Answer:
Cost that will no longer be incurred = $90320
Explanation:
$
The relevant variable cost
= 46,000 + 10,500 + 32,500 $89,000
Cost of external supply
= 94.75 × 1090= $103,277.50
Increase in of purchase 14,277.50
Savings in fixed cost (6%× 22,000) ( 1320
Net increase in cost if purchased 12,957.50
Cost that will no longer be incurred = 89,000 +1320 = $90320
Cost that will no longer be incurred = $90320
he Petteys family plans to buy a home for $224,900, and has been offered a 30-year mortgage with a rate of 5.5% if they make a 20% down payment . Calculate the down payment. (Do not include a dollar sign with your answer)
Answer:
44,980
Explanation:
20 % of $224,900 = (20/100) × $224,900 = $44,980
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $16,600,000 of five-year, 11% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Chin Company receiving cash of $15,989,036. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) Second semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.
Answer:
The answer to the question is as attached
Explanation:
a. The total credit matches the debit in a total of $16,600,000
b. Cash $$15989036
Discount on bonds payable (16600000 -15989036) $610964
Bonds payable $16600000
(To record issuance of bonds)
b) Interest expense 825000+610964= $1435964
Discount on bonds payable 610964/11= $55542
Cash 16600000*11%*6/12= $913000
(To record discount amortized and interest paid)
c) Interest expense 825000+55542= $880542
Discount on bonds payable 610964/11= $55542
Cash 16600000*11%*6/12= $913000
You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided. Use the following data to calculate the variances.
Budget Actual
Inpatient Costs $12,568,500 $16,618,350
Members 42,000 42,000
Admission Rate 0.070 0.095
Case Mix Index 0.90 0.85
Cost per Case (CMI = 1.0) $4,750 $4,900
Problem 1: What dollar amount of the total variance is attributed to Enrollment Variance?
Problem 2: What dollar effect did the increased admission rate have on cost?
Problem 3: The intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85. What dollar effect did this have on actual costs?
Problem 4: Costs per case increased to $4,900 from a budgeted value of $4,750. This increased actual total costs by what amount?
a) $400,000
b) $570,000
c) $970,000
d) $600,000
e) cannot calculate with given information
Find the given attachment
Howard Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet.
Data on direct department costs, number of employees, and space occupied are as follows:
S1
S2
P1
P2
Direct dept. costs
$7,500
$11,000
$27,500
$30,000
Number of employees
10
5
20
25
Space occupied (sq. ft.)
1,000
500
1,500
2,500
If Howard used the reciprocal method, the algebraic equation expressing the total costs allocated from S1 is
Select one:
a. S1 = $7,500 + 0.10S2.
b. S1 = $7,500 + 0.20S2.
c. S1 = $10,000 + 0.20S2.
d. S1 = $10,000 + 0.10S2.
Answer: S1 = $ 7500 + 0.20 S2
Explanation:
From the question, Howard Company has two support departments which are (S1 and S2) and two producing departments which are (P1 and P2). The department S1 costs are allocated on the basis of number of employees, and the department S2 costs are allocated on basis of space occupied expressed in square feet.
The algebraic equation expressing the total costs allocated from S1 is calculated as follow:
S1 Direct Cost = $ 7500
The cost of S2 will be allocated to S1 based on the space occupied and the total space that is occupied is:
= 1000 + 1500 + 2500
= 5000 sq ft
Space occupied by S1 = 1000
S2’s cost allocated to S1 will be:
= (1000 / 5000) of S2 cost
= 0.20 S2
Therefore the correct option is:
S1 = $ 7500 + 0.20 S2
Once you have collected data for a message, you’ll need to find a way to organize it. Well-organized messages group similar ideas together, allowing readers to see relationships and follow arguments. You can use two primary techniques for organizing your information: a scratch list and an outline. Answer the question based on the following scratch list.
1. The Boston Hotel
2. High-end linens
3. 600-thread-count sheets
4. Coffeemaker and selected teas
5. Imported beer
6. Fresh-squeezed juices
7. Affordability
8. Food and drink
9. Double-thick bath towels
10. Silk pillowcases
11. Raw silk curtains with gold embellishments
12. $100/night four-star rooms
13. Free snacks, shampoo, and conditioner
14. Free wireless Internet
Which group includes specific supporting detail that could be added to the previous scratch list?
a. High-end linens; free wireless Internet; free snacks, shampoo, and conditioner
b. Safety, comfort, half-price Tuesday
c. Sparkling water, evening wine tasting, four-star hotel restaurant
d. Business messages typically follow either a direct strategy or an indirect strategy. The direct strategy, or frontloading, places the main idea at the beginning of a message.
e. Using a direct opening strategy .
f. An indirect strategy places the main idea after an explanation or reason.
