Pension data for the Ben Franklin Company include the following for the current calendar year: Discount rate, 10% Expected return on plan assets, 12% Actual return on plan assets, 11% Service cost, $270,000 January 1: PBO $ 1,470,000 ABO 1,070,000 Plan assets 1,570,000 Amortization of prior service cost 27,000 Amortization of net gain 4,700 December 31: Cash contributions to pension fund $ 227,000 Benefit payments to retirees 247,000 Required: 1. Determine pension expense for the year. 2. Prepare the journal entries to record pension expense and funding for the year.
Answer:
A. $250,900
B. Dr Pension expense $250,900
Dr Net gain–pensions $4,700
Cr Pension asset $228,600
Cr Prior service cost $27,000
Dr Pension asset $ 227,000
Cr Cash $ 227,000
Explanation:
A. Calculation to determine the pension expense for the year
Service cost $270,000
Add Interest cost (10% x $1,470,000) $147,000
Less Expected return ($188,400 )
(12%*1,570,000)
Add Amortization of prior service cost $27,000
)
Less Amortization of net gain($4,700)
Pension expense $250,900
Therefore pension expense for the year will be $250,900
B. Preparation of the journal entries to record pension expense and funding for the year)
Dr Pension expense $250,900
Dr Net gain–pensions $4,700
Cr Pension asset ($270,000 + 147,000 – $188,400) $228,600
Cr Prior service cost $27,000
Dr Pension asset $ 227,000
Cr Cash $ 227,000
ThingOne Company has the following information available for the past year. They use machine hours to allocate overhead. Actual total overhead$80,510 Actual fixed overhead$32,000 Actual machine hours11,000 Standard hours for the units produced10,600 Standard variable overhead rate$4.60 What is the variable overhead efficiency variance
Answer:
the variable overhead efficiency variance is $1,840 unfavorable
Explanation:
The computation of the variable overhead efficiency variance is shown below:
= Standard variable overhead rate × (standard hours - actual hours)
= $4.60 × (10,600 - 11,000)
= $1,840 unfavorable
Hence, the variable overhead efficiency variance is $1,840 unfavorable
As the standard hours would be less than the actual hours so it would be unfavorable variance
Each of the following is true except for: Multiple Choice a direct involuntary conversion occurs when property taken under eminent domain is replaced with other property. qualified replacement property rules are more restrictive than the like-kind property rules. an indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. losses realized in involuntary conversions are deferred.
Answer: losses realized in involuntary conversions are deferred.
Explanation:
Based on the information given, we should note that every other options are true except the last option "losses realized in involuntary conversions are deferred".
Losses realized in the involuntary conversion are not deferred but they're are realized. Itbus the losses that are realized in the like-kind exchange that are being deferred.
Willamette Manufacturing estimated that its total payroll for the coming year would be $650,000. The workers' compensation insurance premium rate is 0.3%. Calculate the estimated workers' compensation insurance premium.
Answer:
the estimated workers' compensation insurance premium is $1,950
Explanation:
The computation of the estimated workers' compensation insurance premium is shown below:
= Total payroll for the coming year × compensation insurance premium rate
= $650,000 × 0.3%
= $1,950
hence, the estimated workers' compensation insurance premium is $1,950
The above formula to be applied for determining the same
Billy Dan and Betty Lou were recently married and want to start saving for their dream home. They expect the house they want will cost approximately $247,000. They hope to be able to purchase the house for cash in 12 years. To determine the appropriate discount factor(s) using tables, click here to view Tables I, II, III, or IV in the appendix. Alternatively, if you calculate the discount factor(s) using a formula, round to six (6) decimal places before using the factor in the problem.
Answer:
Billy Dan and Betty Lou have to invest $11,551 each year to purchase their dream home at the end of 12 years
Explanation:
The requirement of this is missing, that is provided below
How much will Billy Dan and Betty Lou have to invest each year to purchase their dream home at the end of 12 years? Assume an interest rate of 10 percent.
Use the following formula to calculate the amount of yearly investment.
Cost to purchase the house = Annual investment x ( 1 + Interest rate )^numbers of years ) - 1 ) / interest rate
Where
Cost to purchase the house = $247,000
Interest rate = 10%
Numbers of years = 12 years
Annual investment = ?
