Answer:
Date Account Title and Explanation Debit Credit
2020 Inventory of premium $7,480
Cash $7,480
(To record the purchase of 8,800 premium at $0.85 each)
Date Account Title and Explanation Debit Credit
2020 Cash $333,300
Sales revenue $333,300
(To record sale of 101,000 boxes at $3.30 each)
Date Account Title and Explanation Debit Credit
2020 Premium Expenses $3,570
(42,000 * 0.1 * 0.85)
Inventory of premiums $3,570
(To record premium redemption)
Date Account Title and Explanation Debit Credit
Year end Premium expenses $1,581
2020 Premium liability $1,581
Workings
Particulars Amount
Estimated redemption on number of boxes sold 60,600
= 101,000 * 60%
Less: Coupon already redeemed 42,000
Premium liability of coupons 18,600
Cost of premium liability = 18,600 * 10% * 0.85
Cost of premium liability = $1,581
Milden Company is a merchandiser that plans to sell 43,000 units during the next quarter at a selling price of $60 per unit. The company also gathered the following cost estimates for the next quarter: Cost Cost Formula Cost of good sold $31 per unit sold Advertising expense $187,000 per quarter Sales commissions 6% of sales Shipping expense $45,000 per quarter + $4.00 per unit sold Administrative salaries $97,000 per quarter Insurance expense $10,700 per quarter Depreciation expense $67,000 per quarter Required: 1. Prepare a contribution format income statement for the next quarter. 2. Prepare a traditional format income statement for the next quarter.
Answer:
1. Contribution format income statement for the next quarter.
Sales (43,000 units × $60 ) $2,580,000
Less Variable Costs
Cost of Goods Sold ( 43,000 units × $31 ) ($1,333,000)
Sales commissions (6% × 43,000 units × $60) ($154,800)
Shipping expense ( $4.00 × 43,000 units) ($172,000)
Contribution $920,000
Less Fixed Costs
Advertising expense $187,000
Shipping expense $45,000
Administrative salaries $97,000
Insurance expense $10,700
Depreciation expense $67,000 ($406,700)
Net Income/ (Loss) $513,300
2. Traditional format income statement for the next quarter.
Sales (43,000 units × $60 ) $2,580,000
Less Cost of Goods Sold ( 43,000 units × $31 ) ($1,333,000)
Gross Profit $1,247,000
Less Expenses
Advertising expense $187,000
Shipping Expense :
Variable Shipping expense $172,000
Fixed Shipping expense $45,000
Administrative salaries $97,000
Insurance expense $10,700
Sales commissions $154,800
Depreciation expense $67,000 ($733,500)
Net Profit / (Loss) $513,500
Explanation:
The contribution format income statement shows the Contribution instead of Gross Profit. Contribution is calculated as Sales less all Variable Costs.
The traditional format income statement shows the Gross Profit instead of Contribution. Gross Profit is calculated as Sales less Cost of Goods Sold.
Which of the following is an example of cannibalization? Group of answer choices A toothpaste manufacturer adds a new line of toothpaste (that contains baking soda) to its product line. A grocery store begins selling T-shirts featuring the local university's mascot. A basketball manufacturer adds basketball hoops to its product line. A convenience store begins selling pre-paid cell phones.
Answer:
The corrects answer is: A toothpaste manufacturer adds a new line of toothpaste (that contains baking soda) to its product line.
Explanation:
Cannibalization is a market strategy that can occur without the company's intention, and can be defined as when a company replaces a product on the market with a similar new product, as in the example above, when a toothpaste manufacturer adds a new one line of toothpaste (containing sodium bicarbonate) to its product line.
This strategy can be detrimental to the company, since there may be less sales of an existing product for a similar product, which consequently generated higher production costs for the organization, therefore it would not be characterized as gains for the company, but as losses , as this strategy would not increase the company's market share, but a detriment of one product by another.
