Answer:
a. The capital account balance of each partner after the liquidation of assets and the payment of creditors would be as follows:
Field Brown Snow
Capital Balance -4,200 31,800 19,500
b. a
Debit Credit
Cash 4,200
Field capital 4,200
b. Debit Credit
Brown capital 31,800
Snow capital 19,500
Cash 51,300
c. a Debit Credit
Brown capital 2100
Snow capital 2100
Field Capital 4,200
b. Debit Credit
Brown capital 29,700
Snow capital 17,400
Cash 47,100
Explanation:
a. In order to calculate the capital account balance of each partner after the liquidation of assets and the payment of creditors we would have to make the following calculations:
Field Brown Snow Total
Initial Investment $131,700 $167,700 $155,400 454,800
Allocation of all losses: 135,900 135,900 135,900 407,700
(454,800-47,100)/3
Capital Balance -4,200 31,800 19,500 47,100
b. a. The record of the cash receipt from the deficient partner(s) would be as follows:
Debit Credit
Cash 4,200
Field capital 4,200
b. The record the final disbursement of cash to the partners would be as follows:
Debit Credit
Brown capital 31,800
Snow capital 19,500
Cash 51,300
c. a Record to transfer the deficit of any deficient partners to the other partners would be as follows:
Debit Credit
Brown capital 2100
Snow capital 2100
Field Capital 4,200
Brown capital= 4,200/2=2100
Snow capital=4,200/2=2100
b. Record the final disbursement of cash to the partners would be as follows:
Debit Credit
Brown capital 29,700
Snow capital 17,400
Cash 47,100
Brown capital=31,800-2,100 =29,700
Snow capital=19,500-2,100=17,400
Anson Jackson Court Company (AJC) The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00. Refer to the data for the Anson Jackson Court Company (AJC). Now assume that AJC is considering changing from its original capital structure to a new capital structure with 50% debt and 50% equity. If it makes this change, its resulting market value would be $820,000. What would be its new stock price per share?
Answer:
The new stock price per share would be $62
Explanation:
In order to calculate the new stock price per share we would have to calculate first the value of the firm as follows:
value of the firm=value of equity+value of debt
value of the firm=(60*10,000)+$200,000
value of the firm=$800,000
If the company makes 50% debt and 50% equity, the market value will increase to $820,000 that is value of equity=$820,000-$200,000=$620,000
Therefore, new stock price per share will be=$620,000/10,000
new stock price per share=$62
On January 1, Year 1, Li Company purchased an asset that cost $35,000. The asset had an expected useful life of five years and an estimated salvage value of $7,000. Li uses the straight-line method for the recognition of depreciation expense. At the beginning of the fourth year, the company revised its estimated salvage value to $3,500. What is the amount of depreciation expense to be recognized during Year 4
Answer:
The amount of depreciation expense to be recognized during Year 4 is $7,350
Explanation:
In order to calculate the amount of depreciation expense to be recognized during Year 4 we would have to calculate first the Depreciation as per straight line method as follows:
Depreciation as per straight line method=(Cost-Residual value)/Useful life
=($35,000-$7,000)/5=$5,600
Hence, book value as on beginning of the fourth year=$35,000-($5,600*3)=$18,200
Hence, depreciation revised for the 2 remaining years=($18,200-$3,500)/2
=$7,350
The amount of depreciation expense to be recognized during Year 4 is $7,350
Diogo has a utility function,U(q1, q2) = q1 0.8 q2 0.2,where q1 is chocolate candy and q2 is slices of pie. If the price of slices of pie, p2, is $1.00, the price of chocolate candy, p1, is $0.50, and income, Y, is $100, what is Diogo's optimal bundle?The optimal value3 of good q1 isq = units. (Enter your response rounded to two decimal places.)1 The optimal value of good q2 isq2 = units. (Enter your response rounded to two decimal places.)
