Answer:
Dec 31 2019
Dr Compensation Expenses 219,000
Cr Paid in Capital- Stock Options 219,000
Dec 31 2020
Dr Compensation Expenses 219,000
Cr Paid in Capital- Stock Options 219,000
Dec 31 2021
Dr Cash 256,200
Dr Paid in Capital- Stock Options 339,450
Dr Common Stock 37,200
Cr Paid in capital in excess of par common stock 632,850
Dec 31, 2023
Dr Paid in capital stock options 98,550
Paid in capital Expired Stock Options 98,550
Explanation:
Nash Corporation
Dec 31 2019
Dr Compensation Expenses 219,000
Cr Paid in Capital- Stock Options 219,000
( 438,000/2 years)
Dec 31 2020
Dr Compensation Expenses 219,000
Cr Paid in Capital- Stock Options 219,000
Dec 31 2021
Dr Cash 256,200
(219,000+37,200)
Dr Paid in Capital- Stock Options 339,450
Dr Common Stock 37,200
Cr Paid in capital in excess of par common stock 632,850
Dec 31, 2023
Dr Paid in capital stock options 98,550
(438,000×22.5%)
Paid in capital Expired Stock Options 98,550
Computation of Paid in capital stock options
438,000×77.5%= $339,450
Common stock 7,440 X 5 per share
= 37,200
Stock options redeemed 7,440/9,600= 77.5%
Big data analytics programs (which analyze massive data sets to make decisions) use gigantic computing power to quantify trends that would be beyond the grasp of human observers. As the use of this quantitative analysis increases, do you think it may decrease the "humanity of production" in organizations?
Answer:
The correct answer is: No, it may not decrease the humanity of production in organizations.
Explanation:
To begin with, the term known as ''humanity of production'' refers to that human element that gives to the company its capability of leadership and other human abilities. Moreover, when it comes to the big data analytics those programs would not decrease the humanity of production because in order to create all those programs and in order to read all the information that those programs give and to use it and implement there will be a need of using human capital to complete the whole objective. So therefore that human will be as need as machines.
"In the Modigliani Miller perfect world with no taxes, if we assume that the effect of adding debt to firm's capital structure is exactly balanced by an increase in the cost of equity as more debt is added, what is the effect of increased debt usage on the weighted average cost of capital (WACC)
Answer: WACC remains constant as leverage increases.
Explanation:
Here is the complete question:
In the Modigliani Miller perfect world with no taxes, if we assume that the effect of adding debt to firm's capital structure is exactly balanced by an increase in the cost of equity as more debt is added, what is the effect of increased debt usage on the weighted average cost of capital (WACC)?
a. WACC first increases, then decreases as leverage increases.
b. WACC remains constant as leverage increases.
c. WACC increases continuously as leverage increases.
d. WACC decreases continually as leverage increases.
In the Modigliani Miller perfect world with no taxes, the capital structure is not relevant as the way a company finances it operations does not really matter.
For the capital markets, they will be perfectly competitive and there will be no taxes, bankruptcy costs or transactions cost and investors all have the same expectations. The weighted average cost if capital will be thesame even though leverage increases.
Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. THA's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 379,697 06/30/2021 $ 16,000 $ 18,985 $ 2,985 382,682 12/31/2021 16,000 19,134 3,134 385,816 06/30/2022 16,000 19,291 3,291 389,107 12/31/2022 16,000 19,455 3,455 392,562 06/30/2023 16,000 19,628 3,628 396,190 12/31/2023 16,000 19,810 3,810 400,000 THA buys back the bonds for $384,446 immediately after the interest payment on 12/31/2021 and retires them. What gain or loss, if any, would THA record on this date
Answer:
THA would record a gain of $1,370 on 12/31/2021
Explanation:
Particulars Amount ($)
Carrying value of bonds after the interest payment on 12/31/2021 385,816
Less: Amount paid on redemption on 12/31/2021 (384,446)
Gain on redemption of bonds 1,370
Entry would be-
Date Account titles and Explanation Debit ($) Credit ($)
12/31/2021 Bonds payable 385,816
Cash 384,446
Gain on redemption of bonds 1,370
(To record redemption of bonds)
Which of the following is an expense of this period? Multiple Choice Costs of items paid for in this period but used up next period Repayment of debt from a loan in a prior period Cost of land purchased and paid for this period Costs of items used up this period but paid for next period
Answer: Costs of items used up this period but paid for next period
Explanation:
Period Expenses for the period are transactions that should be expensed because they were used in the current period.
