer:
See attached.
Explanation:
The question requires business events to be analyzed chronologically with each event's impact on the accounting equation.
The accounting equation states that Assets equal Liabilities plus Equity (Assets = Liabilities + Equity). The implication of this equation is that given each business transaction, Assets will always be equal to Liabilities and Equity. Two accounts or more are usually affected by each transaction. It may be two assets accounts or one asset and liabilities, etc. Expenses and Income impact the Retained Earnings, which is part of the Equity.
Assets are the resources owned by the business, while liabilities are financial obligations to third parties that contribute to the owned resources. Equity is the funds contributed by the stockholders, including the earnings retained from business. Equity, therefore, represents the ownership interest in the assets after liabilities have been deducted.
"Cincinnati Supply, Co. is a local supplier to the Kraft Heinz Company, which is the third-largest food and beverage company in North America and the fifth-largest food and beverage company in the world. Cincinnati Supply, Co. purchased new furniture at a cost of $33,000 on January 1. The furniture is estimated to have a useful life of 6 years and a $3,000 salvage value. The company uses the straight-line method of depreciation. What is the amount of depreciation expense reported on December 31
Answer:
Annual depreciation= $5,000
Explanation:
Giving the following information:
Purchasing price= $33,000
Salvage value= $3,000
Useful life= 6 years
To calculate the depreciation expense under the straight-line method, we need to use the following formula:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (33,000 - 3,000)/6
Annual depreciation= $5,000
The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 5 0.3 18 12 a. Calculate the expected rates of return for the market and Stock J. b. Calculate the standard deviations for the market and Stock J.
Answer: The answer is provided below
Explanation:
The expected rates of return for the market = 13.5
the expected rates of return for the market and Stock J = 11.6
The standard deviations for the market = 3.85
The standard deviations for Stock J = 6.22
The explanation has been attached.
During 2022, Bramble Corp. reported cash provided by operations of $778000, cash used in investing of $672000, and cash used in financing of $186000. In addition, cash spent on fixed assets during the period was $270000. Average current liabilities were $637000 and average total liabilities were $1682000. No dividends were paid. Based on this information, what was Bramble free cash flow
Answer:
Bramble free cash flow was $508,000
Explanation:
Cash provided by operations = $778,000
Cash used in investing = $672,000
Cash used in financing = $186,000
Cash spent on fixed assets during the period = $270,000
Average current liabilities = $637,000
Average total liabilities = $1,682,000
Free cash flow = Cash flow from operating activities - Capital expenditures
= $778,000 - $270,000
= $508,000
A manufacturing plant is planning to replace outdated equipment with more energy-efficient and environmental-friendly equipment. Two models are under consideration. Model A is sold for $159,000 and can produce at an optimum speed of 78 unit/hour. Model B is sold for the same price, but can produce at an optimum speed of 76 unit/hour. Model A requires 6 hours of maintenance for every 4300 units produced, while Model B requires 5 hours of maintenance for every 3300 units. The maintenance cost for both models is $100 per hour. The variable operating cost is $340 per hour for Model A and $290 per hour for Model B. Due to obsolete parts, there is a sunk cost of $2700 for model A and $1900 for Model B .
1. If the price of the product is $150 per unit and the company expects to sell 145,000 units each year, which model should be selected?
2. What is the estimate of the cummulative average hours per unit required to produce the 5th unit of a production run that has a(n) 78% learning curve, if the first unit takes 50 hours?
Answer:1. Model A,
2. 33 hours
Explanation:
Bloom Corporation purchased $1,000,000 of Taylor Company 5% bonds at par with the intent and ability to hold the bonds until they matured in 2025, so Bloom classifies their investment as HTM. Unfortunately, a combination of problems at Taylor Company and in the debt market caused the fair value of the Taylor investment to decline to $600,000 during 2018.
Required:
For each of the following scenarios, prepare appropriate entry(s) at December 31, 2018, and indicate how the scenario will affect the 2018 income statement (ignoring income taxes).