Therefore, it is necessary that there is constant monitoring of each product in the company so that cannibalization does not occur and each product contributes to the company's profitability individually.
Suppose that the resale of tickets to professional football games is illegal in Missouri. Due to the high demand for Chiefs (who play in Kansas City, Missouri) tickets there is a shortage of tickets at the current ticket price. Given that the Chiefs will not raise the price at which they sell the tickets, what would be the result
Answer:
The shortage is the result of the quantity demanded exceeding the quantity supplied (since the stadium can only fit a certain amount of people) and the price being fixed and not being able to achieve equilibrium. If the resale if tickets is allowed, the resale price will increase until equilibrium is reached and the shortage disappears.
Explanation:
the question is incomplete, the following is missing:
"Given that the Chiefs will not raise the price at which they sell the tickets, what would be the result of allowing tickets to be resold in a secondary market at whatever price the market would support?"
Employment-at-will is an employment relationship which ________.
Answer:
Employer can terminate the employment of an employee without any reason or explanation
Explanation:
Employment-at-will is a labour practice in which there is a high level of flexibility on the part of the employer and employee.
The employer can determine to terminate an employment contract for no reason.
Also the employee can resign without giving a reason.
This also allows employers to adjust the terms of the contract. For example changing salary or policy on time off can be changed without any prior warning or reason.
Unfortunately, Diana doesn't have enough money in her account right now. She needs to make additional contributions at the end of each of the next three years to be able to pay for the repairs. Her account currently has $3,500, which, along with her additional contributions, is expected to continue earning 6% annual interest. If she makes equal contributions each year, how large must each contribution be for Diana to have $8,000 after three years
Answer: $1,203.49
Explanation:
The equal contributions will be an annuity. The $3,500 already there will also grow at 6% for 3 years. Expression is;
8,000 = ( 3,500 * ( 1 + 6%)^3) + Contribution * Future value interest factor of annuity, 3 years, 6%
8,000 = 4,168.56 + Contribution * 3.1836
Contribution = (8,000 - 4,168.56) / 3.1836
Contribution = $1,203.49
As the controller of Chardon Consulting, you have hired a new employee, whom you must train. She objects to making an adjusting entry for accrued salaries at the end of the period. She reasons, "We will pay the salaries soon. Why not wait until payment to record the expense? In the end, the result will be the same." Write a reply to explain to the employee why the adjusting entry is needed for accrued salary expense.
Explanation:
In this case, it is incorrect to wait until payment to record the expense, as organizational accounting is essential in an organization so that there is a record and control of organizational financial transactions so that companies can obtain information about the business and take reasoned decisions based on the current reality of the company.
Therefore, all income and expenses for the period must be recorded in accounting so that there is real information about an organization's movements in a period.
THE TASK: Re-write this letter, correctly understanding its purpose, by following the writing process and the 7 C’s, you have studied during the course. Please use the letter format. You can make necessary assumptions and delete/add information. I am writing to inquire about your recent order for a custom wedding suit. You forgot to mention what color you want, and you failed to include your measurements. I would like to clear up this confusion quickly so that we will be able to provide you with the suit before the wedding. When, exactly, is the happy day? I know you must be busy getting ready for the wedding, but if you can spare the time, you might want to stop by in person to pick out your suit, because we do offer an incredibly wide selection of fine wedding attire. At that time, you could also select an appropriate tie and shirt. I would also suggest that you choose clothing for your best man and ushers, assuming that you are having a large wedding. We are prepared to provide the best in both custom and rental formal attire for your entire wedding party, regardless of how large or small it may be. Incidentally, you should also bring your fiancée along to coordinate the men’s clothing with the bridesmaid’s dresses. You know how picky women are about clothes. If you can’t come by in person, you should send me a letter stating your measurements and indicating your color and style preferences, or call me at 633-4296. After we receive this information, we will need at least two weeks to complete the suit. Thank you for your cooperation in this matter.
