Answer:
a. Gross profits
= total sales x gross profit margin = $41,000,000 x 76% = $31,160,000
b. Cost of goods sold
= total sales - gross profit = $41,000,000 - $31,160,000 = $9,840,000
c. Operating profits
= total sales x operating profit margin = $41,000,000 x 31% = $12,710,000
d. Operating expenses
= total sales - operating profit = $41,000,000 - $12,710,000 = $28,290,000
e. Earnings available for common stockholders
= net profits = total sales x net profit margin = $41,000,000 x 9% = $3,690,000
f. Total assets
asset turnover = revenue / total assets
total assets = revenue / 2.1 = $41,000,000 / 2.1 = $19,523,810
g. Total common stock equity
ROE = net income / equity
equity = net income / ROE = $3,690,000 / 23% = $16,043,478
h. Accounts receivable
average collection period = 365 / accounts receivable turnover
54.5 = 365 / accounts receivable turnover
accounts receivable turnover = 365 / 54.5 = 6.697248
accounts receivable turnover = sales / accounts receivable
accounts receivable = sales / accounts receivable turnover = $41,000,000 / 6.697248 = $6,121,918
Explanation:
McDougal Printing, Inc.
Year Ended December 31, 2019
Sales $41,000,000
Gross profit margin 76% =
Operating profit margin 31%
Net profit margin 9%
Return on total assets 18.9%
Return on common equity 23%
Total asset turnover 2.1
Average collection period 54.5 days
An investor is deciding whether to build a retail store. If she invests in the store and it is successful, she expects a return of $100,000 in the first year. If the store is not successful, she will suffer a loss of $80,000. She guesses that the probability that the store will be a success is 0.6. To remove some of the uncertainty from this decision, the investor tries to establish more information, but this market research will cost $20,000. If she spends this money, she will have more confidence in her investment. There is a 0.6 probability that this information will be favorable; if it is, the likelihood that the store will be a success increases to 0.9. If the information is not favorable, the likelihood that the store will be a success reduces to only 0.2. Of course, she can elect to do nothing.
A) Draw the associated decision tree.
B) What do you recommend?
C) How much is the information worth?
Replace all the monetary values with the following utilities
Monetary Value Utility
$100,000 1.00
$80,000 0.40
$0 0.20
-$20,000 0.10
-$80,000 0.05
-$100,000 0.00
A) What do you recommend, based on expected utility?
B) Is the investor a risk soeker or a risk avoider?
Answer:
Explanation:
Given that,
expects a return of $100,000 in the first year
loss of $80,000
probability that the store will be a success is 0.6
research will cost $20,000
0.6 probability that this information will be favorable
store will be a success increases to 0.9
store will be a success reduces to only 0.2
a) Decision tree is attachedEMV= (payoff of first outcome) * (probability of first outcome) + (payoff of second outcome) * (probability of second outcome) + (payoff of third outcome) * (probability of third outcome)
EMV(node 1) = EMV(new store)
= ($100,000 * 0.6) + (-80,000 * 0.4)
=$28,000
EMV (node 2) = EMV (no store)
= $0
EMV (node 3) = EMV ( new store and favourable research)
= ($100,000 * 0.9) + (-80,000 * 0.1)
=$82,000
EMV (node 4) = EMV ( no store and favourable research)
= $0
EMV (node 5) = EMV ( new store and unfavourable research)
= ($100,000 * 0.2) + (-80,000 * 0.8)
= -$44,000
EMV (node 6) = EMV ( no new store and unfavourable research)
= $0
B) Here we compare EMV of not conducting the market research ans EMV of conducting the market research and the maximum EMV shall be taken for decision making
Here the EMV of conducting the market research is higher than not conductingHence, the investor can go to market research test. If result is positive, she can invest in the store, if negative she can stop the proposal.
On January 1, Valuation Allowance for Available-for-Sale Investments had a zero balance. On December 31, the cost of the available-for-sale securities was $252,000, and the fair value was $258,890. Prepare the adjusting entry to record the unrealized gain or loss on available-for-sale investments on December 31. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
Dr Valuation Allowance for Available-for-Sale Investments $6890
Cr unrealized gain/(loss) on AFS investments $6890
Explanation:
The unrealized gain or loss on the available-for-sale securities is the difference between its cost of $252,000 and the fair value of $258,890 on 31st December.
Gain/(loss)=$258,890-$252,000=$6890 unrealized gain
The amount would be credited to unrealized gain/(loss) on AFS investments while Valuation Allowance for Available-for-Sale Investments would be debited with the same amount
Wattan Company reports beginning inventory of 10 units at $60 each. Every week for four weeks it purchases an additional 10 units at respective costs of $61, $62, $65, and $70 per unit for weeks 1 through 4. Compute the cost of goods available for sale and the units available for sale for this four-week period. Assume that no sales occur during those four weeks.
