Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.
Date Activiies Units Acquired at Cost Units Sold at Recall
Mar. 1 Beginning inventory 60 units $50.20 per unit
Mar. 5 Purchase 205 units $55.20 per unit
Mar. 9 Sales 220 units $85.20 per unit
Mar. 18 Purchase 65 units $60.20 per unit
Mar. 25 Purchase 110 units $62.20 per unit
Mar. 29 Sales 90 units $95.20 units
Total 440 units 310 units
Required:
1. Compute cost of goods available for sale and the number of units available for sale.
2. Compute the number of units in ending inventory.
3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.
4. Compute gross profit earned by the company for each of the four costing methods.
Answers
Answer:
Warnerwoods Company
Perpetual Inventory System:
1. Cost of Goods Available for Sale and Units Available for Sale:
Mar. 1 Beginning inventory 60 units $50.20 per unit $3,012
Mar. 5 Purchase 205 units $55.20 per unit 11,316
Mar. 18 Purchase 65 units $60.20 per unit 3,913
Mar. 25 Purchase 110 units $62.20 per unit 6,842
Available for Sale 440 units Cost = $25,083
2. The number of units in ending inventory:
Units Available for Sale 440
Subtract units sold 310
Ending Inventory 130 units
3. The Cost assigned to ending inventory using:
a) FIFO: Ending Inventory
20 units at $60.20 per unit = $1,204
110 units at $62.20 per unit = 6,842
Ending Inventory $8,046
b) LIFO: Ending Inventory
Mar. 1 Beginning Inventory 45 units $50.20 per unit = $2,259
Mar. 18 Purchase 65 units $60.20 per unit = 3,913
Mar. 25 Purchase 20 units $62.20 per unit = 1,244
Ending Inventory 130 units Cost = $7,416
c) Weighted Average: Ending Inventory
Cost of Goods Available for Sale divided by units available for sale
= $25,083/440 = $57 per unit
Ending Inventory = $57 x 130 = $7,410
d) Specific Identification: Ending Inventory
This cannot be answered from the information provided in the question:
4. Gross Profit for each costing method:
FIFO LIFO WEIGHTED SPECIFIC
AVERAGE IDENTIFICATION
Sales $27,312 $27,312 $27,312 $27,312
Cost of Sales 17,037 17,667 17,670
Gross Profit $10,275 $9,645 $9,642
Explanation:
a) Sales:
Mar. 9 Sales 220 units $85.20 per unit = $18,744
Mar. 29 Sales 90 units $95.20 units = 8,568
Total = $27,312
b) Cost of Sales:
i) FIFO
Mar 1. Beginning inventory 60 units $50.20 per unit = $3,012
Mar. 5 Purchase 205 units $55.20 per unit = 11,316
Mar. 18 Purchase 45 units $60.20 = 2,709
Cost of Sales = $17,037
ii) LIFO:
Mar. 1 Beginning inventory 15 units $50.20 per unit = $753
Mar. 5 Purchase 205 units $55.20 per unit = $11,316
Mar. 25 Purchase 90 units $62.20 per unit = $5,598
Cost of Sales = $17,667
iii) Weighted Average:
Cost of Sales = $57 x 310 = $17,670
c) Calculations under the specific identification cannot be made because of the figures given under this method.
Cost of goods available for sale = 440 units and $25,071
Number of units in ending inventory is 130 units.
1. The calculation of compute cost of goods available for sale and the number of units available for sale is;
Beginning inventory cost = 60 units x $50.20 = $3,012Purchase on March 5 cost = 205 units x $55.20 = $11,304Purchase on March 18 cost = 65 units x $60.20 = $3,913Purchase on March 25 cost = 110 units x $62.20 = $6,842Cost of goods available for sale = 440 units and $25,071
2. Number of units in ending inventory:
Units sold = 220 + 90 Units sold = 310 unitsUnits in ending inventory = total available for sale - units sold Units in ending inventory = 440 - 310 = 130 unitsNumber of units in ending inventory is 130 units.
3. Compute the cost assigned to ending inventory
4. Compute gross profit earned by the company for each of the four costing methods.
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Related Questions
You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 16 % over the current amount of 102 comma 000 units. If your sales price is $ 19 per unit, what are the incremental revenues next year from the upgrade?
Answers
Answer:
$310,080
Explanation:
Incremental revenue refers to the additional revenue generated by a certain project or activity. In this case, your sales should increase by 16% from 102,000 units to 118,320 units. Total revenue will increase from $1,938,000 (= 102,000 x $19) to $2,248,080 (= 118,320 x $19).
The incremental revenue = $2,248,080 - $1,938,000 = $310,080
Assume the Macro Islands can produce 25 fishing boats or 150 jars of guava jelly in one hour. The Micro Islands can produce 30 fishing boats or 300 jars of guava jelly in the same time period. This data tells an economist that:________. a. the Macro Islands have an absolute advantage in producing fishing boats and the Micro Islands have an absolute advantage in producing guava jelly. b. the Micro Islands have an absolute advantage in producing fishing boats and the Macro Islands have an absolute advantage in producing guava jelly. c. the Macro Islands have a comparative advantage in producing fishing boats and the Micro Islands have a comparative advantage in producing guava jelly. d. the Micro Islands have a comparative in producing fishing boats and the Macro Islands have a comparative advantage in producing guava jelly. the Micro Islands have a comparative and absolute advantage in producing fishing boats.
