Answer:
$56,250.
Explanation:
So, we are given the following data or parameters or information which we will use to solve this particular problem or Question;
=>" Used clothing of taxpayer and his family (all acquired more than a year ago) = $1,350 for Basis and Fair market value = $ 375 "
=> "Stock in ABC, Inc., held as an investment for 15 months 12,000 for Basis and 10,875 for fair market value."
=>" Stock in MNO, Inc., held as an investment for 11 months 15,000 for Basis and 18,000 for fair market value. "
=> "Real estate held as an investment for two years 15,000 for basis and 30,000 for fair market value."
Zeke's charitable contribution deduction for the year can be calculated by adding the the fair markets values of :
Used clothing of taxpayer and his family (all acquired more than a year ago) + Stock in ABC, Inc., held as an investment for 15 months + Real estate held as an investment for two years
Then, the result gotten will be added to the Basis value for Stock in MNO, Inc., held as an investment for 11 months. Thus;
$ 375 + 10,875 + 30,000 = 41,250.
41,250 + 15,000 = $56,250.
If the market price of an orange increases from $0.80 to $1.05, then consumer surplus. Name First orange Second orange Third orange Allison $2 $1.5 $0.75 Bob $1.5 $1 $0.6 Charisse $0.75 $0.25 $0 Group of answer choices increases by $0.75 decreases by $0.95. decreases by $0.75 decreases by $1.00
Answer:
decreases by $0.95.
Explanation:
Here is the full question :
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.
First OrangeSecond OrangeThird OrangeAllison$2.00$1.50$0.75Bob$1.50$1.00$0.60Charisse$0.75$0.25$0
Refer to Table above. If the market price of an orange increases from $0.80 to $1.05, then consumer surplus
Group of answer choices increases by $0.75 decreases by $0.95. decreases by $0.75 decreases by $1.00
Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.
Change in consumer surplus = $1.85 - $2.8 = $-0.95
Please check the attached images for an explanation on how the answer was derived.
I hope my answer helps you
Answer: decreases by $0.95.
Explanation:
Allison $2 $1.5 $0.75
Bob $1.5 $1 $0.6
Charisse $0.75 $0.25 $0
so consumer surplus = willingness to pay - market price
market price before = $0.80
consumer surplus before = Allison + Bob + Charisse
consumer surplus before = (1.2 + 0.7 + 0) + ( 0.7 + 0.2 + 0) + ( 0 + 0 + 0)
consumer surplus before = 2.8
market price after = $1.05
consumer surplus after = Allison + Bob + Charisse
consumer surplus after = (0.95 + 0.45 + 0) + ( 0.45 + 0 + 0) + ( 0 + 0 + 0)
consumer surplus after = 1.85
NOW
consumer surplus before - consumer surplus after
2.8 - 1.85 = 0.95
therefore consumer surplus decreases by $0.95
The Prospect Company estimates that its overhead costs will amount to $602,000 and the company's manufacturing employees will work 86,000 direct labor hours during the current year. Overhead costs are allocated based on direct labor hours. If actual overhead costs for the year amounted to $619,000 and actual labor hours amounted to 87,000, then overhead cost would be:___________.
A- underapplied by $10,000.
B- overapplied by $4,000.
C- underapplied by $17,000.
D- overapplied by $10,000.
Answer:
The correct answer is A.
Explanation:
Giving the following information:
Estimated:
Overhead= $602,000
Direct labor hours= 86,000
Actual:
Overhead= $619,000
Direct labor hours= 87,000
First, we need to calculate the estimated overhead rate:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 602,000/86,000= $7 per direct labor hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH=7*87,000= $609,000
Finally, we determine the over/under allocation:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 619,000 - 609,000
Under/over applied overhead= 10,000 underallocated
Managers in international businesses will need to evaluate the attractiveness of a country as a market or location for a facility or investment. Knowing how to think about events and situations will help the manager make that evaluation?
Countries with democratic regimes, market-based economic policies, and strong protection of property rights are more likely to attain high and sustained economic growth rates, and are thus a more attractive location for international business. The benefits, costs, and risks are associated with the political, economic, and legal systems of the country. The overall attractiveness of a country depends on balancing the benefits, costs, and risks.
Drag each item to the appropriate category of evaluations a manager must make when examining a country's attractiveness.
1. Middle-class population growth potential
2. First-mover advantages
3. Bribe payments
4. Unaxpestec political change
5. Infrastructure issuos
6. Resolving contract disputes
7. Free market economy
8. Economio uncertainty
A. Evaluate Benefits
B. Evaluate Costs
C. Evaluate Risks
Answer: Please refer to Explanation
Explanation:
When Evaluating a country's attractiveness for investment, there are several factors that should be evaluated. Key amongst them are, Benefits, Costs and Risks.
