Answer:
The correct answer to the following question will be Option B.
Explanation:
These conditions hopefully reduce banking crises as well as quantify the community against banks never running cash. The criteria for the reservation were established to be doing the ends of the next day.Amount of inter-bank payments, these funds also convince the public which banks aren't going to make many such mortgages.Other available options have no connection with the particular circumstance. So the answer to the above seems to be the right one.
The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Speedway Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways.
1 Current Year Previous Year
2 Revenues:
3 Admissions $116,034.00 $130,239.00
4 Event-related revenue 151,562.00 163,621.00
5 NASCAR broadcasting revenue 192,662.00 185,394.00
6 Other operating revenue 29,902.00 26,951.00
7 Total revenue $490,160.00 $506,205.00
8 Expenses and other:
9 Direct expense of events $101,402.00 $106,204.00
10 NASCAR purse and sanction fees 122,950.00 120,146.00
11Other direct expenses 18,908.00 20,352.00
12 General and administrative 183,215.00 241,223.00
13 Total expenses and other $426,475.00 $487,925.00
14 Income from continuing operations $63,685.00 $18,280.00
Required:
A. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. Rounding instructions
B. Comment on the significant changes.
Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. Rounding instructions
Answer:
A)
Speedway Motorsports, Inc.
Comparative Income statement
For the Years 202x and 202x₋₁
202x 202x₋₁
Total revenue $490,160 $506,205
Admissions 23.67% 25.73%Event related 30.92% 32.32%NASCAR broadcasting 39.31% 36.63%Other operating revenue 6.1% 5.32%Direct expenses: 49.63% 48.74%
Direct expense of events 20.69% 20.98% NASCAR purse & sanction fees 25.08% 23.73%Other direct expenses 3.86% 4.03%General and administrative 37.38% 47.65%
Income from continuing operations 12.99% 3.61%
B) The most significant changes are that total revenues actually decreased, but net income from operating activities actually creased both in $ amounts and as % of total revenue. Direct expenses remained at similar levels during both years, even 202x₋₁ direct expenses were lower. But the most significant cost reduction was made on general and administrative expenses which were lowered by almost 10% (compared to total revenues). Only NASCAR broadcasting related revenues increased, while all the other revenues decreased in % and absolute amounts.
The following costs are budgeted for Harlow Corporation for next year: The costs above are based on a level of activity of 20,000 units. Assuming that this activity is within the relevant range, what would total cost per unit be for Harlow if the level of activity was only 18,000 units?
Answer:
$48.50
Explanation:
Harlow Corporation
First step is to calculate for Variable cost per unit:
Variable cost per unit =
$270,000 ÷ 20,000 units
= $13.50 per unit
Second step is to calculate for the cost function
Cost function :
Y = $630,000 + $13.50X
Y= $630,000 + $13.50(18,000)
Y=$630,000+$243,000
Y = $873,000
Therefore:
Total cost / number of units = total cost per unit$
Total cost =$873,000
Number of units= 18,000
$873,000 ÷ 18,000
= $48.50
Therefore the total cost per unit is $48.50
Why is research ethics important?
Answer:
Research ethics are important for the following reasons:
1.They promote the aims of research, such as expanding knowledge.
2.They support the values required for collaborative work
3. They support important social and moral values,
The law of diminishing marginal productivity states that:________.
a. As you expand output, your marginal productivity eventually increases
b. As you expand output, your marginal productivity eventually declines
c. As you expand output, the total product eventually increases
d. None of the above
2. What are economies of scale?
a. decreasing average costs as production increases
b. increasing average costs as production increases
c. increasing fixed costs as production increases
d. none of the above
3. What are economies of scope?
a. lower average costs when multiple different products are produced
b. higher average costs when multiple different products are produced
c. Constant average costs when multiple different products are produced
d. none of the above
Answer:
b. As you expand output, your marginal productivity eventually declines
a. decreasing average costs as production increases
a. lower average costs when multiple different products are produced
Explanation:
The law of diminishing marginal returns states that as more unit of variable factors of production are added to production, output would increase at first but after a period, it would increase at a negative rate.
Economies of scale is the reduction in cost thay accrue to firms as they increase production. For example, a supplier might give a firm a discount for buying in bulk.
Economies of scope states that average cost would fall as the production of similar products increases. For example, a fashion designer who makes women's clothings decides to make scarfs with the scraps of clothes left.
I hope my answer helps you
Post the entries in the general journal below to the Accounts Receivable account in the general ledger and to the appropriate accounts in the accounts receivable ledger for Calderone Company.