Answers
Answer:
The correct answer is the option C: the Macro Islands have a comparative advantage in producing fishing boats and the Micro Islands have a comparative advantage in producing guava jelly.
Explanation:
To begin with the term of ''comparative advantage'' is refer to the quality of one country in comparison with another to produce in a better way, a more eficient way, a good. Therefore that when a country has a comparative advantage over another country it means that the first country can produce more of a good with less resources that the second country.
That is why, that the Macro Islands have a comparative advantage in producing fishing boats over the Micro islands due to the fact that there is a very little difference with the other country meanwhile the Micro Islands have a comparative advatange in the production of guava jelly due to the amount of goods that it can produce in the same amount of time with the great amount difference in comparison with the Macro Islands. Therefore that one country chooses to produce the good in which it is better in comparison with the other.
Frances loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $700 in her local bank, which pays her 9% annual interest. Frances decides that she will continue to do this for the next 5 years. Frances’s savings are an example of an annuity. How much will she save by the end of 5 years, rounded to the nearest whole dollar?
Answers
Answer:
Future Value= $4,189.30
Explanation:
Giving the following information:
Investment= $700 annual
Interest rate= 9%
Frances decides that she will continue to do this for the next 5 years.
To calculate the final value, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {700*[(1.09^5)-1]} / 0.09
FV= $4,189.30
Blank Corporation acquired 100 percent of Faith Corporation’s common stock on December 31, 20X2, for $150,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
Item Blank Corporation Faith Corporation
Assets
Cash $ 65,000 $ 18,000
Accounts Receivable 87,000 37,000
Inventory 110,000 60,000
Buildings & Equipment (net) 220,000 150,000
Investment in Faith Corporation Stock 150,000
Total Assets $ 632,000 $ 265,000
Liabilities and Stockholders’ Equity
Accounts Payable $ 92,000 $ 35,000
Notes Payable 150,000 80,000
Common Stock 100,000 60,000
Retained Earnings 290,000 90,000
Total Liabilities & Stockholders’ Equity $ 632,000 $ 265,000
At the date of the business combination, the book values of Faith’s net assets and liabilities approximated fair value. Assume that Faith Corporation’s accumulated depreciation on buildings and equipment on the acquisition date was $30,000.
Required:
a. Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. Prepare a consolidated balance sheet worksheet. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
Answers
Answer:
A1.
Dr Investment 150,000
Cr Cash 150,000
2.
Dr Accumulated Depreciation 30,000
Cr Building & Equipment 30,000
B.Total Assets $ 567,000 $ 265,000 $30,000 $180,000 $747,000
Total Liabilities & Stockholders’ Equity $ 632,000 $ 265,000 $150,000 $0 $ 747,000
Explanation:
a) Blank Corporation Journal Entries:
1.
Dr Investment 150,000
Cr Cash 150,000
2.
Dr Accumulated Depreciation 30,000
Cr Building & Equipment 30,000
b)
BLANK AND SUBSIDIARY
Consolidated Balance sheet Worksheet
December 31, 20x2
Blank Faith Debit Credit Consolidated
Cash $ 65,000 $ 18,000 $0 $0 $83,000
Accounts Receivable
87,000 37,000 $0 $0 $124,000
Inventory 110,000 60,000 $0 $0$ $170,000
Buildings & Equipment (net) 220,000 150,000 30,000 30,000 370,000
Investment in Faith Corporation Stock
150,000 $0 $0 150,000 $0
Total Assets $ 567,000 $ 265,000 $30,000 $180,000 $747,000
Blank Faith Debit Credit Consolidated
Liabilities and Stockholders’ Equity
Accounts Payable $ 92,000 $ 35,000 $0 $0 $127,000
Notes Payable 150,000 80,000 $0 $0 $230,000
Common Stock 100,000 60,000 $60,000 $0 $100,000
Retained Earnings 290,000 90,000 $90,000 $0 $290,000
Total Liabilities & Stockholders’ Equity $ 632,000 $ 265,000 $150,000 $0 $ 747,000
Identify the statement that is incorrect. Multiple Choice Higher financial leverage involves higher risk. Risk is higher if a company has more liabilities. Risk is higher if a company has more assets. The debt ratio is one measure of financial risk. Lower financial leverage involves lower risk.
Answers
Answer:
Risk is higher if a company has more assets.
Explanation:
All of the following statements are true and correct;
1. Higher financial leverage involves higher risk.
2. Risk is higher if a company has more liabilities.
3. The debt ratio is one measure of financial risk.
4. Lower financial leverage involves lower risk.
However, it is false and an absolutely incorrect to say risk is higher if a company has more assets.
