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.
Sloan Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,831. The freight and installation costs for the equipment are $554. If purchased, annual repairs and maintenance are estimated to be $415 per year over the four-year useful life of the equipment. Alternatively, Sloan can lease the equipment from a domestic supplier for $1,745 per year for four years, with no additional costs.
Required:
a. Prepare a differential analysis dated December 3 to determine whether Sloan should lease (Alternative 1) or purchase (Alternative 2) the equipment. 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. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.)
b. Determine whether the Sloan should lease (Alternative 1) or purchase (Alternative 2) the equipment.
Answer:
Alternative 1 Alternative 2 Differential
Lease Buy Amount
Purchase cost $0 $3,831 ($3,831)
Freight and $0 $554 ($554)
installation costs
Annual repairs and $0 $1,660 ($1,600)
maintenance costs
Lease costs $6,980 $0 $6,980
Total costs $6,980 $6,045 $935
The equipment should be purchased instead of leased because the costs of purchasing and maintenance costs are lower than lease costs.
Explanation:
A differential analysis is carried out to determine whether alternative projects' revenues and costs are higher. This way you can determine which project or investment costs less or generates higher profits.
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
Bookmark question for later Zoey is the CEO of a corporation she organized herself, and the corporation has 15 shareholders. The company operates in several states, as well as outside of the U.S. Her business consists mostly of training services for in-home medical care personnel. Her company would be a __________ corporation
Answer:
Professional corporation
Explanation:
A professional corporation is a type of corporation that is established by professional, majorly licensed individuals; they could include doctors, attorneys or architects. They mostly provide services that are related to the profession they practice. For example, architects establish an architectural firm to provide architectural services.
Professional corporations are usually established based on the laws binding the profession or the laws of the state. Most professional entrepreneurs can set up a professional corporation and can be established by one or more professionals.
In most professional corporations, the shareholders are usually only licensed individuals of the service rendered by the professional company.
Therefore, considering the information, Zoey's corporation would be a professional corporation.
At the end of 2021, Larkspur Co. has accounts receivable of $653,700 and an allowance for doubtful accounts of $24,200. On January 24, 2022, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,245.
A) Prepare the journal entry to record the write-off.
Credit
Enter an account title Enter a debit amount Enter a credit amount
What is the cash realizable value of the accounts receivable before the write-off and after the write-off?
Before Write-Off After Write-Off
Cash realizable value $ $
Answer:
January 24, 2022, Madonna Inc.'c account is written off
Dr Allowance for doubtful accounts 4,245
Cr Accounts receivable 4,245
the cash realizable value of the accounts receivable account:
before the write off = $653,700 - $24,200 = $629,500after the write off = ($653,700 - $4,245) - ($24,300 - $4,245) = $629,500The net balance of the account does not change because the allowance for doubtful accounts is a contra asset account that already decreased the accounts receivable balance.
Some major technology companies have faced scrutiny in the past when it comes to labor and human rights on the overseas suppliers' side. What are the challenges of monitoring overseas suppliers (especially tier 3, tier 4, etc.) that are guilty of not following labor and human rights guidelines
Answer: The answer is provided below
Explanation:
With overseas factories that continue to move to new locations with a lower labour costs, the monitoring and controlling working conditions becomes a challenge. Research has shown that companies do little to monitor human rights violations in the low-cost supply chain locations.
A scandal involving Apple was reported in 2014 at a manufacturing building in China. The building which was owned by Catcher Technology Co., manufactures metal iPad covers for iPhones. Some findings included hiring discrimination, locked safety exits, excessive work hours, and also unpaid overtime each month totalling about $290,000 in owed wages. The factory was reported to have been dumping its industrial fluids and waste into nearby rivers, and also not providing proper toxic equipment for the employees.
Human rights of these people saw n those area are being abused by having them exposed to pollution, which can lead to lung diseases.
Companies like Apple have said that they are continuing to monitor situations like this, and are fixing them, but we still hear cases of more wrongdoings, therefore you have to wonder how vital these issues truly are to the firms involved.