Answer:
c. Sparkling water, evening wine tasting, four-star hotel restaurant
Explanation:
The scratch list in general includes a series of services that are provided by a Hotel (the Boston Hotel). Because of the items included in the list, it seems that the Hotel is quite fancy.
Numeral c would be a good addition to the scratch list, because it lists items that would fall in place for the type of Hotel being described: sparking water, evening wine tasting, and a the mention of a four-star hotel restaurant.
In the short-run aggregate demand and supply model, one important difference between monetary and fiscal policy is that monetary policy:_______.
a. influences aggregate supply but fiscal policy influences aggregate demand.
b. has shorter lags than fiscal policy, so monetary policy may impact the economy more quickly than fiscal policy.
c. influences aggregate demand but fiscal policy influences aggregate supply.
d. has longer lags than fiscal policy, so fiscal policy may impact the economy more quickly than monetary policy.
Answer:
a. influences aggregate supply but fiscal policy influences aggregate demand.
Explanation:
Remember, when the term monetary policy is used it refers to policies that are focused on the interest rates as well as the inflation rate, which certainly affects the money supply specifically. However, the fiscal policy is usually channelled towards aggregate demand of the economy.
Thus, it is right to say that one important difference between monetary and fiscal policy is that monetary policy affects aggregate supply but fiscal policy influences aggregate demand.
An investor wishes to buy a new issue of U.S. Government agency bonds. You recommend that the customer purchase Federal Home Loan Bank bonds with a 20 year maturity. An investor who purchases the new issue of Federal Home Loan Bank bonds can expect to pay:
Answer:
The answer is Par
Explanation:
An investor who purchases the new issue can expect to pay Part.
The agency appoints a selling group that sells new issues of agency securities.This selling group is usually made of large banks and broker-dealers. They sell the issue at par to the public. From what was made from the sale, the agency then pays the selling group a selling concession. In contrast, direct U.S. Government obligations are sold through auction
The following transactions occurred during the month of June 2018 for the Stridewell Corporation. The company owns and operates a retail shoe store
1. Issued 115,000 shares of common stock in exchange for $575,000 cash.
2. Purchased furniture and fixtures at a cost of $95,000. $38,000 was paid in cash and a note payable was signed for the balance owed
3. Purchased inventory on account at a cost of $230,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $391,000. The cost of the goods sold was $195,500
5. Paid $5,000 in rent on the store building for the month of June
6. Paid $2,640 to an insurance company for fire and liability insurance for a one-year period beginning June 1, 2018
7. Paid $166,175 on account for the merchandise purchased in 3
8. Collected $78,200 from customers on account.
9. Paid shareholders a cash dividend of $5,750
10. Recorded depreciation expense of $1,900 for the month on the furniture and fixtures
11. Recorded the amount of prepaid insurance that expired for the month.
Required
Prepare journal entries to record each of the transactions and events listed above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Transaction General Journal Debit Credit 01 Cash 575,000 Common stock 575,000
Answer:
See the journal entries below.
Explanation:
Tr. General Journal Dr ($) Cr ($)
1. Cash 575,000
Common stock 575,000
(To record common stock issued for cash.)
2. Furniture and fixtures 95,000
Cash 38,000
Note payable 57,000
(To record purchase of furniture and fixtures.)
3. Merchandise inventory 230,000
Account payable 230,00
(To record inventory purchased on account.)
4a. Account receivable 391,000
Sales 391,00
(To record credit sales).
4b. Cost of goods sold 195,500
Merchandise inventory 195,000
(To record cost of inventory sold.)
5. Rent expenses 5,000
Cash 5,000
(To record interest paid for June.)
6. Prepaid insurance 2,640
Cash 2,640
(To record prepaid insurance.)
7. Account payable 166,175
Cash 166,175
(To record payment for merchandise inventory bought on account.)
8. Cash 78,200
Account receivable 78,200
(To record cash received from customer.)
9. Dividend paid 5,750
Cash 5,750
(To record cash dividend paid.)
10. Depreciation expenses 1,900
Accumulated Dep. - F $ F 1,900
(To record record depreciation expenses for Furniture & F.)