Under Benefits, the economy is evaluated based on the benefits it brings to the table. It's strengths and Opportunities. The goal is to see if these benefits present the company with adequate enough incentives to want to invest.
Under Costs, the cost of setting up and thriving is evaluated. What does the company have to pay and who do they have to pay it to in order to set up properly.
Under Threats, the factors that could adversely affect the company as a result of Investing in the country are evaluated. This is very important to know so that if need be, contingencies can be established.
Classifying the above.
1. Middle-class population growth potential. EVALUATE BENEFITS.
The middle class are the main purchasers of goods and services in the economy. In evaluating benefits the potential growth rate of the middle class should be evaluated.
2. First-mover advantages. EVALUATE BENEFITS.
Evaluating the potential benefits to be had from investing first in a country is part of Benefits Evaluation.
3. Bribe payments. EVALUATE COSTS.
Bribery payments are a cost when it comes to setting up in corrupt nations. They need to be evaluated as costs.
4. Unexpected political change. EVALUATE RISKS.
Under the evaluation of risks, this should be evaluated because a new Political leadership could have a different attitude to the company and this is a threat.
5. Infrastructure issues. EVALUATE COSTS.
Under the evaluation of cost there must be an evaluation of infrastructural issues in the country. If there are infrastructural challenges, the cost of setting up will be higher because depending on the infrastructure you'd have to bring in infrastructure from other areas and that would be expensive.
6. Resolving contract disputes. EVALUATE COSTS.
What are the costs of resolving contract disputes in the country. If they are favourable then the country is fine.
7. Free market economy. EVALUATE BENEFITS.
A free Market Economy is very useful to Entreprise. The type of economy needs to be evaluated therefore to see if it is a Free Market Economy that can benefit the company.
8. Economic uncertainty. EVALUATE RISKS.
How stable is the economy of the country in question. A country with an unstable Economy is one with a lot of Uncertainty and any company going in there will have to risk suffering losses if the Economy goes through peril.
Prepare journal entries to record the following transactions entered into by the Merando Company: 2016 June 1 Received a $10,000, 6%, 1-year note from Dan Gore as full payment on his account. Nov. 1 Sold merchandise on account to Barlow, Inc., for $14,000, terms 2/10, n/30. Nov. 5Barlow, Inc., returned merchandise worth $1,000. Nov. 9 Received payment in full from Barlow, Inc. Dec.31 Accrued interest on Gore's note. 2017 June 1 Dan Gore honored his promissory note by sending the face amount plus interest.Date Account Title and Explanation Debit Credit
Answer and Explanation:
The Journal entries are prepared below:-
1. Notes Receivable Dr $10,000
To dan Gore $10,000
(Being notes receivable is recorded)
2. Barlow Dr $14,000
To Inventories $14,000
(Being inventory is recorded)
3. Inventories Dr, $1,000
To Barlow $1,000
(Being inventory is recorded)
4. Cash Dr, $12,740 ($13,000 × 98%)
Discount Dr, 260
To Barlow $13,000
(Being cash received is recorded)
5. Interest receivable Dr, $350 ($10,000 × 6% × 7 ÷ 12)
To Interest revenue $350
(Being interest revenue is recorded)
6. Cash Dr, $10,600
To Interest receivable $350
To Interest revenue $250 ($10,000 × 6% × 5 ÷ 12)
To Notes receivable $10,000
(Being cash received is recorded)
Shanghai Company sells glasses, fine china, and everyday dinnerware. It uses activity-based costing to determine the cost of the shipping and handling activity. The shipping and handling activity has an activity rate of $12 per pound. A box of glasses weighs 2 pounds, a box of fine china weighs 4 pounds, and a box of everyday dinnerware weighs 6 pounds. a Determine the shipping and handling activity cost to be allocated to each unit of product. Glasses $ Fine China $ Everyday dinnerware $ b Determine the total shipping and receiving costs to be allocated to the fine china if 3,100 boxes are shipped.