Placing values in the formula
$247,000 = Annual investment x ( 1 + 10% )^12 ) - 1 ) / 10%
$247,000 = Annual investment x 21.384284
Annual investment = $247,000 / 21.384284
Annual investment = $11,550.54
Annual investment = $11,551
Hence, they have to invest $11,551 each year to be able to purchase the house for cash in 12 years.
Classic Limo, Inc. provides limousine service to Tri-Cities airport. The price of the service is fixed at a flat rate for each trip and most costs of providing the service are stable for each trip. Marc Pence, the owner, budgets income by estimating two factors that fluctuate with the economy: the fuel cost associated with each trip and the number of customers who will take trips. Looking at next year, Marc develops the following estimates of contribution margin (price less variable cost of the trip, including fuel) and for the estimated number of customers. Although Marc understands that it is not strictly true, he assumes that the cost of fuel and the number of customers are independent.
Contribution Margin Per
Scenario Ride (Price - Variable cost) Number of Customers
Excellent $40 10,500
Fair $25 6,000
Poor $15 4,500
In addition to the costs of a ride, Marc estimates that other service costs are $50,000 plus $5 for each customer (ride) in excess of 6,000 rides. Annual administrative and marketing costs are estimated to be $25,000 plus 10% of the contribution margin.
Required:
1) Using the above information, construct an Excel spreadsheet to prepare an analysis of the possible operating income for Classic Limo, Inc.
2) 2) If you were manager of Classic Limo, Inc. and had to choose only one budget scenario to use for planning for the year, which one of the nine scenarios would you choose?
Answer:
1) See the attached excel file for the analysis of the possible operating income for Classic Limo, Inc.
2) The scenario with the highest operating profit $280,500 which is Excellent with $40 Contribution Margin and 10,500 Numbers of Customers.
Explanation:
1) Using the above information, construct an Excel spreadsheet to prepare an analysis of the possible operating income for Classic Limo, Inc.
Note: See the attached excel file for the analysis of the possible operating income for Classic Limo, Inc.
2) If you were manager of Classic Limo, Inc. and had to choose only one budget scenario to use for planning for the year, which one of the nine scenarios would you choose?
The scenario that would be chosen is the scenario with the highest operating profit $280,500 which is Excellent with $40 Contribution Margin and 10,500 Numbers of Customers.
The economy of the United States can be best described as
a) a mixed economy
b) a command economy
c) a mixed economy, but predominantly command and tradition
d)
a pure free marker
Answer:
A a mixed economy.
Explanation:
The asnswer is a mixed economy
Brief Exercise 15-02 During January, its first month of operations, Coronado Company accumulates the following manufacturing costs: raw materials $4,400 on account, factory labor $6,200 of which $5,800 relates to factory wages payable and $400 relates to payroll taxes payable, and factory utilities payable $2,100. Prepare separate journal entries for each type of manufacturing cost.
Answer:
Item 1
Debit : Raw Materials $4,400
Credit : Accounts Payable $4,400
Item 2
Debit : Work in Process : Factory wages ($5,800 + $400) $6,200
Credit : Wages Payable $6,200
Item 3
Debit : Work In Process : Factory Utilities $2,100
Credit : Utilities Payable $2,100
Explanation:
If there is no immediate payment of cash for the expenses incurred, raise a liability - Accounts Payable otherwise recognize a Cash Outflow.
All manufacturing costs incurred are accounted for in the Work In Process Account.
Journal entries for each type of manufacturing cost have been prepared above.