Therefore if a period cost is not used in the period, it is not considered a period cost even if the company pays for it in the current period which also means that if a period cost for the period is not paid in the current period but in the next one, it is still a period cost for the current period.
From the above therefore, the period cost is the cost of items used up in this period but paid for in the next one.
The land purchased might look like the obvious choice but it is not because Assets are capitalised and not expensed.
Granite Construction Company is considering selling excess machinery with a book value of $328,100 (original cost of $449,200 less accumulated depreciation of $121,100) for $222,800, less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $217,860 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $16,708.
Required:
A. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery.
B. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
Answer:
A)
book value = $328,100
net selling cost = $222,800 - 6% = $209,432
net lease revenue = $217,860 - $16,708 = $201,152
Granite Construction
Differential analysis
November 7
Alternative 1 Alternative 2 Differential
SELL LEASE amount
Revenue from sales $222,800 $0 $222,800
- sales expenses ($3,368) $0 ($3,368)
Revenue from lease $0 $217,860 ($217,860)
- lease expenses $0 ($16,708) $16,708
total $209,432 $201,152 $8,280
B) Granite Construction should sell the equipment since it will earn $8,280 more than leasing it, and that without considering the value of money in time (discount rate on lease revenue).
Marx and Springsteen provides hair-cutting services in the local community. In February, the business cut the hair of 200 clients, earned $ 5,100 in revenues, and incurred the following operating costs:
Hair saloon expense: $500
Building rent expense: 1458
Utilities expense: 200
Depreciation expense--- Equipment: 50
Required:
What was the cost of service to provide one haircut?
Answer:
Cost of service to provide one haircut is $ 11.04
Explanation:
Hair saloon expense: $500
Building rent expense: $1,458
Utilities expense: $200
Depreciation expense --- Equipment: $50
Total operating cost = Hair saloon expense + Building rent expense + Utilities expense + Depreciation expense
= $500 + $1,458 + $200 + $50
= $ 2,208
Total hair cuts = 200
Therefore, cost per hair cut = Total operating cost ÷ Total hair cuts
= $2,208 ÷ $200
= $ 11.04
Ace Ventura, Inc., has expected earnings of $5 per share for next year. The firm's ROE is 15%, and its earnings retention ratio is 40%. If the firm's market capitalization rate is 10%, to the nearest dollar what is the present value of its growth opportunities
Answer: $25
Explanation:
Value with no growth = Expected earnings/Market capitalization rate
= $5/10%
= $5/0.1
= $50
Growth rate = Earnings retention ratio × ROE
Growth rate = 40% × 15%
= 40/100 × 15/100
= 0.4 × 0.15
= 0.06 = 6%
Value with growth = [$5 × (1-0.4)]/(0.10 - 0.06)
= ($5 × 0.6)/0.04
= $3/0.04
= $75
Present value of growth opportunities will now be:
= Value with growth - value with no growth
= $75 - $50
= $25
Sandhill Company reports the following operating results for the month of August: sales $382,500 (units 5,100), variable costs $245,000, and fixed costs $98,000. Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 16% with no change in total variable costs or units sold.
2. Reduce variable costs to 59% of sales.
Compute the net income to be earned under each alternative.
1. Net Income
$enter a dollar amount
2. Net Income
$enter a dollar amount
Which course of action will produce the higher net income? select an option
Answer:
Results are below.
Explanation:
Giving the following information:
Sales $382,500 (units 5,100 $75 per unit)
variable costs $245,000 (48.04 per unit)
fixed costs $98,000.