Answer:
a) Shipping and handling cost of each product:
Glasses = $ 24, China = $ 48, Everyday dinnerware = $ 72
b) Total shipping and receiving costs of 3,500 boxes of fine China is $148,800
Explanation:
a) Shipping and handling cost of each product:
Glasses = Weighs × Activity rate per lbs = 2 lbs × $ 12 = $ 24
China = Weighs × Activity rate per lbs = 4 lbs × $ 12 = $ 48
Everyday dinnerware = Weighs × Activity rate per lbs = 6 lbs × $ 12 = $ 72
b) Total shipping and receiving costs of 3,100 boxes of fine China
= 3100 boxes × Shipping and receiving cost each product
= 3100 × 48
= $ 148,800
RequiredIndicate the effect of each of the following transactions on (1) the current ratio, (2) working capital, (3) stockholders’ equity, (4) book value per share of common stock, and (5) retained earnings. Assume that the current ratio is greater than 1:1. (Indicate the effect of each transactions by selecting "+" for increase, "–" for decrease, and "NC" for no change.)a. Collected account receivable.b. Wrote off account receivable.c. Converted a short-term note payable to a long-term payable.d. Purchased inventory on account.e. Declared cash dividend.f. Sold merchandise on account at a profit.g. Issued stock dividend.h. Paid account payable.i. Sold building at a lossdo a +, -. or NC for each one.Current Ratioa.b.c.d.e.f.g.h.i.Working Capitala.b.c.d.e.f.g.h.i.Stockholders Equitya.b.c.d.e.f.g.h.i.Book Valuea.b.c.d.e.f.g.h.i.Retained Earningsa.b.c.d.e.f.g.h.i.
Find the given attachment
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.
Someone is retiring next year.What would be an appropriate amount of risk to take with their investments?
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.
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.
Jeremy has been dissatisfied in his job. He has revised his resume, updated his LinkedIn profile, and accepted an invitation to interview with a competitor firm. Which response to dissatisfaction is Jeremy engaging in?
Answer:
The response to dissatisfaction is Exit
Explanation:
Since He has revised his resume, updated his LinkedIn profile, and accepted an invitation to interview with a competitor firm, this symbolizes Exit
Exit has to do with leaving an organization, transferring to another work unit, or at least trying to get away from the unsatisfactory situation. Jeremy is already searching for better work opportunities elsewhere
The response to dissatisfaction is Jeremy engaging in is Exit
Information regarding dissatisfaction:Since He has revised his resume, updated his LinkedIn profile, and accepted an invitation to interview with a competitor firm, this represents Exit. Here Exit means leaving an organization, transferring to another work unit. Also, Jeremy is already searching for better work opportunities elsewhere
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Grosheim Incorporated has fixed expenses of $211,500 per year. Right now, Grosheim Incorporated is selling its products for $100 per unit. Management is contemplating a 20% increase in the selling price for the next year. Variable costs are currently 40% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will pay the same amount for variable costs next year). If fixed costs increase 10% next year, and the new selling price per unit goes into effect, how many units will need to be sold to breakeven?
Answer:
Breakeven in units is 3231
Explanation:
Breakeven units=fixed costs/contribution margin per unit.
new selling price=$100*(1+20%)=$120
variable cost per unit=$120*40%=$48
contribution margin=selling price per unit-variable cost per unit
contribution margin per unit=$120-$48=$72
fixed costs next year=$211,500*(1+10%)=$232,650.00
breakeven units=$232,650.00/$72=3231
A type of manager that supports first line managers is known as
Answer:
First-line managers operate their departments. They assign tasks, manage work flow, monitor the quality of work, deal with employee problems, and keep the middle managers and executive managers informed of problems and successes at ground level in the company.
Explanation:
An engineer analyzing cost data about hydrogen sulfide monitors discovered that the information for the first three years was missing. However, he knew the cost in year 4 was $1250 and that it increased by 5% each year thereafter. If the same trend applied to the first three years, the cost in year 1 was:
Answer:
Find below full question:
An engineer analyzing cost data about hydrogen sulfide monitors discovered that the information for the first three years was missing. However, he knew the cost in year 4 was $1250 and that it increased by 5% each year thereafter. If the same trend applied to the first three years, the cost in year 1 was:
a. $1312.50
b. $1190.48
c. $1028.38
d. $1079.80
Option D,$ 1,079.80 is correct
Explanation:
The present value formula can be used to determine the cost in year one as follows:
PV=FV*(1+r)^-n
FV is the future cost in year 4 which is $1,250
r is the growth rate of cost per year which is 5%
n is the duration of time involved,it is 3 because the difference between year 4 and year 1 is 3
PV=$1250*(1+5%)^-3
PV=$1250*(1.05)^-3
PV=$1250*0.863837599
PV=$ 1,079.80
The cost of the hydrogen sulfide monitor in year one is $ 1,079.80
In essence option D,$ 1,079.80 is correct
Suppose that the standard deviation of returns for a single stock A is σA = 30%, and the standard deviation of the market return is σM = 10%. If the correlation between stock A and the market is rhoAM = 0.3, then the stock’s beta is . Is it reasonable to expect that the volatility of the market portfolio’s future expected returns will be greater than the volatility of stock A’s returns? Yes No
Answer:
The stock’s beta is 0.90
Is not reasonable to expect that the volatility of the market portfolio’s future expected returns will be greater than the volatility of stock A’s returns
Explanation:
In order to calculate the stock’s beta we would have to calculate the following formula:
Beta of stock = (standard deviation of stock A x correlation between stock A and market) / standard deviation of market
beta = (30% x 0.3) / 10% = 0.90
The market is assumed to have a beta of 0.90 and beta of a stock is the volatility of the stock in relation to the market. Since, stock A has beta equal to the market, its volatility will be correlated with the market. Therefore is not reasonable to expect that the volatility of the market portfolio’s future expected returns will be greater than the volatility of stock A’s returns
If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2% sellers of interest-bearing financial assets _____ interest rates to find willing buyers. Sales of financial assets do not depend on the rate offered. must offer higher can offer 2% can offer lower
Answer: must offer higher
Explanation:
The financial world of investment is inter-correlated and products can sometimes be substitutes for one another. What this means is that if one financial product is not offering enough return on investment or is risky or for any other reason shakes their confidence in it, then investors tend to run to financial products that are perceived as better.
