The following table shows a simplified consolidated balance sheet for the entire
banking system (all figures are in billions). The reserve ratio is 25 percent.
Assets Liabilities &Equity
Reserves 96 Checkable Deposits 400
Securities 104
Loans 200
a. 1. What is the amount of excess reserves in this banking system?
2. What is the maximum amount the banking system might lend?
3. Show how the balance sheet would look after this amount has been lent
(construct new balance sheet or add columns).
4. What is the size of the monetary multiplier?
b. 1. Answer the questions in part a assuming the reserve ratio is 15 percent.
2. What is the resulting difference in the amount that the banking system can
lend? How do you explain the difference?
Answers
Answer:
Kindly check explanation
Explanation:
Excess reserve = (Actual reserve - required reserve)
Required reserve = reserve ratio × Checkable deposit
Required reserve = 0.25 × $400 billion
Required reserve = $100 billion
Excess reserve = $96 - $100 = - $4billion
B) money multiplier = 1/ required reserve ratio
1/0.25 = 4
Maxumum amount that can be Lent = 4 × 4 = $16 million
If reserve ratio = 15%
Required reserve = 0.15 × $400 billion = $60 billion
Excess reserve = $96 - $60 = $36 billion
Monetary multiplier = 1/ 0.15 = 6.667
Maximum amount of loan = 6.667 × 36 = $240 billion
Related Questions
In a Q system, the demand rate for strawberry ice cream is normally distributed, with an average of 305 pints per week. The lead time is 5 weeks. The standard deviation of weekly demand is 14 pints. Refer to the standard normal table for z-values.
a. The standard deviation of demand during the 5-week lead time is ______ pints. (Enter your response rounded to the nearest whole number.)
b. The average demand during the 6-week lead time is _____pints. (Enter your response as aninteger.)
c. The reorder point that results in acycle-service level of 96 percent is _____pints. (Enter your response rounded to the nearest whole number.)
Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359
0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5754
0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141
0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517
0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879
0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224
0.6 0.7258 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7518 0.7549
0.7 0.7580 0.7612 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852
0.8 0.7881 0.7910 0.7939 0.7967 0.7996 0.8023 0.8051 0.8079 0.8106 0.8133
Answers
Answer: a. 31.304. b. 1525. c. 1589.17
Explanation:
Lead time = 5 weeks
Standard deviation of weekly demand = 14 pints
a. ✓L × Standard deviation Weekly
= ✓5 × 14
= 2.236 × 14
= 31.304
b. Average demand during the 5-week lead time will be:
= Leadtime × weekly demand
= 5 × 305
= 1525
c. Note that the Z value at 96% service level is 2.05
R=dL+z*sd*sqrt(L)= (305 × 5)+ (2.05 × 14 × ✓5)
= 1525 + 64.17
= 1589.17
Compared with diversification based on intangible resources, diversification based on financial resources is: a. less imitable and more likely to create value on a long-term basis. b. more imitable and less likely to create value on a long-term basis. c. less imitable and less likely to create value on a long-term basis. d. more imitable and more likely to create value on a long-term basis.
Answers
Answer:
b. more imitable and less likely to create value on a long-term basis.
Explanation:
In Finance, diversification can be defined as an investment technique that focuses on distributing capital or portfolio across various investments.
Basically, the aim of adopting a diversification is to lessen or mitigate the degree of uncertainty of the portfolio by enhancing its high long-term returns.
Diversification helps financial experts or investors to complement or annul the losses associated with an asset class by the benefits of another asset class in a portfolio.
Compared with diversification based on intangible resources, diversification based on financial resources is more imitable or copied by rivals in the industry and less likely to create value on a long-term basis.
Diversification based on intangible resources, includes intellectual property, brand recognition, human resources, patents, customer lists, trademarks, copyrights, and goodwill etc.
Diversification based on financial resources, includes shares, money, bond, gold, debentures, checks, and promissory notes.
A firm's bonds have a maturity of 14 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 7 years at $1,073.00, and currently sell at a price of $1,135.93. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places.
Answers
Answer:
YTM = 6.51%
YTC = 6.40%
Explanation:
We need to solve using excel goal seek or bond formulas to generate the yield (interest rate) which matches the future couponb and maturity payment with the current selling price of the bond:
Present value of the coupon
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 40.000 (1,000 x 8% / 2 payment per year)
time 28 (14 years x 2 payment per year)
rate 0.032529972 (generate using goal seek tool)
[tex]40 \times \frac{1-(1+0.0325299719911398)^{-28} }{0.0325299719911398} = PV\\[/tex]
PV $727.8688
Pv of the maturity (lump sum)
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 1,000.00
time 28.00
rate 0.032529972
[tex]\frac{1000}{(1 + 0.0325299719911398)^{28} } = PV[/tex]
PV 408.06
PV c $727.8688
PV m $408.0612
Total $1,135.9300
As this is a semiannual rate we multiply it by 2
0.032529972 x 2 = 0.065059944 = 6.51%
We repeat the procedure with changing the time and end-value to adjust for the callabe conditions:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 40.000
time 14 (7 years x 2 payment per year)
rate 0.032015131
[tex]40 \times \frac{1-(1+0.0320151313225188)^{-14} }{0.0320151313225188} = PV\\[/tex]
PV $445.6984
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 1,073.00 (call price)
time 14.00
rate 0.032015131
[tex]\frac{1073}{(1 + 0.0320151313225188)^{14} } = PV[/tex]
PV 690.23
PV c $445.6984
PV m $690.2316
Total $1,135.9300
Againg his will be a semiannual rate so we multiply by two:
0.032015131 x 2 = 0.064030263 = 6.40%
Creative Computing sells a tablet computer called the Protab. The $740 sales price of a Protab Package includes the following: One Protab computer. A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months. A coupon to purchase a Creative Probook e-book reader for $150, a price that represents a 50% discount from the regular Probook price of $300. It is expected that 20% of the discount coupons will be utilized. A coupon to purchase a one-year extended warranty for $70. Customers can buy the extended warranty for $70 at other times as well. Creative estimates that 40% of customers will purchase an extended warranty. Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an extended warranty, but estimates that if it did so, a Protab alone would sell for $720. All Protab sales are made in cash. Required: 1. & 2. Indicated below whether each item is a separate performance obligation and allocate the transaction price of 100,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 100,000 Protab Packages (ignore any sales of extended warranties).