Answer:
Activity Units Units cost Cost of Goods Available
Beginning Inventory 10 $60.00 $600
1st week purchase 10 $61.00 610
2nd week purchase 10 $62.00 620
3rd week purchase 10 $65.00 650
4th week purchase 10 $70.00 700
Units available for sale 50
Cost of goods available for sale $3,180
Explanation:
We can compute the cost of goods available for sale and the units available for sale for this four-week period by assuming that no sales occur during those four weeks
Activity Units Unit Cost Cost of Goods Available
Beginning Inventory 10 60 600
1st Week purchase 10 61 610
2nd Week purchase 10 62 620
3rd Week purchase 10 65 650
4th Week purchase 10 70 700
Units available for sale 50
Cost of goods available for sale 3180
Thus, in the above it is shown the computing of the cost of goods available for sale and the units available for sale for this four-week period by assuming that no sales occur during those four weeks.
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Compute ending merchandise inventory, cost of goodssold, and gross profit using the (1) FIFO inventory costingmethod, (2) LIFO inventory costing method, and (3) weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)
Begin by determining ending merchandise inventory and cost of goods sold under each of the three methods.
Requirement 1.
FIFO
Plus:
Less:
Cost of goods sold
Requirement 2.
LIFO
Requirement 3.
Weighted-Average
Additional Information:
June.1 Beginning merchandise inventory 17 units at $15each
12 Purchase 5 units at $19each
20 Sale 14 units at $37each
24 Purchase 11 units at $23each
29 Sale 13 units at $37each
Answer:
a) Ending Merchandise Inventory and Cost of Goods Sold under FIFO:
Beginning Inventory, 17 units at $15each $255
Plus Purchases:
June 12 Purchase, 5 units at $19each 95
June 24 Purchase, 11 units at $23each 253
Cost of Goods Available for Sale $603
Less Ending Inventory 138
Cost of Goods Sold $465
b) Ending Merchandise Inventory and Cost of Goods Sold under LIFO:
Beginning Inventory, 17 units at $15each $255
Plus Purchases:
June 12 Purchase, 5 units at $19each 95
June 24 Purchase, 11 units at $23each 253
Cost of Goods Available for Sale $603
Less Ending Inventory 90
Cost of Goods Sold $513
c) Ending Merchandise Inventory and Cost of Goods Sold under Weighted Average:
Beginning Inventory, 17 units at $15each $255
Plus Purchases:
June 12 Purchase, 5 units at $19each 95
June 24 Purchase, 11 units at $23each 253
Cost of Goods Available for Sale $603
Less Ending Inventory 109.62
Cost of Goods Sold $493.38
2. Ending Inventory = 6 units (17 units + 5 - 14 + 11 - 13)
FIFO LIFO Weighted Average
Ending Inventory value = $23 *6 = $138; $15 *6 = $90; $18.27 *6 = $109.62
Weighted Average = Cost of Goods Available for Sale / Quantity Available for Sale = $603/33 = $18.27 per unit
Explanation:
FIFO: First In, First Out: This is a method of costing inventory which assumes that goods remaining in stock are those that were brought in last. This means that goods are sold out according to the time they are bought, with earlier bought goods being sold before later bought goods.
LIFO: Last In, First Out: This costing method assumes that goods that are sold are those that were bought later leaving those bought earlier to remain in stock. The entity using this method exhausts the last quantity bought before selling the earlier quantities.
Weighted Average: This is another technique which weighs the averages of the cost of inventory before determining the value of inventory. The weighted average method divides the cost of the goods available for sale by the number of those units still on the shelf. The result is the weighted average cost per unit, which can be used to assign a cost to both the ending inventory and the cost of goods sold.
15) A market is defined as A) a physical place where people buy only goods. B) a physical place where people buy both goods and services. C) a store where people buy physical goods. D) any arrangement that brings buyers and sellers together. E) a place where one good is bartered for another.
Answer:
D) any arrangement that brings buyers and sellers together.
Explanation:
In earlier times before now a market has a specific way of defining it. But due to recent advancement in technology, it can be described or defined to be any arrangement that brings buyers and sellers together.
The power of online presence totally altered the initial marker definitions the world know as any physical place where these buyers and sellers meet to do their tradings or businesses or a place where goods are bartered for another. Therefore any arrangement, be it via mail, sms, codes, online stores, video meetings etc are all forms of market places.
Required Information
The following information applies to the questions displayed below) Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $13. At the start of January 2018, VGC's income statement accounts had zero balances and its balance sheet account balances were as follows:________.
Cash $1,600,000
Accounts Receivable 174,000
Supplies 15,100
Equipment 930,000
Buildings 510,000
Land 2,050,000
Accounts Payable 113,000
Deferred Revenue 74,800
Notes Payable (due 2025) 94,800
Common Stock 2,500,000
Retained Earnings 2,498,100
In addition to the above accounts, VGC's chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. The following transactions occurred during the January month:________.
A. Received $57,750 cash from customers on 1/1 for subscriptions that had already been earned in 2017.
B. Purchased 10 new computer servers for $41,500 on 1/2; paid $11,500 cash and signed a three-year note for the remainder owed.
C. Paid $14,300 for an Internet advertisement run on 1/3.
D. On January 4, purchased and received $5,300 of supplies on account.
E. Received $150,000 cash on 1/5 from customers for service revenue earned in January.
F. Paid $5,300 cash to a supplier on January 6.
G. On January 7, sold 19,900 subscriptions at $13 each for services provided during January. Half was collected in cash and half was sold on account.