A company having more assets would have a debt ratio less than one (1) because it has many assets to fund it's business. Thus, the company would have little or no debts and as such, it's risk portfolio is very low.
Hence, risk is lower if a company has more assets.
Juan acquires a new 5-year class asset on March 14, 2018, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. On July 15, 2019, Juan sells the asset.
a. Determine Juan’s cost recovery for 2017.
b. Determine Juan’s cost recovery for 2018.
Answers
Answer:
A. $40,000
B$32,000
Explanation:
Cost Recovery can be defined as the way in which a business or an organisation is said to record the revenue in which they earns from
the transaction carried out at the time that their client has paid the invoice given to him or her in the cost of the transaction.
Asset acquired =$200,000
Tax rate =20%
Hence:
$200,000×0.2
= $40,000
B.
Asset acquired = $200,000
Tax rate =32%
Hence:
$200,000×0.32
= $32,000
1. The field of management science a. concentrates on the use of quantitative methods to assist in decision making. b. approaches decision making rationally, with techniques based on the scientific method. c. is another name for decision science and for operations research. d. each of these choices are true.
Answers
Answer:
d. each of these choices are true.
Explanation:
The field of management science refers to the study of various problem solving and decision-making technique for the organization that is strongly tied to the management and other subjects like economics, engineering, etc
The organization is able to accomplish its goals and objectives by applying different scientific methods. It only deals with qualitative methods. Plus it required research also
hence, the correct option is d.
Copper Corporation, a calendar year C corporation, owns stock in Bronze Corporation and has net operating income of $900,000 for the current year. Bronze Corporation pays Copper a dividend of $150,000. What amount of dividends received deduction may Copper claim if it owns 85% of Bronze stock (and the two corporations are members of the same affiliated group)? (Assume Copper's dividends received deduction is not limited by its taxable income.)
Answers
Answer:
$150,000
Explanation:
Copper Corporation
The amount of dividends received deduction will tend to depends upon the ownership percentage by the corporate shareholder.
Therefore in a situation where Copper Corporation is said to owns only 85% of what Bronze Corporation had, Copper Corporation definitely qualify for a percentage of 100 deduction or a total amount of $150,000.if we have to based on the above information given because Bronze Corporation pays Copper Corporation a dividend of $150,000.
You believe that the Non-Stick Gum Factory will pay a dividend of $2 on its common stock next year. Thereafter, you expect dividends to grow at a rate of 5% a year in perpetuity. If you require a return of 12% on your investment, how much should you be prepared to pay for the stock
Answers
Answer:
$28.57
Explanation:
Dividend growth model can only be used in a situation where the firm pays a dividend which can tend to grow at constant rates reason been that the stock has been influenced by the growth rates which is involved in the dividends which means the firm can increase the dividends.
Therefore the Dividend that is to be paid next year will be:
$2Growth rates
5 %Rates of return
12% Return on Investment
Formular for the calculation of current price of the stock = D1/(r-g)
Where:
D1=2%
r=12%
g=6%
Hence:
2/ (0.12-0.05)= $ 33.33
=2/0.07
=$28.57
Therefore the amount I should be prepared to pay for the stock today will be $28.57
Clemens Cars’s job cost sheet for Job A40 shows that the cost to add security features to a car was $23,500. The car was delivered to the customer, who paid $28,200 in cash for the added features. What journal entries should Clemens record for the completion and delivery of Job A40?
Answers
Answer:
Finished Goods
Dr Working in progress $23,500
Cr Transfer from Work in progress to Finished goods $23,500
Cost of goods sold
Dr Finished Goods $23,500
Cr Transfer from Finished Goods to Cost of goods sold $23,500
CASH
Dr Sales $ 28,200
Cr Sale of car after job was completed $28,200
Explanation:
Clemens Cars’s Journal entries
Finished Goods
Dr Working in progress $23,500
Cr Transfer from Work in progress to Finished goods $23,500
Cost of goods sold
Dr Finished Goods $23,500
Cr Transfer from Finished Goods to Cost of goods sold $23,500
CASH
Dr Sales $ 28,200
Cr Sale of car after job was completed $28,200
Maple Aircraft has issued a convertible bond at 4.75% interest due 2020. The market price of the convertible is 93% of face value (face value is $1,000). The conversion price is $45. Assume that the value of the bond in the absence of a conversion feature is about 63% of face value. How much is the convertible holder paying for the option to buy one share of common stock?