Answer:
[tex](0.5 \times 8q_2)+q_2=100\\\\5q_2=100\\\\q_2=20[/tex]
since [tex]q_2 = 20[/tex]
[tex]q_1 = 8*20\\\\q_1=160[/tex]
Explanation:
U(q₁ q₂)
[tex]q_1^{0.8}q_2^{0.2}\\\\P_1= \$0.5 \ P_2=\$1 \ Y=100[/tex]
Budget law can be given by
[tex]P_1q_1+P_2q_2=Y\\\\0.5q_1+q_2=100[/tex]
Lagrangian function can be given by
[tex]L=q_1^{0.8}q_2^{0.2}+ \lambda (100-0.5q_1-q_2)[/tex]
First order condition csn be given by
[tex]\frac{dL}{dq} =0.8q_1^{-0.2}q_2^{0.2}-0.5 \lambda=0\\\\0.5 \lambda=0.8q_1^{-0.2}q_2^{0.2}---(i)[/tex]
[tex]\frac{dL}{dq} =0.2q_1^{0.8}q_2^{-0.8}- \lambda=0\\\\ \lambda=0.2q_1^{0.8}q_2^{-0.8}---(ii)[/tex]
[tex]\frac{dL}{d \lambda} =100-0.5q_1-q_2=0\\\\0.5q_1+q_2=100---(iii)[/tex]
From eqn (i) and eqn (ii) we have
[tex]\frac{0.5 \lambda}{\lambda} =\frac{0.8q_1^{-0.2}q_2^{0.2}}{0.2q_1^{0.8}q_2^{-0.8}} \\\\0.5=\frac{4q_2}{q_1}\\\\q_1=8q_2}[/tex]
Putting [tex]q_1=8q_2[/tex] in euqtion (iii) we have
[tex](0.5 \times 8q_2)+q_2=100\\\\5q_2=100\\\\q_2=20[/tex]
since [tex]q_2 = 20[/tex]
[tex]q_1 = 8*20\\\\q_1=160[/tex]
The manager of the customer service division of a major consumer electronics company is interested in determining whether the customers who have purchased a Blu-ray player made by the company over the past 12 months are satisfied with their products. Which of the following will be a good frame for drawing a sample? a. telephone directory b. a list of potential customers purchased from a database marketing company c. voting registry d. the list of customers who returned the registration card
Answer:
D. The list of customers who returned the registration card
Explanation:
The list of customers who returned the registration card will be a good frame for drawing the sample because it will enable the company to easily and effectively known how good or bad the Blu-ray player was when used by the customers and the satisfaction the customers had from using the company products which is why checking through the record or list of customers who returned the registration card can be good frame from drawing the sample without error occuring because it will give the company the correct and accurate result of all what they need to know about how good or bad their Blue ray player was and the satisfaction their customers derived from using it.
Answer:
D. The list of customers who returned the registration card
Explanation:
The list of customers who returned the registration card will be a good frame for drawing the sample because it will enable the company to easily and effectively known how good or bad the Blu-ray player was when used by the customers and the satisfaction the customers had from using the company products which is why checking through the record or list of customers who returned the registration card can be good frame from drawing the sample without error occuring because it will give the company the correct and accurate result of all what they need to know about how good or bad their Blue ray player was and the satisfaction their customers derived from using it.
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $16,600,000 of five-year, 11% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Chin Company receiving cash of $15,989,036. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) Second semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.
Answer:
The answer to the question is as attached
Explanation:
a. The total credit matches the debit in a total of $16,600,000
b. Cash $$15989036
Discount on bonds payable (16600000 -15989036) $610964
Bonds payable $16600000
(To record issuance of bonds)
b) Interest expense 825000+610964= $1435964
Discount on bonds payable 610964/11= $55542
Cash 16600000*11%*6/12= $913000
(To record discount amortized and interest paid)
c) Interest expense 825000+55542= $880542
Discount on bonds payable 610964/11= $55542
Cash 16600000*11%*6/12= $913000
The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 90,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows:
Direct materials $22.80
Direct labor $18.60
Variable manufacturing overhead $14.20
Fixed manufacturing overhead $16.00
Variable selling expense $12.80
Fixed selling expense $8.40
The regular selling price of one unit of Product C is $100.80. A special order has been received by Melrose from Moore Corporation to purchase 3,500 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling expenses would be unaffected except that Melrose will need to purchase a specialized machine to engrave the Moore name on each unit of product C in the special order. The machine will cost $6,300 and will have no use after the special order is filled. Assume that direct labor is a variable cost.
Assume that Melrose expects to sell 68,000 units of Product C to regular customers next year. At what selling price for the 3,500 units would Melrose be economically indifferent between accepting and rejecting the special order from Moore?
a. $59.10
b. $60.60
c. $81.10
d. $82.60
Answer:
Indifferent selling price =$67 per units
Explanation:
The selling at which Mel rose would be economically be indifferent between accepting and rejecting the special order from Moore is that that equates the relevant cost of making to the revenue from t
Relevant variable cost making
= 22.80 + 18.60 + 14.20 + (75%×12.80) = $65.2
$
Variable cost of special order (= $65.2 × 3,500)= 228,200
Cost of machine 6,300
Total relevant cost of special order 234,500
The price at which Melrose would be indifferent
= total relevant cost/ number of units
$234,500/3500 units
=$67 per units
In the short-run aggregate demand and supply model, one important difference between monetary and fiscal policy is that monetary policy:_______.
a. influences aggregate supply but fiscal policy influences aggregate demand.
b. has shorter lags than fiscal policy, so monetary policy may impact the economy more quickly than fiscal policy.
c. influences aggregate demand but fiscal policy influences aggregate supply.
d. has longer lags than fiscal policy, so fiscal policy may impact the economy more quickly than monetary policy.
Answer:
a. influences aggregate supply but fiscal policy influences aggregate demand.
Explanation:
Remember, when the term monetary policy is used it refers to policies that are focused on the interest rates as well as the inflation rate, which certainly affects the money supply specifically. However, the fiscal policy is usually channelled towards aggregate demand of the economy.
Thus, it is right to say that one important difference between monetary and fiscal policy is that monetary policy affects aggregate supply but fiscal policy influences aggregate demand.