Answers
Answer:
Explanation:
1. Package of $740 sales price includes :
Protab Computer - 1
Limited warranty for 6 month
Coupon to purchase e-book for $150 (represents 50% discount) expected 20% utilized
Coupon to purchase 1-year warranty for $70 regular price $70 expected 40% purchase
Protab Computer price alone is $720.
2.
Performance Stand along Percentage of the Allocation of total
Obligation selling price sum of the stand transactions price to
of the performance alone selling price each performance
obligation of the performance obligation.
obligation
Protab - $72000000 96% $71040000
tablet
Open to $3000000 4% $2960000
purchase
Probook
Option to
purchase $0 0 .00% -
extended
warranty
Total; $75,000,000 100.00% $74,000,000
Protab Selling Price = 100000 units × $720 = $72,000,000
Selling price of option to purchase probook = 100000 units × 20% utilisation * $150 = $3000000
Selling price of option to purchase extended warranty = ($70 -$70)×100000 units * 40% = $0
Total = $75,000,000
Percentage of Protab selling price of Total Selling Price = $72,000,000 /$75,000,000 = 96%
Percentage of Option to purchase Probook of Total Selling Price = $3,000,000 /$75,000,000 = 4%
Percentage of Option to purchase extended warranty of Total Selling Price = 0 .00%
Total Transaction Price = 100000 units × $740 = $74,000,000
Allocation of Total Transaction price to Protab = $74,000,000 * 96% = $71040000
Allocation of Total Transaction price to Option to purchase probook = $74,000,000 * 10% = $2960000
3.
Journal Entry
Account Title Debit Credit
Cash $74,000,000
Sales Revenue $71040000
Deffered Revenue - discount option $2960000
Consider a country where all money is currently held as cash and the money supply has a value of $2,200. A banking system is developed, and the residents of the country deposlt the $2,200 of cash into the banking system and decide they no longer want to hold any cash. If the reserve ratio is equal to 4%, then the banking system has the ability to create $_________ money supply in the economy will be equal to $__________
Answers
Answer: the banking system has the ability to create $52,800 of new money and the money supply in the economy will be equal to $55,000
Explanation:
To find out how much new money was created or rather how much can be created you can use the Money Multiplier. The money multiplier enables one to see how much money can be created in an economy given a certain reserve ratio.
The Money Multiplier is calculated by,
= 1/reserve requirement
Multiplying the Money Multiplier with the initial deposit in the bank gives the amount that that deposit can create.
With a Reserve Requirement of 4%, the Money Multiplier is,
= 1/4%
= 25
The Amount of money created in the economy is therefore,
= 25 * 2,200
= $55,000
The amount of New Money created will be the amount created less the initial deposit,
= 55,000 - 2,200
= $52,800
SCC Co. reported the following for the current year:
Net sales $ 59,000
Cost of goods sold $ 48,800
Beginning balance in inventory $ 3,100
Ending balance in inventory $ 9,100
Compute (a) inventory turnover and (b) days’ sales in inventory.
Hint: Recall that inventory turnover uses average inventory, and days’ sales in inventory uses the ending balance in inventory."
Answers
Answer:
a. The inventory turnover is 8.00 times
b. The days’ sales in inventory is 68 days
Explanation:
a. In order to calculate the inventory turnover we would have to use the following formula:
inventory turnover=cost of goods sold/average inventory
inventory turnover=$ 48,800/($3,100+$ 9,100)/2
inventory turnover=8.00 times
b. In order to calculate thedays’ sales in inventory we would have to use the following formula:
days’ sales in inventory=(Ending invenory/cost of goods sold)*365
days’ sales in inventory=($9,100/$48,800)*365
days’ sales in inventory=68 days
6. The term strategy can be defined as: a. A company’s market share, which allows it to outperform competition. b. A coordinated deployment of a firm’s resources to achieve competitive advantage. c. The sum total of a company’s financial, organizational, physical and human resources. d. All of the above.
Answers
Answer:
A coordinated deployment of a firm’s resources to achieve competitive advantage.
Explanation:
The term strategy can be defined as a coordinated deployment of a firm’s resources to achieve competitive advantage. It is a long-term plan of action that is focused on using a firm's available resources to achieve set objectives and goals, which includes dominating the market, meeting customer's demands, expanding the business, etc.
The executive management team ensures that their business strategy is in tandem with the aim, objectives vision and mission. A good business strategy is a continuous process that should function as a roadmap or guide to achieve competitive advantage, sustained profitability, growth and development of an organization.
A business strategy can be classified into various categories, such as product strategy, marketing strategy, growth strategy etc.