H. Paid $380,000 in wages to employees on 1/30 for work done in January.
I. On January 31, received an electric and gas utility bill for $6,260 for January utility services. The bill will be paid in February.
Answer:
Cash 57,750 debit
Account receivables 57,750 credit
--------------------------------------------
Equipment 41,500 debit
cash 11,500 credit
note payable 30,000 credit
--------------------------------------------
Advertising Expense 14,300 debit
cash 14,300 credit
--------------------------------------------
supplies 5,300 debit
account payables 5,300 credit
------------------------------------------
cash 150,000 debit
service revenue 150,000 credit
-------------------------------------------
account payables 5,300 debit
cash 5,300 credit
---------------------------------------------
cash 129,350 debit
account receivables 129,350 debit
services revenue 258,700 credit
---------------------------------------------
wages expense 380,000 debit
cash 380,000 credit
--------------------------------------------
utilities expense 6,260 debit
account payable 6,260 credit
Explanation:
To make thge jounral entries we must follow the basic principles:
debit = credit
and one value per account
Is important to comment that A state the income has been earned so we deduct from account recievables
then. we again receive cash for service earned
In none ofthe case we are doing the recognition of hte deferred revenue so this, stays untouched.
G) 19,900 x $13 each = $258,700
half cash-half credit : 258,700 / 2 = 129,350
Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,900 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:
Answer:
Allowance for Doubtful Accounts $2,900
To Accounts Receivable $2,900
(Being the written off amount is recorded)
Explanation:
The journal entry to record the write off of the account using allowance method is shown below:
On May 3
Allowance for Doubtful Accounts $2,900
To Accounts Receivable $2,900
(Being the written off amount is recorded)
For recording this we debited the allowance for doubtful accounts as it reduced the allowance and credited the account receivable as it decreased the assets so that the proper recording of the given transaction could be done
The separate components highlight several features of return on investment not revealed by a single calculation:a.The importance of investment turnover as a key to income is stressed.b.The importance of revenues is explicitly recognized.c.The important components are expressed as ratios or percentages instead of dollarfigures. This form of expression often enhances comparability of different divisions,businesses, and time periods.d.The breakdown stresses the possibility of trading off investment turnover for incomeas a percentage of revenues so as to increase the average ROI at a given level ofoutput
Answer:
The options (a) (b) and (c) is correct.
Explanation:
From the question stated the features that highlights the return of investment is listed as follows.
The significance of investment turnover as a key to income is stressedThe importance import of revenues is explicitly recognizedThe significant components are expressed as ratios or percentages instead of dollar figures.Hence, the last option is not correct.
Granite Construction Company is considering selling excess machinery with a book value of $328,100 (original cost of $449,200 less accumulated depreciation of $121,100) for $222,800, less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $217,860 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $16,708.
Required:
A. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery.
B. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
Answer:
A)
book value = $328,100
net selling cost = $222,800 - 6% = $209,432
net lease revenue = $217,860 - $16,708 = $201,152
Granite Construction
Differential analysis
November 7
Alternative 1 Alternative 2 Differential
SELL LEASE amount
Revenue from sales $222,800 $0 $222,800
- sales expenses ($3,368) $0 ($3,368)
Revenue from lease $0 $217,860 ($217,860)
- lease expenses $0 ($16,708) $16,708
total $209,432 $201,152 $8,280
B) Granite Construction should sell the equipment since it will earn $8,280 more than leasing it, and that without considering the value of money in time (discount rate on lease revenue).
Lehi City has designated an internal service fund as the single fund to account for its self-insurance activities. Most of the insured activities such as the police department, fire department, and general government functions are accounted for in the General Fund. What is the maximum amount that can be charged to expenditure in the General Fund related to the self-insurance activities
Answer: c)The actuarially determined amount necessary to cover claims, expenditures, and catastrophic losses.
Explanation:
The Expenditure on the account related to self - insurance activities refers to the amounts that will be deducted from the fund for anything insurance related.
The insurance is meant to cover the claims and unlikely events of catastrophies. Therefore when those things do occur it will be deducted from the service fund to cover those things.
Those along with expenses incurred to maintain the fund will be considered expenses and that is the maximum amounts that can be deducted from the fund.
A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows: Location FC (annual) VC (per unit) Atlanta $ 80,000 $ 20 Phoenix $ 140,000 $ 16 If the annual demand will be 20,000 units, what would be the cost advantage of the better location? HINT: Compare the total costs Select one: a. 40000 b. 20000 c. 460000 d. 60000
Answer:
Cost Advantage of different locations:
b. $20,000
Phoenix certainly had a cost advantage over Atlanta and based on this factor, it should be chosen for the new plant instead of any other city.