Answer:
Wedding Clothings Inc.,
232 Wasington Drive,
Tennessee State,
United States of America.
33 Georgia county,
New York City.
Dear MaryJane,
Re: Inquiry on your recent wedding dress order.
I am writing to inquire about your recent order for a custom wedding suit. I notice that, you might be busy with the wedding planning and organization hence the reason why you forgot that you placed an order. In your order, you did not indicate what color you want, and your measurements. This two information is necessary to be able to provide you with the suit before your actual the wedding.
If you don't mind me asking, when exactly is the happy day going to be? And, also, it would be nice if you can spare some time and stop by in our shop in person inorder to pick out your suit. This is because, we do offer an incredibly wide selection of fine wedding attire. The opportunity would afford you the time to select an appropriate tie and shirt.
I would also suggest that you choose clothing for your best man and ushers, assuming that you are having a large wedding. We are prepared to provide the best in both custom and rental formal attire for your entire wedding party, regardless of how large or small it may be. Also, you could bring your fiancée along to coordinate the men’s clothing with the bridesmaid’s dresses. You know how picky women are about clothes.
If you can’t come by in person, you should send me a letter stating your measurements and indicating your color and style preferences, or call me at 633-4296. After we receive this information, we will need at least two weeks to complete the suit. Thank you for your cooperation in this matter.
Sincerely yours,
Janet McCoy (Sales Manager)
For: Wedding Clothings Inc.
Explanation:
A $1 off coupon for carnation instant breakfast powder is a form of:___________.
a. public relations
b. sales promotion
c. advertising
d. personal selling
e. publicity
Answer:
b. sales promotion
Explanation:
Sales promotion is the best method to sell any product or attract customers to purchase that particular product. Sales promotion is a method to increase productivity. It also motivating customers to buy the product and trial or switch their product.
Therefore according to the given situation, the correct answer is b that is sales promotion.
Photographic Supplies, Inc.'s accounting records include the following for 2016:
Income Tax-Saving Extraordinary Loss $8,000 Sales 575,000
Income Tax-Saving_Loss on Operating expense
(Including Income Tax) 100,000
Discontinued Expense 9,600
Extraordinary Loss 20,000 Cost of Goods Sold 245,000
Loss on Discontinued Operations 24,000
Required:
Prepare Click's multi-step income statement for 2016. Omit earnings per share.
Answer and Explanation:
The preparation of the multi-step income statement for the year is presented below:
Photographic Supplies, Inc.
Income statement
Year Ended December 31, 2016
Sales revenue $575,000
Less: Cost of goods sold -$245,000
Gross profit $330,000
Less: Operating expenses -$100,000
Income from continuing operations $230,000
Less: Loss on discontinued operations -$24,000
Discontinued expenses $9,600
Income before extraordinary item $215,600
Less: Extraordinary loss -$20,000
income tax savings $8,000
Net income $203,600
The top management of a fast-food hamburger chain is considering installing point-of-sale machines that will allow customers to pay for food with a credit card or debit card. Previously, the restaurant has accepted only cash. What information could the management accounting department supply to assist management with this decision?
Answer:
Accounting department plays an important role in implementation of any new system because that the only department which knows each and every points for implementation of new system, here is some of the example of information the accounting department can give to management.
i. Daily turnover of outlets
ii. No of customers expected to pay through ATM card
iii. Cost of installation and operation of new point of sales (POS) system
iv. Savings from new point of sales (POS) system and interest cost saving
Berg Inc. has just paid a dividend of $2. Its stock in now selling for $48 per share. The firm is half as risky as the market. The expected return on the market is 14%, and the yield on U.S. Treasury bonds is 11%. If the market is in equilibrium, what rate of growth is expected?