Problem 15-04A a-c (Video) Oriole Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year. Department D E K Manufacturing overhead $1,260,000 $1,625,000 $960,000 Direct labor costs $1,800,000 $1,375,000 $495,000 Direct labor hours 110,000 125,000 44,000 Machine hours 440,000 550,000 120,000 During January, the job cost sheets showed the following costs and production data. Department D E K Direct materials used $154,000 $138,600 $85,800 Direct labor costs $132,000 $121,000 $41,250 Manufacturing overhead incurred $108,900 $136,400 $86,900 Direct labor hours 8,800 12,100 3,850 Machine hours 37,400 49,500 10,390 Compute the predetermined overhead rate for each department
Answer and Explanation:
The computation of the predetermined overhead rate for each department is given below:
For department D
= Estimated manufacturing overhead ÷ direct labor cost
= $1,260,000 ÷ $1,800,000
= 70% of direct labor cost
For department E
= Estimated manufacturing overhead ÷ direct labor hours
= $1,625,000 ÷ 125,000
= $13 per direct labor hours
For department K
= Estimated manufacturing overhead ÷ machine hours
= $960,000 ÷ 120,000
= $8 per machine hours
A proposed new project has projected sales of $219,000, costs of $96,000, and depreciation of $26,000. The tax rate is 23 percent. Calculate operating cash flow using the four different approaches. (Do not round intermediate calculations.) Top-down
Answer and Explanation:
The computation of the operating cash flow using the four different approaches is shown below:
1. EBIT + depreciation - taxes approach
But before that the net income would be
Sales $219,000
Less cost -$96,000
Less depreciation -$26,000
EBT $97,000
Less tax at 23% -$22,310
Net income $74,690
Now the operating cash flow is
= EBIT + depreciation - taxes
= $97,000 $26,000 - $22,310
= $100,690
2. top down approach
= Sales - cost - taxes
= $219,000 - $96,000 - $22,310
= $100,690
3. Tax shield approach
= (Sales - cost) × (1 - tax rate) + tax rate × depreciation expense
= ($219,000 - $96,000) × 0.23 + 0.23 × $26,000
= $94,710 + $5,980
= $100,690
4. Bottom up approach
= Net income + depreciation
= $74,690 + $26,000
= $100,690
Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $48,400. The machine's useful life is estimated at 10 years, or 394,000 units of product, with a $9,000 salvage value. During its second year, the machine produces 33,400 units of product.
Required:
Determine the machine's second-year depreciation using the units-of-production method.
Answer:
$3,340
Explanation:
Step 1 : Determine the Depreciation rate
Depreciation rate = Cost - Salvage Value ÷ Estimated Units
Depreciation rate = $0.10
Step 2 : Depreciation Expense
Depreciation Expense = Depreciation rate x units produced
Depreciation Expense = $3,340
Therefore,
the machine's second-year depreciation using the units-of-production method is $3,340
Do It! Review 15-01 During the current month, Wacholz Company incurs the following manufacturing costs. (a) Purchased raw materials of $17,500 on account. (b) Incurred factory labor of $41,500. Of that amount, $32,400 relates to wages payable and $9,100 relates to payroll taxes payable. (c) Factory utilities of $3,400 are payable, prepaid factory property taxes of $2,640 have expired, and depreciation on the factory building is $8,400. Prepare journal entries for each type of manufacturing cost.
Answer:
Item (a)
Debit : Raw Materials Item $17,500
Credit : Accounts Payable $17,500
Item (b)
Debit : Work in Process - Factory Wages $41,500
Credit : Wages Payable $41,500
Item (c)
Debit : Factory Utilities $3,400
Credit : Accounts Payable $3,400
Item (d)
Debit : Work in Process - Property taxes $2,640
Credit : Prepaid Property taxes $2,640
Item (e)
Debit : Work in Process - Depreciation expense $8,400
Credit : Accumulated depreciation $8,400
Explanation:
When no immediate payment of cash is made for a cost incurred, we raise a Liability - Accounts Payable.
Piedmont Company purchased merchandise on account from a supplier for $45000, terms 1/10, n/30. Piedmont Company returned $7000 of the merchandise and received full credit.If Piedmont Company pays the invoice within the discount period, what is the amount of cash required for the payment
Answer:
$33,500
Explanation:
The Cash Required for Payment to Supplier is The Purchases Price less Credit Allowance and Cash Discount granted since Piedmont Company pays the invoice within the discount period.
If Piedmont Company had paid invoice out of the discount period we would only deduct the Credit Allowance from the Purchase Price.
Cash Required for Payment Calculation :
Purchase Price $45,000
Less Credit Allowance ($7,000)
Less Cash Discount $45,000 x 10% ($4,500)
Cash Required for Payment $33,500
What macroeconomic goal is Real GDP used to measure for?
Answer:
"Economic growth " would be the correct answer.
Explanation:
Throughout a particular year, real GDP tests the overall production as well as commodities of the economy, including light of the price adjustments.People should measure or equate GDP throughout the year as inflation would be factored into the equation which would be a fair predictor about wherever the market cycle goes.Thus the above is the right answer.