Explanation:
a) Total Costs of different locations:
Atlanta Phoenix
Fixed Cost $80,000 $140,000
Variable cost 400,000 320,000
Total Costs $480,000 $460,000
b) Variable costs
Atlanta Phoenix
Annual Demand 20,000 20,000
Variable cost/unit $20 $16
Total variable cost $400,000 $320,000
c) Cost Advantage is the competitive edge which location (or company) can have over another through reduced production or marketing costs or both so that it can offer cheaper prices or use excess profits to bolster promotion or distribution. In this case, the comparison is on the total cost, which is made of variable and fixed costs.
Wolford Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attracting business away from city areas. At the end of the company’s fiscal year on November 30, 2017, these accounts appeared in its adjusted trial balance.
Accounts Payable $ 26,800
Accounts Receivable 17,200
Accumulated Depreciation—
Equipment 68,000
Cash 8,000
Common Stock 35,000
Cost of Goods Sold 614,300
Freight-Out 6,200
Equipment 157,000
Depreciation Expense 13,500
Dividends 12,000
Gain on Disposal of Plant Assets 2,000
Income Tax Expense 10,000
Insurance Expense 9,000
Interest Expense 5,000
Inventory 26,200
Notes Payable 43,500
Prepaid Insurance 6,000
Advertising Expense 33,500
Rent Expense 34,000
Retained Earnings 14,200
Salaries and Wages Expense 117,000
Sales Revenue 904,000
Salaries and Wages Payable 6,000
Sales Returns and Allowances 20,000
Utilities Expense 10,600
Answer:
Wolford Department Store
Income Statement
For the Year Ended November 30,2017
Sales Revenue $904,000
Sales Returns and Allowances ($20,000 )
Net Sales $884,000
Cost of Goods Sold ($614,300)
Gross profit $269,700
Operating expenses:
Wages Expense $117,000 Advertising Expense $33,500 Rent Expense $34,000 Depreciation Expense $13,500 Insurance Expense $9,000 Utilities Expense $10,600Freight-Out $6,200Total operating expenses ($223,800)
Income from operations $45,900
Other revenues:
Gain on Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000 )
Income before income taxes $42,900
Income Tax Expense ($10,000)
Net income after taxes $32,900
Wolford Department Store
Balance Sheet
For the Year Ended November 30,2017
Assets:
Cash $8,000
Accounts Receivable $17,200
Prepaid Insurance $6,000
Inventory $26,200
Equipment $157,000
Accumulated Depreciation - Equipment (68,000)
Total Assets: $146,400
Liabilities and Stockholders' Equity:
Accounts Payable $26,800
Wages Payable $6,000
Notes Payable $43,500
Common Stock $35,000
Retained Earnings $35,100
Total Liabilities and Stockholders' Equity: $146,400
Wolford Department Store
Statement of Retained Earnings
For the Year Ended November 30,2017
Retained earnings at the beginning of the period: $14,200
Net income after taxes: $32,900
Dividends ($12,000)
Retained earnings at he end of the period: $35,100
a. The Wolford Department Store's Multi-level Income Statement, Balance Sheet, and Statement of Retained Earnings as of November 30, 2017 are as follows:
Wolford Department Store
Income Statement
For the Year Ended November 30,2017
Sales Revenue $904,000
Sales Returns and Allowances ($20,000)
Net Sales $884,000
Cost of Goods Sold ($614,300)
Gross profit $269,700
Operating expenses:
Wages Expense $117,000
Advertising Expense 33,500
Rent Expense 34,000
Depreciation Expense 13,500
Insurance Expense 9,000
Utilities Expense 10,600
Freight-out 6,200
Total operating expenses ($223,800)
Income from operations $45,900
Other revenues:
Gain from Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000)
Income before Income Taxes $42,900
Income Tax Expense ($10,000)
Net Income After Taxes $32,900
Wolford Department Store
Balance Sheet
As of November 30,2017
Assets:
Current Assets:
Cash $8,000
Accounts Receivable 17,200
Prepaid Insurance 6,000
Inventory 26,200
Current assets $57,400
Long-term assets:
Equipment $157,000
Accumulated Depreciation (68,000) $89,000
Total Assets $146,400
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $26,800
Wages Payable 6,000
Current liabilities $32,800
Long-term liabilities
Notes Payable $43,500
Total liabilities $76,300
Equity:
Common Stock $35,000
Retained Earnings 35,100
Total Equity $70,100
Total Liabilities & Stockholders' Equity $146,400
Wolford Department Store
Statement of Retained Earnings
As of November 30,2017
Retained earnings 1 Dec. 2016 $14,200
Net income after taxes 32,900
Dividends ($12,000)
Retained earnings, Nov. 30, 2017 $35,100
b) The profitability ratios are computed as follows:
1. Profit Margin = (Net Income/Net Sales x 100)
= $32,900/$884,000 x 100
= 3.72%
2. Gross Profit rate = Gross Profit/Net Sales x 100)
= $269,700/$884,000 x 100
= 30.51%
c. If the net sales increases by 15%, the Net sales = $1,016,600 ($884,000 x 1.15)
If Gross profit increases by $40,443, the Gross profit = $310,143 ($269,700 + $40,443)
If Expenses increase by $58,600, the total operating Expenses = $282,400 ($223,800 + $58,600)
Revised Net Income:
Gross Profit $310,143
Total operating expenses (282,400)
Income from operations $27,743
Other revenues:
Gain from Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000)
Income before Income Taxes $24,743
Income Tax Expense ($10,000)
Net Income After Taxes $14,743
b) The profitability ratios are computed as follows:
1. Profit Margin = (Net Income/Net Sales x 100)
= $14,743/$1,016,600 x 100
= 1.45%
2. Gross Profit rate = Gross Profit/Net Sales x 100)
= $310,143/$1,016,600 x 100
= 30.51%
d. With the proposed changes, the gross profit rate remains the same (without any impact) because the net sales increased by the same rate (15%) as the cost of goods sold and the gross profit.