This is why when interest rates are stable and stocks are volatile, stock markets tend to lose value and bond markets sometimes gain value as investors leave the stock market and come to the bond market.
In the scenario described, the interest rate in the money market is 5%. If interest bearing financial assets are only at 2%, investors will leave/ not invest in those interest bearing bonds because the rate is lower. The sellers of such assets will therefore have to make them more attractive by increasing the the interest rates to find willing buyers.
Presented below is the 2018 income statement and comparative balance sheet information for Tiger Enterprises.TIGER ENTERPRISESIncome StatementFor the Year Ended December 31, 2018($ in thousands)Sales revenue $ 15,000 Operating expenses: Cost of goods sold $ 5,000 Depreciation 400 Insurance 900 Administrative and other 3,400 Total operating expenses 9,700 Income before income taxes 5,300 Income tax expense 2,120 Net income $ 3,180 Balance Sheet Information ($ in thousands) Dec. 31,2018 Dec. 31, 2017Assets: Cash $ 620 $ 360 Accounts receivable 830 990 Inventory 810 760 Prepaid insurance 130 35 Plant and equipment 3,200 2,600 Less: Accumulated depreciation (1,160 ) (760 ) Total assets $ 4,430 $ 3,985 Liabilities and Shareholders' Equity: Accounts payable $ 380 $ 520 Payables for administrative and other expenses 380 560 Income taxes payable 360 310 Note payable (due 12/31/2019) 1,380 950 Common stock 1,100 960 Retained earnings 830 685 Total liabilities and shareholders' equity $ 4,430 $ 3,985 Required:Prepare Tiger’s statement of cash flows, using the indirect method to present cash flows from operating activities. (Hint: You will have to calculate dividend payments). (Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.)
Answer:
Net Income 3,180
Non-monetary terms:
Depreciation expense 400
Adjusted Income 3,580
Change in Working Capital:
Decrease in A/R 160
Increase in Inv (50)
Increase in Prepaid (95)
Increase Tax /P 50
Decrease in A/P (140)
Decrease in Other /P (180)
Change In Working Capital (255)
Cash-flow From Operating 3,325
Investing
Purchase of Equipment (600)
Financing
Note payable 430
From Issuance of Common Stock 140
Dividends Paid: (3,035)
Cash used for Financing (2,465)
Beginning Cash 360
Cash Flow 260
Ending Cash 620
Explanation:
We first remove the non.monetary concepts from the net income.
Then we adjust for the change in working capital which are the increase and decrease in the current assets and liabilities account
Increase in asset and decrease in liabilities represent cash outflow
while the opposite is true when an asset decrease(convert to cash) or a liability increase (delay of the payment)
Dividends Paid Calculation:
Beginning R/E 685 + 3,180 Income - Ending R/E 830 = 3,035
A couple borrows $200,000 for a mortgage that requires fixed monthly payments over 30 consecutive years. The first monthly payment is due in one month. If the interest rate on the mortgage is 5%, which of the following comes closest to the monthly payment?
When would the calculation of the effective annual interest rate be most useful?
a. When comparing two investments with different annuity amounts
b. When comparing two investments with different par values
c. When comparing two investments that end at different points in time
d. When comparing two investments that compound differently within a year
e. When comparing two investments that have different inherent risk
Answer:
(a) The monthly payment is $ 1,073.64
(b) The correct option is option D. When comparing two investments that compound differently within a year.