11. Insurance expenses (2,640 / 12) 220
Prepaid insurance 220
(To record insurance expenses for the month.)
Maxxie purchased a tract of land for $24,500. Today, the same land is worth $43,800. How many years have passed if the price of the land has increased at an annual rate of 6.4 percent
Answer:
9.35 years
Explanation:
To find the numbers of years that have passed, you can use the following formula:
n = ln(FV / IV)/ln(1 + r)
n= number of periods
FV= Future value= $43,800
IV= Initial value= $24,500
r= rate= 6.4%
n=ln(43,800/24,500)/ln(1+0.064)
n= ln1.79/ln1.064
n=0.58/0.062
n= 9.35
According to this, 9.35 years have passed.
Which of the following factors has not contributed to the trend towards outsourcing in recent decades: Group of answer choices
a. Increasing turbulence of the business environment.
b. Increasing emphasis on cost efficiency.
c. Increasing emphases on the need for competitive advantage based upon superior capabilities Increasing transaction costs
Fast-food restaurants like McDonald's are replacing cashiers with touch-screen ordering kiosks. Currently the MPL for an additional cashier is 48 customers served per hour and the MPK for an additional kiosk is 32 customers served per hour. A cashier can be hired for wage of $15; a kiosk rents for $12.
(a) Is Whataburger using the optimal cost-minimizing mix of cashiers and kiosks? Explain.
(b) What can Whataburger do to improve its mix of inputs – hire more cashiers or fewer? Rent more kiosks or fewer?
Answer:
a. Whataburger is not using the optimal cost-minimizaing mix of cashier and kiosks.
b. Whataburger should hire more cashier and rent fewer kiosks in order to improve its mix of inputs and minimize the cost
Explanation:
a. According to the given data we have the following:
Let "C" is a cashier.
"K" is a kiosk
MPC = 48 (Marginal Product of Cashier)
MPK = 32 (Marginal Product of Kiosk)
PC = $15 (cashier can be hired for a wage of $15)
PK = $12 (Kiosk rents for $12)
At optimal cost minimization point, (MPC / MPK) = (PC / PK)
(MPC / PC) = (MPK / PK)
(MPC / PC) = (48 / 15) = 3.2
(MPK / PK) = (32 / 12) = 2.67
Since the (MPC / PC) and (MPK / PK) is not equal. It implies Whataburger is not using the optimal cost-minimizaing mix of cashier and kiosks.
b. We have to use the following:
(MPC / PC) > (MPK / PK)
i.e., 3.2 > 2.67
It means Whataburger hire more cashier and rent fewer kiosks in order to improve its mix of inputs and minimize the cost.
Lang Warehouses borrowed $287,610 from a bank and signed a note requiring 15 annual payments of $27,709 beginning one year from the date of the agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the interest rate implicit in this agreement
Answer:
The interest rate implicit in this agreement is 5%
Explanation:
A fix periodic payment made for a specific of time is known as annuity.
The 15 annual loan payment of $27,709 is an annuity payment and we will use the following formula to calculate the interest rate.
PV of annuity = P x annuity factor
Where
P = annual payments = $27,709
Placing values in the formula
$287,610 = $27,709 x annuity factor
Annuity factor = $287,610 / $27,709
Annuity factor = 10.37966
The annuity factor of 10.37966 for 15 years is for 5% interest rate.
On June 1, Kareem sends Fatima an e-mail offering to build her a new garage for $20,000. In his e-mail, Kareem wrote, "acceptance by certified mail is advisable." On June 2 at 8 a.m., Kareem sends Fatima a certified letter attempting to revoke the offer. At 2 p.m. the same day, Fatima mails Kareem a letter via certified mail attempting to accept his offer. Under these circumstances, _____.
Answer:
B. Fatima's acceptance is effective upon dispatch
Explanation:
The option B is correct as it is mentioned in the question that acceptance by certified mail is advisable that implies if the parties have mail each other than the contract should be accepted
Therefore in the given case, the certified mail is accepted when it is dispatched that results into an acceptance of Fatima i.e tp be effective
Hence, the second option is correct
Sort the items below into two main categories: whether demand for each type of good is relatively elastic or relatively inelastic.
