Answer: 1%
Explanation:
The Nominal interest rate has not been adjusted for inflationary effects yet and as such is considered overstated.
The Real Interest rate has been adjusted for inflation and is believed to show the actual return one receives.
Tax is calculated on the Nominal rate.
After tax Nominal Rate = 5% * ( 1 - 40%)
= 3%
Then adjust for inflation to find real rate,
= 3% - 2%
= 1%
The After-tax real rate is 1%.
A company started the year with the following: Assets $121,000; Liabilities $41,500; Common Stock $71,500; Retained Earnings $8,000. During the year, the company earned revenue of $6,400, all of which was received in cash, and incurred expenses of $3,700, all of which were unpaid as of the end of the year. In addition, the company paid dividends of $2,400 to owners. Assume no other activities occurred during the year. The amount of liabilities at the end of the year is
Answer:
$45,200
Explanation:
According to the scenario, the computation of the given data are as follows:
Liabilities = $41,500
Expense incurred during year = $3,700
So, we can calculate the total amount of liabilities by using the following formula:
Liabilities at the end of the year = Liabilities + Expense incurred
Liabilities at the end of the year = $41,500 + $3,700
= $45,200
North Star prepared the following unadjusted trial balance at the end of its second year of operations ending December 31. Account Titles Debit Credit Cash $ 12,800 Accounts Receivable 6,800 Prepaid Rent 2,560 Equipment 21,800 Accumulated Depreciation $ 1,080 Accounts Payable 1,080 Income Tax Payable 0 Common Stock 25,600 Retained Earnings 2,900 Sales Revenue 52,400 Salaries and Wages Expense 25,800 Utilities Expense 13,300 Rent Expense 0 Depreciation Expense 0 Income Tax Expense 0 Totals $ 83,060 $ 83,060 Other data not yet recorded at December 31: Rent expired during the year, $1,280. Depreciation expense for the year, $1,080. Utilities used and unpaid, $9,800. Income tax expense, $470. Prepare the adjusting journal entries required at December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
North Star
Adjusting Journal Entries:
December 31:
Rent Expense $1,280
Prepaid Rent $1,280
To accrue rent for the period.
Depreciation Expense $1,080
Accumulated Depreciation $1,080
To accrue Depreciation charge for the year.
Utilities Expense $9,800
Utilities Payable $9,800
To accrue unpaid utilities.
Income Tax Expense $470
Income Tax Payable $470
To accrue income tax liability.
Explanation:
Adjusting entries are journal entries that are made at the end of an accounting period to ensure that all expenses and incomes pertaining to the period are recognized in accordance with the accrual concept and the matching principle. These accounting concepts require that all expenses incurred whether paid for or not and income whether received or not, which relate to the period, are matched respectively.
Helix Company has been approached by a new customer to provide 2,000 units of its regular product at a special price of $6 per unit. The regular selling price of the product is $8 per unit. Helix is operating at 75% of its capacity of 10,000 units. Identify whether the following costs are relevant to Helix's decision as to whether to accept the order at the special selling price. No additional fixed manufacturing overhead will be incurred because of this order. The only additional selling expense on this order will be a $0.50 per unit shipping cost. There will be no additional administrative expenses because of this order. Calculate the operating income from the order.
Answer:
Helix decision would be to accept this order at the special price because from the calculations they will still have a net income of $2,000 at this special price of $6 per unit
Explanation:
Selling price: at $6 per unit; This is a relevant cost ; Revenue = ($6*2000) units) $12,000
_________________________
Direct material cost: at $1 per unit; This is a relevant cost; Revenue = (1 * 2000) $2000
____________________________
Direct labor cost: at $2 per unit; This is a relevant cost ; Revenue = (2 * 2000) $4000
____________________________
Variable manufacturing overhead: at $1.50 per unit; This is a relevant cost; Revenue = (1.50 * 2000) $3,000
____________________________
Fixed manufacturing overhead: at $0.75 per unif; This is not a relevant cost; Revenue = $0 (not relevant)
_____________________________
Regular selling expenses: at $1.25 per unit; This is not a relevant cost; Revenue = $0(not relevant)
______________________________
Additional selling expenses(shipping cost) : at $0.50 per unit; This is a relevant cost; Revenue = (0.50 * 2000) $1,000
______________________________
Administrative expenses: at $0.75 per unit; This is not a relevant cost; Revenue = $0
__________________________
Total operating expenses: Sum of all relevant cost = (Direct material cost + Direct labor cost + Variable manufacturing overhead + Additional selling expenses) = ($2,000 + $4,000 + $3,000 + $1,000) = $10,000
__________________________
Net income : (Selling price - Total operating expenses)= ($12,000 - $10,000) = $2,000
________________________
Yes, Helix should accept the order at the special price
______________
Helix decision would be to accept this order at the special price because from the calculations they will still have a net income of $2,000 at this special price of $6 per unit
The graph shows excess demand. A graph titled Excess supply has quantity on the x-axis and price on the y-axis. A line with positive slope represents supply and a line with negative slope represents demand. The lines intersect at the point of equilibrium (p star, Q star). A point on the demand line is (P 2, quantity demanded) and a point on the supply line is (P 2, quantity supplied). Both points are lower than the point of equilibrium. Excess demand is indicated between the 2 points. Which needs to happen in order to stop disequilibrium from occurring? Q needs to be coordinated with supply. Q needs to be coordinated with demand. The price of goods needs to be increased. The price of goods needs to be decreased.