1. Bloom now believes it is more likely than not that it will have to sell the Taylor bonds before the bonds have a chance to recover their fair value. Of the $400,000 decline in fair value, Bloom attributes $250,000 to credit losses, and $150,000 to noncredit losses.
2. Bloom does not plan to sell the Taylor bonds prior to maturity, and does not believe it is more likely than not that it will have to sell the Taylor bonds before the bonds have a chance to recover their fair value. Of the $400,000 decline in fair value, Bloom attributes $250,000 to credit losses, and $150,000 to noncredit losses.
Answer:
1)
Since Bloom plans to sell the bonds, it must record the entire loss as credit loss (loss on sale of bonds)
Dr Other than temporary impairment loss 400,000
Cr Discount on bond investment - Taylor bonds 400,000
Credits losses must be recognized as a loss in earnings in the income statement.
2)
Journal entry to record credit loss:
Dr Other than temporary impairment loss 250,000
Cr Discount on bond investment - Taylor bonds 250,000
Journal entry to record non-credit loss:
Dr Other than temporary impairment loss 150,000
Cr Fair value adjustment - Taylor bonds 150,000
Non-credit losses must be recognized as part of other comprehensive income/loss and must be disclosed separately than credit losses. They must be reported in the balance sheet (they lower retained earnings directly), not the income statement.
Four of the ships sought a passage along a southern...……
1 coast
2 inland
3 border
4 body of land with water on three sides
5 non of the above
what is the answer
If he goes to college, he will spend $22,000 on tuition, $11,000 on room and board, and $1,700 on books. If he does not go to college, he will earn $12,000 working in a store and spend $6,000 on room and board. Taio's cost of going to college is
Answer:
$40,700
Explanation:
To determine Taio's cost of going to college you need to find the economic cost that involves all the costs that you need to cover to receive a benefit and the opportunity costs that refer to what you would have received if you had chosen a different alternative. According to this, Taio's cost is equal to all the acounting costs related to going to college plus the opportunity costs that are the benefits lost from the other option which was not going to college.
Accounting costs= $22,000+$11,000+$1,700= $34,700
Opportunity costs= $12,000-$6,000= $6,000
Taio's cost of going to college is equal to the acount costs plus the opportunity costs:
$34,700+$6,000= $40,700
Which of the following is not an example of a "lag" that diminishes the potential impact of the use of fiscal policy? a. the recessionary lag b. the data lag c. the legislative lag d. the transmission lag
Answer:
a. the recessionary lag
Explanation:
Fiscal policy in economics refers to the use of government expenditures (spending) and revenues (taxation) in order to influence macroeconomic conditions such as Aggregate Demand (AD), inflation, and employment within a country. Fiscal policy is in relation to the Keynesian macroeconomic theory by John Maynard Keynes.
Lag in economics can be defined as a measure of the time it takes to recognize economic conditions and how they're being responded to by the government (policy makers).
For instance, measuring the time between when a fiscal policy is implemented and when the people feel its impact in the society.
The recessionary lag is not an example of a "lag" that diminishes the potential impact of the use of fiscal policy because after implementation, the next phase is for the people to feel the impact or effectiveness of the fiscal policy.
Examples of a "lag" that diminishes the potential impact of the use of fiscal policy are;
1. The data lag.
2. The legislative lag.
3. The transmission lag.
A company's January 1, 2019 balance sheet reported total assets of $111,000 and total liabilities of $48,000. During January 2019, the following transactions occurred: (A) the company issued stock and collected cash totaling $21,000; (B) the company paid an account payable of $5,100; (C) the company purchased supplies for $2,900 with cash; (D) the company purchased land for $41,000, paying $18,000 with cash and signing a note payable for the balance. What is total stockholders' equity after the transactions above
The recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously is referred to as need for organizations to improve the state of people, the planet, and profit simultaneously is referred to as
Answer:
The correct answer is: Corporate Social Responsibility (CSR).
Explanation:
To begin with, the concept known as ''Corporate Social Responsibility'' refers to a type of position adopted by the organization in order to achieve certain goals that are related to the subjects of the state of people, the health of the planet and its environment and take all that and combine it with the typically normal profit goal of every business so in that way the members of the organization can act with the purpose of achievieng all those.