A. Goods that are narrowly defined.
B. Goods on which consumers spend a small share of their budget.
C. Consumers have a long time to adjust to a change in price.
D. Goods that have a large number of available substitutes.
E. Goods that are necessities.
Answer:
A. Relatively elastic
B. Relatively inelastic
C. Relatively elastic
D. Relatively elastic
E. Relatively inelastic
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes
Demand is inelastic if there's little or no change in quantity demanded when the price of the good changes.
If Consumers have a long time to adjust to a change in price, demand is usually elastic because consumers would have enough time to adjust to price changes. For example, if the price of the good has increased and the consumer has enough time to adjust to the price change, the consumer would have enough time to find cheaper suitable substitutes.
The elasticity of demand for necessities is usually inelastic because consumers have no choice but to buy the product. For example, water is considered a necessity. If the price of a bottle of water increases, consumers have no choice but to consume water so they would keep buying the bottle of water despite the increase in price.
Goods that have many substitutes usually have an elastic demand because the good can be easily replaced with the numerous substitutes available.
Goods on which consumers spend a small share of their budget usually have an inelastic demand. For example, if you earn $500,000 and you usually buy a product for 10 cents and the price increases to 15 cents, you would probably not stop purchasing the product as a result of the price increase since it constitutes a negligible part of your budget.
Goods that are narrowly defined have an elastic demand. For example, there are many substitutes for bread but there are no subsituites for food.
I hope my answer helps you
Kevin owns one share of Acme, Inc. stock. He purchased the stock three years ago for $29. The stock is currently trading for $29.50 per share. The stock has paid the following dividends over the past three years. o Year 1: $1.50 o Year 2: $2.00 o Year 3: $2.50 What is the compounded rate of return (IRR) that Kevin has earned on this investment
Answer:
Find below the multiple choices:
5.6%.
6.6%.
10.1%.
7.35%
The last option ,7.35% is correct
Explanation:
The excel IRR formula can be very useful in determining the IRR for the investment in stock, the formula is stated thus:
=IRR(values)
the values in the case are the cash flows (inflows and outflows) arranged from the earliest to the latest as shown in the attached spreadsheet.
Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,050. The first bond is issued at a deep discount with a coupon rate of 4% and a price of $580 to yield 8.4%. The second bond is issued at par value with a coupon rate of 8.75%.
a. What is the yield to maturity of the par bond? Why is it higher than the yield of the discount bond?
b. If you expect rates to fall substantially in the next two years, which bond has the higher expected rate of return?
c. In what sense does the discount bond offer "implicit call protection"?
Answer:
Explanation:
a)
The YTM of the bond at par value is equals to its coupon rate, 8.75%. Other things being equal, this 4% coupon rate bond will be more eye-catching as the coupon rate is lower than the current market yields, and its price is far below the call price. So, if yields drop, capital gains on the bond will not be restricted by the call price.
b)
If an investor foresees that yields will fall considerably, the 4% bond proposes a better expected return.
c)
Implicit call protection is offered in the sense that any likely fall in yields would not be nearly enough to make the firm consider calling the bond. In this sense, the call feature is almost irrelevant
Journalize the following transactions that occurred in November 2018 for May's Adventure Park. Assume May's uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name
Julie's Fun World estimates sales returns at the end of each month.
Nov.
4 Purchased merchandise inventory on account from Vera Company, $5,000. Terms 3/10, n/EOM, FOB shipping point.
6 Paid freight bill of $100 on November 4 purchase.
8 Returned half the inventory purchased on November 4 from Vera Company
10 Sold merchandise inventory for cash, $1,100. Cost of goods, $400. FOB destination.
11 Sold merchandise inventory to Geary Corporation, $11,100, on account, terms of 2/10, n/EOM. Cost of goods, $6,105. FOB shipping point.
12 Paid freight bill of $20 on November 10 sale.
13 Sold merchandise inventory to Caldwell Company, $9,500, on account, terms of n/45. Cost of goods, $5,225. FOB shipping point.
14 Paid the amount owed on account from November 4, less return and discount
17 Received defective inventory as a sales return from the November 13 sale, $500. Cost of goods, $275
18 Purchased inventory of $3,600 on account from Rainman Corporation. Payment terms were 2/10, n/30, FOB destination.
20 Received cash from Geary Corporation, less discount.
26 Paid amount owed on account from November 18, less discount.
28 Received cash from Caldwell Company, less return.
29 Purchased inventory from Sandra Corporation for cash, $12,300, FOB shipping point. Freight in paid to shipping company,
$170.