Hoosier Corporation declared a 2-for-1 stock split to all shareholders of record on March 25 of this year. Hoosier reported current E&P of $600,000 and accumulated E&P of $3,000,000. The total fair market value of the stock distributed was $1,500,000. Barbara Bloomington owned 1,000 shares of Hoosier stock with a tax basis of $100 per share.a) What amount of taxable dividend income, if any, does Barbara recognize this year? Assume the fair market value of the stock was $150 per share on March 25 of this year.b) What is Barbara's income tax basis in the new and existing stock she owns in Hoosier Corporation, assuming the distribution is tax-free?c) How does the stock dividend affect Hoosier's accumulated E&P at the beginning of next year?
Answer:
(a) The stock dividend is not taxable because it affects all shareholders pro rata
(b) Babara will transfer half of the old stock base to the new stock and make her new and old stock tax base $50
(c) Hoosier does not change his E&P for the stock dividend since the shareholders are not taxable.
Explanation:
The owner of a downtown parking lot has employed a civil engineering consulting frim to advise him on the economic feasibility of constructing an office building on the site. bill samuels, a newly hired civil engineer, has been assigned to make the analysis. he has assembled the following data
alternative total investment total net annual revenue
sell parking lot 0 0
keep parking lot 200,000 22,000
build 1 story building 400,000 60,000
build 2 story building 555,000 72,000
build 3 story building 750,000 100,000
build 4 story building 875,500 105,000
build 5 story building 1,000,000 120,000
The analysis period is be 15 years. for all alternatives, the property has an estimated resale(salvage) value at the end of 15 years equal to the present total investement.
(a) constuct a choice table for interest rate from 0% to 100%
(b) if the MARRR is 10%, what recommendation should bill make?
Answer: The answer has been attached
Explanation:
Base on the MARR been 10%, I'll recommend 3 storey building.
Further explanation has been attached. In the explanation, note that:
I = A/P e.g.
Interest rate for build 1 storey building:
= 60/400 × 100
= 15%
Investment Management Inc. (IMI) uses the capital market line to make asset allocation recommendations. IMI derives the
following forecasts:
• Expected return on the market portfolio: 12%.
• Standard deviation on the market portfolio: 20%.
• Risk-free rate: 5%.
Samuel Johnson seeks 'Ml's advice for a portfolio asset allocation. Johnson informs IMI that he wants the standard deviation of the portfolio to equal half of the standard deviation for the market portfolio. Using the capital market line, what expected return can IMI provide subject to Johnson's risk constraint?
Answer:
The expected return that IMI can provide subject to Johnson's risk constraint is 8.5%
Explanation:
Capital Market Line (CML)
Expected return on the market portfolio, E([tex]r_m[/tex]) = 12 %
Standard deviation on the market portfolio, σ[tex]_p[/tex] = 20%
Risk-free rate, [tex]r_f[/tex] = 5%
E([tex]r_c[/tex]) = [tex]r_f[/tex] + [ E([tex]r_p[/tex]) - [tex]r_f[/tex] ] × ( σ[tex]_c[/tex] ÷ σ[tex]_p[/tex])
= 0.05 + [ 0.12 - 0.05] × (0.10 ÷ 0.20)
= 8.5%
You have been asked to analyze the bids for 200 polished disks used in solar panels. These bids have been submitted by three suppliers: Thailand Polishing, India Shine, and Sacramento Glow. Thailand Polishing has submitted a bid of 3,000 baht. India Shine has submitted a bid of 3,000 rupee. Sacramento Glow has submitted a bid of $3,000. You check with your local bank and find that $1=10 baht , and $1=8 rupee. The final destination for the disks is New Delhi, India and there is a 35% import tax. Thailand Polishing and Sacramento Glow are based outside of India and India Shine is based in India.A .What is the price per unit in dollars, including import tax for Thailand polishing?B. What is the price per unit for India Shine?C. What is the price per unit for Sacramento Glow?
Answer:
(a) Thailand polishing price per unit is $2.03
(b) India shine price per unit is $1.88
(c) Sacramento glow price per unit is $15
Explanation:
(a) Thailand polishing:
Thailand polishing has submitted a quote of 3000 baht
$1 = 10 bhat
1 bhat = $ 0.1
Thailand polishing submitted bid = 3000 × $0.1 =$300
Import tax = 35%
Total cost = 1.35 × 300 = $405
Cost per unit = 405 ÷ 200 = $2.03
(b) India shine:
India shine has submitted a bid of 3000 rupees
$1 = 8 rupees
1 Rupee = $0.125
India shine submitted bid = 3000 × 0.125 = $375
Price per unit = 375 ÷ 200 = $1.88
(c) Sacramento Glow submitted bid = $3,000
price per unit = $3,000 ÷ 200
= $15
Kat Outfitting currently has $22,500 in cash. The company owes $49,500 to suppliers for merchandise and $52,500 to the bank for a long-term loan. Customers owe the company $41,000 for their purchases. The inventory has a book value of $76,800 and an estimated market value of $72,000. If the store compiled a balance sheet as of today, what would be the book value of the current assets?