A travel agent wants to determine how much the average client is willing to pay for a weekend at an all-expense paid resort. The agent surveys 30 clients and finds that the average willingness to pay is $2,500 with a standard deviation of $840. However, the travel agent is not satisfied and wants to be 95% confident that the sample mean falls within $150 of the true average. What is the minimum number of clients the travel agent should survey
Answer:
[tex]n=(\frac{1.960(840)}{150})^2 =120.47 \approx 121[/tex]
So the answer for this case would be n=12 rounded up to the next integer
Explanation:
[tex]\bar X=2500[/tex] represent the sample mean
[tex]\mu[/tex] population mean (variable of interest)
s=840 represent the sample standard deviation
n represent the sample size
The margin of error is given by this formula:
[tex] ME=z_{\alpha/2}\frac{\sigma}{\sqrt{n}}[/tex] (a)
And on this case we have that ME =150 and we are interested in order to find the value of n, if we solve n from equation (a) we got:
[tex]n=(\frac{z_{\alpha/2} \sigma}{ME})^2[/tex] (b)
The critical value for 95% of confidence interval, the significance level if 5% and the critical value would be [tex]z_{\alpha/2}=1.960[/tex], replacing into formula (b) we got:
[tex]n=(\frac{1.960(840)}{150})^2 =120.47 \approx 121[/tex]
So the answer for this case would be n=12 rounded up to the next integer
Cullumber Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 40,780 timers, the company has calculated the following unit costs. Direct fixed costs include supervisory and clerical salaries and equipment depreciation. Direct materials $12 Direct labor 7 Variable manufacturing overhead 3 Direct fixed manufacturing overhead 8 (30% salaries, 70% depreciation) Allocated fixed manufacturing overhead 8 Total unit cost $38 Clifton Clocks has offered to provide the timer units to Cullumber at a price of $32 per unit. If Cullumber accepts the offer, the current timer unit supervisory and clerical staff will be laid off. Warning Don't show me this message again for the assignment Ok Cancel Collapse question part (a1) Correct answer. Your answer is correct. Calculate the total relevant cost to make or buy the timer units. (Round answers to 0 decimal places, e.g. 5,275.) Assume that if Cullumber Water accepts Clifton’s offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 93,050 of the new lights each year at a price of $12. Variable costs of the lights are expected to be $9 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer.
Answer:
If Cullumber accepts the offer, the current timer unit supervisory and clerical staff will be laid off.
If Cullumber accepts the offer its net profits will decrease by ($309,928)If Cullumber accepts the offer, and uses the freed-up manufacturing facilities to manufacture a new line of growing lights.
Cullumber's net profits will decrease by ($30,778)Explanation:
annual production of 40,780 timers
Direct materials $12
Direct labor $7
Variable manufacturing overhead $3
Direct fixed manufacturing overhead $8 (30% supervisory and clerical salaries, 70% equipment depreciation)
Allocated fixed manufacturing overhead $8
total cost per unit = $38 per unit x 40,780 = $1,549,640
40,780 timers have been offered at $32 per timer = $1,304,960
scenario 1: Cullumber accepts the offer and lays off personnel:
Keep producing Purchase Differential
clocks clocks amount
Production costs $995,032 $995,032
(unavoidable fixed
costs not included)
Purchase costs $1,304,960 ($1,304,960)
total costs $995,032 $1,304,960 ($309,928)
If Cullumber accepts the offer its net profits will decrease by $309,928
relevant costs / revenues related to accepting the offer:
93,050
scenario 1: Cullumber accepts the offer and uses the freed-up manufacturing facilities to manufacture a new line of growing lights.
Keep producing Purchase Differential
clocks clocks amount
Production costs $995,032 $995,032
(unavoidable fixed
costs not included)
Purchase costs $1,304,960 ($1,304,960)
Revenue from ($279,150) $279,150
production of lights
(contribution margin
x 93,050 units)
total costs $995,032 $1,025,810 ($30,778)
Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projects:
Year 0 1 2 3
Sales (Revenues) 100,000 100,000 100,000
- Cost of Goods Sold (50% of Sales) 50,000 50,000 50,000
- Depreciation 30,000 30,000 30,000
= EBIT 20,000 20,000 20,000
- Taxes (35%) 7000 7000 7000
= unlevered net income 13,000 13,000 13,000
+ Depreciation 30,000 30,000 30,000
- capital expenditures -90,000
1. The free cash flow for the first year of Epiphany's project is closest to:________
A. $43,000
B. $25,000
C. $13,000
D. $45,000
2. The NPV for Epiphany's Project is closest to:_______
A. $4,800
B. $39,000
C. $13,300
D. $20,400
Answer:
FCF years 1 is $43,000
NPV is $13,300
Explanation:
The free cash flow for the first year=net income+depreciation-Capital exp
net income is $13,000
depreciation is $30,000
capital exp for the first year is nil
the free cash flow=$13,000+$30,000+$0=$43,000
FCF year zero=-$90,000
the FCF for year1 applies to years 2 and 3 as well
NPV=-$90,000+$43,000/(1+12%)^1+$43,000/(1+12%)^2+$43,000/(1+12%)^3=
$13,278.74
The closest option is $13,300
he Petteys family plans to buy a home for $224,900, and has been offered a 30-year mortgage with a rate of 5.5% if they make a 20% down payment . Calculate the down payment. (Do not include a dollar sign with your answer)
Answer:
44,980
Explanation:
20 % of $224,900 = (20/100) × $224,900 = $44,980
One advantage of the direct organizational plan is that it:________.