Answer:
May's Adventure Park
Journal Entries for November 2018:
Nov. 4: Debit Inventory $5,000
Credit Accounts Payable (Vera Company) $5,000
Nov. 6: Debit Freight-in $100
Credit Cash $100
Nov. 8: Debit Accounts Payable (Vera Company) $2,500
Credit Inventory Returns $2,500
Nov. 10: Debit Cash Account $1,100
Credit Sales $1,100
Nov. 10: Debit Cost of Goods Sold $400
Credit Inventory $400
Nov. 11: Debit Accounts Receivable (Geary Corporation) $11,100
Credit Sales $11,100
Nov. 11: Debit Cost of Goods Sold $6,105
Credit Inventory $6,105
Nov. 12: Debit Freight-out $20
Credit Cash Account $20
Nov. 13: Debit Accounts Receivable (Caldwell Company) $9,500
Credit Sales $9,500
Nov. 13: Debit Cost of Goods Sold $5,225
Credit Inventory $5,225
Nov. 14: Debit Accounts Payable (Vera Company) $2,500
Credit Cash Discount $75
Credit Cash Account $2,425
Nov. 17: Debit Sales Returns $500
Credit Accounts Receivable (Caldwell Company) $500
Nov. 17: Debit Inventory $500
Credit Cost of Goods Sold $500
Nov. 18: Debit Inventory $3,600
Credit Accounts Payable (Rainman Corporation) $3,600
Nov. 20: Debit Cash Account $10,878
Debit Cash Discount $222
Credit Accounts Receivable (Geary Corporation) $11,100
Nov. 26: Debit Accounts Payable (Rainman Corporation) $3,600
Credit Cash Discount $72
Credit Cash Account $3,528
Nov. 28: Debit Cash Account $9,000
Credit Accounts Receivable (Caldwell Company) $9,000
Nov. 29: Debit Inventory $12,300
Credit Accounts Payable (Sandra Corporation) $12,300
Nov. 29: Debit Freight-in $170
Credit Cash Account $170
Explanation:
Journal entries are made to debit and credit the accounts involved in each business transaction. They are the first accounting records made to capture transactions after they have been analyzed to know the accounts affected and which accounts in the ledger will be debited or credited. They are usually accompanied with short explanations, e.g. the trade terms.
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $28,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $380,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $1,700,000 to his nephew Frodo. He can afford to save $3,300 per month for the next 10 years. If he can earn an EAR of 10 percent before he retires and an EAR of 7 percent after he retires, how much will he have to save each month in years 11 through 30?
Answer:
He would have to save each month in years 11 through 30 the amount of $2,279.60
Explanation:
Because the cash flows occur monthly, we must get the effective monthly rate. One way to do this is to find the APR based on monthly compounding, and then divide by 12. So, the pre-retirement APR is:
EAR = .11 = [1 + (APR/12)] 12- 1;
APR = 12[(1.11) 1/12- 1] = .1048 or 10.48%
And the post-retirement APR is:
EAR = .08 = [1 + (APR/12)] 12 -1
APR = 12[(1.08) 1/12 -1] = .0772 or 7.72%
First, we will calculate how much he needs at retirement. The amount needed at retirement is the PV of the monthly spending plus the PV of the inheritance. The PV of these two cash flows is:
PVA = $24500{1 -[1/(1 + .0772/12) 12(25) ]}/(.0772/12) = $3,252,096.21
PV = $1525,000/[1 + (.0772/12)] 300 = $222,723.58
So, at retirement, he needs:
$3,252,096.21+ $222,723.58= $3474819.79
He will be saving $2,600 per month for the next 10 years until he purchases the cabin. The value of his savings after 10 years will be:
FVA = $2,600[{[1 + (.1048/12)] 12(10) -1}/(.1048/12)] = $547,487.10
After he purchases the cabin, the amount he will have left is:
$547,487.10 -345,000 = $202487.10
He still has 20 years until retirement. When he is ready to retire, this amount will have grown to:
FV = $202487.10[1 + (.1048/12)] 12(20) = $1632023.27
So, when he is ready to retire, based on his current savings, he will be short:
$3474819.79-1632023.27 = $1842796.52
This amount is the FV of the monthly savings he must make between years 10 and 30. So, finding the annuity payment using the FVA equation, we find his monthly savings will need to be:
FVA = $1842796.52 = C [{[ 1 + (.1048/12)] 12(20) -1}/(.1048/12)]
C = $2,279.60
He would have to save each month in years 11 through 30 the amount of $2,279.60
Levine, Inc., has an ROA of 8.6 percent and a payout ratio of 33 percent.