Answer:
The book value of the current assets is $140,300
Explanation:
Cash = $22,500
Amount owed by company = $49,500
Amount Owed by Customers = $41,000
Book Value of Inventory = $76,800
Estimated market value = $72,000
Book Value of Current Assets = Cash + Amount Owed by Customers + Book Value of Inventory
Book Value of Current Assets = $22,500 + $41,000 + $76,800
Book Value of Current Assets = $140,300
The Digby company will sell 100 units (x1000) of capacity from their Daft product line. Each unit of capacity is worth $6 plus $4 per automation rating. The Digby company will sell the capacity for 35% off. How much do they receive when the capacity is sold
Answer: $2,210,000
Explanation:
The company will sell at full cost per Automation rating which is not provided.
The Comp-XM Inquirer shows this Automation rating to be 7.
The Total Cost per Automation rating is,
= $6 + ($4 * 7)
= $34
Selling 100,000 units gives
= 100,000 * 34
= $3,400,000
Selling at 35% off.
= 3,400,000 * ( 1 - 0.35)
= $2,210,000
The annual fixed costs for a plant are $100,000, and the variable costs are $140,000 at 70% utilization of available capacity, with net sales of $280,000. What is the breakeven point in units of production if the selling price per unit is $40
Answer:
With the production 5000 units the plant will achieve it's break even point
Explanation:
Solution
The break even points is the point in a business when the total revenue is exactly the same to the equal expenditure.
The formula is given below:
D' = Cy/(p-cy)
Here
D' =the demand at break even point
p = the selling price
cy= the variable costs per unit
Cy = the total fixed cost
Thus
The total cost of the plant = $100,000
The variable costs = $140,000
The net sales = $280,000
The selling price per unit = $40
The total no units sold per year is given as :
Annual sale (units) = Total sales/Sale per unit
Now,
By the method of substitution we have the following.
Annual sale (units) = $280,000/40
=7000 units/year
The formula for variable cost per unit cy is
cy = Cy/Annual sale (units)
Now,
We substitute in the above equation the value of Cy as $140,000 and annual sale as 7000 units/per year
cy = $140,000/7000
=$20 units
For the demand at break even point D', we have the following:
D' = Cy/(p-cy)
We We substitute in the above equation the value of Cy as $100,000 and p as $40/unit and cy as $20 /unit
D' = 100000/(40 -20)
=5000 units/year
Callas Corporation paid $380,000 to acquire 40 percent ownership of Thinbill Company on January 1, 20X9. The amount paid was equal to Thinbill’s underlying book value. During 20X9, Thinbill reported operating income of $45,000 and income of $20,000 from gains on derivative contracts that were designated as cash flow hedges, so these gains were reported in Other Comprehensive Income (OCI). Thinbill paid dividends of $9,000 on December 10, 20X9.
Required:
a. Give all journal entries that Callas Corporation recorded in 20X9, associated with its investment in Thinbill Company.
b. Give all closing entries at December 31, 20X9, associated with its investment in Thinbill Company.
Answer: Please refer to Explanation
Explanation:
A.
January 1 20X9
DR Investment in Thinbill Company $380,000
CR Cash $380,000
(To record Investment in Thinbill Company)
DR Investment in Thinbill Company $18,000
CR Income from Thinbill Company $18,000
(To record income from Thinbill company)
DR Investment in Thinbill Company $8,000
CR Unrealised gain on Investment $8,000
(To record share of OCI reported by Thinbill Company)
DR Cash $3,600
CR Dividend $3,600
(To record dividend received from Thinbill Company)
Workings
Income from Thinbill Comapny
Callas owns 40% of Thinbill company and so is entitled to 40% of income which is,
= 40% x 45,000
= $18,000
Dividends
= 9,000 x 40%
= $3,600
Unrealised Gain on Income
= 20,000 x 40%
= $8,000
b. The closing entries are as follows,
DR Income from Thinbill Company $18,000
CR Retained Earnings $18,000
(To recognise income from Thinbill Company)
DR Unrealised Gain on Investment $8,000
CR Accumulated OCI Income from Investee (Thinbill Company) $8,000
(To record accumulated OCI income)
Fine Stationery makes personalized stationery of the highest quality. The company maintains a stock of blank note cards, calling cards, stationery, and envelopes. Customers order online, indicating the product type, personalization (monogram, name), font style, and color. The following schedule is typical of an order of 100 calling cards:
Activity Minutes
Process order ............... 3
Wait for production to begin......... 55
Pull calling cards from inventory........ 15
Set up machine for font style and color.... 2
Process calling cards............ 40
Inspect cards.............. 5
Wait for packaging ............ 16
Package cards for shipping......... 2
Wait for pickup by FedEx......... 120
Required:
Calculate the manufacturing cycle efficiency.