Assume the following account balances at January 1, 2019
Accounts Receivable (control account) $7,880
Accounts Receivable-John Gibrone 4, 780
Accounts Receivable-Jim Garcia 2,090
Accounts Receivable-June Lin. 1,01
General Journal
Date 2019 Description Post Debit Credit
Ref
Jan 8 Cash 470
Accounts Receivable/John Gibrone 470
Received partial payment or account from John Gibrone
20 Sales Returns and Allowances 300
Sales Tax Payabl 24
Accounts Receivable/3im Garcia 324
Accept return of defective merchandis, Credit
Memorandum 121; original sale
made on Sales S1ip 11102 of
December 27, 2018 1.
Prepare a schedule of accounts recelvable for Calderone Company at January 31, 2019. 2. Should the total of your accounts receivable schedule agree with the balance of the Accounts Receivable account in the general ledger at January 31, 2019?
Answer:
1. Prepare a schedule of accounts receivable for Calderone Company at January 31, 2019.
Since there is not enough room here, I prepared an excel spreadsheet. Since we are not told the credit terms of the sales, I assumed all the sales were more not past due.
2. Should the total of your accounts receivable schedule agree with the balance of the Accounts Receivable account in the general ledger at January 31, 2019?
Of course, the balance of the accounts receivable control account should equal the total balance of the accounts receivable schedule. Even if some accounts are written off (bad debt), both the accounts receivable schedule and the general ledger accounts receivable should show that write off.
Explanation:
Miguel works at LoftCo, Inc., and has been asked to help lead the development of the company's new balanced scorecard. He and his multifunctional team developed strategic objectives and performance metrics for each of the four perspectives. This work constitutes the complete set of steps in developing a BSC performance management system.
a. true
b. false
Answer:
The correct answer is A. True
Explanation:
Solution
Balanced scorecard performance management system: It is define as a management system and strategic planning that companies or firms use in communicating their set target and objectives.
Furthermore, a balanced scorecard is a measurement of management performance which can recognize and refine internal functions and external results.
On July 8, Jones Inc. issued an $62,900, 9%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends on July 31. Using the 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year
Answer:
The amount of interest expense recognized by Jones in the current fiscal year is $361.675
Explanation:
According to the given data Jones Inc. issued an $62,900, 9%, 120-day note payable to Miller Company On July 8, therefore if the the fiscal year of Jones ends on July 31 there 23 days between July 8 and July 31.
So, to calculate the amount of interest expense recognized by Jones in the current fiscal year we would have to make the following calculation:
Interest expense=$62,900*9%*(23/360)
Interest expense=$361.675
The amount of interest expense recognized by Jones in the current fiscal year is $361.675
(5). The variance of Stock A is .005, the variance of the market is .008 and the covariance between the two is .0026. What is the correlation coefficient
Answer:
0.4110
Explanation:
The formula and computation of the correlation coefficient is shown below:
Correlation co-efficient = Covariance ÷ (Standard deviation of market × Standard deviation of Stock A)
where,
Covariance between the two = 0.0026
Variance of the stock A = 0.005
And, the variance of the market is 0.008
Now placing these values to the above formula
So, the correlation coefficient is
= 0.0026 ÷ (0.008 × 0.005)^0.50
= 0.0026 ÷ 0.006324555
= 0.411096096
= 0.4110
Hence, the correlation coefficient is 0.4110
Which of the following statements concerning the selection of risk management techniques and insurance market conditions is (are) true? I.It's easier to purchase affordable insurance during a "soft" market than during a "hard" market.II.Retention is used more during a "soft" market than during a "hard" market.I onlyII onlyboth I and IIneither I nor II
Answer:
I.It's easier to purchase affordable insurance during a "soft" market than during a "hard" market
I only
Explanation:
When a purchaser of insurance wants to make a purchase he analyses the market to get a favourable condition that reduces risk and loss.
The market condition can be a soft market or hard market.
Soft market is one in which potential sellers are more than potential buyers. So supply exceeds demand. Buyers are able to buy affordable insurance.
Hard market on the other hand is when there is an upswing in market cycle. Premiums increase and capacity for insurance decreases.
It is more difficult to get affordable insurance in this market
Digital Corp is considering investing in project A. Their accountants gave them the following information: Initial investment: $1,200,000 Salvage Value: $340,000 Contribution Margin: $320,000 Present Value of Cash Flows: 4,580,000 Annual Cash Inflow: $850,000 Cost of Capital: 9% Length of project: 5 years What is the payback period
Answer:
The payback period for the investment is 1.41 years
Explanation:
The payback period is the length of time it takes an investment to repay back the investment capital outlay committed to it at the inception of the project.
The payback period is computed as the initial investment divided by annual cash inflow
Initial investment is $1,200,000
Annual cash inflow is $850,000
Payback period=$1,200,000/$850,000= 1.41 years
We can express the 0.41 in months=0.41*12=4.92 approximately 5 months
Accounting Cycle Review 15 a-e
Cullumber Corporation’s trial balance at December 31, 2020, is presented below. All 2020 transactions have been recorded except for the items described below.