Explanation:
Monthly payment = $1,073.64
Using financial calculator BA II Plus - Input details:
$
I/Y = Rate = 5/12 = 0.416667
FV = Future value = $0
N = Total payment term 25*12 = 360
PV = Present value of loan -$200,000
CPT > PMT = Monthly Payment $1,073.64
1. The monthly payment by the couple is $1,073.64.
2. The calculation of the effective annual interest rate would be most useful d. When comparing two investments that compound differently within a year.
Data and Calculations:
The monthly payment is determined as follows:
(# of periods) = 360 months (30 x 12)
I/Y (Interest per year) = 5%
PV (Present Value) = $200,000
FV (Future Value) = $0
Results:
Monthly Payment = $1,073.64
Sum of all periodic payments = $386,511.57
Total Interest = $186,511.57
Thus, the couple would pay $1,073.64 monthly for 30 years in order to pay off the mortgage of $200,000 at 5% interest.
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You’re about ready to sign a big new client to a contract worth over $50,000. Your boss is under a lot of pressure to increase sales. He calls you into his office and tells you his job is on the line, and he asks you to include the revenue for your contract in the sales figures for the quarter that ends tomorrow. You know the contract is a sure thing but the client is out of town and cannot possibly sign by tomorrow. What do you do?
Answer:
This is a complicated ethical dilemma because generally you wouldn't want to hurt or do things that can be negative for your boss, specially if he is a good boss. But including unrealized sales is also a bad thing.
This is not only unethical but also violates accounting principles (known as accounting fraud). This can lead to several and severe penalties, which in some cases include jail time. In this case and for this amounts that would not be the case, but other negative consequences can result.
What happens if something goes wrong and the sales is not closed. The answer is simple, you will lose your job. If other employees learn about this your credibility will suffer a lot. Everyone will believe that you always lie about your sales figures.
Personally, I would find an excuse for not including that sales contract in the current month. No choice is easy, but you should do the right and legal thing.
This is a difficult ethical problem because you normally don't want to damage or do things that could harm your boss, especially if he is a nice one. However, counting anticipated sales is also problematic.
Not only is immoral, but it also goes against accounting standards . This can result in a variety of harsh sanctions, including jail time in some situations. That would not be the case in this circumstance and for these amounts, but other undesirable repercussions could occur.
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Faber Products has $35 million of sales and $9.75 million of net income. Its total assets are $150 million. Assume the company’s total assets equal total invested capital, and its capital structure consists of 40% debt and 60% common equity. The firm’s interest rate is 4%, and its tax rate is 21%. What would happen if this firm used less leverage (debt)?
Answer:
If the firm uses less leverage, its ROE will decrease since the cost of equity is much higher than the cost of debt. If all debt is eliminated, then ROE will decrease to 7.764% from 10.83%.
Explanation:
net income = $9.75 million
capital structure:
$90 million equity$60 million debtinterest rate = 4% and tax rate = 21%
current return on equity (ROE) = $9.75 / $90 = 10.83%
current return of assets (ROA) = $9.75 / $150 = 6.5%
cost of debt = 4% x (1 - 21%) = 3.16%
if the company issues more equity to lower debt to 0, then:
net income = $9.75 + [$60 million x 4% x (1 - 21%)] = $9.75 + $1.896 = $11.646 million
return on equity (ROE) = $11.646 / $150 = 7.764%
return of assets (ROA) = $11.646 / $150 = 7.764%
Lloyd Inc. has sales of $250,000, a net income of $20,000, and the following balance sheet: Cash $51,000 Accounts payable $63,600 Receivables 118,800 Notes payable to bank 40,800 Inventories 294,000 Total current liabilities $104,400 Total current assets $463,800 Long-term debt 82,800 Net fixed assets 136,200 Common equity 412,800 Total assets $600,000 Total liabilities and equity $600,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2.5x); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no other changes occur, by how much will the ROE change? Do not round intermediate calculations. Round your answer to two decimal places. % What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.
Answer:
If inventories are sold and not replaced (thus reducing the current ratio to 2.5x); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no other changes occur The ROE will be of 9.4%
The firm's new quick ratio is 3.95
Explanation:
To calculate how much will the ROE change we have to calculate first the current ratio as follows:
Current ratio = Current assets / Current liabilities
2.5 times = (Cash + receivables + Inventories ) / (Accounts payable + Other current liabilities)
2.5 = ($51,000 + $118,800 + Inventories) / $104,400
$169,000 + inventories = $261,000
Inventories = $92,000
Therefore, $202,000 worth of inventories were sold off.