However, the net income reduced drastically, especially with the income tax remaining the same amount.
Thus, without the income tax effect, there is no merit in this proposal as it reduced the net income margin from 3.72% to 1.45%.
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Hi-Tech, Inc., reports net income of $65.0 million. Included in that number are depreciation expense of $5.5 million and a loss on the sale of equipment of $1.5 million. Records reveal increases in accounts receivable, accounts payable, and inventory of $2.5 million, $3.5 million, and $4.5 million, respectively. What are Hi-Tech's net cash flows from operating activities?
Answer:
Net Cash Flows from operating activities is $68.5 million.
Explanation:
The indirect Method would be used here because all we will find the cash expenses and revenues that were converted into within the year and are reported in the income statement by calculating the increase and decrease in the current assets and current liabilities. Here we will also eliminate the non cash expense effects by adding them back.
The net cash flows from operating activities can be calculated using the following method:
Millions
1. Net Income 65
Add Non Cash Deductions
2. Depreciation 5.5
3. Loss on sale of Equipment 1.5
Add / (Less) the increase or
decrease in current Assets or
liabilities
4. Increase in Trade Receivables (2.5)
5. Increase in Trade Payables 3.5
6. Increase in inventory (4.5)
Net Cash Flows from operating activities $68.5
Presented below is an aging schedule for Bryan Company. Number of Days Past Due Customer Total Not Yet Due 1-30 31-60 61-90 Over 90 Aneesh $ 24,000 $ 9,000 $15,000 Bird 30,000 $ 30,000 Cope 50,000 5,000 5,000 $40,000 DeSpears 38,000 $38,000 Others 120,000 72,000 35,000 13,000 $262,000 $107,000 $49,000 $28,000 $40,000 $38,000 Estimated percentage uncollectible 3% 7% 12% 24% 60% Total estimated bad debts $ 42,400 $ 3,210 $3,430 $3,360 $ 9,600 $22,800 At December 31, 2016, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $8,000.Journalize the adjusting of bad debit at December 31 2016.
Answer and Explanation:
The adjusting journal entry is shown below:
On Dec 2016
Bad debt expense Dr ($42,400 - $8,000) $34,400
To Allowance for doubtful debts $34,400
(Being the bad debt expense is recorded)
For recording this we debited the bad debt expense as it increased the expenses and credited the allowance for doubtful debts as it reduced the assets
The expected average rate of return for a proposed investment of $800,000 in a fixed asset with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $360,000 for the four years is
Answer:
22.5%
Explanation:
For computation of return on investment first we need to find out the average investment and average income per year which is shown below:-
Average investment = Proposed investment ÷ Average
= $800,000 ÷ 2
= $400,000
Now, the Average income per year = Expected total net income ÷ Number of year
= $360,000 ÷ 4
= $90,000
Return on investment = Average income per year ÷ Average investment
= $90,000 ÷ $400,000
= 0.225
or
= 22.5%
NewTech Incorporated management plans on paying the company's first dividend of $2.00 three years from today (D3 = $2.00) on its' common stock. After year three the dividend is expected to grow at a constant rate of 5% thereafter. As an investor with a required rate of return of 15%, what would you pay for NewTech common stock today?
Answer:
Stock price today = $13.807
Explanation:
According to the dividend valuation model , the current price of a stock is the present value of the expected future dividends discounted at the required rate of return
This principle can be applied as follows:
The value of cash flow the stock today is the present value of the future cash flow discounted at the required rate of return
Step 1 : Compute the PV in year 3 of future dividend
PV = D× (1+g)/r-g
D- div in year 3, g- growth rate, r-required rate of return
PV in year 3 = 2× (1.05)/0.15-0.05
= 21
Step 2: PV in year in year 0
PV = PV in year 3 × (1+r)^(-n)
r-rate of return- 15%, n- number of years- 3
= 21 × 1.15^(-3)
=13.80784088
Stock price today = $13.807
The following data have been recorded for recently completed Job 323 on its job cost sheet. Direct materials cost was $2,063. A total of 33 direct labor-hours and 234 machine-hours were worked on the job. The direct labor wage rate is $18 per labor-hour. The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $24 per machine-hour. The total cost for the job on its job cost sheet would be:
Answer:
$8,723
Explanation:
Calculation for total cost for the job on its job cost sheet
Direct materials 2,063
Direct labor (33 hours × $18 per hour) 594
Manufacturing overhead (234 hours × $24 per hour) 5,616
Total manufacturing cost for job 8,273
CarsonWentz Company uses a job-order costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year, manufacturing overhead and direct labor-hours were estimated at $88,000 and 16,000 hours respectively, for the year. In June, job #315 was completed. Materials costs on the job totaled $1,590 and labor costs totaled $2,340 at $6.50 per hour. At the end of the year, it was determined that the company worked 15,300 direct labor-hours for the year, and incurred $86,750 in actual manufacturing overhead cos
Answer:
Instructions are below.