What is defined by an organization's mission statement?
A. A comprehensive list of the organization's budgets, schedules, and
milestones
B. How the organization differs from others and provides value to its
customers
C. A broad and inspiring overview of the company's
accomplishments
omplay's
D. The desired future plans for the expansion of the organization
Answer:How the organization differs from others and provide value to its customers
Explanation:
AP EX
In 1960, Frederick Herzberg constructed a two-dimensional paradigm of factors that affect people's work attitudes.
a. True
b. False
Answer:
A.
Explanation:
Frederick Herzberg was an American behavioral scientists who proposed the theory of Two-Factors. In his theory, he defined that an employee is motivated by two-factors, viz., motivators and hygience factors.
He remarks that motivators such as recognition and achievement motivates employees to work harder, whereas, hygience factors such as salary also effects employees motivation to work.
Therefore, the given statement is true. Thus option A is correct.
Rupali’s financial advisor tells her that she needs a personal balance sheet. Rupali has no idea what this is. What should the financial advisor tell her about a personal balance sheet?
a) Her bank can print one out for her if she requests it.
b) Emergency expenses are listed at the top of this document.
c) It ultimately will show her what her net worth totals.
d) It describes her cash flow situation over the past few months.
Answer:
d) It describes her cash flow situation over the past few months.
Explanation:
Balance sheet is a statement of account of an individual, which showcases the cash flow situation of that particular individual. That is, the debt and the credit associated with the bank account statement of the individual in question.
It is used to keep track of the financial growth and net-worth which helps in making a balanced decision. In her case, assuming she is applying for a loan, the cash flow situation of hers would enable the financial advisor in a bank to be clear on the actual amount she could eligible to get as a loan.
Answer:
It ultimately will show her what her net worth totals.
Explanation:
Correct for Gradpoint
Arendelle Enterprises has inventory of $667,000 in its stores as of December 31. It also has two shipments in-transit that left the suppliers' warehouses by December 28. Both shipments are expected to arrive on January 5. The first shipment of $128,000 was sold f.o.b. destination and the second shipment of $80,000 was sold f.o.b. shipping point. What amount of inventory should Arendelle report on its balance sheet as of December 31
Answer:
$747,000
Explanation:
Calculation to determine What amount of inventory should Arendelle report on its balance sheet as of December 31
December 31 Inventory $667,000
Add Second shipment f.o.b. shipping point of $80,000
December 31 Inventory $747,000
($667,000+$80,000)
Therefore What amount of inventory should Arendelle report on its balance sheet as of December 31 is $747,000
The market price of Northern Mills stock has been relatively volatile and you think this volatility will continue for a couple more months. Thus, you decide to purchase a two-month European call option on this stock with a strike price of $30 and an option price of $1.60. You also purchase a two-month European put option on the stock with a strike price of $30 and an option price of $.20. Contracts are on 100 shares. What will be your net profit or loss on these option positions if the stock price is $36 on the day the options expire
Answer:
$420
Explanation:
Calculation to determine What will be your net profit or loss
First step is to calculate Net Profit from call option Using this formula
Net Profit from call option = (Gain from Exercising Call Option - Option Premium paid) * Size of the Contract
Let plug in the formula
Net Profit from call option= (($36 - $30) - $1.60) × 100 Shares
Net Profit from call option= $440
Second step is to calculate Net Loss from put option
Using this formula
Net Loss from put option = (Option Premium paid) * Size of the Contract
Let plug in the formula
Net Loss from put option = $0.20 × 100 Share
Net Loss from put option = $20
Now let calculate the net profit using this formula
Net profit= Net Profit from Call Option - Net loss from Put Option
Let plug in the formula
Net profit= $440 - $20
Net profit= $420
Therefore What will be your net profit is $420
ando Company incurs a $10.00 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, the company can purchase it for $5.00 per unit and sell it for $11.90 per unit. If it does so, unit sales would remain unchanged and $5.00 of the $10.00 per unit costs of Product A would be eliminated. 1. Prepare Incremental cost analysis. Should the company continue to manufacture Product A or purchase it for resale
Answer and Explanation:
The preparation of the Incremental cost analysis is presented below:
Particulars Product A Purchase
Sales $13.50 $11.90
less: cost
Avoidable cost $5
Unavoidable cost $5 $5
Purchase cost $5
Net income $3.50 $1.90
Since the net income is higher in the manfufacture so the company should continue with manfuacture the product A
"Which of the following is true? Airfreight A. has lower transporting rates than trucks. B. efficiently delivers all types of goods. C. serves many more locations than trucks. D. is best for goods that are heavy relative to their sales value, such as iron ore. E. can help reduce inventory costs."