Answer:
Explanation:
Given the following :
Price of stock (p) = $48/share
Dividend (d) = $2
Expected return on market = 14%
Yield on Treasury bond = 11%
If market is in equilibrium ; Expected growth Rate will be:
Required rate of return (r):
Yield on Treasury + ( expected return on market - yield on Treasury) × 0.5
11% + (14% - 11%)× 0.5
11% + 1.5% = 12. 5% = 0.125
Using:
P = d(1 - g) / (r - g)
Where G = growth rate
48 = 2(1 + g) / (0.125 - g)
(0.125 - g)48 = 2 + 2g
6 - 48g = 2 + 2g
-48g - 2g = 2 - 6
-50g = - 4
g = 4 / 50
g = 0.08 = 8.0%
When using straight line amortization on premium bonds:_______.
A. the same interest income is reported each year
B. decreasing interest income is reported each year
C. increasing interest income is reported each year
D. the reported interest income is determined by the current market price of the bond
Answer: the same interest income is reported each year
Explanation:
The straight-line amortization method is a simple way to amortize a bond as an equal amount of interest are allocated over every accounting period.
When using straight line amortization on premium bonds, the same interest income is reported each year. Therefore, option A is the best answer.
Give definition of microeconomic and macroeconomics
Microeconomics: is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
Macroeconomics : the branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.
a mid-level manager at ABC Manufacturing, is negotiating supplier agreements with a Chinese firm in Beijing. This is Antonio's first experience with a Chinese supplier. Antonio insists that all contract agreements be explicitly detailed, which is exactly the way he deals with American suppliers. Antonio believes this strategy is the best way to conduct business and is very comfortable following his own approach. Antonio can be described as adopting a(n) ________ orientation. a not selected option a polycentric b not selected option b polychronic c not selected option c geocentric d not selected option d ethnocentric e not selected option e monochronic
Answer:
Explanation:
A monochronic culture, values preciseness, emphasize schedules, punctuality, and preciseness. Monochronic cultures like to do just one particular thing at a time and they value orderliness and do not like to be interrupted unlike the Polychronic cultures which like to do several things at the same.
Based on this, Antonio believes this strategy is the best way to conduct business and is very comfortable following his own approach. Antonio can be described as adopting an monochronic culture.
mic exchange and the
2. How does it affect economics in the Philippines?
Answer:
phillipine pget no money
Explanation:
1. Matt has two choices for a summer job. The first opportunity is at a computer manufacturer, where he would earn 10.25 an hour. The second opportunity is with a landscaping company, where he could work and have lunch with three of his closest friends every day. The landscaping job would pay $8.65 per hour.
Answer:
the question is incomplete, so i looked for similar questions and they referred to opportunity costs:
the opportunity cost of taking the summer job at the computer manufacturer = lost wages from the landscaping job + the value that Matt assigns to working and having lunch with his 3 friends = $8.65 per hour + value of friendship. Assuming that he could work 160 hours per month, total opportunity cost = $1,384 + value of friendship
the opportunity cost of taking the summer job at the landscaping company = the lost wages from the computer manufacturing job = $10.25 per hour. Assuming that he could work 160 hours per month, total opportunity cost = $1,640
Opportunity costs are the extra costs or benefits lost resulting from choosing one activity or investment over another alternative.
Which best describes the similarity and differences between the Construction pathway and the
Maintenance/Operations pathway?
Both rely on knowledge of safety regulations, but Construction focuses more on identifying problems and
repairing them.
Both rely on drawing and design skills, but Maintenance/Operations focuses more on math and making
calculations.
Both rely on physical strength and dexterity, but Maintenance/Operations focuses more on identifying problems
and repairing them.
Both rely on a high level of independence, but Construction focuses more on interacting with customers.
Answer:
Both rely on physical strength and dexterity, but Maintenance/Operations focuses more on identifying problems
Explanation:
The correct answer is option C) Both rely on physical strength and dexterity, but Maintenance/Operations focuses more on identifying problems and repairing them.