Option 1:
Increase selling price by 16%.
New selling price= 75*1.16= 87
Sales= 5,100*87= 443,700
variable costs= (245,000)
fixed costs= (98,000)
Net income= 100,700
2. Reduce variable costs to 59% of sales.
Contribution margin= (382,500*0.41)= 156,825
fixed costs= (98,000)
Net income= 58,825
The most profitable option is the first one.
Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:
Old Machine
Cost of machine, 10-year life $89,000
Annual depreciation (straight-line) 8,900
Annual manufacturing costs, excluding depreciation 23,600
Annual non-manufacturing operating expenses 6,100
Annual revenue 74,200
Current estimated selling price of machine 29,700
New Machine
Purchase price of machine, six-year life $119,700
Annual depreciation (straight-line) 19,950
Estimated annual manufacturing costs,
excluding depreciation 6,900
Annual non-manufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Required:
1. Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
Differential Analysis
Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2)
April 30
1 Continue with Old Machine Replace Old Machine Differential Effect on Income
2 (Alternative 1) (Alternative 2) (Alternative 2)
3
4
5
6
7
8
2. Choices of what other factors should be considered.
Was the purchase price of the old machine too high?
What effect does the federal income tax have on the decision?
What opportunities are available for the use of the $90,000 of funds ($119,700 less $29,700 proceeds from the old machine) that are required to purchase the new machine?
Should management have purchased a different model of the old machine?
Are there any improvements in the quality of work turned out by the new machine?
Answer:
old machine:
depreciation costs $8,900
other manufacturing costs $23,600
other non-manufacturing expenses $6,100
annual revenue $74,000
new machine:
purchase price $119,700 - 29,700 (sales price of old machine) = $90,000
depreciation costs $19,950
other manufacturing costs $6,900
other non-manufacturing expenses $6,100
annual revenue $74,000
1)
DIFFERENTIAL ANALYSIS
Alternative 1 Alternative 2 Differential
old machine new machine amount
Purchase cost $0 ($119,700) ($119,700)
Proceeds from sale $0 $29,700 $29,700
Total revenues $444,000 $444,000 $0
Manufacturing costs ($141,600) ($41,400) $100,200
(excluding dep.)
Other non- ($36,600) ($36,600) $0
manufacturing costs
Total $265,800 $276,000 $10,200
If the company purchases the new machine, its differential revenue will be higher considering the 6 years of useful life. But we are missing two important aspects: required rate of return and tax rate, which could affect our decision.
2) Choices of what other factors should be considered.
What effect does the federal income tax have on the decision?
Net cash flows are affected by deprecation expense and how they are taxed. Alternative 2 would benefit from higher tax rates.What opportunities are available for the use of the $90,000 of funds ($119,700 less $29,700 proceeds from the old machine) that are required to purchase the new machine?
We should discount the future cash flows using the company's WACC.Are there any improvements in the quality of work turned out by the new machine?
If the new machine improves the quality of our products or reduces production time, then that is something that should be considered.Business strategy focuses on:_______.
a. ensuring that the company maintains the existing market share that it has historically enjoyed.
b. improving the competitive position of a corporation's products or services within the industry or market segment served.
c. providing adequate shareholders' return on investment. preventing the competition from gaining a competitive edge by undermining their marketing plan.
d. recovering the competitive lead by using all available resources that the company can provide.
Answer:
b. improving the competitive position of a corporation's products or services within the industry or market segment served.
Explanation:
Business strategy is defined as various decisions and actions a business takes in order to reach its goals and stay competitive in the industry.
This guides the business on resource allocation.
Adjustments to business strategy is continous to tackle challenges a business faces in maintaining bits competitive advantage in the market.
So business strategy focuses on improving the competitive position of a corporation's products or services within the industry or market segment served.
On May 1, 2021, Bonita Industries declared and issued a 10% common stock dividend. Prior to this dividend, Bonita had 195000 shares of $1 par value common stock issued and outstanding. The fair value of Bonita's common stock was $24 per share on May 1, 2021. As a result of this stock dividend, Bonita's total stockholders' equity:______
a. decreased by $480700.
b. increased by $480700.
c. did not change.
d. decreased by $23000.