Answer:
The price of goods needs to be increased.
Explanation:
Excess demand occurs when the quantity demanded is higher than the quantity supplied. This happens when the price of the good is lower than the equilibrium price. This can happen naturally in the market, or can happen if the government imposes a binding price floor.
The best way to solve excess demand is to raise the price, in order to reach equilibrium. Once in equilibrium, the price will coordinate the quantity supplied and the quantity demanded so that they're roughly equal.
Association between the number of goods the producers wants to sell at a specific value to that of quantity the purchaser wants to buy is called demand and supply.
The correct answer is:
Option C. The cost of goods needs to be raised.
This can be explained as:
When there is more need for the product than it is supplied or created is excess demand.This problem arises when the value of the goods and commodities is lower.This can arise intrinsically or due to any trade or governmental policies.The excess demand can be solved by increasing the price of the product.Therefore, the price of the goods should be increased.
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A company's beginning Work in Process inventory consisted of 21,500 units that were 20% complete with respect to direct labor. These beginning units were completed and another 92,400 units were started during the current period. Of those started, 61,500 were finished and the remaining 30,900 were 40% complete at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:
Answer:95,360 units.
Explanation:The equivalent unit of production shows the quantity of work done by a manufacturing company on units of output partially completed at the end of a period.
Equivalent units of production =Units completed(work n progress at beginning + finished goods)+Ending work in progess
=(21,500+61, 500)+(30,900×40%)
=83,000 + 12,360
=95,360 units.
The equivalent units of production for conversion is 95,000 units.
Gelb Company currently manufactures 53,500 units per year of a key component for its manufacturing process. Variable costs are $2.95 per unit, fixed costs related to making this component are $67,000 per year, and allocated fixed costs are $64,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 53,500 units and buying 53,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier
Answer and Explanation:
The computation of the total incremental cost is shown below;
For making 53,500 units
Particulars Relevant Relevant Total
Per Unit Fixed Costs Relevant Costs
Variable Cost
Per Unit $2.95 $157,825
(53,500 units × $2.95)
Fixed
Manufacturing
Costs $67,000 $67,000
Total Incremental Costs to Make $224,825
For making 53,500 units
Particulars Relevant Relevant Total
Per Unit Fixed Costs Relevant Costs
Purchase
Price
Per Unit $3.50 $187,250
(53,500 units × $3.50)
Total Incremental Cost to Buy $187,250
The company should buy the component from the outside supplier as it saves the cost for ($224,825 - $187,250) = $37,575 plus the buying cost is less than the making cost
Abe and Bea each have some money to invest in a CD (Certificate of Deposit). Abe has $5,000 and Bea has $20,000. Both are interested in making a 6-month investment at Synchrony Bank. The CD rates for Synchrony Bank (as of July 8, 2015) are as listed below. With 0.41% interest, Abe would get $5,010 in six months. With 0.50% interest, Bea would get $20,050 at the end of six months. If they pool their funds, they will be able to purchase a $25,000 CD, which pays a higher interest rate. The 0.60% interest will return $25,075 at the end of six months. Obviously, Abe gets back his $5,000 principle, and Bea gets back her $20,000 principle. How should the $75 interest be divided between the two of them
Answer:
Abe = $17.5
Bae = $57.5
Explanation:
Abe's principle = $5,000
Bea's principle = $ 20,000
Abe individual investment yield at 0.41% = (5010-5000) = $10
Bae's individual investment yield at ) 0.50%= (20000-20050) $50
Combined investment yield at 6 % = (25,075 - (20,000+5000) = $75
Extra interest yield = (75-(50+10) = $15
The extra interest yield of $15 should be shared equally among Abe and Bae as a result of joint effort
= 15/2 - $7.5
Therefore , the $75 interest is shared as below
Abe = $10 (interest on individual principle)+$7.5 = $17.5
Bae = $50 (interest on individual principle)+$7.5 = $57.5
All of the following are techniques being used to make data centers more "green" except:________.