If the funds generated are used to reduce the common equity that is by repurchasing the equity at book value.
Hence, the common equity amounts to $210,800
Calculating the ROE before the inventory is sold off:
ROE = Net income / Steockholder's equity
= $20,000 / $412,800
= 0.048 or 4.8%
Calculating the ROE after selling off the inventory:
ROE = $20,000 / $210,800
= 0.094 or 9.4%
If inventories are sold and not replaced (thus reducing the current ratio to 2.5x); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no other changes occur The ROE will be of 9.4%
The firm's new quick ratio is
Quick ratio = (Current assets - Inventories) / Current liabilities
= ($463,800 - $92,000) / $104,400
= 3.95
Logan Company can sell all of the standard and premier products they can produce, but it has limited production capacity. It can produce 8 standard units per hour or 4 premier units per hour, and it has 36,600 production hours available. Contribution margin per unit is $20.00 for the standard product and $23.00 for the premier product. What is the total contribution margin if Logan chooses the most profitable sales mix
Answer:
The most profitable sales mix is 288,000 standard units and 0 premier units.
Explanation:
8 standard units per hour
4 premier units per hour
36,600 production hours available
For standard units, contribution margin per hour = 8 x $20 = $160
For premier units, contribution margin per hour = 4 x $23 = $92
Therefore, most profitable sales mix = 36,000 hours x 8 units per hour of standard product
= 288,000 standard units and 0 premier units.
Consider the following 2011 data for Newark General Hospital (in millions of dollars):__________.
Static Flexible Actual
Budget Budget Results
Revenues $4.7 $4.8 $4.5
Costs 4.1 4.1 4.2
Profits 0.6 0.7 0.3
Calculate and interpret the profit variance.
=Actual profit-Static profit
=$0.3-$0.6
=-$0.3
There is an unfavorable profit variance which means that the company earned less that it prepared for.
Calculate and interpret the revenue variance.
=Actual revenues-Static Revenues
=$4.5-$4.7
=-$0.2
There is an unfavorable revenue variance, because the company sold less than it planned for.
Calculate and interpret the cost variance.
=Static Cost-Actual Cost
=4.1-4.2
=-$0.1
There is an unfavorable cost variance, this means that the company spent more than it planned for.
Calculate and interpret the volume and price variances on the revenue side.
Volume variance=Flexible Revenue-Static Revenue
=$4.8-$4.7=$0.1
Favorable because the company sold more units than it planned for.
Price variance=Actual Revenues-Flexible Revenues
=$4.5-$4.8=-$0.3
The answer is unfavorable because the company sold it products at a lower price than plan which might have actually resulted to the increase in actual volume sold.
Calculate and interpret the volume and management variances on the cost side.
Volume variance=Static cost –Actual Cost
=$4.1-$4.1=$0
Favorable which means that regardless of the fact that the company sold more units, the company produce the same number of units it plan for.
Management variance=Flexible Cost –Actual Costs
=$4.1-$4.2=$0.1
This is unfavorable which means maybe as a result of the higher units sold, the company had to spend more in servicing these units resulting to cost inefficiency for the period.
How are the variances calculated above related?
The above variances are associated, as the increase in volume, should increase the revenue and cost proportionality. However, it has not increased in the same portion. Therefore, there are unfavorable variances.
Answer:
Calculate and interpret the profit variance.
profit variance = actual profit - budgeted profit = $0.3 - $0.7 = -$0.4 U
The profit variance is unfavorable because actual profit was lower than the budgeted profit. Whenever we have a static and a flexible budget, we must use the flexible budget to calculate the variances. Not only revenues were lower than expected, but also costs were higher than expected.
Calculate and interpret the revenue variance.
revenue variance = actual revenue - budgeted revenue = $4.5 - $4,8 = -$0.3 U
The revenue variance is unfavorable because revenue was lower than expected. This means that they either had less patients or charged less per patient.
Calculate and interpret the cost variance.
cost variance = actual costs - budgeted costs = $4.2 - $4,1 = $0.1 U
When we analyze costs variances, positive numbers represent unfavorable variances because actual costs were larger than budgeted. It is the opposite to what happens with revenue and profit variances.
In this case, actual costs were larger than expected, which means that the hospital spent more money than budgeted.
Calculate and interpret the volume and price variances on the revenue side.
volume variance = flexible revenue - static revenue = $4.8 - $4.7 = $0.1 F
the flexible budget shows higher numbers because the number of patients was higher than expected.
price variance = actual revenue - flexible revenue = $4.5 - $4.8 = -$0.3 U
even though the volume variance was favorable, more patients, the price charged was lower than expected because total revenue was lower than the flexible revenue.