Answer:
E. can help reduce inventory costs.
Explanation:
Airfreight can be defined as the transportation or movement of goods from one location to another through the air and use of shipping containers.
A shipping container refers to a metal container made from steel and having the ability or strength to withstand all external factors during shipment or storage of materials. It is an essential part of transportation of goods or materials from one location to another, thereby boosting trade between countries.
The various types of shipping containers are, dry storage container, open-side storage container, ISO Reefer container, flat rack container, tunnel container, open top container, double doors container, thermal containers, intermodal freight container etc.
An inventory cost can be defined as all costs such as carrying cost, stock out (shortage) cost and ordering cost that are associated with the procurement, holding (storage) and management (handling) of inventory.
Generally, airfreight can help to reduce the total logistics cost or inventory cost since it's faster, large and devoid of various impediments when compared with other forms of transportation.
Hence, the true statement about airfreight is that it can help reduce inventory costs.
jasmine has too many files in her math folder and can't easily find her class notes. what should she do to help her find her notes easily?
Answer:
used folders or sticky notes in a binder. Notes saying what they are help too.
Explanation:
Nicole’s Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of the year at a cost of $16,000. The estimated useful life was five years and the residual value was $1,000. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production was year 1, 2,400 hours; year 2, 2,300 hours; year 3, 2,200 hours; year 4, 2,100 hours; and year 5, 1,000 hours.
Required:
1. Complete a depreciation schedule for each of the alternative methods.
A. Straight-line.
B. Units-of-production.
C. Double-declining-balance.
2. Assume NGS sold the hydrotherapy tub system for $3,000 at the end of year 3. Prepare the journal entry to account for the disposal of this asset under the three different methods.
1) Record the disposal of the hydrotherapy tub system for $3,000 in year 3 assuming depreciation was calculated using the straight line method.
2) Record the disposal of the hydrotherapy tub system for $3,000 in year 3 assuming depreciation was calculated using the units-of-production method.
3) Record the disposal of hydrotherapy tub system for $3,000 in year 3 assuming depreciation was calculated using the double-declining method.
Answer:
Nicole's Getaway Spa (NGS)
1. Depreciation Schedules:
A. Straight-line method:
Year Depreciation Book Value Accumulated Net Book Value
Expense of asset Depreciation
Year 1 $3,000 $16,000 $3,000 $13,000
Year 2 3,000 16,000 6,000 10,000
Year 3 3,000 16,000 9,000 7,000
Year 4 3,000 16,000 12,000 4,000
Year 5 3,000 16,000 15,000 1,000
B. Units-of-production method:
Year Depreciation Book Value Accumulated Net Book Value
Expense of asset Depreciation
Year 1 $3,600 $16,000 $3,600 $12,400
Year 2 3,450 16,000 7,050 8,950
Year 3 3,300 16,000 10,350 5,650
Year 4 3,150 16,000 13,500 2,500
Year 5 1,500 16,000 15,000 1,000
C. Double-declining-balance method:
Year Depreciation Book Value Accumulated Net Book Value
Expense of asset Depreciation
Year 1 $6,400 $16,000 $6,400 $9,600
Year 2 3,840 16,000 10,240 5,760
Year 3 2,304 16,000 12,544 3,456
Year 4 1,382 16,000 13,926 2,074
Year 5 1,074 16,000 15,000 1,000
2. Sale of machine for $3,000 at the end of year 3:
Journal Entry of disposal:
1) Straight-line method:
Debit Cash $3,000
Credit Sale of Equipment $3,000
To record the disposal of the equipment.
Debit Sale of Equipment $16,000
Credit Equipment $16,000
To transfer equipment to sale of equipment.
Debit Accumulated Depreciation $9,000
Credit Sale of Equipment $9,000
To close accumulated depreciation.
Debit Income Summary $4,000
Credit Sale of Equipment $4,000
To record the loss from sale of equipment.