Answers
Answer:
The convertible holder paying for the option to buy one share of common stock is $13.63
Explanation:
According to the given data we have the following:
Value of convertible bond=93%*1,000=$930
Value of straight bond=63%*1,000=$630
Value of warrants=$300
Hence, number of warrants per bond=$1,000/$45
number of warrants per bond=22
Therefore, price of one warrant=$300/22
price of one warrant=$13.63
The convertible holder paying for the option to buy one share of common stock is $13.63
ak Creek Furniture Factory (OCFF), a custom furniture manufacturer, uses job order costing to track the cost of each customer order. On March 1, OCFF had two jobs in process with the following costs: Work in Process Balance on 3/1 Job 33 $ 7,500 Job 34 6,000 $ 13,500 Source documents revealed the following during March: Materials Requisitions Forms Labor Time Tickets Status of Job at Month-End Job 33 $ 3,500 $ 6,500 Completed and sold Job 34 6,000 7,800 Completed, but not sold Job 35 4,200 3,250 In process Indirect 1,300 2,140 $ 15,000 $ 19,690 The company applies overhead to products at a rate of 150 percent of direct labor cost. Required: 1. Compute the cost of Jobs 33, 34, and 35 at the end of the month. 2. Calculate the balance in the Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts at month-end.
Answers
Answer:
Job 33 $ 27250
Job 34 $ 31500
Job 35 $ 12325
Cost of Goods Sold Job 33 $ 27250
Finished Goods Inventory Job 34 $ 31500
Work in Process Inventory Job 35 $ 12325
Explanation:
Work in Process Balance on 3/1
Job 33 $ 7,500
Job 34 6,000
Total $ 13,500
Job 33
Direct Materials $3500
Direct Labor 6500
Overheads (150%) 9750
Add Opening WIP 7500
Total Cost $ 27250
We add the Direct Material Direct Labor and Mfg overheads with the opening balance of WIP to get the total cost of given jobs.
Job 34
Direct Materials $6000
Direct Labor 7800
Overheads (150%) 11700
Add Opening WIP 6000
Total Cost $ 31500
Job 35
Direct Materials $4200
Direct Labor 3250
Overheads (150%) 4875
Add Opening WIP ------
Total Cost $ 12325
Cost of Goods Sold Job 33 (given) $ 27250
Finished Goods Inventory Job 34 (given) $ 31500
Work in Process Inventory Job 35 (given)$ 12325
It is given in the question that Job 34 is transferred to Finished Goods , Job 35 is still in process and Job 33 is cost of goods sold.
Suppose your company reports $160 of net income and $40 of cash dividends paid, and its comparative balance sheet indicates the following. Beginning Ending Cash $ 35 $ 205 Accounts Receivable 75 175 Inventory 245 135 Total $ 355 $ 515 Salaries and Wages Payable $ 10 $ 50 Common Stock 100 100 Retained Earnings 245 365 Total $ 355 $ 515 Required: Prepare the operating activities section of the statement of cash flows, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Answers
Answer and Explanation:
The preparation of the operating activities section of the cash flow statement using the indirect method is shown below:
Cash flow from operating activities
Net income $160
Add or less adjustments made
Less Increase in account receivable $100 ($175 - $75)
Add: Decrease in inventory $110 ($245 - $135)
Add: Increase in salaries and wages payable $40 ($50 - $10)
Net cash provided by operating activities $210
The cash inflow represents in a positive sign and cash outflow represents in negative sign
The operating activities section of the statement of cash flows, using the indirect method is $210.
Cash flow from operating activities
Net income $160
Increase in account receivable ($100)
($175 - $75)
Decrease in inventory $110
($245 - $135)
Increase in salaries and wages payable $40
($50 - $10)
Net cash flow from operating activities $210
Inconclusion the operating activities section of the statement of cash flows, using the indirect method is $210.
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You are a bright, hard-working, entry-level manager who fully intends to rise up through the ranks. Your performance evaluation gives you high marks for your technical skills but low marks when it comes to people skills. Do you think peo-ple skills can be learned, or do you need to rethink your career path? If people skills can be learned, how would you go about learning them?
Answers
Answer with its Explanation:
People skills are composed of their knowledge and constant commitment to improve it through experience and hard work. The People skills mostly includes the skills that have to be constantly improve while some of the skills are naturally blessed and all of these skills can be learned. The examples includes the communication skills which helps to influence the viewpoint of the peer group, leadership skills, etc.,
The person must work hard to develop these skills and undergo continuous professional development to compete in the market. The investment in the skills improvement always pays more than investment in the stock exchange. The experience of the person and appetite to learn new everyday and asking attitude to understand the mechanism helps in better understanding and resolving the issues in future.
A perfectly elastic demand function A. shows that a consumer is willing to pay any amount for the product. B. has a marginal revenue that is always decreasing. C. is characteristic of an individual firm operating in a perfectly competitive market. D. shows that the individual firm can increase sales by lowering the price of output.
Answers
Answer:
C. is characteristic of an individual firm operating in a perfectly competitive market.
Explanation:
Demand is perfectly elastic if the coefficient of elasticity is infinite. It means thay consumers would only buy at one price. Once that price changes, demand falls to zero.
A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply.
If a seller decides to increase the price of his good in a perfect competition, demand falls to zero and reducing price woild lead to losses.
I hope my answer helps you
As you negotiate with a potential employer, you ask for an additional $3,000 in annual salary. The employer asks why you why you want this increase, and learns that you need to begin repaying a student loan. The employer states that he cannot increase your salary, but that his company can assume your loan at a 0% interest rate. In this example, the employer has identified your . . .?