A. Results in more formal messages.
B. Positions the major news first.
C. Presents key topic sentences before subsequent ideas.
D. Arranges supporting details in order of priority.
E. Gives reasons up front to prepare the reader for negative news.
Answer:
B
Explanation:
One advantage of the direct organizational plan is that it positions the major news first.
The major news receives the most attention because of it importance,hence it is given proper analysis which in turn brings attention.
When the direct approachis used, the main idea (such as a recommendation, conclusion, or request) comes in as the top on the priority list of the document, followed by the evidence. This is a deductive argument. This approach is used when your audience will be neutral or positive about your message.
Howard Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet.
Data on direct department costs, number of employees, and space occupied are as follows:
S1
S2
P1
P2
Direct dept. costs
$7,500
$11,000
$27,500
$30,000
Number of employees
10
5
20
25
Space occupied (sq. ft.)
1,000
500
1,500
2,500
If Howard used the reciprocal method, the algebraic equation expressing the total costs allocated from S1 is
Select one:
a. S1 = $7,500 + 0.10S2.
b. S1 = $7,500 + 0.20S2.
c. S1 = $10,000 + 0.20S2.
d. S1 = $10,000 + 0.10S2.
Answer: S1 = $ 7500 + 0.20 S2
Explanation:
From the question, Howard Company has two support departments which are (S1 and S2) and two producing departments which are (P1 and P2). The department S1 costs are allocated on the basis of number of employees, and the department S2 costs are allocated on basis of space occupied expressed in square feet.
The algebraic equation expressing the total costs allocated from S1 is calculated as follow:
S1 Direct Cost = $ 7500
The cost of S2 will be allocated to S1 based on the space occupied and the total space that is occupied is:
= 1000 + 1500 + 2500
= 5000 sq ft
Space occupied by S1 = 1000
S2’s cost allocated to S1 will be:
= (1000 / 5000) of S2 cost
= 0.20 S2
Therefore the correct option is:
S1 = $ 7500 + 0.20 S2
The Accounts Receivable balance for Bach Consulting is $4,400,000 as of May 31, 2020. Before calculating and recording the month’s bad debt expense, there is a credit balance in the Allowance for Doubtful Accounts of $80,000. The May 2020 net sales were $30,000,000. In the past several years, 1% of net sales have proven uncollectible. An aging of accounts receivable results in a $360,000 estimate for the Allowance for Doubtful Accounts as of May 31, 2020.
PART A: PERCENT OF SALES METHOD
Assume that Bach Consulting uses the percent of sales method to estimate future uncollectible accounts.
What adjusting entry does Bach make to record May 2020 Bad Debt Expense?
What is "Accounts Receivable, net" on Bach’s May 31, 2018 Balance Sheet? $___________
What is "Bad Debt Expense" on Bach’s May 2020 Income Statement? $___________
PART B: ANALYSIS OF RECEIVABLES METHOD
Assume that Bach Consulting instead uses the analysis of receivables method to estimate future uncollectible accounts.
What adjusting entry does Bach make to record May 2020 Bad Debt Expense?
What is "Accounts Receivable, net" on Bach’s May 31, 2018 Balance Sheet? $___________
What is "Bad Debt Expense" on Bach’s May 2020 Income Statement? $___________
Problem 3
Use PVH Corp.’s financial statement information to answer the following questions.
Provide the following account balances for PVH:
February 2, 2020
February 3, 2019
Accounts Receivable (gross)
Allowance for Doubtful Accounts
Accounts Receivable, net
Which of the above numbers represents the amount of its February 2, 2020 Accounts Receivable balance that PVH expects to collect in the subsequent year(s)?
Which of the above numbers represents that amount that PVH believes it will not collect from its customers as of February 2, 2020?
Which of the above numbers represents the total amount PVH is owed by customers as of February 2, 2020?
Provide the journal entry (both accounts and amounts) that PVH must have made to record its estimate of Bad Debt Expense in fiscal year 2019.
Provide the journal entry (both accounts and amounts) that PVH must have made to record Accounts Receivable writeoffs in fiscal year 2019.
Answer:
Assume that Bach Consulting uses the percent of sales method to estimate future uncollectible accounts.
What adjusting entry does Bach make to record May 2020 Bad Debt Expense?
Dr Bad debt expense 300,000 (= $30,000,000 x 1%)
Cr Allowance for doubtful accounts 300,000
What is "Accounts Receivable, net" on Bach’s May 31, 2018 Balance Sheet? $4,100,000 (= $4,400,000 - $300,000)
What is "Bad Debt Expense" on Bach’s May 2020 Income Statement? $300,000
Assume that Bach Consulting instead uses the analysis of receivables method to estimate future uncollectible accounts.
What adjusting entry does Bach make to record May 2020 Bad Debt Expense?
Dr Bad debt expense 280,000 (= $360,000 - $80,000)
Cr Allowance for doubtful accounts 280,000
What is "Accounts Receivable, net" on Bach’s May 31, 2018 Balance Sheet? $4,120,000
What is "Bad Debt Expense" on Bach’s May 2020 Income Statement? $280,000
Use PVH Corp.’s financial statement information to answer the following questions.