Debit
Credit
Cash
$26,100
Accounts Receivable
60,000
Inventory
23,300
Land
67,200
Buildings
81,700
Equipment
41,000
Allowance for Doubtful Accounts
$470
Accumulated Depreciation—Buildings
25,500
Accumulated Depreciation—Equipment
14,200
Accounts Payable
19,500
Interest Payable
–0–
Dividends Payable
–0–
Unearned Rent Revenue
7,200
Bonds Payable (10%)
44,000
Common Stock ($10 par)
28,000
Paid-in Capital in Excess of Par—Common Stock
5,600
Preferred Stock ($20 par)
–0–
Paid-in Capital in Excess of Par—Preferred Stock
–0–
Retained Earnings
65,330
Treasury Stock
–0–
Cash Dividends
–0–
Sales Revenue
570,000
Rent Revenue
–0–
Bad Debt Expense
–0–
Interest Expense
–0–
Cost of Goods Sold
380,000
Depreciation Expense
–0–
Other Operating Expenses
36,900
Salaries and Wages Expense
63,600
Total
$779,800
$779,800
Unrecorded transactions and adjustments:
1. On January 1, 2020, Cullumber issued 1,000 shares of $20 par, 6% preferred stock for $23,000.
2. On January 1, 2020, Cullumber also issued 1,000 shares of common stock for $24,000.
3. Cullumber reacquired 260 shares of its common stock on July 1, 2020, for $46 per share.
4. On December 31, 2020, Cullumber declared the annual cash dividend on the preferred stock and a $1.30 per share dividend on the outstanding common stock, all payable on January 15, 2021.
5. Cullumber estimates that uncollectible accounts receivable at year-end is $6,000.
6. The building is being depreciated using the straight-line method over 30 years. The salvage value is $5,200.
7. The equipment is being depreciated using the straight-line method over 10 years. The salvage value is $4,100.
8. The unearned rent was collected on October 1, 2020. It was receipt of 4 months’ rent in advance (October 1, 2020 through January 31, 2021).
9. The 10% bonds payable pay interest every January 1. The interest for the 12 months ended December 31, 2020, has not been paid or recorded.
(Ignore income taxes.)
Requirment: Prepare a Balance Sheet as at December 31, 2020.
Answer:
Cullumber CorporationBalance Sheet as of December 31, 2020:Current Assets:
Cash $61,140
Accounts Receivable 60,000
less allowance for doubtful 6,000 54,000
Inventory 23,300 138,440
Non-current Assets:
Land 67,200
Buildings 81,700
Accumulated Depreciation 28,050 53,650
Equipment 41,000
Accumulated Depreciation 17,890 23,110 143,960
Total Assets $282,400
Liabilities + Equity:
Current Liabilities:
Accounts Payable 19,500
Interest Payable 4,400
Dividends Payable 5,802
Unearned Rent Revenue 1,800 31,502
Non-current Liabilities:
Bonds Payable (10%) 44,000 $75,502
Equity:
Common Stock ($10 par) 38,000
Paid-in Capital in Excess of Par—Common 10,240
Preferred Stock ($20 par) 20,000
Paid-in Capital in Excess of Par—Preferred 3,000
Retained Earnings 138,258
Treasury Stock (2,600) 206,898
Total Liabilities + Equity $282,400
Explanation:
a) Cullumber Corporation's Unadjusted Trial Balance as of December 31, 2020:
Debit Credit
Cash $26,100
Accounts Receivable 60,000
Inventory 23,300
Land 67,200
Buildings 81,700
Equipment 41,000
Allowance for Doubtful Accounts $470
Accumulated Depreciation—Buildings 25,500
Accumulated Depreciation—Equipment 14,200
Accounts Payable 19,500
Interest Payable –0–
Dividends Payable –0–
Unearned Rent Revenue 7,200
Bonds Payable (10%) 44,000
Common Stock ($10 par) 28,000
Paid-in Capital in Excess of Par—Common Stock 5,600
Preferred Stock ($20 par) –0–
Paid-in Capital in Excess of Par—Preferred Stock –0–
Retained Earnings 65,330
Treasury Stock –0–
Cash Dividends –0–
Sales Revenue 570,000
Rent Revenue –0–
Bad Debt Expense –0–
Interest Expense –0–
Cost of Goods Sold 380,000
Depreciation Expense –0–
Other Operating Expenses 36,900
Salaries and Wages Expense 63,600
Total $779,800 $779,800
b) Cullumber Corporation's Adjusted Trial Balance as of December 31, 2020:
Debit Credit
Cash $61,140
Accounts Receivable 60,000
Inventory 23,300
Land 67,200
Buildings 81,700
Equipment 41,000
Allowance for Doubtful Accounts $6,000
Accumulated Depreciation—Buildings 28,050
Accumulated Depreciation—Equipment 17,890
Accounts Payable 19,500
Interest Payable 4,400
Dividends Payable 5,802
Unearned Rent Revenue 1,800
Bonds Payable (10%) 44,000
Common Stock ($10 par) 38,000
Paid-in Capital in Excess of Par—Common Stock 10,240
Preferred Stock ($20 par) 20,000
Paid-in Capital in Excess of Par—Preferred Stock 3,000
Retained Earnings 65,330
Treasury Stock 2,600
Cash Dividends 5,802
Sales Revenue 570,000
Rent Revenue 5,400
Bad Debt Expense 5,530
Interest Expense 4,400
Cost of Goods Sold 380,000
Depreciation Expense 6,240
Other Operating Expenses 36,900
Salaries and Wages Expense 63,600