Answers
Answer:
Employer has identified your Interest.
Explanation:
During any course of negotiation, parties have two sets of interests to consider: personal interests and the interests of the other side (employer).
Interests are a party's underlying reasons, values or motivations. It explains why someone is trying to take a particular position.
From the question, an increase in salary by $3000 is needed to pay off student loan. This is the point of interest. The employer identifies this and offers to assume the loan at 0% interest rate instead.
You buy a share of The Ludwig Corporation stock for $21.40. You expect it to pay dividends of $1.07, $1.1449, and $1.2250 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $26.22 at the end of 3 years.
A. Calculate the growth rate in dividends.
B. Calculate the expected dividend yield .
C. Assuming the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to get the expected total rate of return. What is the stock
Answers
Answer:
A. the growth rate in dividends = 7.00%
B. Expected dividend yield = 4.67%
C. Stock's xpected total rate of return = 11.67%
Explanation:
A. Calculate the growth rate in dividends
Current dividend growth rate = (Current year dividend - Previous year dividend) / Previous year dividend
Therefore,
Year 2 dividend growth rate = ($1.1449 - $1.07) / $1.07 = 0.0700, or 7.00%
Year 3 dividend growth rate = ($1.2250 - $1.1449) / $1.1449 = 0.0700, or 7.00%
This shows that;
Year 2 dividend growth rate = Year 3 dividend growth rate = 7.00%
B. Calculate the expected dividend yield
Dividend yield = Dividend per share / Market price per share
Therefore,
Expected dividend yield = Expected dividend per share in year 3 / Expected market price per share in year 3 = $1.2250 / $26.22 = 0.0467, or 4.67%
C. Assuming the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to get the expected total rate of return. What is the stock
Note: The complete statement is "What is this stock’s expected total rate of return?"
Stock's xpected total rate of return = Growth rate + Expected dividend yield in 3 = 7.00% + 4.67% = 11.67%.
Walter, a single taxpayer, purchased a limited partnership interest in a tax shelter in 1993. He also acquired a rental house in 2019, which he actively manages. During 2019, Walter's share of the partnership's losses was $30,000, and his rental house generated $20,000 in losses. Walter's modified adjusted gross income before passive losses is $130,000.
A. Calculate the amount of Walter's allowable deduction for rental house activities for 2017.B. Calculate the amount of Walter's allowable deduction for the partnership losses for 2017.C. What may be done with the unused losses, if anything?
1. The unused losses may be carried.
2. tax years to reduce.
3. income in those years.
Answers
Answer:
A. $10,000
B. $0
C. The unused losses may be carried forward to future tax years to reduce passive income in those years.
Explanation:
A. Calculate the amount of Walter's allowable deduction for rental house activities for 2017.
Excess of Walter's modified adjusted gross income before passive losses over $100,000 = $130,00 - $100,000 = $30,000
Allowable deductions = $25,000 - ($30,000 * 50%) = $10,000.
It should be noted that 50 cents, used as 50% above, for each dollar the tax payers modified adjusted gross income exceeds $100,000 is deducted from$25,000 to arrive at allowable deductions. However, there will not be allowable deduction in the case that the modified adjusted gross income is greater $150,000.
B. Calculate the amount of Walter's allowable deduction for the partnership losses for 2017.
Walter is eligible for allowable deduction for the partnership losses for 2017. Therefore, Walter's allowable deduction for the partnership losses for 2017 is $0.
C. What may be done with the unused losses, if anything?
1. The unused losses may be carried forward to future
2. tax years to reduce passive
3. income in those years.
Therefore, this can be joined together as follows:
The unused losses may be carried forward to future tax years to reduce passive income in those years.
A decrease in operating expenses would have which of the following effects on a company's profit margin? Multiple Choice There is not enough information given to determine the effect. Net profit margin would increase. Net profit margin would decrease. Net profit margin would remain unchanged.
Answers
Answer: Net profit margin would increase.
Explanation:
A company's net profit margin is the Net Profit divided by Revenue. Net Profit is derived by subtracting some expenses and liabilities from the Revenue such as Cost of Goods as well as operating expenses.
If operating expenses were to reduce therefore, there would be less subtractions from the revenue. The would translate to a higher Net Profit and when that is then divided by the Revenue, it will give a higher Net Profit Margin.
Mr. Isaac is lending Gh₵20000 to Mr. Hayford, to be repaid over five years. Mr. Isaac would like to effect a policy on Mr. Hayford’s life to cover the loan should Mr. Hayford die. Mr. Hayford would like to insure Mr. Isaac’s life just in case he dies and the beneficiaries of his will insist that the loan be repaid early.
Answers
Question:
Mr. Isaac is lending Gh₵20000 to Mr Hayford, to be repaid over five years. Mr Isaac would like to effect a policy on Mr Hayford’s life to cover the loan should Mr Hayford die. Mr Hayford would like to insure Mr Isaac’s life just in case he dies and the beneficiaries of his will insist that the loan be repaid early.