Explanation:
Giving the following information:
Estimated manufacturing overhead= $88,000
Estimated direct labor-hours= 16,000
Job 315:
Materials costs on the job totaled $1,590 and labor costs totaled $2,340 at $6.50 per hour.
At the end of the year, it was determined that the company worked 15,300 direct labor-hours for the year, and incurred $86,750 in actual manufacturing overhead costs.
With the information provided, we can calculate the total cost of Job 315 and the amount of under/over allocated overhead.
First, we need to determine the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 88,000/16,000= $5.5 per direct labor hour
Job 315:
Direct labor hours= 2,340/6.5= 360 hours
Total cost= 1,590 + 2,340 + 5.5*360= $5,910
Now, to calculate the over/under allocation, first, we need to allocate overhead for the whole company.
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 5.5*15,300= $84,150
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 86,750 - 84,150= $2,600 underallocated
Suppose that an issuing bank pays on documents that are conforming to the requirements of the letter of credit, but the seller has shipped worthless goods to the buyer. Which of the following statements, if any, are true?
a. As long as the documents strickly comply with the letter of credit requirements, the bank will not have to reimburse the buyer
b. If there is fraud in the transaction, the bank will have to reinburse the buyer and seek its remedies against the seller
c. The strick compliance insulates the bank from liability, since it assures the bank that the underlying contract between the buyer and seller is entirely independent from the letter of credit contract
d. A and B
Answer:
the answer C
Explanation:
As long as the documents strickly comply with the letter of credit requirements, the bank will not have to reimburse the buyer
b. If there is fraud in the transaction, the bank will have to reinburse the buyer and seek its remedies against the seller
c. The strick compliance insulates the bank from liability, since it assures the bank that the underlying contract between the buyer and seller is entirely independent from the letter of credit contract
"ART Company just paid a dividend of $2.00. The dividend is expected to grow by 10% this year, 9% in year two and 6% in year three. Then, beginning in year four, the dividend will begin growing at a constant rate of 4%. With a required return of 10%, what is the stock worth today
Answer:
The stock is worth $38.99 per share today
Explanation:
We can calculate the value of the stock using the dividend discount model approach (DDM). The DDM values the stock based on the present value of the expected future dividends from the stock. To calculate the price of the stock today, we simply discount back all the future expected dividends and terminal value (calculated when the growth rate in dividends become constant) to their present value using the required rate of return as the discount factor.
The value of ART company's stock today will be,
P0 or V0 = 2 * (1+0.1) / (1+0.1) + 2 * (1+0.1)*(1+0.09) / (1+0.1)^2 +
2 * (1+0.1)*(1+0.09)*(1+0.06) / (1+0.1)^3 +
[( 2 * (1+0.1)*(1+0.09)*(1+0.06)*(1+0.04)) / (0.1 - 0.04)] / (1+0.1)^3
P0 or V0 = $38.9939 rounded off to $38.99
Which of the following is NOT a pitfall an organization should avoid in strategic planning? Involving all managers rather than delegating planning to a "planner" Failing to communicate the plan to employees Failing to create a collaborative climate supportive of change Top managers not actively supporting the strategic-planning process Doing strategic planning only to satisfy accreditation or regulatory requirements
Answer:
Involving all managers rather than delegating planning to a "planner"
Explanation:
Strategic planning is a process of establishing the direction of a business. It assesses where the business is and where it is going. And the action plan needed to get to it's goal.
Delegating planning to a planner rather than involving all managers is an identified pitfall in strategic planning.
This is why Involving all managers rather than delegating planning to a "planner" is the correct answer since we are required to identify a non pitfall by the question.
If 4 million kegs of beer are sold, , which means that: It would be fairer for society to devote fewer resources to the production of beer. It would be fairer for society to devote more resources to the production of beer. Society is currently devoting the efficient quantity of resources to the production of beer. It would be more efficient for society to devote more resources to the production of beer. If 12 million kegs of beer are sold, , which means that: It would be fairer for society to devote more resources to the production of beer. Society is currently devoting the efficient amount of resources to the production of beer. It would be fairer for society to devote fewer resources to the production of beer. It would be more efficient for society to devote fewer resources to the production of beer. The efficient allocation of resources would result in the production of kegs of beer.
Answer:
1. It would be more efficient for society to devote more resources to the production of beer.
2. Society is currently devoting the efficient amount of resources to the production of beer.
Explanation:
1. If 4 million kegs of beer are sold, the marginal benefit exceeds marginal cost which means that: the society values this quantity of kegs of beer and would be more beneficial and efficient if the society devote more resources to beer production.