Construction of pathway
The construction pathway includes workers who build and remodel homes, or community, recreational, industrial, and office facilities. Includes builders of highways, streets, bridges, tunnels and airports.
What is the difference between the Construction pathway and the maintenance and operations pathway?
Both rely on knowledge of safety regulations, but Construction focuses more on identifying problems and repairing them. Both rely on drawing and design skills, but Maintenance/Operations focuses more on math and making calculations.
Learn more about construction pathway here: brainly.com/question/2773489
#SPJ2
Lorenzo was complaining about his workload before the staff meeting began. Later, when the manager announced that 12 parking spaces would be lost due to construction across the street, he raised his hand and asked, "Then where exactly do you expect us to park?" The manager tried to provide some recommendations, but Lorenzo continued to complain until the manager gave up and announced the meeting was over. What could Lorenzo do to make the next meeting more effective and productive?
Answer:
Bring a positive attitude
Explanation:
In this scenario Lorenzo already had a negative attitude before the meeting and was complaining about the workload he had.
This negative attitude made him to be inconsiderate of all recommendations made by his manager with regards to the 12 parking spaces that will be lost.
Bringing a positive attitude to the next meeting will help Lorenzo keep an open mind to alternative solutions, and he can even propose some way to get around the lost parking spaces.
Meric Mining Inc. recently reported $15,000 of sales, $7,500 of operating costs other than depreciation, and $1,200 of depreciation. The company had no amortization charges, it had outstanding $6,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 35%. How much was the firm's net income after taxes
Answer:
The firm's net income after taxes is $3,830.94.
Explanation:
Net income after taxes refers to the net income obtained after relevant taxes have been deducted from income before taxes. This can be calculated for Meric Mining Inc. by preparing an income statement as follows:
Meric Mining Inc.
Income statement
For the period .....
Particulars $
Sales 15,000.00
Operating costs (7,500.00)
Depreciation (1,200.00)
Income before in interest and taxes 6,300.00
Interest on bond ($6,500 * 6.25%) (406.25)
Net Income before taxes 5,893.75
Taxes ($5,893.75 * 35%) (2,062.81)
Net income after taxes 3,830.94
Therefore, the firm's net income after taxes is $3,830.94.
What can a cover letter explain that a résumé cannot?
a. Gaps in employment history
b. Reentry into the job market
C. Changes in career focus
d. All of the above
Answer:
D. All of the above.
Explanation:
You have successfully started and operated a company for the past 10 years. You have decided that it is time to sell your company and spend time on the beaches of Hawaii. A potential buyer is interested in your company, but he does not have the necessary capital to pay you a lump sum. Instead, he has offered $700,000 today and annuity payments for the balance. The first payment will be for $180,000 in three months. The payments will increase at 2.3 percent per quarter and a total of 30 quarterly payments will be made. If you require an EAR of 10 percent, how much are you being offered for your company
Answer:
$5,890,521.80
Explanation:
initial payment: 700000
quarter 1: 180000
quarter 2: 184140
quarter 3: 188375
quarter 4: 192708
quarter 5: 197140
quarter 6: 201674
quarter 7: 206313
quarter 8: 211058
quarter 9: 215912
quarter 10: 220878
quarter 11: 225959
quarter 12: 231156
quarter 13: 236472
quarter 14: 241911
quarter 15: 247475
quarter 16: 253167
quarter 17: 258990
quarter 18: 264947
quarter 19: 271040
quarter 20: 277274
quarter 21: 283652
quarter 22: 290176
quarter 23: 296850
quarter 24: 303677
quarter 25: 310662
quarter 26: 317807
quarter 27: 325116
quarter 28: 332594
quarter 29: 340244
quarter 30: 348069
now we must determine the quarterly interest rate:
1.10 = (1 + i)⁴
⁴ √1.10 = ⁴ √(1 + i)⁴
1.024113689 = 1 + i
i = 0.024113689 = 2.4113689% ≈ 2.4114%
Now we need to determine the present value of this annuity and our discount rate is 2.4114%. I will use an excel spreadsheet to determine the present value of the 30 quarterly payments and then add the initial payment.