Answer:
No Answer in Option but the Equity decreases by $468,000
Explanation:
From the question,
Common Stock that Bonita industries had at par $1 = $195,000
They issued a common stock dividend= 10%
The Value of Stock dividend = 10/100 * 195,000 = $19,500
The fair value of Bonita's common stock was $24 per share on May 1, 2021. Hence, the stock dividend will be 19,500 * 24 = $468,000
We must understand that Stock dividend are issued from Retained Earning, hence as a result of this stock dividend, Bonita's total stockholder equity decreased by $468,000
The following equity investment transactions were completed by Romero Company during a recent year:
Apr. 10 Purchased 3,600 shares of Dixon Company for a price of $51 per share plus a brokerage commission of $95.
July 8 Received a quarterly dividend of $0.95 per share on the Dixon Company investment.
Sept. 10 Sold 2,000 shares for a price of $41 per share less a brokerage commission of $75.
Journalize the entries for these transactions.
Answer:
The journal entries will look as follows:
Explanation:
Date Particulars Dr ($) Cr ($)
Apr 10 Investments - Dixon (w.1.) 183,695
Cash (w.1.) 183.695
(To record total value of investment in Dixon Company.)
July 8 Cash 3,420
Dividend revenue (w.2.) 3,420
(To record dividend revenue from Dixon Company shares.)
Sept. 10 Cash (w.3.) 81,925
Loss on investment sold (w.5.) 20,128
Investments - Dixon (w.4.) 102,053
(To record sales of investment in Dixon Company.)
Workings:
w.1. Total value of investment in Dixon Company = (3,600 * $51) + $95 = $183,695
w.2. Dividend revenue = 3,600 * $0.95 = $3,420
w.3. = Cash = (2,000 * 41) - $75 = $81,925
w.4. Value of investment in Dixon = ($183,695 / $3,600) * 2,000 = $102,053
w.5. Loss on sale of investment = w.3. - w.4. = $102,053 - $81,925 = $20,128
Maxxie purchased a tract of land for $24,500. Today, the same land is worth $43,800. How many years have passed if the price of the land has increased at an annual rate of 6.4 percent
Answer:
9.35 years
Explanation:
To find the numbers of years that have passed, you can use the following formula:
n = ln(FV / IV)/ln(1 + r)
n= number of periods
FV= Future value= $43,800
IV= Initial value= $24,500
r= rate= 6.4%
n=ln(43,800/24,500)/ln(1+0.064)
n= ln1.79/ln1.064
n=0.58/0.062
n= 9.35
According to this, 9.35 years have passed.
Identify the information that the current Generally Accepted Accounting Principles and Auditing Standards require the financial statements of an entity to show for the reporting period:_________.1. Budgeting vs actual comparisons of key balance sheet and income statement accounts2. Market value of the entity's net assets3. Number of people employed by the entity4. Investments by and distribution to owners (ex: stockholders) during the period5. Financial Position at the end of the period6. Cash flows during the period7. Earnings for the period
Answer:
4. Investments by and distribution to owners (ex: stockholders) during the period.
5. Financial Position at the end of the period.
6. Cash flows during the period.
7. Earnings for the period.
Explanation:
The information that the current Generally Accepted Accounting Principles (GAAP) and Auditing Standards require the financial statements of an entity to show for the reporting period are;
1. Investments by and distribution to owners (ex: stockholders) during the period.
2. Financial Position at the end of the period.
3. Cash flows during the period.
4. Earnings for the period.
The Financial Accounting Standards Board (FASB) issued some standards, accounting principles, and procedures to be followed by public companies in the United States of America for reporting and recording statements of income, this is known as the Generally Accepted Accounting Principles (GAAP).
The GAAP is also adopted by the Securities and Exchange Commission (SEC) to measure, analyze and regulate the stock market.