2. If 12 million kegs of beer are sold, where marginal cost equal marginal benefit, it means that this is a good point in which shows an efficient allocation of resources to beer production because the marginal cost of the resources is equal to the marginal benefit of each keg of beer.
If 4 million kegs of beers are sold, marginal benefit exceeds the marginal cost, which means that :
It would be more efficient for society to devote more resources to the production of beers.
Reason :
the advantage of an additional unit of producing a good is more than the cost of producing it.hence it is good to produce more where marginal benefit equals marginal cost.If 12 million kegs of beers are sold, marginal cost exceeds the marginal benefit, which means that :
It would be more efficient for society to devote fewer resources to the production of beers.
Reason :
the advantage of an additional unit of producing a good is less than the cost of producing it.hence it is good to produce less where marginal benefit equals marginal cost.Learn More :
https://brainly.com/question/21060213
The owner of a small firm has just purchased a personal computer, which she expects will serve her for the next two years. The owner has been told that she "must" buy a surge suppressor to provide protection for her new hardware against possible surges or variations in the electrical current, which have the capacity to damage the computer. The amount of damage to the computer depends on the strength of the surge. It has been estimated that there is a 3% chance of incurring 350 dollar damage, 5% chance of incurring 250 dollar damage, and 12% chance of incurring 100 dollar damage from a surge within the next two years. An inexpensive suppressor, which would provide protection for only one surge, can be purchased. How much should the owner be willing to pay if she makes decisions on the basis of expected value
Answer:
$35
Explanation:
The computation of the expected value is shown below;
As we know that
= Estimated chance of damage percentage × dollar damage + Estimated chance of damage percentage × dollar damage + Estimated chance of damage percentage × dollar damage
= 3% × $350 + 5% × $250 + 12% × $100
= $10.5 + $12.5 + $12
= $35
We simply multiplied the estimated chance of damage percentage with the dollar damage and then added the other two so that the expected value could arrive
Raising Canes is a restaurant located primarily in the south and the owner is interested in expanding nationwide. Name and describe the various types of research suppliers and discuss which type could meet his need for finding the best locations in new markets.?
Answer:
- syndicate research service
- limited research service
- standardized research
- custom research
Explanation:
Note, Raising canes ones to expand nationwide, which of course is a monumental task.
- The syndicated research supplier using is already established standards for the research in exchange for a fee.
- Standardized research supplier is willing to meet the needs of clients by directing strategies best fitted to find suitable retail locations. It is the best type of research service to meet this client’s needs.
- Limited-service research are suppliers that are limited in their scope of operations such as data warehousing, or data processing.
Sandhill Company reports the following operating results for the month of August: sales $382,500 (units 5,100), variable costs $245,000, and fixed costs $98,000. Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 16% with no change in total variable costs or units sold.
2. Reduce variable costs to 59% of sales.
Compute the net income to be earned under each alternative.
1. Net Income
$enter a dollar amount
2. Net Income
$enter a dollar amount
Which course of action will produce the higher net income? select an option
Answer:
Results are below.
Explanation:
Giving the following information:
Sales $382,500 (units 5,100 $75 per unit)
variable costs $245,000 (48.04 per unit)
fixed costs $98,000.
Option 1:
Increase selling price by 16%.
New selling price= 75*1.16= 87
Sales= 5,100*87= 443,700
variable costs= (245,000)
fixed costs= (98,000)
Net income= 100,700
2. Reduce variable costs to 59% of sales.
Contribution margin= (382,500*0.41)= 156,825
fixed costs= (98,000)
Net income= 58,825
The most profitable option is the first one.
Robinson Company purchased Franklin Company at a price of $2,500,000. The fair market value of the net assets purchased equals $1,800,000. 1. What is the amount of goodwill that Robinson records at the purchase date? 2. Does Robinson amortize goodwill at year-end? 3. Robinson believes that its employees provide superior customer service, and through their efforts, Robinson believes it has created $900,000 of goodwill. Should Robinson Company record this goodwill?
Answer:
Explanation:
Goodwill is defined as the excess in amount of the purchase price of a company over the fair value at acquisition.It is intangible in nature , meaning it can not be physically separated from the other assets. Example are patent , brand name , good employee relation.
1.
Goodwill calculation
Purchase price - $2,500,000
Fair value - $1,800,000
Goodwill - $700,000
2.
No
Under the IAS 36, impairment of assets , goodwill is not amortized but annually tested for impairment as amortization is applicable to intangible assets with a definite useful life while intangible assets with indefinite useful life are annually tested for impairment to evaluate a loss in value experienced.