Required information
An internal control system consists of the policies and procedures managers use to protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies. It can prevent avoidable losses and help managers both plan operations and monitor company and human performance. Principles of good internal control include establishing responsibilities, maintaining adequate records, insuring assets and bonding employees, separating recordkeeping from custody of assets, dividing responsibilities for related transactions, applying technological controls, and performing regular independent reviews. Sarbanes-Oxley Act requires each of the following:
A. An effective internal control.
B. Light penalties for violators.
C. Auditors must evaluate internal controls.
D. Auditor's work overseen by Public Accounting Board.
Answer:
Options A and D.
Explanation:
Just like it is given in the question above, the concept of internal control system has to do with the regulations and policies that are being set by each companies/firms or agencies or bodies or business organization in order to increase their productivity and efficiency.
The Sarbanes-Oxley Act was enacted on the 30th day of the month of July in the year 2002 by the 107th United States of America congress and its main work or purpose is to make sure sure that there is reliability and transparency in financial and accounting institutions and also to protect investors.
When a breech is perceived, group of people will be appointed to conduct "An effective internal control" and also for the "Auditor's work overseen by Public Accounting Board."
Answer:
A. An effective internal control
C. Auditors must evaluate internal controls
Explanation:
SOX requires managers and auditors whose stock is publicly traded to have an effective internal control system, auditors must evaluate internal controls, violators may receive harsh penalties (not light penalties), and auditors’ work is overseen by Public Company Accounting Oversight Board (PCAOB) (not by the Public Accounting Board).
On day 51 a project has an earned value of $600, an actual cost of $650, and a planned cost of $560. Compute the SV, CV, and CPI for the project. What is your assessment of the project on day 51
Answer and Explanation:
The computation is shown below:
a. Schedule variance (SV)
= Earned value - planned cost
= $600 - $560
= $40
b. Cost variance (CV)
= Earned value - actual cost
= $600 - $650
= -$50
c. Consumer price index (CPI)
= Earned value ÷ actual cost
= $600 ÷ 650
= 0.92
As we can see from the above calculation, the project showed negative CV i.e overbudgeted but at the same time, it also showed Positive SV i.e the project is on schedule.
And, the CPI determines that the completing cost is more than the planned cost that reflects the bad condition
Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined above. Assume the unadjusted balance in Allowance for Doubtful Accounts is a $3,600 debit. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title for the adjusting entry to record the bad debts Bad Debt Expense enter a debit amount enter a credit amount enter an account title for the adjusting entry to record the bad debts Allowance for Doubtful Accounts
Answer:
Find attached missing part:
Dr bad debt expense $ 22,050.00
Cr allowance for doubtful accounts $ 22,050.00
Explanation:
The estimated balance of uncollectible debts is the accounts receivable of $570,000 multiplied by 4.5% which is the rate of uncollectible debt given in the question.
Estimated balance of uncollectible debt=$570,000*4.5%=$ 25,650.00
The adjusting entries required to record bad debts as per the amount computed above is the estimated balance of uncollectible of $ 25,650.00 minus the debit balance of $3,600 already in the unadjusted balance in allowance for doubtful debts.
adjusting amount=$ 25,650.00-$3,600.00=$ 22,050.00
Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver.
a. Direct manufacturing labor is $10 per hour.
b. Direct materials cost $15.60 per cubic yard.
c. Utilities have a minimum charge of $5,000, plus a charge of $0.30 per kilowatt-hour.
d. Machine operating costs include $300,000 of machine depreciation per year, plus $100 of utility costs for each day the machinery is in operation.
Answer:
a)
y = $10x
b)
y = $15.6x
c)
y = $5000 + $0.3x
d)
y = $300000 + $100x
Explanation:
y for estimated costs and X for activity of the cost driver. Linear cost function is given as:
y = a + bx.