Answer:
The correct answer is:
A coordinated deployment of a firm’s resources to achieve competitive advantage. (b)
Explanation:
The goal of every business is to maximize profit, hence, business strategy is paramount in achieving this, and it is a combination of all the decisions taken, and actions implemented to achieve business goals and to gain a competitive advantage in the market. From this definition, it is therefore noted that business strategies are effectively drawn up at the beginning of the business year, because it is like a roadmap for the business, and implemented throughout the period, although, it can also change depending on the condition of the business environment. Note also that business strategy is different from the business plan, while business plans sets the goals of the business, business strategy states how to achieve these goals.
Data related to the inventories of Kimzey Medical Supply are presented below: Surgical Equipment $ 260 170 Surgical Supplies $ 120 Selling price Cost Replacement cost Costs to sell Normal gross profit ratio 90 Rehab Equipment $ 340 250 235 25 30 % Rehab Supplies $ 165 162 158 240 80 30 30% 10 30 % 20 % In applying the lower of cost or market rule, the inventory of surgical equipment would be valued at:_________
A) $170.
B) $152.
C) $230.
D) $240.
Answers
Answer: A) $170
Explanation:
In applying the Lower of Cost or Market Value, inventory is valued at the amount that is lower between the current market value or the cost of the inventory and recorded in the balance sheet.
Market Value can be calculated as the current value minus the cost to sell.
From the above question, the value of the Surgical Equipment is $260 and the cost to sell is $30.
That means that the Market Value is,
= 260 - 30
= $230
This figure is larger than the cost of the Surgical Equipment which is $170 so to record the inventory according to the Lower of cost or market rule, the $170 is picked as it is lower.
The Rehe Comany sells its razors at $3 per unit. The company uses a first-in, first-out actual costing system. A fixed manufacturing cost rate is computed at the end of each year by dividing the actual fixed manufacturing costs by the actual production units. The following data are related to its first two years of operation:
2011 2012
Sales 1000 units
1200 units
Costs:
Variable manufacturing
Fixed manufacturing
Variable operating (marketing)
Fixed operating (marketing)
$ 700
700
1000
400
$ 500
700
1200
400
1. Prepare income statements based on variable costing for each of the two years.
2. Prepare income statements based on absorption costing for each of the two years.
3. Prepare a numerical reconciliation and explanation of the difference between operating income for each year under absorption costing and variable costing.
4. Critics have claimed that a widely used accounting system has led to undesirable buildups of inventory levels. (a) Is variable costing or absorption costing more likely to lead to such buildups? Why? (b) What can be done to counteract undesirable inventory buildups?
Answers
Answer:
2011 2012
Sales 1000 units 1200 units
Production 1400 1000
Costs:
Variable manufacturing $700 $500
per unit $0.50
Fixed manufacturing $700 $700
Variable operating (marketing) $1000 $1200
Fixed operating (marketing) $400 $400
cogs under absorption costing 2011 = ($1,400 / 1,400) x 1,000 = $1,000
cogs under absorption costing 2012 = $400 + ($1,200 / 1,000) x 800 = $1,360
1. INCOME STATEMENTS
VARIABLE COSTING
2011 2012
Total sales revenue: $3,000 $3,600
Opening inventory: ($0) ($200)
Variable manufacturing: ($700) ($500)
Ending inventory: $200 $100
Gross contribution margin: $2,500 $3,000
Variable operating: ($1,000) ($1,200)
Contribution margin: $1,500 $1,800
Fixed manufacturing: ($700) ($700)
Fixed operating: ($400) ($400)
Net operating income: $400 $700
2. INCOME STATEMENTS
ABSORPTION COSTING
2011 2012
Total sales revenue: $3,000 $3,600
COGS: ($1,000) ($1,360)
Gross margin: $2,000 $2,240
Operating costs: ($1,400) ($1,600)
Net operating income: $600 $640
3. Under variable costing, closing inventory = 400 units x $0.50 (variable production costs per unit) = $200.
Under absorption costing, closing inventory = 400 units x $1 (production cost per unit) = $400
Since closing inventory is $200 higher under absorption costing, then net operating income during 2011 increases by $200.
4. a) Variable costing is more likely to result in inventory buildups. Since variable costing determines the value of closing inventory only using variable manufacturing costs, their value is much lower. E.g. in this case the value of closing inventory 2011 under variable costing is $200, while under absorption costing it is $400. This means that less costs are transferred from one year to another.
b) Cost of goods sold must include all production costs (both variable and fixed). This way COGS costs cannot be over estimated during one year and under estimated the next.
City Auto Parts recently traded in store fixtures. The exchange had commercial substance. The old fixtures had a cost of $48,000 and accumulated depreciation of $14,000. City paid $101,000 for the new store fixtures. These new fixtures had a market value of $117,000. There is a loss of $18,000 on this exchange.True or False
Answers
Answer:
The correct option is true
Explanation:
The book value of the old fixtures at the date of exchange which is the cost less accumulated depreciation till date is computed thus:
Book value of old fixtures=$48,000-$14,000=$34000
Expected cash payable by the company for the new fixtures is the market value of the new fixtures minus the carrying value of the old fixtures.
Expected cash=$117,000-$34,000=$83,000.00
Loss on the exchange =cash paid -expected cash payable=$101,000-$83,000=$18000
If the Fed carries out an open market operation and sells U.S. government securities, as long as the federal funds interest rate remains within the corridor the federal funds rate ________ and the quantity of reserves ________. Group of answer choices rises; decreases falls; increases falls; decreases rises; increases
Answers
Answer:
rises; decreases
Explanation:
When the Fed sells US securities, it is engaging in a contractionary monetary policy. This means that they are trying to cool down the economy and lower inflation rate by reducing the money supply. This will lead to an increase in the federal funds rate and the whole economy's interest rates.