$5,190,521.80 + $700,000 = $5,890,521.80
Classify the given goods according to whether or not they would be included in calculating the GDP for the United States. All goods should be placed. If a country is not specified, you can assume the action is performed in the United States. Included in the GDP of the U.S. NOT included in the GDP of the U.S. Answer Bank
Please find full question attached Answer:
Honda's assembly and sale of cars in the US
old navy purchases mannequins to display clothes
Explanation:
The above are the only goods that qualify to be entered for GDP calculations since they are final goods and are also produces in the United States. The others do not qualify as some are not final goods and others are not produced in the country example ocean spray purchases plastics to make bottles cannot be classified as final goods since they are intermediate goods and will stillGdP will still be calculated on the final product
Fiori Corporation's relevant range of activity is 4,700 units to 11,500 units. When it produces and sells 8,100 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 6.50 Direct labor $ 3.90 Variable manufacturing overhead $ 2.20 Fixed manufacturing overhead $ 2.50 Fixed selling expense $ 0.95 Fixed administrative expense $ 0.85 Sales commissions $ 1.35 Variable administrative expense $ 0.85 The incremental manufacturing cost that the company will incur if it increases production from 10,500 to 10,501 units is closest to:
Answer:
$12.6
Explanation:
Calculation for incremental manufacturing cost
The incremental manufacturing cost will be the addition of the following :
Direct materials $ 6.50
Direct labor $ 3.90
Variable manufacturing overhead $ 2.20
Incremental manufacturing cost $12.60
Therefore incremental manufacturing cost will be $12.60
Hula Products has reintroduced the hula hoop to the world and faces a growing demand for its product in two distinct markets: the United States and Europe. Demand in these markets is: United States: PU = 20 - 0.1QU Europe: PE = 10 - 0.05QE where all quantities are expressed in thousands of units (i.e. QU = 10 should be interpreted as 10 thousand hula hoops). The company has a marginal cost of two dollar per unit in the United States (MCU = $2) and four dollars per unit in Europe (MCE= $4). Finally, the firm has a production limitation or constraint of 96 units (96 thousand hula hoops). How many hoops should be sold in the United States?
Answer:
90 units hoops (90 thousand hula hoops) should be sold in the United States.
Explanation:
Demand function given are indirect demand functions. The total revenue can be obtained by multiplying the indirect demand function my the quantity.
Since we wan to calculate the number of hoops that should be sold in the United States, we therefore have:
TRU = QU(20 - 0.1QU)
TRU = 20QU - 0.1QU^2 ......................... (1)
Where TRU denotes the total revenue in the United States.
The marginal revenue in the United States (MRU) can be obtained by differentiating equation (1) with respect to QU as follows:
MRU = dTRU/dQU = 20 - 0.2QU ............ (2)
Note that in the question, the company has a marginal cost of two dollar per unit in the United States given as follows:
MCU = $2
Since profit is maximized at where marginal revenue is equal to the marginal cost, we therefore equate MRU and MCU and solve for QU as follows:
MRU = MCU
This implies;
20 - 0.2QU = 2
-0.2QU = 2 - 20
-0.2QU = -18
QU = -18 / -0.2
QU = 90
This implies that profit is maximized in the US at 90 units hoops (90 thousand hula hoops).
Therefore, 90 units hoops (90 thousand hula hoops) should be sold in the United States.