Total $839,412 $839,412
c) Cash Account Adjustment:
Balance as per Trial Balance $26,100
Preferred Stock 23,000
Common Stock 24,000
Treasury Stock (11,960)
Adjusted Cash balance $61,140
d) Income Statement
Sales Revenue $570,000
Cost of goods sold 380,000
Gross profit $190,000
Rent Revenue 5,400
Total $195,400
less expenses:
Bad Debt Expense 5,530
Interest Expense 4,400
Depreciation Expense 6,240
Other Operating Expenses 36,900
Salaries and Wages Expense 63,600 116,670
Net Income $78,730
Retained Earnings 65,330
Dividends (5802)
Retained Earnings carried forward $138,258
Esquire Comic Book Company had income before tax of $1,000,000 in 2016 before considering the following material items:
1. Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $350,000. The division generated beforetax income from operations from the beginning of the year through disposal of $500,000. Neither the loss on disposal nor the operating income is included in the $1,000,000 before-tax income the company generated from its other divisions.
2. The company incurred restructuring costs of $80,000 during the year.
Required: Prepare a 2016 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 40%. Ignore EPS disclosures.
Answer:
Esquire Comic Book Company
Income Statement
For the Year Ended December 31, 2016
Operating income $1,000,000
Restructuring costs ($80,000)
Income from continuing operations b/ Taxes $920,000
Income tax expense ($368,000)
Income from continuing operations $552,000
Discontinued operations:
Operating income $500,000Loss on disposal ($350,000)Income tax on discontinued operations ($60,000)Income from discontinued operations $90,000
Net income $642,000
Explanation:
Income from discontinued operations must be reported separately, but any restructuring costs must be included as operational expenses.
Digger Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year.
Budgeted Actual
Overhead cost $975,000 $950,000
Machine hours 50,000 45,000
Direct labor hours 100,000 92,000
Required:
a. Compute the predetermined overhead rate.
b. Determine the amount of overhead applied for the year.
Answer:
Predetermined overhead rate = $ 9.75 per direct labor hours
Overhead applied = $897,000
Explanation:
Given:
Budgeted Overhead cost = $975,000
Actual Overhead cost = $950,000
Budgeted Machine hours = 50,000
Actual Machine hours = 45,000
Budgeted Direct labor hours = 100,000
Actual Direct labor hours = 92,000
Computation:
(a) Predetermined overhead rate.
Predetermined overhead rate = budgeted overhead cost / budgeted direct labor hours
Predetermined overhead rate = $975,000 / 100,000
Predetermined overhead rate = $ 9.75 per direct labor hours
(b) Amount of overhead applied for the year.
Overhead applied = Actual hours × Predetermined overhead rate
Overhead applied = 92000 × $9.75
Overhead applied = $897,000
Gretchen has just started as a fashion marketing intern for an up-and-coming design firm. When she came in, she was asked to work on a project identifying important events where celebrities might wear the fashions. She soon realized that this activity was part of _____________, directly related to marketing.
Answer:
A push-pull strategy
Explanation:
The Push strategy is an aspect of marketing where the marketer aims at taking his products directly to a target audience. This is done so as to stimulate the interest of the consumer in that particular product. Developing brands tend to employ this strategy to showcase themselves to the consumer in hopes of getting them attracted to their products. This is the strategy which the up-and-coming design firm is trying to employ when they seek to identify important events where celebrities might wear the fashions. They engage in this activity because they want to showcase their designs to the target audience- the celebrities.
Pull strategy is the opposite of this strategy as customers are now aware of the reputation of the brand and then seek them out on their own.
A local radio commercial costs $600 and reaches an estimated 10,250 listeners. A local cable commercial costs $1000 and reaches an estimated 18,500 viewers. Which medium provides the lowest CPM?
a. The radio commercial
b. The cable commercial
c. The radio and cable commercials have the same CPM
d. The CPM cannot be calculated given the limited information provided
e. None of the above
Answer:
b. The cable commercial
Explanation:
CPM or cost per mille is a measure used in advertising to determine how effectively a promotional message is getting to its audience. It is the cost of getting an advert in front of 1,000 people.