Provide the following account balances for PVH:
February 2, 2020 February 3, 2019
Accounts Receivable (gross) $762,000,000 $800,000,000
Allowance for Doubtful Accounts $21,000,000 $22,000,000
Accounts Receivable, net $741,000,000 $778,000,000
Which of the above numbers represents the amount of its February 2, 2020 Accounts Receivable balance that PVH expects to collect in the subsequent year(s)?
$741,000,000
Which of the above numbers represents that amount that PVH believes it will not collect from its customers as of February 2, 2020?
$21,000,000
Which of the above numbers represents the total amount PVH is owed by customers as of February 2, 2020?
$762,000,000
Provide the journal entry (both accounts and amounts) that PVH must have made to record its estimate of Bad Debt Expense in fiscal year 2019.
Dr Bad debt expense 22,000,000
Cr Allowance for doubtful accounts 22,000,000
Provide the journal entry (both accounts and amounts) that PVH must have made to record Accounts Receivable writeoffs in fiscal year 2019.
Dr Allowance for doubtful accounts 22,000,000
Cr Accounts receivable 22,000,000
Explanation:
Accounts receivable = $4,400,000
beginning balance Allowance for doubtful accounts = $80,000
May's net sales = $30,000,000
1% of net sales are uncollectible
aging of accounts receivable results in a $360,000 estimate for the Allowance for doubtful accounts as of May 31, 2020
Lang Warehouses borrowed $287,610 from a bank and signed a note requiring 15 annual payments of $27,709 beginning one year from the date of the agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the interest rate implicit in this agreement
Answer:
The interest rate implicit in this agreement is 5%
Explanation:
A fix periodic payment made for a specific of time is known as annuity.
The 15 annual loan payment of $27,709 is an annuity payment and we will use the following formula to calculate the interest rate.
PV of annuity = P x annuity factor
Where
P = annual payments = $27,709
Placing values in the formula
$287,610 = $27,709 x annuity factor
Annuity factor = $287,610 / $27,709
Annuity factor = 10.37966
The annuity factor of 10.37966 for 15 years is for 5% interest rate.
A company issues a callable (at par) ten-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $104 per $100 of face value. What is the yield to worst of this bond when it is released
Answer:
6.32%
Explanation:
This can be calculate using the YTC using the following equation:
YTC = (C + (CP - P) / t) / ((CP + P) / 2) .......................... (1)
Where:
YTC = YTW = yield to call or yield to worst = ?
C = annual coupon interest payment = bond interest rate * Bond price = 6% * $100 = $6
CP = call price of the bond = $104
P = price of the bond = $100
t = time in years remaining until the call date = 10 - 1 = 9 years
Substituting the values into equation (1), we have:
YTC = ($6 + ($104 - $100) / 9) / (($104 + $100) / 2) = 0.0632, or 6.32%
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $28,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $380,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $1,700,000 to his nephew Frodo. He can afford to save $3,300 per month for the next 10 years. If he can earn an EAR of 10 percent before he retires and an EAR of 7 percent after he retires, how much will he have to save each month in years 11 through 30?
Answer:
He would have to save each month in years 11 through 30 the amount of $2,279.60
Explanation:
Because the cash flows occur monthly, we must get the effective monthly rate. One way to do this is to find the APR based on monthly compounding, and then divide by 12. So, the pre-retirement APR is:
EAR = .11 = [1 + (APR/12)] 12- 1;
APR = 12[(1.11) 1/12- 1] = .1048 or 10.48%
And the post-retirement APR is:
EAR = .08 = [1 + (APR/12)] 12 -1
APR = 12[(1.08) 1/12 -1] = .0772 or 7.72%
First, we will calculate how much he needs at retirement. The amount needed at retirement is the PV of the monthly spending plus the PV of the inheritance. The PV of these two cash flows is:
PVA = $24500{1 -[1/(1 + .0772/12) 12(25) ]}/(.0772/12) = $3,252,096.21
PV = $1525,000/[1 + (.0772/12)] 300 = $222,723.58
So, at retirement, he needs:
$3,252,096.21+ $222,723.58= $3474819.79
He will be saving $2,600 per month for the next 10 years until he purchases the cabin. The value of his savings after 10 years will be:
FVA = $2,600[{[1 + (.1048/12)] 12(10) -1}/(.1048/12)] = $547,487.10
After he purchases the cabin, the amount he will have left is:
$547,487.10 -345,000 = $202487.10
He still has 20 years until retirement. When he is ready to retire, this amount will have grown to:
FV = $202487.10[1 + (.1048/12)] 12(20) = $1632023.27
So, when he is ready to retire, based on his current savings, he will be short:
$3474819.79-1632023.27 = $1842796.52
This amount is the FV of the monthly savings he must make between years 10 and 30. So, finding the annuity payment using the FVA equation, we find his monthly savings will need to be:
FVA = $1842796.52 = C [{[ 1 + (.1048/12)] 12(20) -1}/(.1048/12)]
C = $2,279.60
He would have to save each month in years 11 through 30 the amount of $2,279.60
The risk-free rate of interest, kRF, is 6 percent. The overall stock market has an expected return of 12 percent. Nutshell, Inc. has a beta of 1.2. What is the required return of Nutshell, Inc. stock? *
Answer:required return of Nutshell, Inc. stock = 13.2%
Explanation:The Required return also called Hurdle rate is the minimum return in percentage which an investor should receive from doing business or investing in a business to compensate for the risks associated with the business. The more risky the investment, the more high returns and the less risky investment, the lower the returns.