Answer:
The manufacturing cycle efficiency is 0.219
Explanation:
In order to calculate the manufacturing cycle efficiency we would have to calculate the following formula:
manufacturing cycle efficiency=value added time/throughput time
value added time= 40 min
throughput time=Process time+Inspection time+movie time+Queue time
throughput time=40+5+15+2+120
throughput time=182 min
Therefore, manufacturing cycle efficiency=40/182
manufacturing cycle efficiency=0.219
The manufacturing cycle efficiency is 0.219
Two different forecasting techniques (F1 and F2) were used to forecast demand for cases of bottled water. Actual demand and the two sets of forecasts are as follows:
PREDICTED DEMAND
Period Demand F1 F2
1 68 63 62
2 75 66 61
3 70 73 70
4 74 65 71
5 69 71 73
6 72 69 73
7 80 70 76
8 78 72 80
a.
Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate? (Round your answers to 2 decimal place.)
MAD F1
MAD F2
(Click to select)F1F2None appears to be more accurate.
b.
Compute the MSE for each set of forecasts. Given your results, which forecast appears to be more accurate? (Round your answers to 2 decimal places.)
MSE F1
MSE F2
(Click to select)F1F2None appears to be more accurate.
c.
In practice, either MAD or MSE would be employed to compute forecast errors. What factors might lead a manager to choose one rather than the other?
Either one might already be in use, familiar to users, and have past values for comparison. If (Click to select)control chartstracking signals are used, MSE would be natural; if (Click to select)tracking signalscontrol charts are used, MAD would be more natural.
d.
Compute MAPE for each data set. Which forecast appears to be more accurate? (Round your intermediate calculations to 2 decimal places and and final answers to 2 decimal places.)
MAPE F1
MAPE F2
Answer:
a. Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate?
I used an excel spreadsheet (attached as MAD).
F1 seems to be more accurate.
b. Compute the MSE for each set of forecasts.
I used an excel spreadsheet (attached as MSE).
F2 seems to be more accurate.
c. In practice, either MAD or MSE would be employed to compute forecast errors. What factors might lead a manager to choose one rather than the other?
Either one might already be in use, familiar to users, and have past values for comparison.
If control charts are used, MSE would be natural; if tracking signals are used, MAD would be more natural.d. Compute MAPE for each data set. Which forecast appears to be more accurate?
I used an excel spreadsheet (attached as MAPE).
F2 seems to be more accurate.
Explanation:
Period Demand F1 F2
1 68 63 62
2 75 66 61
3 70 73 70
4 74 65 71
5 69 71 73
6 72 69 73
7 80 70 76
8 78 72 80
The two independent cases are listed below: Case A Case B Year 2 Year 1 Year 2 Year 1 Sales Revenue $11,000 $9,000 $21,000 $18,000 Cost of Goods Sold 6,000 5,500 12,000 11,000 Gross Profit 5,000 3,500 9,000 7,000 Depreciation Expense 1,000 1,000 1,500 1,500 Salaries and Wages Expense 2,500 2,000 5,000 5,000 Net Income 1,500 500 2,500 500 Accounts Receivable 300 400 750 600 Inventory 750 500 730 800 Accounts Payable 800 700 800 850 Salaries and Wages Payable 1,000 1,200 200 250 Show the operating activities section of the statement of cash flows for year 2 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
Net cash from operating activities are $2,250 for Case A and $3,820 for Case B.
Explanation:
The indirect method of presenting the cash flow statement is a method that starts with net income or loss, and then with additions to or subtractions from of revenue and expense items that are non cash to obtain cash flow from operating activities.