Where y is the cost being predicted, x is the cost driver, a is the fixed cost (intercept) and b is the variable cost per unit (slope)
a) Since Direct manufacturing labor is $10 per hour, variable cost (b) = Direct manufacturing labor = $10
Therefore:
y = $10x
b) variable cost (b) = Direct materials cost = $15.60 per cubic yard.
Therefore:
y = $15.6x
c) Fixed cost (a) = utilities = $5000 and variable cost (b) = charges = $0.3 per kilowatt-hour. Therefore:
y = $5000 + $0.3x
d) Fixed cost (a) = Machine operating costs = $300000 and variable cost (b) = utility costs = $100 per day. Therefore:
y = $300000 + $100x
If Katerina were delivering an expository speech about strip mining, she would be presenting _______________________. a. an informative process speech b. an exposition of a theory, principle, or law c. an exposition of political, economic, social, religious, or ethical issues d. an exposition of historical events and forces
Answer:
a. an informative process speech
Explanation:
An expository speech is one that explains the processes involved in doing an activity. It is meant to inform the audience on processes involved in executing a task.
In this scenario strip mining is the process of removing the top layer of soil in order to gain access to a mineral. This process is opposed to digging of deep holes to access minerals. The method is commonly used in coal reserves.
An expository speech by Katerina on strip mining will be an informative process speech on this process of mining minerals
Zisk Co. purchases raw materials on account. Budgeted purchase amounts are April, $80,000; May, $110,000; and June, $120,000. Payments are made as follows: 70 % in the month of purchase and 30 % in the month after purchase. The March 31 balance of accounts payable is $22,000 Prepare a schedule of budgeted cash payments for April, May, and June.
April May June
Current month purchases 70%
Ending accounts payable 30 %
Total purchases
ZISK CO.
Schedule of Cash Payments For April, May, and June
Аpril May June
Cash payments for
Current month purchases
Prior month purchases
Budgeted cash payments for materials
Answer:
Results are below.
Explanation:
Giving the following information:
Budgeted purchase:
April= $80,000
May= $110,000
June= $120,000.
Payments are made as follows:
70% in the month of purchase and 30% in the month after purchase.
The March 31 balance of accounts payable is $22,000
April:
Purchase from April= 80,000*0.7= 56,000
From previous month= 22,000
Total cash= 78,000
May:
Purchase from May= 110,000*0.7= 77,000
From previous month= 80,000*0.3= 24,000
Total cash= 101,000
June:
Purchase from June= 120,000*0.7= 84,000
From previous month= 110,000*0.3= 33,000
Total cash= 117,000
A North Face retail store in Chicago sells 500 jackets each month. Each jacket costs the store $100 and the company has an annual holding cost of 25 percent.The fixed cost of a replenishment order (including transportation) is $100. The store currently places a replenishment order every month for 500 jackets. What is the annual holding and ordering cost? On average, how long does a jacket spend in inventory? If the retail store wants to minimize ordering and holding cost, what order size do you recommend? How much would the optimal order reduce holding and ordering cost relative to the current policy?
Answer:
1) What is the annual holding and ordering cost?
annual ordering cost = $100 x 12 = $1,200
annual holding cost = ($100 x 25%) x [500 x 1/2(average inventory)] = $6,250
total $7,450
2) On average, how long does a jacket spend in inventory?
= 30 days / 2 = 15 days
3) If the retail store wants to minimize ordering and holding cost, what order size do you recommend?
economic order quantity (EOQ) = √[(2 x annual demand x order cost) / annual holding cost per unit]
EOQ = √[(2 x 6,000 x 100) / 25] = √48,000 = 219.09 units ≈ 219 units
4) How much would the optimal order reduce holding and ordering cost relative to the current policy?