a) use of hydropower.
b) air-cooling.
c) use of wind power.
d) use of backup generators.
e) virtualization.
Answer:
d) use of backup generators.
Explanation:
Going green is a term used for practices that protect the environment by reducing, reusing and recycling resources. It involves engaging in ecologically friendly decisions and lifestyles with a view of preserving natural resources for future generations.
The use of backup generator causes production of green house gases like carbon dioxide. Green house gases erode the ozone layer and increases global warming.
The other options like use of hydropower, air cooling, use of wind power, and virtualisation do not have adverse effect on the environment.
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 $17,600,000
Net operating income $6,200,000
Average operating assets $36,000,000
Required:
a. Compute the margin for Alyeska Services Company.
b. Compute the turnover for Alyeska Services Company.
c. Compute the return on investment (ROI) for Alyeska Services Company.
Answer:
a. The margin for Alyeska Services Company: 35.23%
b. The turnover for Alyeska Services Company: 0.49
c. The return on investment (ROI) for Alyeska Services Company: 17.22%
Explanation:
a. The profit margin reflects a company's overall ability to turn income into profit, is calculated by formula:
Profit margin = (Net operating income/Net sales ) x 100% = $6,200,000/$17,600,000 x 100% = 35.23%
b. Asset turnover helps investors understand how effectively companies are using their assets to generate sales. Asset turnover is calculated by using following formula:
Asset Turnover = Total Sales/ Average Total Assets = $17,600,000/$36,000,000 = 0.49
c. Return on investment (ROI) is calculated by using following formula:
ROI = Net income/Total investment x 100%
In Alyeska Services Company,
ROI = Net operating income/Average operating assets x 100% = $6,200,000/$36,000,000 x 100% = 17.22%
Christie and Jergens formed a partnership with capital contributions of $250,000 and $350,000, respectively. Their partnership agreement calls for Christie to receive a $55,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $119,000, then Christie and Jergens's respective shares are:
Answer:
Christie and jergen's respective shares are $59,500 and $59,500
Explanation:
Solution
Recall that:
Christie and Jergens created a partnership with capital contributions of = $250,000 and $350,000
The contract terms enables Christie to receive an amount of = $55,000 per salary
An interest allowance is received by both of them equal to =10%
The net income of the Present year = $119,000
Thus,
We find the respective shares of both partners which is stated as follows :
Christie's net income = $59,500
Jergen's net income = $59, 500
The total for both is =$119,000
Hence, due to their partnership contract terms or agreement the sharing of the profit and loss is dividend equally between them.
Data for Sedgwick Company are presented in E12.8. Sedgwick Company now decides to liquidate the partnership. Instructions Prepare the entries to record: (a) The sale of noncash assets. (b) The allocation of the gain or loss on realization to the partners. (c) Payment of creditors. (d) Distribution of cash to the partners.
Complete Question:
Sedgwick Company at December 31 has cash $22,800, noncash assets $108,000, liabilities $57,800, and the following capital balances: Floyd $43,200 and DeWitt $29,800. The firm is liquidated, and $113,000 in cash is received for the noncash assets. Floyd and DeWitt income ratios are 70% and 30%, respectively. Sedgwick Company now decides to liquidate the partnership. Prepare the entries to record: (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The sale of noncash assets. (b) The allocation of the gain or loss on realization to the partners. (c) Payment of creditors. (d) Distribution of cash to the partners.
Answer:
The entries are given below alongwith its explanation:
Explanation:
Part A. As the Non Cash Assets are sold at gain $5000 (113k-108k), the entry would be as under:
Dr Cash 113000
Cr non cash asset 108000
Cr Gain on sale of asset 5000
Part B. The entry to record the allocation of the gain to partners Floyd and Dewitt at 70:30 respectively.