In this scenario when we calculate CPM for the radio station
$600 = 10,250 listeners
x= 1,000 listeners
Cross multiply
x= (600 * 1,000) ÷ 10,250 = $58.54
For the local cable commercial
$1000 = 18,500 viewers
y = 1,000 viewers
Cross multiply
y= (1,000 * 1,000) ÷ 18,500= $54.05
Imagine that you work in a call center. Your manager tells you that you need to answer 25% more calls per hour. In order to do this, you must spend less time with each caller, and your caller satisfaction scores are going down. By answering more phone calls but providing worse service, you ARE being __________ but NOT ___________.
Answer:
By answering more phone calls but providing worse service, you ARE being EFFICIENT but NOT SATISFY CUSTOMERS' NEEDS.
Explanation:
A worker's efficiency is measured by the total output per hour of labor. In this case, since you are answering more calls per hour, your efficiency is increasing (higher output per hour).
The quality of the service provided by a worker's is measured by the quality of their output (or performance), and if you satisfy your customers' needs. Since the service that you are providing is not that good, then your quality levels are decreasing.
You may be producing more services, but the services produced lack good quality.
Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of the year, her accountant computes her accrual basis income that is used on her tax return. For 2015, Selma had cash receipts of $1.4 million, which included $200,000 collected on accounts receivable from 2014 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2015, she had $250,000 in accounts receivale from customers, all from 2015 sales.
a. Compute Selma's accrual basis gross receipts for 2015
b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2014 was $1.3 million. At the end of 2014, she had merchandise on hand with a cost of $150,000. At the end of 2015, the cost of merchandise on hand was $300,000. Compute Selma's gross income from merchandise sales for 2015
Answer:
A.$1,350,000
B.$ 200,000
Explanation:
Selma
a.
Selma's accrual basis gross receipts for 2015 will be ;
Amount of Cash received by Selma $1,400,000
Less:
Accounts receivable collected (200,000)
Bank loan proceed(100,000)
Add: Ending accounts receivable 250,000
Gross receipts $1,350,000
b.Selma's gross income from merchandise sales for 2015 will be :
Gross receipts brought forward(A) $1,350,000
Cost of goods sold:
Selma Purchases$1,300,000
Inventory at the beginning 150,000
Ending inventory(300,000)
Gross income$ 200,000
(1,350,000-1,150,000)
(1,300,000+150,000-300,000)
=1,150,000
In a closed system one kilogram of carbon dioxide (CO_2) is expanded reversibly from 30 degree C and 200 kPa to 100 kPa pressure. If the expansion is polytropic with n = 1.27, determine the total work, the change in total internal energy, and the total heat transferred in [kJ], Note that for CO_2, R = 188.9 J/kg.K and c_v = 655 J/kg.K. W = -29.05 kJ, DeltaU = -27.19 kJ, Q = 1.860 kJ
Answer:
the total work W = 29.05 kJ
the change in total internal energy is [tex]\mathbf{\Delta U = - 27.19 \ kJ}[/tex]
the total heat transferred in [kJ] is Q = 1.860 kJ
Explanation:
Given that
mass of carbon dioxide in the closed system = 1 kg
Temperature [tex]T_1= 30 ^0 C[/tex] = (273+30 ) K = 303 K
Pressure [tex]P_1 = \ 200 \ kPa[/tex]
Pressure [tex]P_2 = 100 \ kPa[/tex]
polytropic expansion n = 1.27
Note that we are also given the following data set:
R = 188.9 J/kg.K
c_v = 655 J/kg.K
So; for a polytropic process ; [tex]PV^{1.27} = c[/tex]
[tex]\dfrac{T_2}{T_1}= ( \dfrac{V_1}{V_2})^{n-1} = (\dfrac{P_2}{P_1})^{\frac{n-1}{n}[/tex]
[tex]T_2 = T_1 [\dfrac{P_2}{P_1}]^{\frac{n-1}{n}[/tex]
[tex]T_2 = 303 [\dfrac{100}{200}]^{\frac{1.27-1}{1.27}[/tex]
[tex]T_2 = 261.48 \ K[/tex]
Since the system does not follow the first order of thermodynamics; To calculate the total work by using the expression:
[tex]W = \dfrac{P_1V_1-P_2V_2}{n-1} = \dfrac{mR(T_1-T_2)}{n-1}[/tex]
[tex]W = \dfrac{1*188.9(303-261.48)}{1.27-1}[/tex]
W = 29048.62222 J
W = 29.05 kJ
Thus, the total work W = 29.05 kJ
The change in internal energy can be expressed by the formula:
[tex]\Delta U = mc_v (T_2-T_1)[/tex]
[tex]\Delta U = 1*655(261.48-303)[/tex]
[tex]\Delta U = -27195.6 \ J[/tex]
[tex]\mathbf{\Delta U = - 27.19 \ kJ}[/tex]
Hence; the change in total internal energy is [tex]\mathbf{\Delta U = - 27.19 \ kJ}[/tex]
Finally; to determine the total heat transferred in [kJ]; we go by the expression for the first order of thermodynamics which say:
Total Heat Q = ΔU + W
Q = (-27.19 + 29.05)kJ
Q = 1.860 kJ
Hence; the total heat transferred in [kJ] is Q = 1.860 kJ
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.10 (given its target capital structure). Vandell has $8.67 million in debt that trades at par and pays an 7.3% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 6% a year. Both Vandell and Hastings pay a 40% combined federal and state tax rate. The risk-free rate of interest is 6% and the market risk premium is 7%. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.5 million, $3.2 million, $3.5 million, and $3.57 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell’s $8.67 million in debt (which has an 7.3% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.5 million each year for Years 1, 2, and 3. After Year 3, a target capital structure of 30% debt will be maintained. Interest at Year 4 will be $1.465 million, after which the interest and the tax shield will grow at 6%. Indicate the range of possible prices that Hastings could bid for each share of Vandell common stock in an acquisition. Round your answers to the nearest cent. Do not round intermediate calculations.