Since the Fed absorbs money from the banks and other investors, the quantity of banks' reserves decreases, which leads to less loans and higher interest rates charged.
The four conditions (mutual exclusion, hold and wait, no preemption and circular wait) are necessary for a resource deadlock to occur. Give an example to show that these conditions are not sufficient for a resource deadlock to occur. When are these conditions sufficient for a resource deadlock to occur
Answers
Explanation:
The conditions sufficient for a resource deadlock to occur is when a deadlock will prevail for process A, B, and C when two resources R and S; if only one instance of each resources is allowed.
Solution
Deadlock conditions
A deadlock is a situation where two or more processes request for same critical resource at the same time.
The mutual exclusion applies a restriction to a resource when the resource is used by any process, it should become unavailable for the other resources
The hold and wait allocations explains that any process which is allocate resources must hold them; till all needed resources are nor sure.
In the meantime, if any other processes need a resource which is held by another process, then the latter will release the resource to prevent deadlock.
No pre-emption states that the operating system can grant access to resources to another process while it is in use by another process; depending on the priority , to prevent deadlock.
Circular wait should not be implemented so that resources being requested by process are allocated when they get free.
Now,
Three processes A, B, and C functions on a system, having two distinct resources R and S.
The resource R has one instant active while resource S has two instances available.
The instance of R is allocated to a process A after request. first instance of resource S is allocated to process B, and second instance of resource S is allocated to process C.
When a request is placed by process B for resource R, then the resource is not available for execution. the process A request for resource S which is used by both C and B.
All the four conditions prevail in this situation; yet deadlock does not occur.
The resource S is released by process C and is allocated to process A. when process A finishes, it releases resources and resources R is allocate d to process B.
Hence all three processes end without a deadlock.
However, the deadlock will prevail for process A, B, and C when two resources R and S; if only one instance of each resources is allowed.
Suppose a relative has promised to give you $1,000 as a wedding gift the day you get engaged. Assuming a constant interest rate of 7%, consider the present and future values of this gift, depending on when you become engaged.
Complete the first row of the table by determining the value of the gift in one and two years if you become engaged today.
Present Value Value in One Year Value in Two Years
Date Received (Dollars) (Dollars) (Dollars)
Today 1,000.00 ? ?
In 1 year ? 1,000.00
In 2 years ? 1,000.00
Complete the first column of the table by computing the present value of the gift if you get engaged in one year or two years.
The present value of the gift is __________ if you get engaged in two years than it is if you get engaged in one year.
Answers
Answer:
a.
Future Value in One Year = $1,070.00
Future Value in Two Years = $1,144.90
b.
Present Value of amount received in 1 year = $934.58
Present Value of amount received in 2 years = $873.44
The present value of the gift is less/lower if you get engaged in two years than it is if you get engaged in one year.
Explanation:
These can be done as follows:
Present Value Value in One Year Value in Two Years
Date Received (Dollars) (Dollars) (Dollars)
Today 1,000.00 1,070.00 1,144.90
In 1 year 934.58 1,000.00
In 2 years 873.44 1,000.00
a. Complete the first row of the table by determining the value of the gift in one and two years if you become engaged today.
To do this, we use future value (FV) formula as follows:
Future Value = A * (1 + r)^n ........................................ (1)
Where;
A = Amount received to day = $1,000.00
r = interest rate = 7%, or 0.07
n = number of years
Using equation (1), we therefore have:
Future Value in One Year = 1,000.00 * (1 + 0.07)^1 = $1,070.00
Future Value in Two Years = 1,000.00 * (1 + 0.07)^2 = $1,144.90
b. Complete the first column of the table by computing the present value of the gift if you get engaged in one year or two years.
To do this, we use present value (PV) formula as follows:
Present Value = A / (1 + r)^n ........................................ (2)
Where;
A = Amount received in specified year = $1,000.00
r = interest rate = 7%, or 0.07
n = number of years
Using equation (2), we therefore have:
Present Value of amount received in 1 year = 1,000.00 / (1 + 0.07)^1 = $934.58
Present Value of amount received in 2 years = 1,000.00 / (1 + 0.07)^2 = $873.44
Since $873.44 is less/lower than $934.58, we therefore have:
The present value of the gift is less/lower if you get engaged in two years than it is if you get engaged in one year.
The correct statement will be that the present value of the wedding gift is $873.43 if you get engaged in two years, then it is $934.57 if you get engaged in one year when the future value is $1000.
The future value of wedding gifts will be $1070.00 and $1144.9 at the end of first and second year respectively. The computation for the values can be done by applying values to the formula.
Calculation of future value and present valueThe present value of the gift can be calculated as using the formula below, [tex]\rm Present\ Value= \dfrac{Future\ Value}{1+ Fixed\ Interest\ Rate}\\\\\\\\\rm Present\ Value= \dfrac{\$1000}{1.07}\\\\\\\rm Present\ Value= \$ 934.57[/tex]The present value for one year is 934.57 USD. Now for two years, [tex]\rm Present\ Value= \dfrac{\$934.57}{1.07}\\\\\rm Present\ Value= \$873.43[/tex]Now to calculate the future value when the present value is considered to be as $1000. We will use the formula below, [tex]\rm Future\ Value\ for\ One\ Year=Present\ Value\ +\ \dfrac{Present\ Value\ x\ Time\ x\ Interest\ Rate}{100}\\\\\\\rm Future\ Value\ for\ One\ Year= 1000\ +\ \dfrac{1000\ \rm x\ 1\ \rm x\ 7}{100}\\\\\\\rm Future\ Value= \$1070[/tex]For the end of two years, the future value will be, [tex]\rm Future\ Value= Present\ Value\ (1+\dfrac{Interest}{no.\ of\ Compoundings})^n^t\\\\\\\rm Future\ Value= 1000\ (1+\dfrac{0.07}{1})^1^ x\ ^2\\\\\rm Future\ Value= \$1144.9[/tex]Hence, the value of the gifts can be ascertained as per the calculations above.