For this question, this can be presented as follows:
Details Case A ($) Case B ($)
Net Income 1,500 2,500
Adjustments:
Depreciation Expense 1,000 1,500
Changes in Operating assets & liab.:
(Increase) Decrease in Acct receivables 100 –150
Decrease (Increase) in Inventory –250 70
Increase (Decrease) in Accounts payable 100 –50
Increase (Decrease) in Sal. & Wag. Paybl. –200 –50
Net cash from operating activities 2,250 3,820
The Net cash-flow from the operating activities for Case A is $2,250.
The Net cash-flow from the operating activities for Case B is $3,820.
Here, we are preparing the "Year 2" operating activities section of the cash flows statement using the indirect method
Statememt of Cash flow (Operating activities)
Case A Case B
Particulars Amount Amount
Net Income $1,500 $2,500
Adjustments for Case A & B
Depreciation Expense $1,000 $1,500
Changes in operating assets
& liabilities of Case A & B
(Increase) / Decrease in Account receivables $100 -$150
Decrease / (Increase) in Inventory -$250 $70
Increase / (Decrease) in Accounts payable $100 -$50
Increase / (Decrease) in Sal. & Wage Payable $200 -$50
Net cash from operating activities $2,250 $3,820
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A company currently pays a dividend of $3.4 per share (D0 = $3.4). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.3, the risk-free rate is 6.5%, and the market risk premium is 1.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
Answer:
Current price of stock =$128.06
Explanation:
The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return.
The model is given as
P = D× g/(r-g)
P- price, D- dividend payable in year 1, r -cost of equity, g - growth rate in dividend
Cost of equity
The cost of equity can be calculated using the Capital Asset Model (CAPM).
Ke= Rf +β(Rm-Rf)
Ke =? , Rf- 6.5%, (Rm-Rf)- 1.5, β- 1.3
Ke=6.5% + 1.3× (1.5)= 8.45%
Stock price
PV of dividend in year 1 = 3.4× 1.17× 1.0845^(-1)=3.668
PV of dividend in year 2 = 3.4× 1.17^2× 1.0845^(-2) = 3.9572
PV of dividend in year 3
This will be done in two(2) steps:
Step 1- PV in year 2 terms
3.4× 1.17^2× 1.05/(0.0845- 0.05)= 141.651
Step 2- PV in year 0
141.6513913× 1.0845^(-2)= 120.4375
Current piece of stock = 3.668 + 3.957 + 120.4375 = 128.062
Current price of stock =$128.062
Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $12. At the start of January 2015, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows:
Cash $ 1,590,000
Accounts Receivable 245,000
Supplies 17,800
Equipment 922,000
Land 1,250,000
Building 435,000
Accounts Payable 137,000
Unearned Revenue 140,000
Notes Payable (due 2018) 81,000
Common Stock 2,800,000
Retained Earnings 1,301,800
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.
1. Analyze the effect of the January transactions (shown below) on the accounting equation, and indicate the account, amount, and direction of the effect (+ for increase and − for decrease) of each transaction.(Enter any decreases to account balances with a minus sign.)
a. Received $65,250 cash from customers for subscriptions that had already been earned in 2014.
b. Received $215,000 cash from Electronic Arts, Inc. for service revenue earned in January.
c. Purchased 10 new computer servers for $34,600; paid $14,400 cash and signed a three-year note for the remainder owed.
d. Paid $12,600 for an Internet advertisement run on Yahoo! in January.
e. Sold 19,200 monthly subscriptions at $12 each for services provided during January. Half was collected in cash and half was sold on account.
f. Received an electric and gas utility bill for $5,250 for January utility services. The bill will be paid in February.
g. Paid $420,000 in wages to employees for work done in January.
h. Purchased $3,300 of supplies on account.
Paid $3,300 cash to the supplier in (h).
Prepare journal entries for the January transactions listed in part 1, using the letter of each transaction as a reference. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts.
Prepare an unadjusted trial balance as of January 31, 2015.