The bid for each share should range between $ ______ per share and $ _______ per share.
Answer:
$40.79 per share and $52.90 per share
Explanation:
Cost of Debt (Kd) = Wd * Rd (1 - T)
Cost of Debt for Vandell Corporation is $7.30 * (1 - 0.40) = 4.38%
Cost of Equity (Ke) = Rf + [tex]\beta[/tex] * Rp
Cost of Equity for Vandell Corporation is 6 + 1.10 * 7 = 13.70%
Weighted Average Cost of Capital (WACC) = Wd * Kd + We * Ke
Cash Flow of Firm = $2.5m + $3.2m + $3.5m + $3.57m = $12.77
Weight of Equity = $8.94
WACC = 30% * 4.38% + 70% * 13.70% = 10.9%
CashFlows after discounting synergy will be = $40.79
The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI’s capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 40%.
a. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Cost of equity capital %
b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
Answer:
Cost of equity is 11.2%
WACC is 8.74%
Explanation:
The formula for cost of equity is given below:
Cost of equity=risk free rate+(Beta *risk premium)
risk free rate is the treasury bill rate of 4%
Beta is 0.9
market risk premium is 8%
cost of equity=4%+(0.9*8%)=11.2%
WACC=Ke*E/V+Kd*D/V*(1-t)
Ke is the cost of equity of 11.2%
Kd is the cost of debt of 5%
t is the tax rate of 40% or 0.4
E is the equity weighting of 70% or 0.7
D is the debt weighting of 30% or 0.3
V is the E+D=0.7+0.3=1
WACC=11.20% *0.7/1+(5%*0.3/1*(1-0.4)
WACC=7.84% +0.90% =8.74%
Section 103 of the Federal Public Works Employment Act establishes the Minority Business Enterprise program and requires that, absent a waiver by the secretary of commerce, 10 percent of all federal grants given by the Economic Development Administration be used to purchase services or supplies from businesses owned and controlled by U.S. citizens belonging to one of six minority groups: African Americans, Spanish speaking, Asian, Native American, Eskimo, and Aleut. White owners of business contend the Act constitutes illegal reverse discrimination. Discuss.
Explanation:
Looking from a fair point of view, the White owners of businesses have legitimate reasons to feel that the Act constitutes illegal reverse discrimination.
Remember, reverse discrimination implies an unfair treatment of the majority group (White owners) in an effort to please the minority group. This is evident from the fact that the 10 percent of all federal grants to be released by the Economic Development Administration was only to be used to purchase services or supplies from businesses owned and controlled by U.S. citizens belonging to one of six minority groups excluding the White business owners; making the White owners feel discriminated against.
Thus, unintentionally the Act became a reverse discrimination on White business owners.
Imperial Jewelers manufactures and sells a gold bracelet for $408.00. The company’s accounting system says that the unit product cost for this bracelet is $268.00 as shown below:
Direct materials $147
Direct labor 85
Manufacturing overhead 36
Unit product cost $268
The members of a wedding party have approached Imperial Jewelers about buying 30 of these gold bracelets for the discounted price of $368.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $452 and that would increase the direct materials cost per bracelet by $9. The special tool would have no other use once the special order is completed.
To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $15.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party’s order using its existing manufacturing capacity.
Required:
a. What is the financial advantage (disadvantage) of accepting the special order from the wedding party?
b Should the company accept the special order?