Required Rate of Return = Risk Free Rate + Beta x (Whole Market Return – Risk Free Rate)
given
risk-free rate = 6%
market return= 12 %
beta = 1.2
Required Rate of Return = Risk Free Rate + Beta * (Whole Market Return – Risk Free Rate
= 6% + 1.2 x (12% - 6%) = 6% + 1.2 x 6% = 0.06 + 1.2x 0.06= 0.06 + 0.072=0.132 x 100 = 13.2%
Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $880. Selected data for the company’s operations last year follow:Units in beginning inventory 0Units produced 280Units sold 240Units in ending inventory 40Variable costs per unit: Direct materials $ 115 Direct labor $ 335 Variable manufacturing overhead $ 35 Variable selling and administrative $ 25 Fixed costs: Fixed manufacturing overhead $ 63,000 Fixed selling and administrative $ 23,000 The absorption costing income statement prepared by the company’s accountant for last year appears below:Sales $ 211,200Cost of goods sold 170,400Gross margin 40,800Selling and administrative expense 29,000Net operating income $ 11,800Required:Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.
Answer:
Fixed manufacturing cost allocated to inventory= $9,000
Explanation:
Giving the following information:
Units in beginning inventory 0
Units produced 280
Units sold 240
Units in ending inventory 40
Fixed manufacturing overhead $63,000
The absorption costing method includes all costs related to production, both fixed and variable.
First, we need to calculate the unitary fixed manufacturing cost:
unitary fixed manufacturing cost= 63,000/280= $225
Fixed manufacturing cost allocated to inventory= 40*225=$9,000
If an advertiser bids $4.75 CPM and another advertiser bids $0.50 per CPC with a click rate of 1%, the display network would award the ad space to A. the CPM bidder because the network would earn $4.75 versus only 50 cents with the CPC bidder BY. the CPM bidder since the network has no idea how many click throughs the CPM bidder will get C. the CPC bidder because the 1% click through rate would produce $5.00 over 1,000 impressions D. the CPC bidder because the $0.50 per click rate would produce an income of $50.00 versus only $4.75 for the CPM bidder
Answer: C. the CPC bidder because the 1% click through rate would produce $5.00 over 1,000 impressions
Explanation:
From the question, an advertiser bids $4.75 cost per thousand impressions (CPM) while another advertiser bids $0.50 per CPC with a click rate of 1%. Over 1000 impressions, the second advertiser bids will produce:
= $0.50 × 1% × 1000
= $0.50 × 0.01 × 1000
= $5
Based on the analysis above, the CPC bidder will be awarded the advertisement space because the 1% click through rate would give $5.00 over 1,000 impressions.
Agency theory presents some important managerial considerations. Broadly speaking, governance mechanisms need to assure alignment of incentives between principals and agents. The text provides an example of financial institutions in the situation of profits remaining within the firm while losses are paid by the public as a description of:________.A) a board of directors' problem.B) a challenge of information symmetry.C) a moral hazard problem.D) a private information problem.E) an adverse selection problem.
Answer: a moral hazard problem
Explanation:
Agency theory is a principle used to explain and resolve the issues in the relationship that exists between business principals and their agents. The relationship is usually the one between the shareholders who act as the principals, and the company executives who act as the agents.
When banks are bailed out through public funds for the excessive risky mortgage obligations or undue risk taking, this lead to increase in moral hazard. The gains of successful risk taking will stay with the private firm and the risks would be shared with the other parties.
Journalize the following transactions that occurred in November 2018 for May's Adventure Park. Assume May's uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name
Julie's Fun World estimates sales returns at the end of each month.
Nov.
4 Purchased merchandise inventory on account from Vera Company, $5,000. Terms 3/10, n/EOM, FOB shipping point.
6 Paid freight bill of $100 on November 4 purchase.
8 Returned half the inventory purchased on November 4 from Vera Company
10 Sold merchandise inventory for cash, $1,100. Cost of goods, $400. FOB destination.
11 Sold merchandise inventory to Geary Corporation, $11,100, on account, terms of 2/10, n/EOM. Cost of goods, $6,105. FOB shipping point.
12 Paid freight bill of $20 on November 10 sale.
13 Sold merchandise inventory to Caldwell Company, $9,500, on account, terms of n/45. Cost of goods, $5,225. FOB shipping point.
14 Paid the amount owed on account from November 4, less return and discount
17 Received defective inventory as a sales return from the November 13 sale, $500. Cost of goods, $275
18 Purchased inventory of $3,600 on account from Rainman Corporation. Payment terms were 2/10, n/30, FOB destination.
20 Received cash from Geary Corporation, less discount.
26 Paid amount owed on account from November 18, less discount.
28 Received cash from Caldwell Company, less return.
29 Purchased inventory from Sandra Corporation for cash, $12,300, FOB shipping point. Freight in paid to shipping company,
$170.