Calculate and interpret the volume and management variances on the cost side.
volume variance (cost) = actual costs - budgeted costs = $4.2 - $4.1 = $0.1 U
When cost variances are positive, they are unfavorable because expenses were higher than expected. This means that the hospital spent more money than they had planned for carrying out the same amount of procedures.
management variance = actual costs - budgeted costs = $4.2 - $4.1 = $0.1 U
Since costs were higher than expected, this means that the hospital's management didn't perform properly. In this case, all variances show that management didn't work well. Revenues were lower than expected, costs were higher than expected and profits were lower. They should be glad that this is just a question, in real life they would be in serious problems for poor performance.
Explanation:
Static Flexible Actual
Budget Budget Results
Revenues $4.7 $4.8 $4.5
Costs $4.1 $4.1 $4.2
Profits $0.6 $0.7 $0.3
If the Fed carries out an open market operation and sells U.S. government securities, as long as the federal funds interest rate remains within the corridor the federal funds rate ________ and the quantity of reserves ________. Group of answer choices rises; decreases falls; increases falls; decreases rises; increases
Answer:
rises; decreases
Explanation:
When the Fed sells US securities, it is engaging in a contractionary monetary policy. This means that they are trying to cool down the economy and lower inflation rate by reducing the money supply. This will lead to an increase in the federal funds rate and the whole economy's interest rates.
Since the Fed absorbs money from the banks and other investors, the quantity of banks' reserves decreases, which leads to less loans and higher interest rates charged.
Montana Mining Co. pays $3,721,000 for an ore deposit containing 1,525,000 tons. The company installs machinery in the mine costing $213,500, which will be abandoned when the ore is completely mined. Montana mines and sells 166,200 tons of ore during the year. Prepare the year-end entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion.
Answer:
Ore deposit depletion and Mining machinery depreciation Journal entries
Dr Depletion charge (Ore deposits) 405,528
Cr Accumulated depreciation 405,528
Dr Depletion charge (Ore deposits) 23,268
Cr Accumulated depreciation 23,268
Explanation:
Preparation of the year-end entries to record both the ore deposit depletion and the mining machinery depreciation of Montana Mining Co
Depletion of natural resources can be defined as the way in which the cost of natural resources is apportioned upto the period when it will be utilized which is why they are shown at cost in balance sheet.
The entry is to record depreciation charged on ore deposit depletion. Therefore To record this entry we have to debit depletion charges, and credit accumulated depreciation
Dr Depletion charge (Ore deposits) 405,528
Cr Accumulated depreciation 405,528
Computation of depletion cost per unit:
The depletion cost per unit can be calculated by dividing the net cost of the ore with the total units of capacity :
Depletion/units = Cost - Salvage/ Total unit of capacity
$3,721,000/1,525,000 tons
=$2.44
Hence, depletion per unit is $2.44.
Computation depletion amount on ore deposit:
The depletion amount on ore deposit can be calculated by multiplying the cost per depletion unit with the number of units utilized:
Depletion =Cost/Unit ×Units Utilized
$2.44×166,200 tones
=$405,528
Hence, depletion expenses on ore deposit amounts to $405,528.
The pass entry to record depreciation charged on mining machine :
Dr Depletion charge (Ore deposits) 23,268
Cr Accumulated depreciation 23,268
Computation of depreciation cost per unit:
The depletion cost per unit can be calculated by dividing the net cost of the ore with the total units of capacity :
Depletion/units = Cost - Salvage/ Total unit of capacity
$213,500/1,525,000 tons
=$0.14
Hence, depreciation per unit is $0.14.
Computation of depreciation amount on ore deposit:
The depletion amount on ore deposit can be calculated by multiplying the cost per depletion unit with the number of units utilized:
Depletion =Cost/Unit ×Units Utilized
$0.14×166,200 tones
=$23,268
Therefore the depreciation expenses on ore deposit amounts to $23,268
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?
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
The rate of economic growth per capita in france from 1996 to 2000 was 1.9% per year, while in korea over the same period it was 4.2%. Per capita real GDP was $28,900 in france in 2003, and $12,700 in korea. Assume the growth rates for each country remain the same.