Answer:
2352, Yes
Explanation:
a) Incremental Cost = Direct Material cost + Direct labour cost + Filgree + Manufacturing overhead cost
= 147 + 85 + 9 + 15 = 256
Total additional Cost = 256 x 21 = 5376
Incremental Revenue = 368
Total additional Revenue = 368 x 21 = 7728
Incremental net operating income = Total additional revenue - total additional cost
= 7728 - 5376 = 2352
b) As Incremental net operating income is positive, company is earning from the special order. Yes, it should accept it
The relevant costs for a decision to accept the special order are :
1. Incremental Revenue from the special order
2. incremental variable cost
3. The cost of the special tool
Unit variable cost = 147+ 85 + 9 + 15 = $256
The balance of manufacturing overhead would be incurred either way. Therefore, they are not relevant for the decision
Sales revenue from special order $
(21× $368) 7728
The Variable cost of special order $
(21× $256) (5376 )
Financial advantage 2358
The company should accept the special order, as it will increase its profit by $2352
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Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.
Date Activiies Units Acquired at Cost Units Sold at Recall
Mar. 1 Beginning inventory 60 units $50.20 per unit
Mar. 5 Purchase 205 units $55.20 per unit
Mar. 9 Sales 220 units $85.20 per unit
Mar. 18 Purchase 65 units $60.20 per unit
Mar. 25 Purchase 110 units $62.20 per unit
Mar. 29 Sales 90 units $95.20 units
Total 440 units 310 units
Required:
1. Compute cost of goods available for sale and the number of units available for sale.
2. Compute the number of units in ending inventory.
3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.
4. Compute gross profit earned by the company for each of the four costing methods.
Answer:
Warnerwoods Company
Perpetual Inventory System:
1. Cost of Goods Available for Sale and Units Available for Sale:
Mar. 1 Beginning inventory 60 units $50.20 per unit $3,012
Mar. 5 Purchase 205 units $55.20 per unit 11,316
Mar. 18 Purchase 65 units $60.20 per unit 3,913
Mar. 25 Purchase 110 units $62.20 per unit 6,842
Available for Sale 440 units Cost = $25,083
2. The number of units in ending inventory:
Units Available for Sale 440
Subtract units sold 310
Ending Inventory 130 units
3. The Cost assigned to ending inventory using:
a) FIFO: Ending Inventory
20 units at $60.20 per unit = $1,204
110 units at $62.20 per unit = 6,842
Ending Inventory $8,046
b) LIFO: Ending Inventory
Mar. 1 Beginning Inventory 45 units $50.20 per unit = $2,259
Mar. 18 Purchase 65 units $60.20 per unit = 3,913
Mar. 25 Purchase 20 units $62.20 per unit = 1,244
Ending Inventory 130 units Cost = $7,416
c) Weighted Average: Ending Inventory
Cost of Goods Available for Sale divided by units available for sale
= $25,083/440 = $57 per unit
Ending Inventory = $57 x 130 = $7,410
d) Specific Identification: Ending Inventory
This cannot be answered from the information provided in the question:
4. Gross Profit for each costing method:
FIFO LIFO WEIGHTED SPECIFIC
AVERAGE IDENTIFICATION
Sales $27,312 $27,312 $27,312 $27,312
Cost of Sales 17,037 17,667 17,670
Gross Profit $10,275 $9,645 $9,642
Explanation:
a) Sales:
Mar. 9 Sales 220 units $85.20 per unit = $18,744
Mar. 29 Sales 90 units $95.20 units = 8,568
Total = $27,312
b) Cost of Sales:
i) FIFO
Mar 1. Beginning inventory 60 units $50.20 per unit = $3,012
Mar. 5 Purchase 205 units $55.20 per unit = 11,316
Mar. 18 Purchase 45 units $60.20 = 2,709
Cost of Sales = $17,037
ii) LIFO:
Mar. 1 Beginning inventory 15 units $50.20 per unit = $753
Mar. 5 Purchase 205 units $55.20 per unit = $11,316
Mar. 25 Purchase 90 units $62.20 per unit = $5,598
Cost of Sales = $17,667
iii) Weighted Average:
Cost of Sales = $57 x 310 = $17,670
c) Calculations under the specific identification cannot be made because of the figures given under this method.
Cost of goods available for sale = 440 units and $25,071
Number of units in ending inventory is 130 units.
1. The calculation of compute cost of goods available for sale and the number of units available for sale is;
Beginning inventory cost = 60 units x $50.20 = $3,012Purchase on March 5 cost = 205 units x $55.20 = $11,304Purchase on March 18 cost = 65 units x $60.20 = $3,913Purchase on March 25 cost = 110 units x $62.20 = $6,842Cost of goods available for sale = 440 units and $25,071
2. Number of units in ending inventory:
Units sold = 220 + 90 Units sold = 310 unitsUnits in ending inventory = total available for sale - units sold Units in ending inventory = 440 - 310 = 130 unitsNumber of units in ending inventory is 130 units.
3. Compute the cost assigned to ending inventory
4. Compute gross profit earned by the company for each of the four costing methods.
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Calculate the Social Security and Medicare deductions for the following employee (assume a tax rate of 6.2% on $128,400 for Social Security and 1.45% for Medicare): (Round your answers to the nearest cent.)