Learn more about Future Values, here:
https://brainly.com/question/1759639
You are given the following information concerning a noncallable, sinking fund debenture: Principal: $1,000 Coupon rate of interest: 7 percent Term to maturity: 15 years Sinking fund: 5 percent of outstanding bonds retired annually; the balance at maturity If you buy the bond today at its face amount and interest rates rise to 12 percent after three years have passed, what is your capital gain or loss
Answers
Answer:
Explanation:
A) If you buy the bond today at its face amount and interest rates rise to 12% after three years have passed what is your capital gain or loss?
B) If you hold the bond 15 years what do you recive at maturity?
C) What is the bond current yield as of right now?
D) Given your price in a, what is the yield of maturity
E) Is there any reason to believe that the bond will be called after three years have elapsed if interest rates decline
F) what proportion of the total debt issue is retired by the sinking fund
G) What assets secure this bond?
h) If the final payment to retire this bond is $1,000,000 how much must the firm invest to accumulate this sum if the firm is able to earn 7% on the invest funds.
A) If the interest rates rise to 12%, the price of the bond assuming semi-annual interest payments, will be
1000*pvif(6,24) + 35*pvifa(6,24)
= 1000*0.2470 +35*12.5504
= 247 + 439.26 = $686.26
The capital gain would be 1000 - 686.26 = $313.74.
B) Bond face value is $1000 and coupon rate is 7%. Half yearly interest = 1000*7%/2 = $35.
Maturity value of $1000, plus half yearly interest of $35.
C) The bonds current yield = 7%, assuming the price of the bond is $1000 today.
D) The yield to maturity is 12%.
E) No, the bonds are not callable.
F) 5% of the bonds are retired every year. So 14 years * 5 = 70%. Balance 30% is paid full at EOY 15.
5%*14 = 70%.
G) Debentures are not secured by any specific asset.
H) It is not specified as to how the money would be invested; whether its a
lump sum invested on day 0 or equal amounts invested at each year end
If it a lump sum to be invested now, the amount should be 1000000/107^15 = $362,446
If it in equal amounts to be invested each year end the annual investments is given by 1,000,000/fvifa(7,15)
= 1000000/25.1290
= $3979.
The following list of statements about corporations are given below.
1. A corporation is an entity separate and distinct from its owners.
2. As a legal entity, a corporation has most of the rights and privileges of a person.
3. Most of the largest U.S. corporations are publicly held corporations.
4. Corporations may buy, own, and sell property; borrow money; enter into legally binding contracts; and sue and be sued.
5. The net income of a corporation is taxed as a separate entity.
6. Creditors have no legal claim on the personal assets of the owners of a corporation if the corporation does not pay its debts.
7. The transfer of stock from one owner to another does not require the approval of either the corporation or other stockholders; it is entirely at the discretion of the stockholder.
8. The board of directors of a corporation manages the corporation for the stockholders, who legally own the corporation.
9. The chief accounting officer of a corporation is the controller.
10. Corporations are subject to more state and federal regulations than partnerships or proprietorships. Andrea has studied the information above and has come with more statements about corporations.
Identify whether each statement is true or false.
1. Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership.
A. True B. False
2. Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation.
A. True B. False
3. When a corporation is formed, organization costs are recorded as an asset.
A. True B. False
4. Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation.
A. True B. False
5. The number of issued shares is always greater than or equal to the number of authorized shares.
A. True B. False
6. A journal entry is required for the authorization of capital stock.
A. True B. False
8. Publicly held corporations usually issue stock directly to investors. The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor.
A. True B. False
9. The market price of common stock is usually the same as its par value.
A. True B. False
10. Retained earnings is the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.
A. True B. False
Answers
Answer:
1. Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership.
A. True B. False
2. Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation.
A. True B. False
3. When a corporation is formed, organization costs are recorded as an asset.
A. True B. False
4. Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation.
A. True B. False
5. The number of issued shares is always greater than or equal to the number of authorized shares.
A. True B. False
6. A journal entry is required for the authorization of capital stock.
A. True B. False
8. Publicly held corporations usually issue stock directly to investors. The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor.
A. True B. False
9. The market price of common stock is usually the same as its par value.
A. True B. False
10. Retained earnings is the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.
A. True B. False
Explanation:
1) Corporation management means that experts can be hired as managers. On the other hand, the managers may not act in the best interest of the owners, even though, they are legally required to do so.
2) Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation. Limited liability of stockholders may be a disadvantage to non-stockholders, but it is an advantage for stockholders, who will not be required to contribute more money to offset liabilities of the corporation in the event of liquidation. Since corporations are distinct persons in law, they also need to be regulated and taxed as separate persons. So, this is not a disadvantage. It is only a consequence of being separate entity, like all individuals.
3) Organization costs include legal payments, state and federal registration, and incorporation fees, promotions, and charges associated with the underwriting of stocks and bonds. Organization costs can be classified as assets on the company's balance sheet.
4) A share in a company's stock accords some rights on the holder as itemized above.