Prepare an Income Statement for the month ended January 31, 2015, using unadjusted balances from part 4
Calculate net profit margin, expressed as a percent
Answer:
Explanation:
1 Journal Entries:
Date-----Accounts Title and Explanation-----Debit$--------Credit $
a Cash 65250
Service Revenue 65250
b Cash 215000
Accounts Receivable 215000
c Office Equipment (computers) 34600
Cash 14400
Note Payable 20200
d Advertisement expense 12600
Cash 12600
e Cash 115200
Accounts Receivable 115200
Service Revenue 230400
f Utility expenses 5250
Accounts Payable 5250
g Wages 420000
Cash 420000
h Supplies 3300
Accounts Payable 3300
i Accounts Payable 3300
Cash 3300
unadjusted trial balance as of January 31, 2015:
Account Title Debit $ Credit $
Cash 1535150
Accounts Receivable 145200
Supplies 21100
Equipment 956600
Land 1250000
Building 435000
Accounts Payable 142250
Unearned Revenue 140000
Notes Payable 101200
Common Stock 2800000
Retained Earnings 1301800
Service Revenue 295650
Advertisement 12600
Utilities 5250
Wages 420000
Total 4780900 4780900
Income Statement for the month ended January 31, 2015:
Service Revenues $295650
Less: Expenses:
Wages 420000
Advertisement 12600
Utility expense 5250 437850
Net Income (Loss) ($142200)
January Income Statement is showing loss of 48.1%.
Homestead Jeans Co. has an annual plant capacity of 67,000 units, and current production is 45,700 units. Monthly fixed costs are $54,400, and variable costs are $30 per unit. The present selling price is $40 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 19,600 units of the product at $33 each. Dawkins Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Homestead Jeans Co.
Required:
a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. 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.
b. Briefly explain the reason why accepting this additional business will increase operating income.
c. What is the minimum price per unit that would produce a positive contribution margin?
a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. 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.
Answer:
Homestead Jeans Co.
a) Differential Analysis dated November 12
Options Reject (Alternative 1) Special Order Accept (Alternative 2)
Units sold 45,700 19,600 65,300
Revenue $1,828,000 $646,800 $2,474,800
Variable Cost -1,371,000 -588,000 -1959,000
Contribution $457,000 $58,800 $515,800
Fixed Costs 652,800 $0 652,800
Net Income/(Loss) -$195,800 $58,800 -$137,000
b) Accepting this order will reduce operating loss from $195,800 to $137,000, making a difference of $58,800. The reason is that the special order will make a contribution towards offsetting the fixed cost with a sum of $58,800.
c) Minimum price per unit to produce positive contribution margin:
The contribution margin per unit = Selling price minus variable cost per unit = $40 - $30 = $10 per unit.
To produce positive contribution margin, selling price must be more than variable cost. Selling price will be at least $31.
Therefore, the minimum price per unit to produce positive contribution is $31.
Explanation:
a) In differential analysis, only relevant costs are considered. Fixed costs are regarded as sunk and therefore irrelevant in making any differential decision.
b) The revenue is a function of selling price and quantity sold. While the variable costs equal units sold multiplied by the unit variable cost.
Identify what type of unemployment each of the individuals faces. James is an architect who has been laid off owing to a slump in the demand for property. He feels he will have to wait until the economy picks up before he can get a new job. James is facing
Answer:
cyclical unemployment
Explanation:
The situation when the overall demand for goods and services cannot support full employment in an economy, it results in cyclical unemployment. It takes place during periods of slow economic growth.
In the given question,
as James will have to wait until the economy picks up before he can get a new job, he is facing cyclical unemployment.
Cho's Performance Pizza is a small restaurant in Miami that sells gluten-free pizzas. Cho's very tiny kitchen has barely enough room for the three ovens in which her workers bake the pizzas. Cho signed a lease obligating her to pay the rent for the three ovens for the next year. Because of this, and because Cho's kitchen cannot fit more than three ovens, Cho cannot change the number of ovens she uses in her production of pizzas in the short run. However, Cho's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, Cho lets them know how many workers she needs for each day of the week. In the short run, these workers are __________ inputs, and the ovens are __________ inputs.
Answer: Variable ... Fixed
Explanation:
In the short run, Variable Inputs or costs are known as those which can be changed and their quantities can be varied. In this scenario, the employees that Cho's uses can be varied and so are the Variable Inputs.
Similarly, those costs that cann ot be changed or varied in the short run are rightly known as Fixed Inputs. Cho's Kitchen cannot take more than 3 ovens and also she has already signed a lease for them. These costs cannot be changed and so make the oven a Fixed Input.