Answer:
Social Security tax = $7,960.80
Medicare tax = $1,861.80
Explanation:
Let's begin by listing out the information given:
Social Security tax rate = 6.2%,
Medicare tax rate = 1.45%,
Income = $128,400
To calculate for the deductions(tax), we use the formula:
Tax = Tax rate * Income
For Social Security
Tax = Tax rate * Income
Tax = 6.2% * $128,400
T = 0.062 * $128,400
T = $7,960.80
∴ $7,960.80 of the employee's income is deducted for Social Security tax
For Medicare
Tax = Tax rate * Income
Tax = 1.45% * $128,400
T = 0.0145 * $128,400
T = $1,861.80
∴ $1,861.80 of the employee's income is deducted for Medicare tax
Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables: Feb. 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible. May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment. If an amount box does not require an entry, leave it blank. Feb. 20 May 10 May 10
Answer:
A journal was entered to determine the following transactions using the direct write-off method of accounting for uncollectible receivable shown below
Explanation:
Solution
PART A:
Particulars Debit Credit
Feb 20 Bad Debt Expense $4,000
Cash $1,000
Accounts receivable $5000
May 10 Accounts receivable $4,000
Bad Debt Expense $4,000
Cash $4,000
Accounts receivable $4,000
Roadside, Inc. had the following balances and transactions during 2018:Beginning Merchandise Inventory10units at $ 72March 10Sold 8unitsJune 10Purchased 20units at $ 82October 30Sold 14unitsWhat is the amount of the company's ending Merchandise Inventory, as disclosed in the December 31, 2018 balance sheet, using the periodic LIFO inventory costing method?
Answer:
$576
Explanation:
The computation of the ending inventory using the periodic LIFO inventory costing method is shown below:
But before determining the ending inventory first we have to find out the ending inventory units which is
Units of ending inventory = Opening Stock + Units purchased - Units sold
= 10 + 20 - (8 + 14)
= 8 units
The Ending inventory is 8 units. So, These should be the units out of opening stock
Therefore
Ending inventory is
= 8 units × $72
= $576
Audio Zone Co. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months.
Month Total Overhead Machine Hours
Jan. $6,288 1,980
Feb. 6,460 2,090
Mar. 5,987 1,745
Apr. 5,559 1,560
May 6,032 1,865
June 6,341 2,012
Using the high-low method, total monthly fixed overhead cost is calculated to be:________.
Answer:
$2,907
Explanation:
the formulas to calculate costs using the high-low method are:
variable cost = (highest activity cost - lowest activity cost) / (highest activity units - lowest activity units) fixed costs = highest activity cost - (variable cost per unit x highest activity units)variable cost = ($6,460 - $5,559) / (2,090 - 1,560) = $901 / 530 units = $1.70 per unit
fixed costs = $6,460 - ($1.70 x 2,090) = $6,460 - $3,553 = $2,907
Marina had an accident with her car and the repair bill came to $900. She didn't have any emergency fund money and no extra
money in her monthly budget, so she ended up borrowing from a pay-day loan company. As long as she can pay the loan back at
the end of the 30 day period she won't be charged any interest, technically. However, she did have to pay an $18 processing fee
per $100 that she borrowed.
If she were to consider the processing fee to represent interest paid in her formula, what would she discover to
be the annual interest rate she was charged on her short term loan?
Answer:
216%
Explanation:
Ordinary interest is computed on the basis of a 360-day year, so Marina's borrowing period is 1/12 of a year. The annual rate is then 12 times the rate Marina pays for 30 days:
12 × 18/100 = 216/100 = 216%
Marina would discover the annual interest rate is 216%.
Rational choice theorists would define the behavior of corporate executives who outsource many jobs to countries where the cost of labor is substantially less than in the United States as being:
Answer: Instrumental
Explanation:
Rational choice theory, is a school of thought which is based on the assumption that individuals will choose a course of action which goes in line with what they personally prefer.
For the instrumental rationality, it has to do with looking for the most cost effective method in order to achieve a particular objective. Therefore, the behavior of corporate executives who outsource jobs to other countries where labor cost is cheaper than in the United States is defined as being instrumental.
A municipal bond is issued with a covenant that states "if revenue collections are insufficient, the state legislature has the authority, but not the obligation, to make an annual apportionment of funds necessary to meet debt service requirements." This is a:
Answer:
Moral obligation bond
Explanation:
Moral obligation bond is defined as a revenue bond that is issued by a municipality or by some other government body.
The benefits of moral obligation bonds are tax exemption and a moral pledge that there will be no default on the bond.
Usually a reserve fund is established in case the issuing body is unable to meet its debt obligations.
In this scenario the bond is issued with a covenant that states "if revenue collections are insufficient, the state legislature has the authority, but not the obligation, to make an annual apportionment of funds necessary to meet debt service requirements."