Answer:
May's Adventure Park
Journal Entries for November 2018:
Nov. 4: Debit Inventory $5,000
Credit Accounts Payable (Vera Company) $5,000
Nov. 6: Debit Freight-in $100
Credit Cash $100
Nov. 8: Debit Accounts Payable (Vera Company) $2,500
Credit Inventory Returns $2,500
Nov. 10: Debit Cash Account $1,100
Credit Sales $1,100
Nov. 10: Debit Cost of Goods Sold $400
Credit Inventory $400
Nov. 11: Debit Accounts Receivable (Geary Corporation) $11,100
Credit Sales $11,100
Nov. 11: Debit Cost of Goods Sold $6,105
Credit Inventory $6,105
Nov. 12: Debit Freight-out $20
Credit Cash Account $20
Nov. 13: Debit Accounts Receivable (Caldwell Company) $9,500
Credit Sales $9,500
Nov. 13: Debit Cost of Goods Sold $5,225
Credit Inventory $5,225
Nov. 14: Debit Accounts Payable (Vera Company) $2,500
Credit Cash Discount $75
Credit Cash Account $2,425
Nov. 17: Debit Sales Returns $500
Credit Accounts Receivable (Caldwell Company) $500
Nov. 17: Debit Inventory $500
Credit Cost of Goods Sold $500
Nov. 18: Debit Inventory $3,600
Credit Accounts Payable (Rainman Corporation) $3,600
Nov. 20: Debit Cash Account $10,878
Debit Cash Discount $222
Credit Accounts Receivable (Geary Corporation) $11,100
Nov. 26: Debit Accounts Payable (Rainman Corporation) $3,600
Credit Cash Discount $72
Credit Cash Account $3,528
Nov. 28: Debit Cash Account $9,000
Credit Accounts Receivable (Caldwell Company) $9,000
Nov. 29: Debit Inventory $12,300
Credit Accounts Payable (Sandra Corporation) $12,300
Nov. 29: Debit Freight-in $170
Credit Cash Account $170
Explanation:
Journal entries are made to debit and credit the accounts involved in each business transaction. They are the first accounting records made to capture transactions after they have been analyzed to know the accounts affected and which accounts in the ledger will be debited or credited. They are usually accompanied with short explanations, e.g. the trade terms.
Which of the following factors has not contributed to the trend towards outsourcing in recent decades: Group of answer choices
a. Increasing turbulence of the business environment.
b. Increasing emphasis on cost efficiency.
c. Increasing emphases on the need for competitive advantage based upon superior capabilities Increasing transaction costs
Taking all parameters into account, what would you expect to be the probability of it costing exactly $15 to produce one kilogram of penicillin? State where/how you found your answer.
Answer:
Worst case = $28 per kilogram
Base case = $16 per kilogram
Best case = $10.50 per kilogram.
Explanation:
Based on the information and data given in slide 37 what i would expect to be the probability of it costing would tend to depend on the worst, base and best case scenarios once all the parameters given are been taken into account.
The unit of production will tend to cost dollar per Kilogram which means that Worst case will be $28 per kilogram ,Base case will be $16 per kilogram and Best case will be $10.50 per kilogram. .
Your financial investments consist of U.S. government bonds maturing in 10 years and shares in a start-up company doing research in pharmaceuticals. How would you expect each of the following news items to affect the value of your assets?
a. Interest rates of newly issued government bonds rise
A. Stock and bond prices will rise
B. Stock and bond prices will fall
C. Stock prices will fall and bond prices could remain unchanged or rise
D. Stock prices will fall
E. Stock prices will increase
b. Inflation is forecasted to be much lower than previously expected in Recall the Fisher effect Assume for simplicity that this Information does not affect your forecast of the dollar value of the pharmaceutical company's future dividends and stock price
A. Stock prices will fall
B. Stock and bond prices will fall
C. Stock prices will increase
D. Stock and bond prices will rise
c. Large swings in the stock market increase mancalvestors concerns about market risk. (Assume that interest rates on neaty issued government bonds remain unchanged)
A. Stock and bond prices will fall
B. Stock and bond prices will rise
C. Stock prices will fall
D. Stock prices will increase
E. Stock prices will and bond prices could remam unchanged or rise
Answer: 1. B. Stock and bond prices will fall
2. D. Stock and bond prices will rise
3. E. Stock prices will fall and bond prices could remam unchanged or rise
Explanation:
1. When interest rates on Government bonds rise, this signifies a general rise in interest in the economy. When interest rates rise, consumers and companies such as the Pharmaceutical Research Company will have to cut back on spending because borrowing is now more expensive. This reduction in spending reduces Investment and therefore profits which will reduce the price of the company stock.
When interest rates rise, it is a standard principle that bond prices drop. This is because bonds pay a fixed rate therefore when interest rates rise, it signifies that bonds are not paying enough and so the demand reduces as people are always looking for better returns which leads to a drop in price.
2. As a result of inflation being less than previously thought, it means that bonds and stocks are providing a better return per dollar because inflation will not erode the value of the returns. When the market realises this they will flock to purchase both stocks and bonds which will lead to a price increase.