EOQ = 219
total number of orders = 6,000 / 219 = 27.4 per year
average inventory = 219 / 2 = 109.5 units
annual ordering cost = $100 x 27.4 = $2,740
annual holding cost = ($100 x 25%) x 109.5 = $2,737.50
total $5,477.50
annual savings = $7,450 - $5,477.50 = $1,972.50
Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:
Old Machine
Cost of machine, 10-year life $89,000
Annual depreciation (straight-line) 8,900
Annual manufacturing costs, excluding depreciation 23,600
Annual non-manufacturing operating expenses 6,100
Annual revenue 74,200
Current estimated selling price of machine 29,700
New Machine
Purchase price of machine, six-year life $119,700
Annual depreciation (straight-line) 19,950
Estimated annual manufacturing costs,
excluding depreciation 6,900
Annual non-manufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Required:
1. Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
Differential Analysis
Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2)
April 30
1 Continue with Old Machine Replace Old Machine Differential Effect on Income
2 (Alternative 1) (Alternative 2) (Alternative 2)
3
4
5
6
7
8
2. Choices of what other factors should be considered.
Was the purchase price of the old machine too high?
What effect does the federal income tax have on the decision?
What opportunities are available for the use of the $90,000 of funds ($119,700 less $29,700 proceeds from the old machine) that are required to purchase the new machine?
Should management have purchased a different model of the old machine?
Are there any improvements in the quality of work turned out by the new machine?
Answer:
old machine:
depreciation costs $8,900
other manufacturing costs $23,600
other non-manufacturing expenses $6,100
annual revenue $74,000
new machine:
purchase price $119,700 - 29,700 (sales price of old machine) = $90,000
depreciation costs $19,950
other manufacturing costs $6,900
other non-manufacturing expenses $6,100
annual revenue $74,000
1)
DIFFERENTIAL ANALYSIS
Alternative 1 Alternative 2 Differential
old machine new machine amount
Purchase cost $0 ($119,700) ($119,700)
Proceeds from sale $0 $29,700 $29,700
Total revenues $444,000 $444,000 $0
Manufacturing costs ($141,600) ($41,400) $100,200
(excluding dep.)
Other non- ($36,600) ($36,600) $0
manufacturing costs
Total $265,800 $276,000 $10,200
If the company purchases the new machine, its differential revenue will be higher considering the 6 years of useful life. But we are missing two important aspects: required rate of return and tax rate, which could affect our decision.
2) Choices of what other factors should be considered.
What effect does the federal income tax have on the decision?
Net cash flows are affected by deprecation expense and how they are taxed. Alternative 2 would benefit from higher tax rates.What opportunities are available for the use of the $90,000 of funds ($119,700 less $29,700 proceeds from the old machine) that are required to purchase the new machine?
We should discount the future cash flows using the company's WACC.Are there any improvements in the quality of work turned out by the new machine?
If the new machine improves the quality of our products or reduces production time, then that is something that should be considered.Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest will provide $ 9 comma 000 in the first year, and will grow by 7 % per year, forever. If the interest rate is 10 %, how much must Martin provide to fund this bequest?
Answer:
$300,00
Explanation:
In a situation where the interest rate is said to be 10% the amount that Martin must provide in order to fund this bequest will therefore be:
Bequest first year $9,000/(Interest rate 10%-
Increase of 7 % per year)
Hence:
$9,000/0.03
=$300,000
Therefore $300,00 will be provided to fund the bequest
Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 8.00%, or Option #2: Invest in the corporate bonds of Jefferson & Alexander Inc. which are offering an expected return of 10.00% Assume that your decision is based solely on your tax situation. If everything else is the same for both bonds, at what tax rate would you be indifferent between these two bond investments?
Answer: 20%
Explanation:
Municipal Bonds are generally not taxed so if you invest in the Municipal bond, the tax rate does not affect you.
The tax rate therefore that will make you indifferent between the 2 options is the one that will take the Corporate bond returns of Jefferson to 8% so that both bonds may give you the same return after tax.
Assuming that tax rate is 'x' then,
8 = 10 (1 - x)
8 = 10 - 10x
10x = 10 - 8
10x = 2
x = 20%
At a tax rate of 20%, the Corporate bonds give an 8% return.
Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: January February March $ 3 Material purchases 14,870 11,690 12,760 Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $7,200. The budgeted cash payments for materials in January are
A. $13,580.
B. $13,815
C. $9,980
D. $7,200.
E. $19,960.
Answer:
Total= $14,635
Explanation:
Giving the following information:
Cost of materials:
January= 14,870
February= 11,690
March= 12,760
Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase.