What is its internal growth rate?
Answer:
Explanation:
Workings
Internal growth rate is the highest possible growth attained by a business without obtaining outside funding but with its retained earning.
Given information
ROA = 8.6%
Percentage Payout ratio = 33%
Internal growth rate = (ROA * Retention ratio) / 1 - (ROA * Retention ratio)
Retention ratio is the percentage earning that is no paid out in dividends
To calculate the retention ratio , we use the formula
Retention ratio = (1-percentage pay out ratio)
= 1 - 0.33 = 0.67
Substituting retention ratio for 0.67 in the inter growth rate formula
Therefore
Internal growth rate = (0.086*0.67)/1-(0.086*0.67)
0.05762/(1-0.05762) = 0.05762/0.94238
=0.0611
= 6.11%
Billy owns one share of Disney stock. He purchased the share 3 years ago for $15. Disney stock is currently trading for $30 per share. The stock has paid the following dividends over the past three years: year 1, $1.00; year 2, $2.00; year 3, $3.00. What is the compounded rate of return (IRR) that Billy has earned on his investment
Answer:
35.8%
Explanation:
purchase price 3 years ago $15, so CF₀ = -15
CF₁ = $1
CF₂ = $2
CF₃ = $3 + $30 = $33
using an excel spreadsheet (or you can also a financial calculator), you must determine the internal rate of return (IRR) = 35.8%
the IRR is the interest rate where NPV = 0, or the future cash flows equal the investment amount
Hillsdale is considering two options for comparable computer software. Option A will cost $31,000 plus annual license renewals of $1,800 for three years, which includes technical support. Option B will cost $12,000 with technical support being an add-on charge. The estimated cost of technical support is $4,700 the first year, $3,700 the second year, and $2,700 the third year. Assume the software is purchased and paid for at the beginning of year one, but that technical support is paid for at the end of each year. The discount rate is 10%. Ignore income taxes.Required: Determine which option should be chosen based on present value considerations
Answer:
Option B
Explanation:
The computation of the present value is shown below:
For Option A
Year Cash flows Discount factor at 10% Present value
0 -$31,000 1.0000 -$31,000.00
1 -$1,800 0.9091 -$1,636.36
2 -$1,800 0.8264 -$1,487.60
3 -$1,800 0.7513 -$1,352.37
Total -$35,476.33
For Option B
Year Cash flows Discount factor at 10% Present value
0 -$12,000 1.0000 -$12,000.00
1 -$4,700 0.9091 -$4,272.73
2 -$3,700 0.8264 -$3,057.85
3 -$2,700 0.7513 -$2,028.55
Total -$21,359.13
As we can see that the present value for option B is less than the option A so the option B should be selected
The Mazzanti Wholesale Food Company's fiscal year-end is June 30. The company issues quarterly financial statements requiring the company to prepare adjusting entries at the end of each quarter. Assume all quarterly adjusting entries were properly recorded. On December 1, 2020, the company paid its annual fire insurance premium of $9,200 for the year beginning December 1 and debited prepaid insurance. On August 31, 2020, the company borrowed $152,500 from a local bank. The note requires principal and interest at 8% to be paid on August 31, 2021. Mazzanti owns a warehouse that it rents to another company. On January 1, 2021, Mazzanti collected $30,400 representing rent for the 2021 calendar year and credited deferred rent revenue. Depreciation on the office building is $22,200 for the fiscal year. Employee salaries for the month of June 2021 $22,000 will be paid on July 20, 2021. Prepare the necessary year-end adjusting entries at the end of June 30, 2021, for the above situations. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
1.Dr Insurance expense 2,300
Cr Prepaid insurance 2,300
2.Dr Interest expense 3,050
Cr Interest payable 3,050
3.Dr Deferred rent revenue 7,600
Cr Rent revenue 7,600
4.Dr Depreciation expense 5,550
Accumulated
depreciation—building 5,550
5.Dr Salaries and wages expenses 22,000
Cr Salaries and wages payable 22,000
Explanation:
The Mazzanti Wholesale Food Company's Journal entries
1.
Dr Insurance expense 2,300
(9200×3/12 months)
Cr Prepaid insurance 2,300
2.
Dr Interest expense 3,050
(152,500×8%×3/12months )
Cr Interest payable 3,050
3.