Dr Gain on sale of asset $5000
Cr Floyd capital ($5000 * 70%) $3500
Cr Dewitt capital ($5000 * 30%) $1500
Part C. The payment of the liabilities by cash receipt of selling the capital would be as under:
Dr Liabilities $57800
Cr Cash $57800
Part D. The amount left (capital) after paying off the liabilities would be distributed among the partners at capital ratio.
Dr Floyd capital $46,700 (43200 70% +3500 Gain)
Dr Dewitt capital $31,300 (29800 30% +1500 Gain)
Cr Cash $78,000
Each week your supervisor holds a meeting in which he invites you and all the other employees to give feedback regarding current projects. According to path-goal theory, which behavior best describes your supervisor?
1. Supportive
2. Directive
3. Participative
4. Achievement oriented
Answer:
The correct answer is the third option: Participative.
Explanation:
To begin with, the path-goal theory refers to leadership theory developed by Robert House in 1971 and whose main focus is on the behavior that a leader has among its followers and states that the behavior that he has will influece the satisfaction, motivation and performance of his followers.
Secondly, the theory states that there are four behaviors and one of them is the partcipative behavior whose characteristics are that the leader tends to consult with followers and ask for their suggestion before making a final decision and that is why the best behavior that describes correctly to the supervisor is the participative.
Using these data from the comparative balance sheet of Ramirez Company, perform horizontal analysis.
Dec. 31, 2014 Dec. 31, 2013 Amount Percentage
Accounts receivable $535,000 $450,000 _______ _________
Inventory $792,000 $606,000 _______ _______
Total assets $3,138,000 $2,707,000 _______ _______
Answer:
Ramirez Company comparative balance sheet
2014 2013
Particulars Amount Percent Amount Percent
Accounts receivable 535,000 17.05% 450,000 16.62%
Inventory 792,000 25.24% 606,000 22.39%
Other Assets 1,811,000 57.71% 1,651,000 60.99%
Total assets 3,138,000 100% 2,707,000 100%
2014 Workings
Account receivables= 535,000 / 3,138,000 * 100 = 17.05%
Inventory= 792,000 / 3,138,000 * 100 =25.24%
Other Assets= 1,811,000 / 3,138,000 * 100 = 57.71%
2013 Workings
Account receivables= 450,000/2,707,000 * 100= 16.62%
Inventory=606,000/2,707,000 * 100= 22.39%
Other Assets=1,651,000/2,707,000 * 100= 60.99%
Bond X is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1,000 par value. Your required return on Bond X is 8%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 8.5%. How much should you be willing to pay for Bond X today
Answer:
$954.54
Explanation:
The price of the bond today is the present value of the promised cash inflows of coupon payment and repayment of face value which is computed using fv formula in excel below:
Price in 5 years time:
=-pv(rate,nper,pmt,fv)
rate is 8.5% in 5 years' time
nper is 15 years in 5 years' time
pmt is the annual coupon=$1000*9%=$$90
fv is the face value of $1000
=-pv(8.5%,15,90,1000)=$ 1,041.52
Price today:
=-pv(8%,20,90,1,041.52)=$954.54
Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $80,000. PP's current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. Refer to the data for Pennewell Publishing Inc. (PP). Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold until it makes the stock repurchase. PP then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?
Answer:
Price per share after repurchase = $51.064
Shares remaining after repurchase = 6500
Explanation:
Given the following :
Value of operations = $510,638
Value of T-bills = value of debt = $178,723
Therefore, value of equity = $510,638
Number of common shares = 10,000
Price per share = Value of equity / Number of shares
Price per share = $510,638 / 10,000 = $51.064
Price per share prior to repurchase is the same as price per share after repurchase.
However, number of shares repurchased equals;
$178,723 / $51.064 = 3499.99 = 3500 shares
Number of shares left after repurchase :
Totals shares - shares repurchased
10,000 - 3500 = 6,500
. Suppose Stevie'sStevie's expectation to sell one standard scooter for every three chrome scooters was incorrect and for every four scooters sold two are standard scooters and two are chrome scooters. Will the breakeven point of total scooters increase or decrease? Why? (Calculation not required.)
Answer:
It depends upon the contribution per unit of each product or in other words it depends on composite contribution per unit.