(a) What is the extent of insurable interest in each case?
(b) Consider any necessary action if the loan was later repaid earlier than anticipated what happens to the policy?
Answer:
To answer the question (a), one must first understand the concept of Insurable Interest.
A policyholder is said to have an insurable interest in a subject matter whenever the subject matter of a contract provides some financial gain to them and would lead to a financial loss if damaged, destroyed, stolen or lost.
For example, if I purchase a car for my use for $10,000, theft of or damage to that car will translate to financial loss to me. Therefore, I have an insurance interest in the car. This qualified me to Insure the car against loss arising from any form of insurable damage, or theft.
In question (a) there are two cases.
Case I - Mr Isaac would like to effect a policy on Mr Hayford’s life to cover the loan should Mr Hayford die.
Mr Isaac, in this case, has full insurable interest on Mr Hayfords life. If Mr Hayford dies, Mr Isaac will be put in a financial loss to the tune of Gh₵20000.
Case II - Mr Hayford would like to insure Mr Isaac’s life just in case he dies and the beneficiaries of his will insist that the loan be repaid early.
Mr Hayford does an insurable interest on Mr Isaac's life. This insurable interest arises due to the possibility (as given in the question) that Isaacs family have the power to request for the loan earlier than it ought to have been paid.
The insurable interest arises because paying back the loan earlier than anticipated, may put Mr Hayford in financial distress and may lead to financial and economic loss. If the loan is meant for the running of his business, the business may fold up, and he may forfeit all the assets of the business.
In a real-life scenario, this can all be prevented by ensuring that the terms of the loan are documented in a contract which must be ratified by both parties. In this contract, clauses preventing the lender from cutting short the tenure of the loan can be inserted. This is less expensive and easier to administer.
(b) In each of the cases above, if the loan is paid back earlier than anticipated:
i. Under duress from the family: The provision of the policy protecting the interest of Mr. Hayford kicks in and makes good the loss to mitigate it and terminates afterwards.
ii. By volition by Mr Hayford: The policy terminates immediately as the insurable interest he has on Mr Isaac's life becomes extinct.
Cheers!
Statement of Cash Flows A summary of cash flows for Paradise Travel Service for the year ended May 31, 2018, follows: Cash receipts: Cash received from customers $880,000 Cash received from issuing common stock 40,000 Cash payments: Cash paid for operating expenses 758,000 Cash paid for land 150,000 Cash paid as dividends 10,000 The cash balance as of June 1, 2017, was $50,000. Prepare a statement of cash flows for Paradise Travel Service for the year ended May 31, 2018. Use the minus sign to indicate cash outflows, cash payments and decreases in cash. Paradise Travel Service Statement of Cash Flows For the Year Ended May 31, 2018 Cash flows from operating activities: Cash received from customers $ 880,000 Cash payments for operating expenses 758,000 $ Cash flows used for investing activities: Cash flows from financing activities: $ $ Cash as of June 1, 2017 Cash as of May 31, 2018 $
Answers
Answer:
Paradise Travel Service
Cash Flow Statement
For the Year Ended May 31, 2018
Cash flows from operating activities:
Cash received from customers $880,000
Cash paid for operating expenses -$758,000
Net cash provided by operating activities $122,000
Cash flows from investing activities:
Cash paid for land -$150,000
Net cash provided by investing activities -$150,000
Cash flows from financing activities:
Cash received from issuing common stock $40,000
Cash paid as dividends -$10,000
Net cash provided by financing activities $30,000
Net increase in cash $2,000
Cash balance June 1, 2017 $50,000
Cash balance May 31, 2017 $52,000
The following information is available for two different types of businesses for the 2016 accounting year services to is a merchandising business that sells sports clothing to college students
Data for Hopkins CPAs
1 Borrowed $41,000 from the bank to start the business
2. Provided $31,000 of services to clients and collected $31,000 cash
3. Paid salary expense of $ 19,800.
Data for Sports Clothing
1. Borrowed $41,000 from the bank to start the business
2. Purchased $20,000 inventory for cash
3. Inventory costing $16,800 was sold for $30,000 cash
4. Paid $2,400 in cash for operating expenses.
Required
Prepare an income statement, balance sheet, and statement of cash flows for each of the companies (Statement of Cash Flows only, items to be deducted must be indicated with a negative amount.)