3
No
Under IAS 38 , Internally generated goodwill are not recognized as no related cost is incurred towards achieving a future benefit
Karen Bartlett was given a generic version of Sulindac, an anti-inflammatory drug. The result was that she developed toxic epidermal necrolysis, a disease that disfigured and blinded her. She brought suit alleging that there were warnings that should have been put on the generic version of the drug because issues with the skin infections were being reported. However, the manufacturer to Sulindac did not have FDA approval to place the warning on the product. The jury awarded Ms. Bartlett $21 million, and the generic manufacturer appealed the decision. Which of the following theories would be the best approach for the generic manufacturer to take in order to have the verdict reversed?
a. the commerce clause
b. substantive due process
c. preemption
d. due process because of the excessive size of the verdict
Answer:
option c: Preemption
Explanation:
preemption can simply be defined as the rule of law that proclaims the federal law and the constitution as the supreme law in all the land so therefore if there is a case whereby there is a conflict between a federal and a state law, the federal law will be in absolute control and this will render the state law to be void.
there are two primary occasion that will warrant preemption they are where clearly, federal law preempts state or local law, and also where preemption is implied. different kind of preemption can also be said to be express preemption, implied preemption, field preemption, conflict preemption and frustration of purpose preemption.
Lansing, Inc., provided the following data for its two producing departments: Molding Polishing Total Estimated overhead $400,000 $80,000 $480,000 Direct labor hours (expected and actual): Form A 1,000 5,000 6,000 Form B 4,000 15,000 19,000 Total 5,000 20,000 25,000 Machine hours: Form A 3,500 3,000 6,500 Form B 1,500 2,000 3,500 Total 5,000 5,000 10,000 Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 units of Form A produced and sold and 50,000 of Form B. Required:
1. Calculate the overhead rates for each department.
2. Using departmental rates, assign overhead to the two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using direct labor hours?
3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates, and compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?
Answer:
1. Form A$80 per machine hour
Form B $4 per direct labor hour
2.Form A from $3.84 to $10.00
Form B from $7.30 to $3.60
3. Form A Unit overhead cost $ 3.87
Form B Unit overhead cost $ 7.28
Explanation:
Lansing, Inc
1. Overhead rates for each department will be;
Molding
$400,000/5,000
= $80 per machine hour
Polishing
$80,000/20,000
= $4 per direct labor hour
2. The overhead assignment:
Form A
($80 ×3,500) + ($4 ×5,000)
$280,000+$20,000
=$300,000
Form B
($80 ×1,500) + ($4 ×15,000)
$120,000+$20,000
=$180,000
Total applied overhead $300,000 and $180,000
Units of production Form A :
300,000÷30,000
=Unit overhead cost $10.00
Units of production Form B
180,000÷50,000
= Unit overhead cost $3.60
Plantwide rate Will be :
$480,000/25,000
= $19.20 per direct labor hour
Form A overhead cost in units will be:
$19.20 ×6,000/30,000
$19.20×0.2
$3.84
Form B overhead cost in unit will be :
$19.20 ×19,000/50,000
$19.20×0.38
$7.296 approximately $7.30
The plantwide rate for Form A
$3.84 to $10.00
The plantwide rate for Form B
$7.30 to $3.60
3. Overhead assignment:
Form A
($80 ×1,200) + ($4 ×5,000)
=$96,000+$20,000
=$116,000
Form B
($80 ×3,800) + ($4 ×15,000)
=$304,000 +$60,000
=$364,000
Total applied overhead
Form A $116,000
Form B $364,000
Units of production
Form A
$116,000 ÷ 30,000
=Unit overhead cost $ 3.87
Form B
$364,000÷ 50,000
Unit overhead cost $ 7.28
When compared to the plantwide unit overhead costs the cost will be $0.03 more higher for Form A and $0.02 less for Form B.
Which means that departmental rates may not cause a change in the assignments because It will depends on the complexity of each product and the way in which the resource demands are been made in each of the department.
Every year, the U.S. Census Bureau conducts an income survey of about 60,000 American families carefully selected to represent the whole population. The data collected help to measure income inequality in the economy. Which of the following causes the census data to inaccurately measure income inequality?
a) Very few people move from one income quintile to another over the years.
b) Higher-income families tend to have more persons to support.
c) In-kind transfers do not add to people's incomes but are counted as income.
Answer:
c) In-kind transfers do not add to people's incomes but are counted as income.
Explanation:
In the given scenario the aim of the census is to measure income inequality in the population selected.
If however the amount of income earned by individuals is not estimated accurately the results of the study will be inaccurate.
In kind transfers are usually goods and services that a person gets for free of at a reduced rate. They are not considered to be income.
When in kind transfers are counted as income and do not actually add up to income, we cannot get a true picture of income of participants of the income survey.
People who have low income but high in kind transfers will be considered high income earners which is not true.
What was the firm's end-of-year cash balance? Recreate the firm's cash flow statement to arrive at your answer. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar, if necessary.
Answer:
$340,000
Explanation:
Statement of cash flow ( year-end December 31, 2012)
Operating activities Cashflow
Net Income = $5,000,000
Add back: Depreciation = $440,000
Net cashflow = $5,440,000
Investing activities Cashflow
Cash paid for machinery = ($5,400,000)
Net cashflow = ($5,400,000)
Financing activities Cashflow
Cash receipt from issuing long term debt =$1,000,000
Cash paid for dividends =(800,000)
Net cashflow =$200,000
Net increase = ($5,440,000-$5,400,000+$200,000)
Net increase in cash = $240,000
Opening balance as at 1 Jan 2012 =$100,000
Closing balance as at 31 Dec 2012 =($100,000+$240,000) = $340,000