1. Compute the doubling time for France’s per capita real GDP.
2. Compute the doubling time for Korea’s per capita real GDP.
3. What will France’s per capita real GDP be in 2045?
4. What will Korea’s per capita real GDP be in 2045?
Answer:
36.83 years
16.85 years
$63,710.88
$ 71,490.43
Explanation:
We can use the nper formula in excel to compute the doubling time for the capital real GDP of both countries
=nper(rate,pmt,-pv,fv)
FV is the future real GDP which $28,900*2=$57,800 for France while that of Korea is $25,400 ($12,700*2)
PV is the present real GDP
rate is the economic growth rate of 4.2% in Korea and 1.9% in France
France=nper(1.9%,0,-28900,57800)= 36.83
Korea=nper(4.2%,0,-12700,25400)= 16.85
In 2045 ,which is 42 years from now the real GDP are shown thus:
=fv(rate,nper,pmt,-pv)=fv(1.9%,42,0,-28900)=$63,710.88
=fv(rate,nper,pmt,-pv)=fv(4.2%,42,0,-12700)=$ 71,490.43
An insurance company faces an ethical dilemma. A faulty computer program designed to evaluate insurance claims has been denying a high number of valid claims. A meeting has been arranged where senior management would decide how to handle the situation. The people at the table have varying views of what action to take and why.Han wants to report the error and reimburse the affected customers immediately because he believes he could end up being fired if the company's reputation suffers because of the issue. Jamila wants to report the error because it is the honest thing to do, and therefore necessary.After hearing his colleagues' opinions, Keith says he is willing to do whatever the more experienced managers in the group recommend.Several other managers believe the company should correct the problem going forward but not do anything about the customers who lost out on past payments.Assume the meeting ends with the managers deciding not to do anything about the customers who are owed money for past claims. Lori, an employee who was present in the meeting, disagrees with the decision and gives an anonymous tip to a newspaper reporter about the unethical behavior. Which of the following best describes the action taken by Lori?A) Unethical stanceB) WhistleblowingC) ShadowingD) RelativismE) Ethnocentrism
Answer: B) Whistleblowing
Explanation:
Whistleblowing is an act where someone in a company discloses unethical practices usually from the entity that they work in. It is a very risky thing to do because it could signal the end of one's career in a certain industry.
Whistleblowing however helps in contributing to entities staying ethical because they'd rather avoid the bad publicity that comes with it and this is why most companies have a whistleblowing policy to make it easier for people to come forward.
Whistleblowing can be done to the Government, the press or even the entity at fault itself.
Lori by giving an anonymous tip to the press about unethical behavior has engaged in Whistleblowing.
Examples of some well known Whistleblowers include, Edward Snowden and Chelsea Manning.
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2018, net credit sales totaled $5,800,000, and the estimated bad debt percentage is 1.40%. The allowance for uncollectible accounts had a credit balance of $55,000 at the beginning of 2018 and $46,500, after adjusting entries, at the end of 2018. Required: 1. What is bad debt expense for 2018 as a percent of net credit sales
Answer:
Bad debt expense for 2018 is $81,200
Explanation:
2018 net credit sales = $5,800,000
Estimated bad debt percentage = 1.40%.
The allowance for uncollectible accounts had a credit balance of $55,000 at the beginning of 2018 and $46,500, after adjusting entries, at the end of 2018.
Bad debt expense = Estimated bad debt percentage × net credit sales
= 1.40% × $5,800,000
= $ 81,200
Consider two countries, Alpha and Beta. In Alpha, real GDP per capita is $6,000. In Beta, real GDP per capita is $9,000. Based on the economic growth model, what would you predict about the growth rates in real GDP per capita across these two countries
Answer:
The growth rate of real GDP per capita will be higher in Alpha than it is in Beta
Explanation:
If we are to based on the economic growth model, what I would predict about the growth rates in real GDP per capita across ALPA and BETA is that when both countries are been compared with one another The growth rate of real GDP per capita will be higher in Alpha than it is in Beta because the Alpha real GDP per capita is said to be $6,000 while Beta real GDP per capita is said to be $9,000 which means growth rate of real GDP per capita will be much more higher in Alpha than it is in Beta.
10. Define transfer pricing. Describe at least two methods of defending transfer prices if they are challenged by tax authorities. How are transfer prices used in managing multinational tax exposures
Answer:
Explanation:
(A) What is Transfer Pricing?
This is an accounting practice that sets prices for goods and services bought and sold between related entities.
(B) Two methods of defending transfer prices if they are challenged by tax authorities:
1. Treating the related or commonly controlled entities as if they are 2 independent entities.
2. Claiming that services rendered between the 2 related entities could not be priced.
(C) How are transfer prices used in managing multinational tax exposures?
- Transfer Prices help reduce import and export duties. They are used to manage multinational tax exposures by exporting or shipping the goods at a low transfer price, to subsidiaries or related entities in countries with high tariff rates.
- It reduces income taxes and corporate taxes in high tax countries, by overpricing goods that are sold/transferred to subsidiaries in countries with low tax rate.