5) The number of issued shares may be equal to or less than the authorized shares. Some companies do not issue all the shares that they are authorized to issue at the same time.
6) Authorization of capital stock does not require a journal entry. A memorandum record of the authorization is instead maintained to show the number of authorized capital shares and the par value.
7) There is no question 7.
8) Initial public offerings are made directly to investors. The stock exchange market caters for the exchange of shares among investors. The company is not involved and does not take any financial record, except the register of shareholders.
9) The market price of shares may be more or less than the par value. The market price is determined by investors, who exchange shares at arm's length in the stock exchange market. The par value is determined by those authorizing the issue of shares.
10) Retained Earnings are the income generated by the corporation which have not been distributed to shareholders in the form of dividends.
On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $16,800; Accounts Receivable, $7,050; Supplies, $700; Equipment, $11,750; Accounts Payable, $9,000. What is the amount of owner's equity as of May 31 of the current year?
Answers
Answer:
$27,300
Explanation:
Riser Inc. had the following liabilities and assets on May 31 of the current year
Cash= $16,800
Account receivables= $7,050
Supplies= $700
Equipment= $11,750
Account payable= $9,000
Since Assets = Liabilities+ stockholder's equity
The stockholder's equity can be calculated as follows
Cash+Account receivables+Supplies+Equipment= Account payable+stockholder's equity
$16,800+$7,050+$700+$11,750=$9,000+stockholder's equity
$36,300=$9,000+stockholder's equity
Stockholder's equity= $36,300-$9,000
Stockholder's equity= $27,300
Hence the amount of owner's equity as of May 31 of the current year is $27,300
Which of the following statements about pricing is true? Small changes in price can have big effects on company profit but not on the number of units sold. Small changes in price can have big effects on the number of units sold but not on company profit. Small changes in price can have big effects on the number of units sold and also on company profit. Compared to the other 4P’s, pricing is important because once an item has been priced, changing its price can be quite difficult.
Answers
Answer:
Small changes in price can have big effects on the number of units sold and also on company profit
Explanation:
Small change in price will definitely have an effect on the amount of units sold due to a corresponding change in demand that will follow this change, and also will affect the amount of profit that the company generates. This changes can either be positive or negative to the company. Example is the increase in price of coca-cola might trigger customers into switching to pepsi-cola, resulting in a reduced demanded quantity which means less units are produced. The overall effect of these will leave the company with less profit.
Notifies the materials manager to send materials to a production department. 2. Holds indirect costs until assigned to production. 3. Hold production costs until products are transferred from production to finished goods (or another department). 4. Standardizes partially completed units into equivalent completed units. 5. Holds costs of finished products until sold to customers. 6. Describes the activity and output of a production department for a period. 7. Holds costs of materials until they are used in production or as factory overhead.
Answers
Answer:
1. Notifies the materials manager to send materials to a production department--- material requisition
2. Holds indirect costs until assigned to production--- factory overhead account
3. Hold production costs until products are transferred from production to finished goods (or another department)--- goods in process inventory account
4. Standardizes partially completed units into equivalent completed units--- equivalent units of production
5. Holds costs of finished products until sold to customers--- finished goods inventory account
6. Describes the activity and output of a production department for a period--- process cost summary
7. Holds costs of materials until they are used in production or as factory overhead--- raw material inventory account
Explanation:
The complete question requires that we match the above to the options below
a. process cost summary
b. equivalent units of production
c. goods in process inventory account
d. raw material inventory account
e. material requisition
f. finished goods inventory account
g. factory overhead account
Stellar Corporation began operations on January 1, 2014. During its first 3 years of operations, Stellar reported net income and declared dividends as follows.Net incomeDividends declared2014 $49,500 $ –0– 2015 128,600 59,600 2016 161,000 58,800 The following information relates to 2017.Income before income tax $231,000 Prior period adjustment: understatement of 2015 depreciation expense (before taxes) $32,000 Cumulative decrease in income from change in inventory methods (before taxes) $44,800 Dividends declared (of this amount, $32,000 will be paid on January 15, 2018) $118,400 Effective tax rate 40 %Prepare a 2017 retained earnings statement for Stellar Corporation. (List items that increase adjusted retained earnings first.)
Answers
Answer:
$194,820
Explanation:
Retained earnings at the end of 2017 is computed thus:
2014 net income $49,500
2014 dividends ($0)
2014 retained earnings $49,500
2015 net income $128,600
2015 dividends ($59,600)
2015 retained earnings $118,500
2016 net income $161,000
2016 dividends ($58,800)
2016 retained earnings $220,700
understatement of depreciation expense
after tax impact $32,000-(40%*$32,000) ($19,200)
After tax impact of decrease in net income due
to inventory method $44,800-($44,800*40%) ($26,880)
Adjusted retained earnings for 2016 $174,620
net income for 2017 $231,000-($231,000*40%) $138,600
dividends declared for 2017 ($118,400)
Retained earnings for 2017 year end $194,820
Retained earnings in the adjustment in each is the retained earnings brought forward plus the net income for the current year minus dividends declared for the year
Grayson (single) is in the 24 percent tax rate bracket and has sold the following stocks in 2019: (Loss amounts should be indicated by a minus sign.)
Description Date Purchased Basis Date Sold Amount Realized
Stock A 1/23/1995 $7,850 7/22/2019 $4,980
Stock B 4/10/2019 15,200 9/13/2019 18,970
Stock C 8/23/2017 12,250 10/12/2019 17,340
Stock D 5/19/2009 5,710 10/12/2019 13,300
Stock E 8/20/2019 7,720 11/14/2019 3,800
Required:
a. What is Graysonâs net short-term capital gain or loss from these transactions?
b. What is Graysonâs net long-term gain or loss from these transactions?
c. What is Graysonâs overall net gain or loss from these transactions?