James would like to deposit enough money in a savings account to have $8,000 at the end of year 3. Assuming the investment will earn 5% compounded annually, what amount should James deposit in the savings account today
Answer:
$6910.70
Explanation:
At the end of each year, the account balance will be 1.05 times the value at the beginning of the year. Thus, at the end of year 3, the value is 1.05^3 times the original value.
$8000 = (deposit)×1.05^3
deposit = $8000/1.05^3 ≈ $6910.70
James should deposit $6910.70 today.
2. The Fourth of July Company agreed to ship a quantity of fireworks to Behan. After Behan pays in full, he learns that state law prohibits this type of sale. Before the fireworks are sent, Behan calls to cancel this contract and to demand his money back. May he recover his money in court
Answer:
Behan will recover his amount.
Explanation:
The contract has not been formed as the contract is only enforceable if the contract is legally allowed which means that the selling of fireworks in this case scenario is not allowed and hence Behan and Fourth of July Company are both equally responsible for not committing to such type of agreements. So the company must payback the money as the contract is not enforceable in the jurisdiction.
Solve accepted a 60-day, 9 percent note from Pete Houghton in settlement of his past-due account for $6,000. On April 9, Westwood Company discounted the note at the First National Bank. The bank charged a discount rate of 12 percent. What is the amount of the proceeds
Missing information:
The note was accepted on March 10
Answer:
$6,029.10
Explanation:
in order to answer the question, I assumed a 360 day year, so 60 days = 2/12 of a year
the note's value on maturity date = principal + accrued interest = $6,000 + ($6,000 x 9% x 2/12) = $6,000 + $90 = $6,090
bank charges = note's value on maturity date x discount rate x 30 days = $6,090 x 12% x 1/12 = $60.90
net proceeds = $6,090 - $60.90 = $6,029.10
A company purchased a computer system at a cost of $25,000. The estimated useful life is 6 years, and the estimated residual value is $8,000. Assuming the company uses the double-declining-balance method, what is the depreciation expense for the second year
Answer:
$5,102
Explanation:
Double declining Method
Cost $ 25,000
B Residual Value $2,000
C = A - B Depreciable base $23,000
D Life [in years] 7
E = C/D Annual SLM depreciation $3,286
F = E/C SLM Rate 14.29%
G = F x 2 DDB Rate 28.57%
.
Depreciation schedule-Double declining
Year Beginning Book Value Depreciation rate Depreciation expense Accumulated Depreciation Ending Book Value
1 $25,000 , 28.57%, $7,143 , $7,143 $17,857
2 $17,857, 28.57%, $ 5,102 , $ 12,245, $12,755
Godcare, an insurance firm based in California, had difficulties expanding their operations to Asian markets as most of their target countries had strict regulations on transferring the details of the customers among the different branches of the firm. The company had to obtain an approval from its customers before sharing their personal information with its branches in other countries. Which of the following barriers is most likely to have affected the services of Godcare in the given scenario?a. Protectionismb. Control on transborder data flowsc. Protection of intellectual propertyd. Cultural requirements for adaptatione. Language translation barriers
Answer:
The correct answer is: b. Control on transborder data flows.
Explanation:
Control on transborder data flows was the barrier that probably affected Godcare services in the scenario above.
The insurance company had this barrier of control of transborder data when expanding its business to Asian countries with stricter regulations on the transfer of customer data.
Generally, these government restrictions arise to protect against possible abuses and invasions of privacy, which meant that the company needed the approval of each customer to share their personal information with its branches in other countries.
The common stock and debt of Northern Sludge are valued at $62 million and $38 million, respectively. Investors currently require a 16.8% return on the common stock and a/an 7.2% return on the debt. If Northern Sludge issues an additional $21 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change in capital structure does not affect the interest rate on Northern’s debt and that there are no taxes.