Explanation:
The composition matters a lot because of the fact that every product has its own contribution per unit. So if the product chrome has $1 contribution per unit and standard scooter has $2 contribution per unit. Also suppose that $6 is the total fixed cost. Then the priority to sell must be standard scooter, because it has higher contribution. Secondly if we only sell chrome scooters then total 6 ($6 fixed cost - 6 units * $1 contribution per unit) units must be sold and if we only sell standard scooters then only 3 ($6 fixed cost - 3 units * $2 contribution per unit) units must be sold to breakeven. Suppose, if we reduce standard scooters from 3 scooters to 2 units ($6 fixed cost - 2 units * $2 contribution per unit) then their will be loss of $2 which can be reduced to zero by selling 2 chrome scooters ($2 loss - 2 units * $1 contribution per unit).
So this is how contribution per unit affects the composite breakeven units and most important thing is that if the composite contribution per unit has increased then the breakeven units will decrease and vice versa.
Tedd E. Bear has an annual salary of $48,000 with no other loans outstanding. Using the 25% guideline from class and with a 20% down payment, how expensive of a home can Tedd purchase using a 4%, 30 year mortgage
Answer:
The total loan value would be of $261,825
Explanation:
In order to calculate how expensive of a home can Tedd purchase using a 4%, 30 year mortgage we would have to calculate first the amount of annual payments as follows:
amount of annual payments = $48,000*0.25 = $12,000
PMT = 12,000/12 = 1000
FV = 0
rate = 4%/12
N = 30*12
Hence, use FV function in Excel amount after down payment = $209,461.24
this represents 80% of the loan , so total loan value = $209,461.24/0.8 = $261,825
The total loan value would be of $261,825
The total loan amount is $261,825.
The calculation is as follows:Amount of annual payments = 25% of $48,000 = $12,000
PMT = 12,000 ÷ 12 = $1,000
FV = $0
Rate = 4% ÷ 12 = 0.333%
N = 30 × 12 = 360
Here we have to apply the FV function in the excel.
So,
Amount after downpayment = 209,461.24
The above amount represents 80% of the loan
Now
Total loan value is
= $209,461.24 ÷ 0.8
= $261,825
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Thomas Company uses a standard cost system. Information for raw materials for Product RBI for the month of October follows: Standard unit price $1.75 Actual purchase price per unit $1.65 Actual quantity purchased 4,000 units Actual quantity used 3,900 units Standard quantity allowed for actual production 3,800 units What is the materials purchase price variance
Answer:
Material price variance = $400
Explanation:
A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favorable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite.
It is is computed as follows:
The material price variance
$
4000 units should have cost (4,000× 1.75) = 7,000
but did cost - actual cost (4,000× $1.65) = 6,600
Material price variance 400 favorable
Material price variance = $400
A company plans to replace one of its machines 5 years from now. If they deposit $6,827 a month in an account that gives them 0.65% interest per month. How much money will they still need to pay for the machine if the cost is $1,123,553 at that time in the future?
Answer:
They would require $624,532.94 more
Explanation:
The first task is to compute the future value of the monthly deposit of $6,827 with an interest of 0.65% per month for five years.
=fv(rate,nper,-pmt,pv)
rate id 0.65% per month
nper is the number of deposits =5 years*12=60
pmt is the monthly deposit of $6,827
pv is the present value of deposits,it is unknown and taken as zero
=fv(0.65%,60,-6827,0)=$499,020.06
balance of the required funds=required funds-future value of the deposits
balance of required funds= $1,123,553-$499,020.06=$624,532.94
Sundance systems has the following transactions during July.
July 5- Purchases 58 LCD televisions on account from Red River Supplies for $3,400 each, terms 2/10. n/30.
July 8- Returns to Red RIver two televisions that had detective sound.
July 13- Pays the full amount due to Red River.
July 28- Sells remaining 56 televisions purchased on July 5 fpr $3,900 each on account.Record the transactions of Sundance systems, assuming the company uses a perpetual inventory system.
Answer: Please see below for answers
Explanation:
Journal to record Purchase of goods.