It is worthy of note that in the long term, all Costs are considered Variable.
A company is considering the purchase of a new piece of equipment for $90,000. Predicted annual cash inflows from this investment are $36,000 (year 1), $30,000 (year 2), $18,000 (year 3), $12,000 (year 4) and $6,000 (year 5). The payback period is:
Answer:
3.5 years
Explanation:
Payback period calculates the amount of the time it takes to recover the amount invested from the cumulative cash flows.
The amount invested is $-90,000
In the first year , $-90,000 + $36,000 = $-54,000 is recovered
In the second year, $-54,000 + $30,000 = $-24,000 is recovered
In the third year, $-24,000 + $18,000 = $-6,000 is recovered
In the fourth year, $-6,000 + $12,000 = $6000 is recovered.
By the fourth year, the total amount invested is recovered as the cash flow turns postive
Pay back period = 3 years + $6000/$12,000 = 3.5 years
I hope my answer helps you
Lopez Corporation incurred the following costs while manufacturing its product.Materials used in product $120,000 Advertising expense $45,000Depreciation on plant 60,000 Property taxes on plant 14,000Property taxes on store 7,500 Delivery expense 21,000Labor costs of assembly- 110,000 Sales commissions 35,000line workersFactory supplies used 23,000 Salaries paid to sales clerks 50,000Work in process inventory was $12,000 at January 1 and $15,500 at December 31. Finished goods inventory was $60,000 at January 1 and $45,600 at December 31.Compute:____ Cost of goods manufactured $Compute cost of goods sold.
Answer:
Cost of goods manufactured is $323,500
Cost of goods sold is $337,900
Explanation:
Given:
Materials used in product = $120,000
Advertising expense = $45,000
Depreciation on plant = $60,000
Property taxes on plant = $14,000
Property taxes on store = $7,500
Delivery expense = $21,000
Labor costs of assembly-line workers = $110,000
Sales commissions = $35,000
Factory supplies used = $23,000
Salaries paid to sales clerks = $50,000
Work in process inventory was $12,000 at January 1 and $15,500 at December 31.
Finished goods inventory was $60,000 at January 1 and $45,600 at December 31.
(a) Cost of goods manufactured = Materials used in product + Depreciation on plant + Labor costs of assembly-line workers + Property taxes on plant + Factory supplies used + Beginning work in process - ending work in process
= $120,000 + $60,000 + $110,000 + $14,000 + $23,000 + $12,000 - $15,500
= $323,500
(b) Cost of goods sold = Cost of goods manufactured + opening finished goods inventory - Closing finished goods inventory
= $323,500 + $60,000 - $45,600
= $337,900
Based on the given information,
The cost of goods manufactured is $323,500
cost of goods sold $337,900
Calculations are as follows
(a) Cost of goods manufactured =Depreciation on plant + Materials used in product +Property taxes on plant + Labor costs of assembly-line workers + Factory supplies used + Beginning work in process - ending work in process
= $120,000 + $60,000 + $110,000 + $14,000 + $23,000 + $12,000 - $15,500
= $323,500
(b) Cost of goods sold = Cost of goods manufactured + opening finished goods inventory - Closing finished goods inventory
= $323,500 + $60,000 - $45,600
= $337,900
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(LaVilla) LaVilla is a village in the Italian Alps. Given its enormous popularity among
Swiss, German, Austrian, and Italian skiers, all of its beds are always booked in the winter
season and there are, on average, 1,200 skiers in the village. On average, skiers stay in
LaVilla for 10 days.
a. How many new skiers are arriving—on average—in LaVilla every day?
b. A study done by the largest hotel in the village has shown that skiers spend on average $50 per person on the first day and $30 per person on each additional day in local
restaurants. The study also forecasts that—due to increased hotel prices—the average
length of stay for the 2003/2004 season will be reduced to five days. What will be the
percentage change in revenues of local restaurants compared to last year (when skiers
still stayed for 10 days)? Assume that hotels continue to be fully booked!
Q2.6 (Highway) While driving home for the holidays, you can’t seem to get Little’s Law out of
Answer:
a) 120 skiers per day
b) 6.25% increase in revenue
Explanation:
a) If the average skier stays 10 days, the average turnover is 1/10 of the skiers per day, or 1200/10 = 120 skiers per day.
__
b) For a stay of n days, the average skier spends ...
50 +(n-1)30 = 20 +30n
and the average spending per day is ...