Dr Deferred rent revenue 7,600
(30,400×3/12months)
Cr Rent revenue 7,600
4.
Dr Depreciation expense 5,550
(22,200×3/12 months)
Accumulated
depreciation—building 5,550
5.
Dr Salaries and wages expenses 22,000
Cr Salaries and wages payable 22,000
Completed Per Day
Flower Beds Weeded
Bags of Leaves Raked
Samantha
4
8
Adam
5
25
Samantha and Adam own a gardening business together. They each pull weeds from flower beds and rake up leaves for their neighbors. If each decides to specialize in what they are best at, Samantha will
a.weed and Adam will rake because these are the goods each has a comparative advantage in.
b.rake and Adam will weed because these are the goods each has a comparative advantage in.
c.weed and Adam will rake because these are the goods each has an absolute advantage in.
d.rake and Adam will weed because these are the goods each has an absolute advantage in.
Answer:
The correct option is A, Samantha weed and Adam will rake because these are the goods each has a comparative advantage in.
Explanation:
The opportunity formula comes handy in this case, which is given below:
opportunity cost formula=what one sacrifices/what one gains
If Samantha were to weed flower beds, opportunity cost is computed thus:
Opportunity cost of Samantha weeding flower beds=8/4= 2 bags of leaves raked
The opportunity of Adam weeding flower beds=25/5 =5 bags of leaves raked.
In a nutshell ,if Samantha weeds flowers they would lose 2 bags of leaves raked while if Adam were to do so same, they would lose 5 bags of leaves raked, conclusively Samantha should weed flower beds since she has lower opportunity, higher comparative advantage
The State of Idaho issued $2,000,000 of 7% coupon, 20-year semiannual payment, tax-exempt bonds 5 years ago. The bonds had 5 years of call protection, but now the state can call the bonds if it chooses to do so. The call premium would be 5% of the face amount. Today 15-year, 5%, semiannual payment bonds can be sold at par, but flotation costs on this issue would be 2%. What is the net present value of the refunding? Because these are tax-exempt bonds, taxes are not relevant.
Answer:
$278,606
Explanation:
Calaculation of the net present value of the refunding:
The first step is to calculate call premium :
Call premium= 2,000,000 x 5%
= 100,000
Second step is to calculate the Flotation cost
Flotation cost = 2,000,000 x 2%
= 40,000
Calculation for Old interest = 2,000,000 x (7% / 2) = 70,000
Caluclatio fo New interest = 2,000,000 x (5% / 2) = 50,000
Therefore the Six months savings will be:
20,000 70,000 + 50,000 + 20,000 = 140,000
The PV of savings 30 periods 5% / 2 will be:
20,000 x 20.9303 = 418,606
Therefore the Net Present Value of the refunding will be:
418,606- 140,000
= $278,606
A company has a fiscal year-end of December 31:_______.
(1) on October 1, $18,000 was paid for a one-year fire insurance policy; (2) on June 30 the company advanced its chief financial officer $16,000; principal and interest at 6% on the note are due in one year; and (3) equipment costing $66,000 was purchased at the beginning of the year for cash. Depreciation on the equipment is $13,200 per year. If the adjusting entries were not recorded, would net income be higher or lower and by how much?
Answer:
Net income would be higher by $17,220 if the adjusting entries were left unrecorded
Explanation:
The adjusting entries for insurance prepaid would be to recognize three months of insurance cost as insurance expense i.e $18,000*3/12=$4,500
The adjusting entries for the advance of $16,000 is to recognize interest revenue for six months (from July to December) in the books i.e$16,000*6%*6/12=$480
The depreciation charge would increase expenses by $13,200
The impact of profit is shown below:
insurance expense ($4,500)
interest revenue $480
depreciation ( $13,200)
total impact (17220)
A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional basketball per day, total costs would increase to $10,100. From these amounts, we can tell that:________
a. the firm has negative profit.
b. marginal cost equals $100.
c. marginal cost equals $150.
d. marginal cost equals marginal revenue.
Answer:
b. marginal cost equals $100.
Explanation:
Marginal Cost is the cost of one extra unit produced.