2) Units-of-production method:
Debit Cash $3,000
Credit Sale of Equipment $3,000
To record the disposal of the equipment.
Debit Sale of Equipment $16,000
Credit Equipment $16,000
To transfer equipment to sale of equipment.
Debit Accumulated Depreciation $10,350
Credit Sale of Equipment $10,350
To close accumulated depreciation.
Debit Income Summary $2,650
Credit Sale of Equipment $2,650
To record the loss from sale of equipment.
3) Double-declining method:
Debit Cash $3,000
Credit Sale of Equipment $3,000
To record the disposal of the equipment.
Debit Sale of Equipment $16,000
Credit Equipment $16,000
To transfer equipment to sale of equipment.
Debit Accumulated Depreciation $12,544
Credit Sale of Equipment $12,544
To close accumulated depreciation.
Debit Income Summary $456
Credit Sale of Equipment $456
To record the loss from sale of equipment.
Explanation:
a) Data and Calculations:
Cost of machine = $16,000
Residual value = 1,000
Depreciable amount $15,000
Estimated useful life = 5 years
Annual depreciation expense/rate:
A. Straight-line method = $3,000 ($15,000/5)
B. Unit of production method = $1.50 per unit ($15,000/10,000)
Year 1 = $3,600 (2,400 * $1.50)
Year 2 = $3,450 (2,300 * $1.50)
Year 3 = $3,300 (2,200 * $1.50)
Year 4 = $3,150 (2,100 * $1.50)
Year 5 = $1,500 (1,000 * $1.50)
C. Double-declining balance method:
Straight-line method rate = 20% (100/5)
Double-declining rate = 40% (20% * 2)
Year 1 = $6,400 ($16,000 * 40%) Balance $9,600
Year 2 = $3,840 ($9,600 * 40%) Balance $5,760
Year 3 = $2,304 ($5,760 * 40%) Balance $3,456
Year 4 = $1,382 ($3,456 * 40%) Balance $2,074
Year 5 = $1,074 ($2,078 - $1,000) Balance $1,000
Canberra Company uses a job order cost accounting system. During the current month, the factory payroll of $180,000 was paid in cash. The amount of labor classified as direct labor was three times greater than the amount classified as indirect labor. What amount should be debited to Factory Overhead for indirect labor for this month
Answer:
$45,000
Explanation:
Details Amount
Factory payroll in cash $180,000
Ration of Direct labor to Indirect Labor "3:1"
Total = 3 + 1 = 4
So, Indirect Labor = $180,000*1/4 = $45,000
The amount to be debited to Factory Overhead for indirect labor for this month $45,000
Quantitative Problem 3: Assume today is December 31, 2019. Imagine Works Inc. just paid a dividend of $1.35 per share at the end of 2019. The dividend is expected to grow at 18% per year for 3 years, after which time it is expected to grow at a constant rate of 5.5% annually. The company's cost of equity (rs) is 9.5%. Using the dividend growth model (allowing for nonconstant growth), what should be the price of the company's stock today (December 31, 2019)
Answer:
The price of the company's stock today (December 31, 2019) is $49.27.
Explanation:
Note: See the attached file for the calculation of present values (PV) for year 1 to 3 dividends.
From the attached excel file, we have:
Previous year dividend in year 1 = Dividend just paid = $1.35
Total of dividends from year 1 to year 3 = $4.71193752458119
Year 3 dividend = $2.2180932
Therefore, we have:
Year 4 dividend = Year 3 dividend * (100% + Constant dividend growth rate) = $2.2180932 * (100% + 5.5%) = $2.340088326
Share price at year 3 = Year 4 dividend / (Cost of equity - Constant dividend growth rate) = $2.340088326 / (9.5% - 5.5%) = $58.50220815
PV of share price at year 3 = Share price at year 3 / (100% + Cost of equity)^Number of years = $58.50220815 / (100% + 9.5%)^3 = $44.55843215078
Therefore, we have:
The price of the company's stock today = Total of dividends from year 1 to year 3 + PV of share price at year 3 = $4.71193752458119 + $44.55843215078 = $49.27
Explain the effects of low price-guarantee on the price.
Answer:
Low price guarantees have adverse effects on consumer behavior. These strategies can cause consumers to become suspicious of the offer and may avoid making the purchase all together.