Answers
Answer: a. -$150 b. $9810 c. $9660
Explanation:
Stock B and E were chosen as the short term for the holding period while stock A, C, D were chosen as long term for the holding period because the time duration is longer.
For question (a), Grayson's net short-term capital loss from these transactions was -150.
For question (b), Grayson's net long-term gain from these transactions was $9810.
For question (c), Grayson's overall net gain from these transactions was:
= $9810 - $150
= $9660
Kindly check the attached document for further analysis.
During the year, direct labor costs of $30,000 were incurred, manufacturing overhead totaled $42,000, materials purchased were $27,000, and selling and administrative costs were $22,000. Champagne sold 25,000 units of product during the year at a sales price of $5.00 per unit. What were the total manufacturing costs for the year assuming $2 comma 080 of indirect materials were used during the period?
Answers
Answer:
Using the models for total manufacturing cost that includes just direct labour costs, direct materials cost and overhead costs, total manufacturing cost = $99,000
Using the model that includes selling and administrative costs & indirect materials cost, total manufacturing cost = $123,080
Explanation:
Total manufacturing cost is a sum of the amount of cost incurred by a business to produce goods in a reporting period.
It usually consists of direct labour costs, direct materials cost and overhead costs.
In some models, the selling and administrative costs & cost of indirect materials are included.
Direct labour cost = $30,000
Manufacturing overhead costs = $42,000
Direct materials cost = $27,000
Total manufacturing cost = 30000 + 42000 + 27000 = $99,000
Selling and Administrative costs = $22,000
Indirect materials cost = $2,080
Total materials cost including selling and administrative costs & indirect materials cost = 99000 + 22000 + 2080 = $123,080
Hope this Helps!!!
The new growth theory states that A. technological advances are the responsibility of the government. B. the subsistence level income leads to technological advances. C. technological advances are the result of discoveries and choices. D. it is impossible to replicate production activities. E. technological advances are the result of random chance.
Answers
Answer:
C. technological advances are the result of discoveries and choices.
Explanation:
The new growth theory was developed by a man named med Paul Romer. This new growth theory stresses the role which is determined by human choices.
The new growth theory states that technological advances are the result of discoveries and choices, rather than random choices. It explains the fact that new innovations and technological advancement are not the result of random chance, but they occur as a result of humans and their desire for new innovations.
Therefore option C is correct
g On January 1, 2020, Marigold Company issued 10-year, $1,890,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 16 shares of Marigold common stock. Marigold’s net income in 2020 was $470,000, and its tax rate was 20%. The company had 94,000 shares of common stock outstanding throughout 2020. None of the bonds were converted in 2020. (a) Compute diluted earnings per share for 2020.
Answers
Answer:
$3.78
Explanation:
The First step is to calculate basic earning per share then making the adjustments to the basic earning per share to arrive to a diluted earning per share.
Basic Earning per Share = Earnings Attributable to Holders of Common Stock / Weighted Average Number of Common Stock Holders.
Earnings Attributable to Holders of Common Stock Calculation :
Net Income $470,000
Less Bond Interest ($1,890,000×6%×80%) ($90,720)
Earnings Attributable to Holders of Common Stock $379,280
Weighted Average Number of Common Stock Holders Calculation :
Outstanding Common Shares 94,000
Weighted Average Number of Common Stock Holders 94,000
Basic Earning per Share = $379,280 / 94,000 = $4.03
Diluted Earnings per Share = Adjusted Earnings Attributable to Holders of Common Stock / Adjusted Weighted Average Number of Common Stock Holders.
Adjusted Earnings Attributable to Holders of Common Stock Calculation :
Earnings Attributable to Holders of Common Stock $379,280
Add Back Bond Interest ($1,890,000×6%×80%) $90,720
Adjusted Earnings Attributable to Holders of Common Stock $470,000
Adjusted Weighted Average Number of Common Stock Holders.
Outstanding Common Shares 94,000
Add Convertible Bonds ($1,890,000/$1,000×16) 30,240
Adjusted Weighted Average Number of Common Stock Holders 124,240
Diluted Earnings per Share = $470,000 / 124,240 = $3.78
March 1 Issues 49,000 additional shares of $1 par value common stock for $46 per share. May 10 Purchases 4,400 shares of treasury stock for $49 per share. June 1 Declares a cash dividend of $1.20 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.) July 1 Pays the cash dividend declared on June 1. October 21 Resells 2,200 shares of treasury stock purchased on May 10 for $54 per share. Required: Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answers
Answer:
March 1 Issues 49,000 additional shares of $1 par value common stock for $46 per share.
Dr Cash 2,254,000
Cr Common stock 49,000
Cr Additional paid in capital 2,205,000
May 10 Purchases 4,400 shares of treasury stock for $49 per share.
Dr Treasury stock 215,600
Cr Cash 215,600
Treasury stocks are recorded at purchase price against cash. It is a contra equity account that reduces stockholders' equity.
June 1 Declares a cash dividend of $1.20 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.)
Dr Retained earnings 53,520
Cr Dividends payable 53,520
Outstanding stocks = 49,000 - 4,400 = 44,600 stocks
July 1 Pays the cash dividend declared on June 1.
Dr Dividends payable 53,520
Cr Cash 53,520
October 21 Resells 2,200 shares of treasury stock purchased on May 10 for $54 per share.