Marginal Cost = $10,100 - $10,000 = $100
Marginal revenue is revenue earned per extra j
Unit sold. Marginal revenue equals price. $30
Marginal cost is greater than marginal revenue
Profit = Total revenue - Total cost = (1,000 × $30) - $10,000 = $20,000
Profit is positive
I hope my answer helps you
Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales $ 7,500,000 Net operating income $ 600,000 Average operating assets $ 5,000,000 Required: 1. Compute the margin for Alyeska Services Company. 2. Compute the turnover for Alyeska Services Company. (Round your answer to 1 decimal place.) 3. Compute the return on investment (ROI) for Alyeska Services Company. (Do not round intermediate calculations.)
Answer:
1. The margin for Alyeska Services Company is 0.08
2. The turnover for Alyeska Services Company is 1.50
3. The return on investment for Alyeska Services Company is 12%
Explanation:
1. In order to calculate the margin for Alyeska Services Company we would have to calculate the following:
Margin=Net operating Income / Sales
Margin=$600,000 /$7,500,000
Margin=0.08
2. In order to calculate the turnover for Alyeska Services Company we would have to calculate the following:
Turnover= Sales/Average operating assets
Turnover=$7,500,000 /$5,000,000
Turnover=1.50
Turnover of the company is 1.50
3. In order to calculate the return on investment for Alyeska Services Company we would have to calculate the following:
Return on Investments= Net operating Income /Average operating Assets
Return on Investments=$600,000 /$5,000,000
Return on Investments= 12%
The Return on investments is 12%
Sam was injured in an accident, and the insurance company has offered him the choice of $25,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity
Answer:
The lump sum be of $237,228.84
Explanation:
In order to calculate how large must the lump sum be we would have to use and calculate the formula of Present value of annuity due as follows:
Present value of annuity due=(1+interest rate)*Annuity[1-(1+interest rate)^-time period]/rate
Present value of annuity due=(1+0.075)*$25,000[1-(1.075)^-15]/0.075
Present value of annuity due=$25,000*9.489153726
Present value of annuity due=$237,228.84(Approx)
The lump sum be of $237,228.84
Kerbow Corporation uses part B76 in one of its products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. An outside supplier has offered to make the part and sell it to the company for $27.40 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $6,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part B76 could be used to make more of one of the company's other products, generating an additional segment margin of $29,000 per year for that product.A. Prepare a report that shows the effect on the company's total net operating income of buying part B76 from the supplier rather than continuing to make it inside the company.B. Identify which alternative the company should choose and explain why.C. Determine what errors managers may make when considering make or buy decisions and basing the decision solely on the data?
Answer:
12,000 units
outside supplier offers at $27.40 each = $328,800
current relevant costs:
direct materials $7.20 x 12,000 = $86,400direct labor $7.10 x 12,000 = $85,200variable overhead $3.50 x 12,000 = $42,000 supervisor's salary $4.70 x 12,000 = $56,400total = $270,000only $6,000 of allocated fixed costs can be avoided
additional revenue from using the freed space $29,000
A. Prepare a report that shows the effect on the company's total net operating income of buying part B76 from the supplier rather than continuing to make it inside the company.
Keep Buy Differential
producing from vendor amount
production cost $270,000 $0 $270,000
purchase cost $0 $328,800 ($328,800)
avoidable costs $0 ($6,000) $6,000
additional revenue $0 ($29,000) $29,000
total $270,000 $293,800 ($23,800)
B. Identify which alternative the company should choose and explain why.
The company should keep producing the part because production costs are lower than buying it from an outside vendor.
C. Determine what errors managers may make when considering make or buy decisions and basing the decision solely on the data?
If we had made this decision based on total production costs, then management would have erroneously chosen to purchase the part from an outside vendor. Total production costs are $28.30 per unit, but almost $5.80 per unit are not avoidable (mostly fixed and general overhead), so the company will incur them no matter what. You have to compare only relevant costs or revenues.
An asset is acquired using a noninterest-bearing note payable for $100,000 due in two years. Management records the purchase with a debit to the asset for $100,000 and a credit to notes payable for $100,000. Which of the following statements is correct?A. Management has properly recorded the transaction.B. Management has not considered the present value of the note in recording the asset.C. Management should not record the asset until the note has been paid.D. Management should record the note for more than $100,000 to account for the underlying interest.
Answer:
The answer is A. Management has properly recorded the transaction.
Explanation:
According to the given data Since the note is non interest bearing, no interest will be paid on the bond.
Therefore, asset will be debited and note payable will be credited by the full amount.
Therefore, the Management has properly recorded the transaction.
The joural entry would be as follows:
Debit Credit
asset $100,000
note payable $100,000