Low price guarantee is a policy where the seller offer a price is guaranteed to match or beat any other lower price in the market.
Usually, the low price guarantees does persuade the consumers to make purchase, but, it can also have adverse effects on consumer behavior at times.
The strategy of low price-guarantee on the price of the product can cause the consumers to become suspicious and thus, may lead to a decision to avoid making the purchase.
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Chez Fred Bakery estimates the allowance for uncollectible accounts at 1% of the ending balance of accounts receivable. During 2021, Chez Fred's credit sales and collections were $108,000 and $142,000, respectively. What was the balance of accounts receivable on January 1, 2021, if $130 in accounts receivable were written off during 2021 and if the allowance account had a balance of $930 on December 31, 2021?
Answer:
See below
Explanation:
Per the above information,
Ending account receivable balance = Beginning account receivable + Credit sales - Collections - Written off amount
$93,000 = Beginning account receivable + $108,000 - $142,000 - $130
$93,000 = Beginning accounts receivable - $34,130
Beginning accounts receivable = $93,000 + $34,130 = $127,130
So, the beginning account receivable would be;
The ending accounts receivable is computed as;
= $930 ÷ 1%
= $93,000
Which of the following statements concerning the use of support department and joint cost allocations for performance evaluations is not true?
A. A manager may not be responsible for the allocation of support department costs if he or she cannot control the square footage of the areas upon which cost allocations are based.
B. A manager may miss a performance target because direct materials costs are too high.
C. A manager may miss a performance target because he or she has no control over the joint processes prior to his or her department which is after the split-off point.
D. It is rare to need further investigation beyond a preliminary analysis when a manager misses a performance target.
Answer:
d.It is rare to need further investigation beyond a preliminary analysis when a manager misses a performance target.
Explanation:
Performance evaluation can be regarded as process whereby manager pass evaluation or examination on employee on the work behavior of employee through comparison with preset standards.
In the use of support department and joint cost allocations for performance evaluations ;
✓A manager may not be responsible for the allocation of support department costs if he or she cannot control the square footage of the areas upon which cost allocations are based.
✓A manager may miss a performance target because direct materials costs are too high.
✓A manager may miss a performance target because he or she has no control over the joint processes prior to his or her department which is after the split-off point.
The Occupational Safety and Health Administration (OSHA) has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of fertilizer is 0.008. The cost of imposing a regulation that would ban the chemical is $31 million. If the value of a human life is equal to $8 million, how many people must the policy affect in order for the benefits to exceed the costs
Answer: More than 484 person
Explanation:
The expected benefit for one person will be:
= probability of death × value of life
= 0.008 × 8 million = 0.064 million
The number of people that the policy must the affect in order for the benefits to exceed the costs will be:
= 31 million / 0.064 million
= 484.755
Therefore, the people should be more than 484 persons to exceed costs
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following
Machine A could be purchased for $69,000. It will last 10 years with annual maintenance costs of $2,200 per year. After 10 years the machine can be sold for $7,245.
Machine B could be purchased for $57,500. It also will last 10 years and will require maintenance costs of $8,800 in year three, $11,000 in year six, and $13,200 in year eight. After 10 years, the machine will have no salvage value.
Required:
Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase?
Answer:
Esquire should purchase Machine B
Explanation:
Below is the calculation of the present values of Machine A & Machine B.
Machine A Period Amount Present Value Factor Present Value
Purchase Cost 0 ($69,000) 1 ($69,000)
Maintenance Cost 1 - 10 ($2,200) 6.71008 ($14,762)
Salvage Value 10 $7,245 0.46319 $3,356
Present Value of A ($80,406)
Machine B Period Amount Present Value Factor Present Value
Purchase Cost 0 ($57,500) 1 ($57,500)
Maintenance Cost
Year 3 3 ($8,800) 0.79383 ($6,986)
Year 6 6 ($11,000) 0.63017 ($6.932)
Year 8 8 ($13,200) 0.54027 ($7,132)
Present Value of B ($78,550)
Note the Following:
The Net Present Value of B is lower than the Value of Machine A. So, Machine B should be opted.For the Present Value Factor of Machine A's Maintenance Cost, the 10 year annuity value of 8% was calculated.Machine B has no salvage value after the 10th year period.