Answers
Answer and Explanation:
The Preparation of income statement, balance sheet, and statement of cash flows for each of the companies is prepared below:-
Income Statement
HOPKINS CPAs
For the year ended December,31 2016
Particulars Amount
Revenue:
Service Revenue $31,000
Less: Salaries Expense ($19,800)
Net Income $11,200
Balance Sheet
HOPKINS CPAs
As at December 31,2016
Particulars Amount
Assets
Cash $52,200
Total Assets $52,200
Liabilities:
Notes Payable $41,000
Total Liabilities $41,000
Stockholder's Equity:
Retained Earnings $11,200
Total Stockholder's
Equity $11,200
Total Liabilities and
Stockholder's Equity $52,200
Working Note:
The Cash balance as on 31 December, 2016
= Borrowed amount + Collection from customer - Salary expense
= $41,000 + $31,000 - $19,800
=$52,200
Statement of cash flows
HOPKINS CPAs
For the Year Ended 31, December, 2016
Particulars Amount
Cash Flows From Operating Activities:
Cash Inflow from Clients $31,000
Cash outflows for Salaries -$19,800
Net Cash Flow from Operating Activities $11,200
Cash Flows From Investing Activities: $0
Cash Flows From Financing Activities:
Cash Inflow from Loan $41,000
Net Cash Flows from Financing Activities $41,000
Net Increase in Cash $52,200
Add: Beginning Cash Balance $0
Ending Cash Balance $52,200
Income Statement
Sports clothing
For the Year Ended 31 December,2016
Particulars Amount
Revenue:
Service Revenue $30,000
Less;Cost of Goods Sold -$16,800
Gross Margin $13,200
Less: Operating Expense -$2,400
Net Income $10,800
Balance Sheet
Sports clothing
As of December 31,2016
Particulars Amount
Assets:
Cash $48,600
Merchandise Inventory $3,200
Total Assets $51,800
Liabilities:
Notes Payable $41,000
Total Liabilities $41,000
Stockholder's Equity:
Retained Earnings $10,800
Total Stockholder's Equity $10,800
Total Liabilities and
Stockholder's Equity $51,800
Notes:-
Cash balance on 31 December,2016 = Borrowed amount - Purchase of Inventory + Collection from sale of inventory -Operating expense
= $41,000 - $20,000 + $30,000 - $2,400
= $48,600
Merchandise Inventory = Purchase - Cost of goods sold
= $20,000 - $16,800
= $3,200
Statement of Cash Flows
Sports Clothing
For the Year Ended 31, Dec 2016
Particulars Amount
Cash Flows From Operating Activities
Cash Inflow from Customers $30,000
Less: Inventory for Cash Outflow -$20,000
Less: Expenses for Cash Outflow -$2,400
Net Cash Flow From Operating Activities $7,600
Cash Flow From Investing Activities $0
Cash Flow From Financing Activities
Cash Inflow from Loan $41,000
Net Cash Flow From Financing Activities $41,000
Net Increase in Cash $48,600
Add: Beginning Cash Balance $0
Ending Cash Balance $48,600
You are a project manager leading an IT development project. Halfway through your project, you realize that you need to hire an additional worker in order to complete the project on time. How will you convince your project sponsors to authorize the hire? How will you on-board your new worker?
Answers
Answer:
The project manager can convince the project sponsors with the following reasons which are,
(1) Telling the sponsors the additional benefits that the team will have once a member enters the team.
(2)Informing the sponsors about the work not completed due to lesser number of workers.
(3)Informing the sponsors the additional benefits that the team will have once a member enters the team.
For on boarding a new worker the project manager does the following which includes:
(1)it is very necessary to share the agendas and charters of the previous meetings of the project to help individuals to familiarize with the project scope and goals.
(2)Having a one one meeting a with the individual and discussing with him/her about the project and solve his/her issues.
(3) Doing a formal introduction of the new member to both the project team and stakeholders of the project.
Explanation:
Solution:
In the half way of the project, the project manager can convince the project sponsors in the following ways shown below:
Informing the sponsors about the work not completed due to lesser number of workersInforming the sponsors about the delays taking place due to shortage of members in the teamTelling the sponsors the additional benefits that the team will have once a member enters the teamConvincing the sponsors by discussing and talking with him/her the various drawbacks of not having the required numbers of members in the team.For getting a new member on board for the project, it is very important to share the agendas and charters and minutes of the previous meetings of the project to enable individuals to familiarize with the project scope and goals.
Secondly, a one one meeting and discussion with the individual must be organized to brief him/her about the project and solve his/her issues.
Finally the new member must be introduced to both the project team and stakeholders of the project.
Target profit is $100,000; fixed overhead costs are $120,000 and fixed selling and administrative costs are $50,000. If total variable cost is $675,000, the markup percentage to the variable cost using the variable cost method is %. Round your answer to the nearest whole percent
Answers
Answer:
40%
Explanation:
The markup percentage to the variable cost using the variable cost method can be obtained by dividing the addition of the target profit and total fixed cost by the total variable cost as follows:
Total fixed cost = Fixed overhead costs + Fixed selling and administrative costs = $120,000 + $50,00 = $170,000
The markup percentage to the variable cost = (Target profit + Total fixed cost) / Total variable cost = ($100,000 + $170,000) / $675,000 = $270,000 / $675,000 = 0.40, or 40%.
Therefore, the markup percentage to the variable cost using the variable cost method is 40%.