The December Accounts Payable balance is $7,200.
To calculate the cash disbursement for January, we need to use the following structure:
Cash collection:
Accounts Payable= 7,200
Cash From January= (14,870*0.5)= 7,435
Total= $14,635
The environmental protection agency of a county would like to preserve a piece of land as a wilderness area. The current owner has offered to lease the land to the county for 20 years in return for a lump-sum payment of $1.1 million, which would be paid at the beginning of the 20-year period. The agency has estimated that the land would generate $110,000 per year in benefits to hunters, bird watchers, and hikers. Assume that the lease price represents the social opportunity cost of the land and that the appropriate real discount rate is 4 percent.a. Assuming that the yearly benefits, which are measured in real dollars, accrue at the end of each of the 20 years, calculate the net benefits of leasing the land.b. Some analysts in the agency argue that the annual real benefits are likely to grow at a rate of 2 percent per year due to increasing population and county income. Recalculate the net benefits assuming that they are correct.c. Imagine that the current owner of the land was willing to sell the land for $2 million. Assuming this amount equaled the social opportunity cost of the land, calculate the net benefits if the county were to purchase the land as a permanent wildlife refuge. In making these calculations, first assume a zero annual growth rate in the $110,000 of annual real benefits; then assume that these benefits grow at a rate of 2 percent per year.
Answer: The answer is given below
Explanation:
Here , we are going to apply the present value of annuty formula.
a. Social Opportunity cost = $1.1 Million
The Yearly cash flows = $110,000
Time (n) = 20 years
The Discount rate (R) = 4%
Net benefits= Present value of cash inflows - the intial socail opportnity cost
Net benefits= Yearly cash flow × (1 - 1/(1+R)^n) / R - 1100000
Net benefits = 110000 × (1 - 1/1.04^20)/0.04 - (1100000)
= $394936
b. We will use the formula for present value of an annuity with the growth rate in benefits as 2 percent.
Firstly, dg= (0.04 - 0.02)/ (1+0.02)
= 0.01961
PV(benefits) = [($110,000)÷ (1+0.02)][1-(1+dg)-20]/dg]
= $1,770,045
NPV = $1,770,045 - $1,100,000= $670,045
The Work-in-Process inventory account of a manufacturing firm shows a balance of $3,980 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $660 and $460 for materials, and charges of $560 and $740 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:
Answer:
Predetermine overhead rate as a percentage of direct labor cost is 120%
Explanation:
To calculate the predetermined overhead rate, we first need to determine the total overheads under the balance of $3980 for two jobs.
The total cost of both jobs which are uncompleted equals,
Total cost both jobs = (660 + 560) + (460 + 740)
Total cost both jobs = 1220 + 1200 = $2420
Thus, the overhead cost involved in both jobs is,
Total Overhead cost = 3980 - 2420 = $1560
This total overhead of $1560 has been absorbed on the basis of a predetermine overhead rate based on the direct labor cost. The total direct labor cost involved under both uncompleted jobs is,
Total direct labor cost both jobs = 560 +740 = $1300
So, the predetermined overhead rate is,
Overhead rate = Total overheads / total direct labor cost
Overhead rate = 1560 / 1300
Overhead rate = $1.2 per $1 of direct labor cost
Expressed as a percentage of direct labor cost, it is:
% Overhead rate = 1560 / 1300 * 100 = 120% of direct labor cost
Pelzer Printing Inc. has bonds outstanding with 10 years left to maturity. The bonds have a 9% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen to $950.70. The capital gains yield last year was -4.93%. What is the yield to maturity
Answer:
The answer is 9.85%
Explanation:
The number of periods N = 9years(10 years minus 1 year ago)
Yield to Maturity (I/Y) = ?
Present value of the bond (PV) = $950.70
Future value of the bond(FV) = $1,000
Annual payment (PMT) = $90 (9% x $1,000)
Using a financial calculator to solve the problem ( BA II plus Texas instruments):
Yield to Maturity (I/Y) = 9.85%