(20 +30n)/n = (20/n) +30
So, for a 10-day stay, the average skier spends in restaurants ...
20/10 +30 = 32 . . . . per day
And for a 5-day stay, the average skier will spend ...
20/5 +30 = 34 . . . . per day
The change in restaurant revenue is expected to be ...
(34 -32)/32 × 100% = 2/32 × 100% = 6.25%
Restaurant revenues will be 6.25% higher compared to last year.
Ebbers Corporation overstated its ending inventory balance by $7,000 in the current year. What impact will this error have on cost of goods sold and gross profit in the current year and following year?
Answer:
ZOOM
Explanation:
A couple borrows $200,000 for a mortgage that requires fixed monthly payments over 30 consecutive years. The first monthly payment is due in one month. If the interest rate on the mortgage is 5%, which of the following comes closest to the monthly payment?
When would the calculation of the effective annual interest rate be most useful?
a. When comparing two investments with different annuity amounts
b. When comparing two investments with different par values
c. When comparing two investments that end at different points in time
d. When comparing two investments that compound differently within a year
e. When comparing two investments that have different inherent risk
Answer:
(a) The monthly payment is $ 1,073.64
(b) The correct option is option D. When comparing two investments that compound differently within a year.
Explanation:
Monthly payment = $1,073.64
Using financial calculator BA II Plus - Input details:
$
I/Y = Rate = 5/12 = 0.416667
FV = Future value = $0
N = Total payment term 25*12 = 360
PV = Present value of loan -$200,000
CPT > PMT = Monthly Payment $1,073.64
1. The monthly payment by the couple is $1,073.64.
2. The calculation of the effective annual interest rate would be most useful d. When comparing two investments that compound differently within a year.
Data and Calculations:
The monthly payment is determined as follows:
(# of periods) = 360 months (30 x 12)
I/Y (Interest per year) = 5%
PV (Present Value) = $200,000
FV (Future Value) = $0
Results:
Monthly Payment = $1,073.64
Sum of all periodic payments = $386,511.57
Total Interest = $186,511.57
Thus, the couple would pay $1,073.64 monthly for 30 years in order to pay off the mortgage of $200,000 at 5% interest.
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Indicate whether each of the following statements is true or faise Statement 1. The government can raise revenue by taxing the sellers without creating deadweight loss when the demand for the goods being taxed is perfectly inelastic 2. A tax that raises no revenue for the government cannot have any deadweight loss.
Answer and Explanation:
The indication of the following statement regarding true or false is
For Statement 1
This given statement is true as the demand is perfectly inelastic so there is no deadweight loss because quantity does not change or not have any impact
Therefore, in this case, the government only raise revenue but at the same time when there is an increase in elasticity so there is a change in deadweight loss
For Statement 2
This given statement is false as if no revenue is there, there will be deadweight loss
Adjustment for Unearned Revenue
On June 1, 20Y2, Herbal Co. received $41,250 for the rent of land for 12 months.
Journalize the adjusting entry required for unearned rent on December 31, 20Y2.
Set up an Unearned Fees T-account. Recall that the unearned revenue account is decreased (debited) for the amount of the revenue that has been earned, and the related revenue account is increased (credited). The balance before adjustment will be the normal balance for the unearned liability account. The number given for the end of the year is to be the new balance after adjusting out the revenue earned. What amount is this difference between the pre-adjustment balance and the post-adjustment balance?
Answer:
oshe mush have been out of her head
Explanation:
0she lost her dog in the microwave
Plaintiffs filed a class action lawsuit against investment banks alleging that they inflated prices on more than 300 IPOs, causing IPO investors to overpay for stock, and unlawfully benefited these banks through overcompensation of banking commissions and profits made through quick sales of this stock in their own accounts before prices settled into a more realistic valuation. How would you combat such abuses going forward
Answer: The answer is provided below
Explanation:
When we think about investment, individuals and firms should understand the risks before they invest their money, and also the loss risks.
When investing in a business or a corporation that you may work for, it is vital to understand and be clear on the fine print and also the 180-dayhold. It is vital on any purchase to understand the risks and rules which come along with it especially stocks.
It is crucial to the success of an individual, that research is done in order to make sure everything is understood prior to the stock sale.
On the other side, federal banking regulators committee should also do a better job with the investigations and the enforcements of bank and the stock regulations.