Date General Journal Debit Credit
5TH July Inventory ( 58 x 3400) $197, 200
Accounts Payable $197,200
journal to record goods returned
Date General Journal Debit Credit
8TH July Accounts Payable (2 x 3400) $6,800
inventory $ 6,800
journal to record payment made to supplier
Date General Journal Debit Credit
13TH July Accounts Payable (197,200-6,800) $190,400
inventory ( 190,400 x2%) $3808
Cash( 190,400 - 3,808) $186,592
From the question, the conditions for payment states 2/10 and n/30 meaning that the company will get 2% discount if they pay for products in 10 days of payment. the company paid on 13th and therefore will get a discount which is $3,808.
journal to record sale of goods
Date General Journal Debit Credit
28TH July Accounts receivable(56x 3900) $218,400
Sales revenue $218,400
Journal to record cost of good sold
Date General Journal Debit Credit
28TH July cost of good sold $186,592
inventory $186,592
Read the scenario. Yuri has $100 to spend at the store. He spots a pair of designer jeans with a $98 price tag on them but knows that he can buy three pairs of $30 jeans for about the same price. He still decides to buy the $98 pair. What is most likely Yuri’s motivation behind buying the pricier pair? emotional spending confused sense of needs and wants greedy spending conspicuous consumption
Answer:
D
Explanation:
Conspicuous consumption
Conspicuous consumption is the spending of money on and the acquiring of luxury goods and services to publicly display economic power of the income or of the accumulated wealth of the buyer.
Yuri’s motivation behind buying the pricier pair is conspicuous consumption.
What is conspicuous consumption?Conspicuous consumption can be defined as the way in which a person or individual decide to buy luxury items or costly items so as to display or showcase their wealth.
Based on the given scenario Yuri is buying the costly designers jeans instead of the cheaper pair as to showcase his wealth.
Inconclusion Yuri’s motivation behind buying the pricier pair is conspicuous consumption.
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Suppose your employer offers you a choice between a $ 4 comma 600 bonus and 200 shares of the company stock. Whichever one you choose will be awarded today. The stock is currently trading for $ 64 per share. Ignore transaction costs. a. Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus should you choose? What is its value? b. Suppose that if you receive the stock bonus, you are required to hold it for at least one year. What can you say about the value of the stock bonus now? What will your decision depend on?
Answer:
a. Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus should you choose? What is its value?
I would choose the stock bonus because the current market price = 200 x $64 = $12,800 which is much higher than $4,600 (cash bonus)
b. Suppose that if you receive the stock bonus, you are required to hold it for at least one year. What can you say about the value of the stock bonus now? What will your decision depend on?
Even if you are required to hold the stock for one year, the price difference with the cash bonus is too great = ($12,800 - $4,600) / $4,600 = 178% higher. Since you are employed by the company, you should know if the company is doing well or not, and the probable future stock price.
Only if something catastrophic happened to the company would make the cash bonus more attractive.
Gena Manufacturing Company has a fixed cost of $259,000 for the production of tubes. Estimated sales are 153,400 units. A before tax profit of $126,034 is desired by the controller. If the tubes sell for $22 each, what unit contribution margin is required to attain the profit target?
Answer:
$2.51
Explanation:
Gena Manufacturing Company calculation for contribution margin unit
Using this formula
Fixed cost + Tax profit/Estimated sales units
Let plug in the formula
Where:
Fixed cost =$259,000
Tax profit=$126,034
Estimated sales units=153,400
Hence:
(259,000 + 126,034) / 153,400
=$385,034/153,400
= $2.51
Therefore the contribution margin that is required to attain the profit target will be $2.51
A shoe manufacturer is producing at a point where its marginal costs are $5 and its fixed costs are $5000. At the current price of $10 it is producing 500 pairs. If the demand goes down, such that they can now only charge $8 per pair, should they continue production in the short run?
Answer:
In a short time, as long as the product line can be sold with a positive contribution margin, the company should continue selling it.
Explanation:
Giving the following information:
UNitary variable cost= $5
Fixed costs are $5000.
Sales= 500 units
Selling price= $8
First, we need to calculate the current income:
Income= 500*(8-5) - 5000= -$3,500
In a short time, as long as the product line can be sold with a positive contribution margin, the company should continue selling it. Demand can increase and income could become positive.