Which of the following is false? Group of answer choices Lateness in any of the activities located on the critical path would result in lateness in overall project completion time If an activity has a slack value greater than zero, it needs to be a critical activity Lateness in activities, which are not located on the critical path, may or may not result in lateness in overall project completion time, depending on their slack time If there is only one activity in a project, it needs to be a critical activity If Activity A needs to be completed before Activity B starts, Activity A is the immediate predecessor of activity B
Answer:
If an activity has a slack value greater than zero, it needs to be a critical activity
Explanation:
The false statement in the group of answer choices is If an activity has a slack value greater than zero, it needs to be a critical activity this is because for an activity to be considered a critical activity its slack value has to be equal to zero and not greater than zero,
activities with critical value greater than zero are considered just activities and not critical activities because there is time range given to the activity
Discriminatory impulses in the labor market can emerge at a number of levels:
A. among managers.
B. among workers.
C. among customers.
D. all of the above.
Economic principles are generalizations relating to __________ tendencies in economic behavior or to the economy itself_______
Answer: Average
Explanation:
Economic principles are generalizations relating to average tendencies in economic behavior or to the economy itself.
It is impossible to explain the individual choices people or companies make and yet it still needs to be done so that the economy can be studied and planned. For this reason economic principles use generalizations to study and explain the economy based on the behavior of the majority of people.
Essentially they are based on perceived rational tendencies of what is expected of people and firms. This is why some economic principles are supported by one group of economists and not by others. If the principles applied to all, it would not be the case.
A central lesson of the Solow model is:______.a. capital accumulation cannot serve as the engine of long-run per capita economic economic growth. b. capital accumulation is the only engine of the long run per capita economic growth. c. consumption is the only engine of short-run per capita economic growth.d. saving rates serve as the engine of long-run per capita economic growth. d. the initial capital stock plays a large part in long run economic growth.
Answer:
c because it show how the economy runs
Exercise 2-15 Computing net income LO A1 A corporation had the following assets and liabilities at the beginning and end of this year. Assets Liabilities Beginning of the year $ 71,500 $ 30,652 End of the year 122,500 49,613 Owner made no investments in the business, and no dividends were paid during the year. Owner made no investments in the business, but dividends were $1,050 cash per month. No dividends were paid during the year, but the owner did invest an additional $45,000 cash in exchange for common stock. Dividends were $1,050 cash per month, and the owner invested an additional $35,000 cash in exchange for common stock. Determine net income or net loss for the business during the year for each of the above separate cases: (Decreases in equity should be indicated with a minus sign.)
Answer:
a. $32,039
b. $19,439
c. -$12,961
d. $9,639
Explanation:
We will use accounting equation to solve the above question.
Assets = Liabilities + Equity
Also;
Net income will be the difference in equity plus dividends minus contributions
= [Ending equity - Beginning equity ] + Dividends
Since the beginning and ending equity is the same for all the years, then we'll have
$71,500 = $30,652 + Equity
Equity = $40,848
Ending equity = $122,500 - $49,613
= $72,887
a. Income : $72,887 - $40,848 + 0 - 0
= $32,039
b. $72,887 - $40,848 + $1,050 × 12 - 0
= $19,439
c. $72,887 - $40,848 + 0 - $45,000
= -12,961
d. $72,887 - $40,848 + $1,050 × 12 - $35,000
= $32,039 + $12,600 - $35,000
= $9,639
A given investment project will cost RM400,000. Incremental annual cash flows after taxes are expected to be RM80,000 per year for the life of the investment, which is 5 years. There will be no salvage value at the end of the 5 years. The required rate of return is 14%. On the basis of the profitability index method, should the investment be accepted?
Answer:
Based on the profitability index method, the investment should not be accepted.
It does not produce enough cash flows to justify the investment.
Explanation:
The profitability index method measures the present value of benefits for by dividing the present value of benefits by the present of initial investments.
The present value of initial investment in this project remains RM400,000. The present value of incremental annual cash flows of RM80,000 after taxes for 5 years will be equal to:
RM80,000 * 3.668 = RM293,440
Then the next step is to divide the present value of benefits by the initial investment as follows:
RM293,440/RM400,000 = 0.7336 = 73.36%
The implication is that the present value of the benefits is less than the initial investment costs. The project should then be rejected.