Dr Cash 118,800
Cr Treasury stock 107,800
Cr Additional paid in capital 11,000
You want to have $1.5 million in real dollars in a retirement account when you retire in 40 years. The inflation rate is 2.7% and the nominal rate of return on your investment is 10%. What real amount must you deposit each year in the account to achieve your goal?
Answers
Answer:
Annual deposit= $6,952.82
Explanation:
Giving the following information:
You want to have $1.5 million in real dollars in a retirement account when you retire in 40 years.
Inflation rate= 2.7%
Interest rate= 10%
First, we need to deduct from the interest rate the inflation rate.
Real interest rate= 0.10 - 0.027= 0.073
Now, using the following formula, we can determine the annual deposit:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (1,500,000*0.073) / [(1.073^40)-1]
A= $6,952.82
Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records:All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1.Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percenare paid for in the month after acquisition.The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $100,000; accounts receivable, $255,000; and accounts payable, $84,000.Mary and Kay, Inc. maintains a $100,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 8 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time. Additional data: January February MarchSales revenue $630,000 $ 720,000 $ 735,000Merchandise purchases 450,000 480,000 600,000Cash operating costs 111,000 90,000 153,000Proceeds from sale of equipment — — 33,000Required:1. Prepare a schedule that discloses the firm’s total cash collections for January through March.2. Prepare a schedule that discloses the firm’s total cash disbursements for January through March.3. Prepare a schedule that summarizes the firm’s financing cash flows for January through March.
Answers
Answer:
What is need to be done:
1. Prepare a schedule that discloses the firms total cash collections for January through March.
2. Prepare a schedule that discloses the firms total cash disbursements for January through March.
3. Prepare a schedule that summarizes the firms financing cash flows for January through March.
Explanation:
The following data were provided by Rider, Inc, which produces a single product:
Units in beginning inventory 0
Units produced 5,000
Units sold 4,500
Variable costs per unit:
Manufacturing $10
Selling and administrative $4
Fixed costs in total:
Manufacturing $15,000
Selling and administrative $10,000
a. lower than the net operating income under variable costing.b. higher than the net operating income under variable costing.c. the relation between absorption costing and variable costing net operating incomes cannot be determined.d. the same as the net operating income under variable costing.
Answers
Answer:
The correct option is B, higher than the net operating income under variable costing
Explanation:
In calculating the net operating profit under variable costing, the fixed manufacturing cost of $15,000 is deducted as a whole in arriving at net profit.
However, under absorption costing method, only the goods sold are charged with their own portion of fixed manufacturing cost totaling $15,000
Fixed under variable costing method=$15,000
fixed cost under absorption costing method=$15,000/5,000*4500=$13500
Since fixed cost is lower under absorption costing method, net profit tends to be higher.
Suppose Canada can produce 30 peaches or 150 peanuts per month, while Bolivia can produce 50 peaches or 200 peanuts per month. Assume Canada has the same number of resources as Bolivia. Who has an absolute advantage, and in what good
Answers
Answer:
Bolivia
Explanation:
because Canada is all cold and no reasonable temp for the resources, but Bolivia has the temp to make more resources.
g You currently hold an inflation-indexed bond, which pays out real coupons of 10% per year, starting one year from now. The bond has a real face value of $600, and will mature three years from today. If inflation over the next year will be 2% per year for the next three years, what will be the total nominal payment you will receive at the date of maturity
Answers
Answer:
$618 dollars
Explanation:
The beginning face value will be our starting position: $600
Then, we have a 2 percent increase over the next three years
this makes for a principal at maturity of:
600 x (1 + 2% x 3 years ) = $618
This makes each coupon return in coins to also increase over time as, they are calcualted based on the adjusted face vale. This method iguarantee the 10% return on the bond regardless of inflation during the period.
Presented below is information related to Waterway Inc.’s inventory, assuming Waterway uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost $262.20 $146.28 $73.14 Selling price 292.56 200.10 101.78 Cost to distribute 26.22 11.04 3.45 Current replacement cost 280.14 144.90 70.38 Normal profit margin 44.16 40.02 29.33 Determine the following: (a) The two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis. (Round answers to 2 decimal places, e.g. 52.75.)Ceiling Limit
Floor Limit
(b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots.
The cost amount
Answers
Answer:
A. Skis
Ceiling $266.34
Floor $222.18
B.Cost Amount $146.28
C.The market amount $70.38
Explanation:
A. Computation of Waterway Inc two limits to market value that should be used in the lower-of-cost-or-market computation for skis
A. Skis
Ceiling
Selling price 292.56
less:cost to distribute -26.22
Ceiling 266.34
Floor
NRV 266.34
less:normal profit margin -44.16
Floor 222.18
B. Computation of the cost amount that should be used in the lower-of-cost-or-market comparison of boots.
Boots
Ceiling
Selling price 200.10
less:cost to distribute -11.04
Ceiling 189.06
Floor
NRV 189.06
less:normal profit margin -40.02
Floor 149.04
Cost Replacement ceiling Floor MV LCM
146.28 144.90 189.06 149.04 149.04 146.28
Therefore the cost amount that should be used in the lower-of-cost-or-market comparison of boots will be 146.28
C.Calucation for the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
Parkas
Ceiling
Selling price 101.78
less:cost to distribute -3.45
Ceiling 98.33
Floor
NRV 98.33
less:normal profit margin -29.33
Floor 69
Cost Replacement ceiling Floor MV LCM
73.14 70.38 99.33 69 70.38 70.38
The market amount $70.38