Paul Sabin organized Sabin Electronics 10 years ago to produceand sell several electronic devices on which he had securedpatents. Although the company has been fairly profitable, it is nowexperiencing a severe cash shortage. For this reason, it isrequesting a $620,000 long-term loan from Gulfport State Bank,$160,000 of which will be used to bolster the Cash account and$460,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow:
Sabin Electronics
Comparative Balance Sheet
This Year Last Year
Assets
Current assets:
Cash $ 118,000 $ 270,000
Marketable securities 0 30,000
Accounts receivable, net 633,000 420,000
Inventory 1,065,000 715,000
Prepaidexpenses 30,000 34,000
Total currentassets 1,846,000 1,469,000
Plant and equipment,net 1,969,200 1,490,000
Total assets $ 3,815,200 $ 2,959,000
Liabilitiesand Stockholders Equity
Liabilities:
Currentliabilities $ 820,000 $ 420,000
Bondspayable, 12% 850,000 850,000
Totalliabilities 1,670,000 1,270,000
Stockholders'equity:
Commonstock, $15 par 630,000 630,000
Retained earnings 1,515,200 1,059,000
Total stockholders equity 2,145,200 1,689,000
Total liabilitiesand equity $ 3,815,200 $ 2,959,000
Sabin Electronics
Comparative Income Statement and Reconciliation
This Year Last Year
Sales $ 5,600,000 $ 4,710,000
Cost of goodssold 3,995,000 3,570,000
Gross margin 1,605,000 1,140,000
Selling andadministrative expenses 677,000 572,000
Net operatingincome 928,000 568,000
Interestexpense 102,000 102,000
Net income beforetaxes 826,000 466,000
Income taxes(30%) 247,800 139,800
Net income 578,200 326,200
Commondividends 122,000 101,000
Net incomeretained 456,200 225,200
Beginning retainedearnings 1,059,000 833,800
Ending retainedearnings $ 1,515,200 $ 1,059,000
During the past year, the companyintroduced several new product lines and raised the selling priceson a number of old product lines in order to improve its profitmargin. The company also hired a new sales manager, who hasexpanded sales into several new territories. Sales terms are 2/10,n/30. All sales are on account.
e. The average sale period. (Theinventory at the beginning of last year totaled$620,000.)(Round your intermediate calculations and finalanswers to 1 decimal place. Use 365 days in a year.)
f. The operating cycle.(Round your intermediate calculations and final answer to 1decimal place.)
g. The total asset turnover. (The total assets at the beginning oflast year were $2,919,000.) (Round your answers to 2decimal places.)
h. The debt-to-equity ratio.(Round your answers to 3 decimal places.)
i. The times interest earned ratio.(Round your answers to 1 decimal place.)
j. The equity multiplier. (Thetotal stockholdersâ equity at the beginning of last year totaled$1,679,000.) (Round your answers to 2 decimalplaces.)
Answer:
e. The average sales period = (average balance inventory / COGS) x 365 days = {[($1,065,000 + $715,000)/2] / $3,995,000} x 365 days = 81.3 days
f. The operating cycle = average sales period + (average accounts receivable / total credit sales) x 365 days = 81.3 + {[($633,000 + $420,000)/2] / $5,600,000} x 365 days = 81.3 + 34.3 = 115.6 days
g. The total asset turnover = total sales / average assets = $5,600,000 / [($3,815,200 + $2,959,000)/2 = 1.66 times
h. The debt-to-equity ratio = total liabilities / total equity = $1,670,000 / $2,145,200 = 0.778 or 77.8%
i. The times interest earned ratio = EBIT / interest expense = $928,000 / $102,000 = 9.1
j. The equity multiplier = total assets / total equity = $3,815,200 / $2,145,200 = 1.78
The following cost data relate to the manufacturing activities of Chang Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials $ 15,000 Indirect labor 130,000 Property taxes, factory 8,000 Utilities, factory 70,000 Depreciation, factory 240,000 Insurance, factory 10,000 Total actual manufacturing overhead costs incurred $ 473,000 Other costs incurred: Purchases of raw materials (both direct and indirect) $ 400,000 Direct labor cost $ 60,000 Inventories: Raw materials, beginning $ 20,000 Raw materials, ending $ 30,000 Work in process, beginning $ 40,000 Work in process, ending $ 70,000 The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $25 per machine-hour. A total of 19,400 machine-hours was recorded for the year.Prepare a schedule of cost of goods manufactured for the year.