3. When there are large swings in the stock market, this signifies Market volatility. Market volatility signifies risk and when this happens risk averse investors will flee from the stock market which will have the effect of reducing the prices of stock as they are sold off. If interest rates on the newly issued Government bonds remain unchanged, people that are fleeing the stock market might invest in the bonds instead which will cause their price to rise as more are bought. However, there is a chance that the investors fleeing might not view the interest rates offered by the government bonds and so will not invest leading to the price of the bonds not changing dude to stable demand.
Fast-food restaurants like McDonald's are replacing cashiers with touch-screen ordering kiosks. Currently the MPL for an additional cashier is 48 customers served per hour and the MPK for an additional kiosk is 32 customers served per hour. A cashier can be hired for wage of $15; a kiosk rents for $12.
(a) Is Whataburger using the optimal cost-minimizing mix of cashiers and kiosks? Explain.
(b) What can Whataburger do to improve its mix of inputs – hire more cashiers or fewer? Rent more kiosks or fewer?
Answer:
a. Whataburger is not using the optimal cost-minimizaing mix of cashier and kiosks.
b. Whataburger should hire more cashier and rent fewer kiosks in order to improve its mix of inputs and minimize the cost
Explanation:
a. According to the given data we have the following:
Let "C" is a cashier.
"K" is a kiosk
MPC = 48 (Marginal Product of Cashier)
MPK = 32 (Marginal Product of Kiosk)
PC = $15 (cashier can be hired for a wage of $15)
PK = $12 (Kiosk rents for $12)
At optimal cost minimization point, (MPC / MPK) = (PC / PK)
(MPC / PC) = (MPK / PK)
(MPC / PC) = (48 / 15) = 3.2
(MPK / PK) = (32 / 12) = 2.67
Since the (MPC / PC) and (MPK / PK) is not equal. It implies Whataburger is not using the optimal cost-minimizaing mix of cashier and kiosks.
b. We have to use the following:
(MPC / PC) > (MPK / PK)
i.e., 3.2 > 2.67
It means Whataburger hire more cashier and rent fewer kiosks in order to improve its mix of inputs and minimize the cost.
Terrel Gifts produces logo platters and cups bearing the name of the city in which the items will be sold to tourists. Indirect logo printing costs are allocated to platters and cups based on the amount of time spent on the logo machine. The company has budgeted logo costs of $4,224 per month and expects to spend 4,800 hours on the printing logos each month. Each platter uses 24 minutes and each cup spends 6 minutes on the logo machine. How much of the logo printing costs will be allocated to each platter?
Answer:
$0.3528
Explanation:
So, we are given the following data or parameters or information in the question above as:
=> " The company has budgeted logo costs = $4,224 per month."
=> "Time that is being expected to be spent = 4,800 hours on the printing logos each month. "
=> " Each platter uses 24 minutes and each cup spends 6 minutes on the logo machine."
The amount of money the logo printing costs will be allocated to each platter;
Thus, 0.0147 × 24 = 0.3528.
Kindly note that the value; 0.0147 comes from the division of 4800 hours by 60 per each hour
Andrew Manufacturing held an average inventory of $1.1 million (raw materials, work-in-process, finished goods) last year. Its sales were $8.0 million, and its cost of goods sold was $5.8 million. The firm operates 260 days a year. What is the inventory day’s supply? What target inventory level is necessary to reach a 20- and 10-day inventory days supply during the next two years?
Answer:
The Inventory day's supply is 49.3 days supply
The Target inventory level to reach a 20-day inventory days supply is $ 0.446 million
The Target inventory level to reach a 10-day inventory days supply is $ 0.223 million
Explanation:
In order to calculate the inventory day’s supply we would have to calculate the following:
Inventory day's supply = (Average inventory / Cost of goods sold) * 260 days a year
Inventory day's supply = 1.1/5.8)*260
Inventory day's supply = 49.3 days supply
To calculate the target inventory level necessary to reach a 20- and 10-day inventory days supply during the next two years we would have to calculate the following:
Target inventory level to reach a 20-day inventory days supply = (20/260)*5.8 = $ 0.446 million
Target inventory level to reach a 10-day inventory days supply = (10/260)*5.8 = $ 0.223 million
Harry agreed to pay $100 to rent a rooftop spot in Seattle to watch the New Year's Eve festivities. The festivities were canceled at the last minute due to many of the guests' concern over news of a potential terrorist attack in a different section of the city. Harry is likely:
Answer:
Not obligated to pay under the frustration of purpose doctrine
Explanation:
In this specific scenario, Harry is likely Not obligated to pay under the frustration of purpose doctrine. This doctrine states that an individual does not need to abide by his/her contractual duties if a later unforeseen event impedes the buyer's initial purpose for entering into the contract, if and only if the seller knew of the buyer's purpose at the time of entering the contract. Therefore since Harry entered into the agreement for the sole reason of watching the New Year's Eve festivities and it was cancelled due to an unforeseen event (terrorist threat) he does not have to pay.
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2016. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2016 was $210 million.
Required:
1. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2016.
2. Prepare the journal entry by Tanner-UNF to record interest on December 31, 2016, at the effective (market) rate.
3. At what amount will Tanner-UNF report its investment in the December 31, 2016, balance sheet? Why?
4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2017, for $190 million. Prepare the journal entry to record the sale.