Answer:
the expected return on the stock will decrease
Explanation:
total firm's value $100 million
equity $68 milliondebt $32 millionrequired rate of return:
cost of equity 16.8%cost of debt 7.2%if the firm issues new stock and retires debt:
equity $89 milliondebt $11 millionThe return on equity (ROE) measures how much money a company earns per dollar invested, ROE formula = net income / total equity
now let's suppose that the firm's net income is $10 million:
under the old capital structure ROE = $10 / $68 = 14.7%
now under the new capital structure net income will increase by the amount of interests saved = $21 x 7.2% = 1.512
new net income = $11.512
new ROE = $11.512 / $89 = 12.9%
following this example, the new ROE will be 12.2% lower than before because the cost of debt was much lower than the cost of equity.
as the weight of equity increases, the company's WACC will increase also:
old WACC = (68/100 x 16.8%) + (32/100 x 7.2%) = 11.424 + 2.304 = 13.728%old WACC = (89/100 x 16.8%) + (11/100 x 7.2%) = 14.952 + 0.792 = 15.744%You are a crude oil dealer. You intend to sell 40,000 barrels of crude oil in December. Each contract calls for delivery of 1,000 barrels of oil. Current futures price of one barrel of crude oil is $70. You believe that there are only four possible oil prices in December which are $50, $60, $70, and $80. i. Explain what action you would take to protect from changes in oil prices in December. Provide reasons for your action. ii. Calculate the total proceeds for each of the possible prices in December. Question 3 3 marks
Answer:
i. buy put option
ii. Proceeds will be as follows:
$50 : 2,000,000
$60 : 2,400,000
$70 : 2,800,000
$80 : 3,200,000
Explanation:
i. A put is option is one in which buyer of the option has a right to sell the asset at an agreed price at a later date. There can be a premium on the purchase of an option but its safe to buy an option to reduce risk exposure.
ii. $50 : 2,000,000 (40,000 barrels * $50)
$60 : 2,400,000 (40,000 barrels * $60)
$70 : 2,800,000 (40,000 barrels * $70)
$80 : 3,200,000 (40,000 barrels * $80)
Indicate whether each of the following statements is true or faise Statement 1. The government can raise revenue by taxing the sellers without creating deadweight loss when the demand for the goods being taxed is perfectly inelastic 2. A tax that raises no revenue for the government cannot have any deadweight loss.
Answer and Explanation:
The indication of the following statement regarding true or false is
For Statement 1
This given statement is true as the demand is perfectly inelastic so there is no deadweight loss because quantity does not change or not have any impact
Therefore, in this case, the government only raise revenue but at the same time when there is an increase in elasticity so there is a change in deadweight loss
For Statement 2
This given statement is false as if no revenue is there, there will be deadweight loss
Management of Carla Vista, Inc., is planning to raise $1,215,000 in new equity through a private placement. If the sale price is $20.25 per share, how many shares does the company have to issue
Answer:
Number of shares to be issued = 60,000 units
Explanation:
A private placement involves the issue of new shares to a few number of individual and institutional investors. Unlike initial public offering, here the shares are not offered to the general public.
The number of units to be issued is determined as follows
Units to be issued = Total capital to be raised / issue price per share
Number of units to be raised = $1215,000/$20.25 per share= 60,000 units
Number of shares to be issued = 60,000 units
Engineering Wonders reports net income of $63 million. Included in that number is building depreciation expense of $5.3 million and a gain on the sale of land of $1.3 million. Records reveal decreases in accounts receivable, accounts payable, and inventory of $2.3 million, $3.3 million, and $4.3 million, respectively. What are Engineering Wonders' net cash flows from operating activities? (List cash outflows and any decrease in cash as negative amounts. Enter your answer in millions. (i.e., $10,000,000 should be entered as 10).)
Answer:
70.3
Explanation:
The calculation of net cash flows from operating activities is shown below:-
Engineering Wonders reports
Net cash flow from operating activities
Particulars Amount
Net income 63
Adjustment to reconcile net
income to net cash
flow from operating activities
Add: Depreciation expense 5.3
Less: Gain on sale of land 1.3
Add: Decrease in Accounts
receivable 2.3
Less: Decrease in accounts
payable 3.3
Add: Decrease in inventory 4.3
Net cash flow from operating
activities 70.3
Therefore the net cash flow from operating activities is 70.3.