Answer:
Cost of Goods Manufactured $893,000
Explanation:
Chang Company
Schedule of Cost of Goods Manufactured
Inventories: Raw materials, beginning $ 20,000
Add Purchases of raw materials $ 400,000
Less Raw materials, ending $ 30,000
Direct Materials Used $390,000
Direct labor cost $ 60,000
Manufacturing overhead Costs: $ 473,000
Indirect materials $ 15,000
Indirect labor 130,000
Property taxes, factory 8,000
Utilities, factory 70,000
Depreciation, factory 240,000
Insurance, factory 10,000
Total actual Manufacturing Costs 923,000
Add Work in process, beginning $ 40,000
Cost of Goods Available For Manufacture $ 963,000
Less Work in process, ending $ 70,000
Cost of Goods Manufactured $893,000
Applied Overhead = Rate * Hours worked
= 25* 19,400= 485,000
The applied overhead is subtracted or added to the cost of goods sold amount. It is not accounted for in the schedule of cost of goods manufactured.
A firm's average cost increases as it increases its output by expanding its plant and hiring additional workers (its only inputs to production). The firm's owner blames the increase in per-unit costs on the law of diminishing marginal productivity. The owner's reasoning is: A. correct because some inputs are fixed in the long run. B. incorrect because economies of scale are present. C. correct because marginal productivity must decrease in the short run. D. incorrect because all inputs are varied in the example.
Answer: D. incorrect because all inputs are varied in the example.
Explanation: While marginal productivity describes the extra output, or return, or profit gotten per unit by benefits from the production inputs of a company, the law of diminishing marginal productivity is one that recognizes that the quantity of all inputs of production cannot be changed at one time. The owner's reasoning of attributing the increase in per-unit costs on the law of diminishing marginal productivity is incorrect because all inputs are varied in the example. Marginal productivity eventually declines because some inputs are fixed, but however, in the long run where no inputs are fixed, the law does not apply.
The Solow model predicts that, over time, real GDP in developing economies could potentially converge to the same level of real GDP as developed economies. Which of the following is not consistent with convergence?
a. Investors seeking to build new factories would likely build those factories in developing economies that have some political stability.
b. Developing nations should converge because they can take advantage of technological discoveries made by developed economies.
c. Over time, developing economies become richer, and developed economies become poorer, until they reach the same level of wealth.
d. Because investment in developing nations yields relatively greater returns, capital will flow into developing economies, leading to relatively greater economic gro
Answer: c. Over time, developing economies become richer, and developed economies become poorer, until they reach the same level of wealth.
Explanation:
The Solow model which is a neoclassical framework focuses on long term Economics and does indeed speak to the convergence of the Real GDPs of Developed Countries with that of Developing countries.
However, of all the options listed, Option C goes against the model because convergence cannot happen if the Developed Countries keep getting richer while Developing countries keep getting poorer. Should that happen, they will never get to the same level of wealth and indeed might end up on opposite sides of the wealth spectrum with Developed Countries being extremely wealthy and Developing countries being extremely poor.
For convergence to happen, the conditions in A, B and D are preferable as they can indeed bring about the said convergence.
In January 2017, Crane Company, a newly formed company, issued 9500 shares of its $8 par common stock for $13 per share. On July 1, 2017, Crane Company reacquired 950 shares of its outstanding stock for $10 per share. The acquisition of these treasury sharesa. increased total stockholders' equity.b. decreased the number of issued shares.c. decreased total stockholders' equity.d. did not change total stockholders' equity.
Answer:
The correct option is C, decreased total stockholders' equity
Explanation:
By reacquiring 950 shares out of the issued shares of 9,500 shares ,the company takes possession of the 950 shares and give cash to stockholders in return for the shares repossessed.
As a result the total stockholders' equity would reduce, this is usually accounted for by deducting the cost of such repurchase from total stockholders' equity in the equity section of the balance sheet
An ordinary annuity selling at $14,130.15 today promises to make equal payments at the end of each year for the next twelve years (N). If the annuity’s appropriate interest rate (IN) remains at 8.00% during this time, the annual annuity payment (PMT) will be
Answer:
PMT = $1875.00
Explanation:
The annuity refers to a series of fixed payments made after an equal interval of time and for a definite time period. The formula for the present value of annuity is,
For ordinary annuity
PV of annuity = PMT * [(1 - (1+IN)^-n) / IN]
Plugging in the values for the available variables. We calculate the PMT to be,
14130.15 = PMT * [(1 - (1+0.08)^-12) / 0.08]
14130.15 = PMT * 7.536078017
14130.15 / 7.536078017 = PMT
PMT = $1875.000493 rounded off to $1875.00