Jeanie acquires an apartment building in 2008 for $280,000 and sells it for $480,000 in 2019. At the time of sale there is $60,000 of accumulated straight-line depreciation on the apartment building. Assuming Jeanie is in the highest tax bracket for ordinary income and the Medicare tax on net investment income applies, how much of her gain is taxed at 28.8 percent?
Answers
Answer:
$60,000
Explanation:
According to section 1250 of the Internal Revenue Service, the depreciation previously allowed as a deduction would now be taxed in the case of ordinary income at the highest tax level.
And, For this, the asset should be depreciated real property.
In the question, there is depreciation charged for apartment building so the same is eligible
The eligibility is allowed up to $60,000 and the same is to be considered
You have $13,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 13 percent and Stock Y with an expected return of 8 percent. Assume your goal is to create a portfolio with an expected return of 11.45 percent. How much money will you invest in Stock X and Stock Y
Answers
Answer:
You should invest $8,970 in stock X and $4,030 in stock Y.
Explanation:
These can be estimated as follows:
PER = (ERX * wX) + (ERY * wY) ....................... (1)
Where,
PER = Portfolio expected return = 11.45%, or 0.1145
ERX = Expected return of X = 13%, or 0.13
ERY = Expected retun of Y = 8%, or 0.08
wX = Weight of X = ?
wY = Weight of Y = 1 - wX = ?
Substituting the values into equation (1), we have:
0.1145 = [0.13 * wX] + [0.08 * (1 - wX)]
0.1145 = 0.13wX + [0.08 - 0.08wX]
0.1145 = 0.13wX + 0.08 - 0.08wX
0.1145 - 0.08 = 0.13wX - 0.08wX
0.0345 = 0.05wX
wX = 0.0345 / 0.05
wX = 0.69
Since wY = 1 - wX
Therefore,
wY = 1 - 0.69
wY = 0.31
Total amount to invest = $13,000
Investment in stock X = Amount to invest * 0.69 = $13,000 * 0.69 = $8,970
Investment in stock Y = Amount to invest * 0.31 = $13,000 * 0.31 = $4.030
Therefore, you should invest $8,970 in stock X and $4,030 in stock Y.
Solve accepted a 60-day, 9 percent note from Pete Houghton in settlement of his past-due account for $6,000. On April 9, Westwood Company discounted the note at the First National Bank. The bank charged a discount rate of 12 percent. What is the amount of the proceeds
Answers
Missing information:
The note was accepted on March 10
Answer:
$6,029.10
Explanation:
in order to answer the question, I assumed a 360 day year, so 60 days = 2/12 of a year
the note's value on maturity date = principal + accrued interest = $6,000 + ($6,000 x 9% x 2/12) = $6,000 + $90 = $6,090
bank charges = note's value on maturity date x discount rate x 30 days = $6,090 x 12% x 1/12 = $60.90
net proceeds = $6,090 - $60.90 = $6,029.10
You recently received a letter from Cut-to-the-Chase National Bank that offers you a new credit card that has no annual fee. It states that the annual percentage rate (APR) is 16 percent on outstanding balances. What is the effective annual interest rate?
Answers
Answer:
Effect Annual rate of return =17.22%
Explanation:
The Effective annual rate of return is the equivalent rate earned where compounding is done frequently at period or interval less than a year.
EAR = (1+r/m)^n× m - 1
EAR - Equivalent annual rate of return, r- annul rate of return, n-number of years
r= 16/12 =1.333%, n= 1 m= 12 (note there are 12 months in a year)
EAR = (1+0.16/12)^(1×12) - 1
EAR = 1.0133^12 - 1 = 0.1722
EAR 0.1722 × 100 = 17.22%
Effect Annual rate of return =17.22%
What is fixed and variable cost?
Answers
Answer:
Okay, so fixed costs are costs that are consistant in their price (buildings, rent, machinery, etc.). Variable costs are costs that change based on production (wages, materials, utilities, etc.).
Hope this helps :)
Explanation:
Explained above.
Two mutually exclusive investment opportunities require an initial investment of $10 million. Investment A pays $1.5 million per year in perpetuity, while investment B pays $1.2 million in the first year, with cash flows increasing by 3% per year after that. At what cost of capital would an investor regard both opportunities as being equivalent?
Answers
Answer: 15%
Solving this would require finding the rate/cost of capital that gives both investments the same present value.
Investment 1
Investment 1 is a perpetuity which means that it's present value can be calculated as,
= Amount/rate
= 1,500,000/r
Investment 2
Investment 2 pays $1,200,000 in the first year and then grows at a rate of 3% every year afterwards.
The Present Value of such can be calculated with the following equation,
= Amount / ( rate/cost of capital - growth rate)
= 1,200,000 / ( r - 3%)
To find the Rate that gives both figures the same Present Value, simply equate them.
1,500,000/r = 1,200,000 / (r - 3%)
1,500,000(r - 3% ) = 1,200,000r
1,500,000r - 45,000 = 1,200,000r
300,000r = 45,000
r = 45,000/300,000
r= 0.15
r = 15%
At 15% an investor regard both opportunities as being equivalent.