Some of the information found on a detail inventory card for Headland Inc. for the first month of operations is as follows.
Received
Date No. of Units Unit Cost Issued, No. of Units Balance, No. of Units
January 2 1,700 $3.39 1,700
7 1,200 500
10 1,100 $3.62 1,600
13 1,000 600
18 1,500 $3.73 800 1,300
20 1,100 200
23 1,800 $3.84 2,000
26 1,300 700
28 2,100 $3.96 2,800
31 1,800 1,000
Calculate average-cost per unit. (Round answer to 2 decimal places, e.g. 2.76.)
Average-cost per unit $ _____
From these data compute the ending inventory on each of the following bases. Assume that perpetual inventory records are kept in units only.
(1) First-in, first-out (FIFO).
(2) Last-in, first-out (LIFO).
(3) Average-cost. (Round final answers to 0 decimal places, e.g. 6,548.)
(1) FIFO (2) LIFO (3) Average-cost
Ending Inventory $ $ $
If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, would the amounts shown as ending inventory in (1), (2), and (3) above be the same? What amount would be shown as ending inventory? (Round average cost per unit to 4 decimal places, e.g. 2.7621 and final answers to 0 decimal places, e.g. 6,548.)
Answer:
Average-cost per unit $ $3.73
ending inventory in units only:
FIFO = 1,000 x $3.96 = $3,960LIFO = 1,000 x $3.39 = $3,390 Average = $3,728
ending inventory including $:
FIFO = 1,000 x $3.96 = $3,960 (this will not change)LIFO = 1,000 x $3.96 = $3,960 (this will change) Average = $3,728 / (this will not change)Explanation:
Date units units unit total balance
purchased sold price
January 2 1,700 $3.39 $5763 1,700
7 1,200 500
10 1,100 $3.62 $3982 1,600
13 1,000 600
18 1,500 $3.73 $5595 2,100
18 800 1,300
20 1,100 200
23 1,800 $3.84 $6912 2,000
26 1,300 700
28 2,100 $3.96 $8316 2,800
31 1,800 1,000
total 8,200 $3.7278 $30,568
Salaries for professions (such as architect or medical doctor) that require a long period of study are typically higher than those for other jobs. The reasons for this are all of the following EXCEPT __________.a. students sacrifice a good deal of present incomeb. status deserves more reward in the form of wagesc. long periods of schooling incur greater current costsd. future income is worth less than present income
Answer:
d. future income is worth less than present income
Explanation:
Remember, since we want an exception to all the possible reasons for higher salaries of those in medical and architectural profession, we carefully examine the reasons given.
However, in no way is it because those of this profession (architect, medical doctors) would earn future income worth less than their present income a basis for their higher salaries than other jobs, since most often they earn more as they the years goes by in their profession.
A chain of supermarkets specializing in gourmet food, has been using the average cost method to value its inventory. During the current year, the company changed to the first-in, first-out method of inventory valuation. The president of the company reasoned that this change was appropriate since it would more closely match the flow of physical goods. This change should be reported on the financial statements as A. Change in accounting estimate. B. Affecting only future periods. C. Cumulative-effect type accounting change. D. Correction of an error.
Answer: Affecting only future periods.
Explanation:
From the question, we are informed that a chain of supermarkets specializing in gourmet food, that has been using the average cost method to value its inventory changed to the FIFO method in the current year.
This change should be reported on the financial statements as a retroactive effect type of an accounting change. This is necessary because it affects future period and in order to maintain comparability and consistency.
You are considering acquiring a firm that you believe can generate expected cash flows of $10,000 a year forever. However, you recognize that those cash flows are uncertain. a. Suppose you believe that the beta of the firm is 0.4. How much is the firm worth if the risk-free rate is 4% and the expected rate of return on the market portfolio is 11%
Answer:
PV or value of the firm = $147058.8235
Explanation:
To calculate the worth of the firm, we first need to determine the required rate of return of this firm. Using the CAPM equation, we calculate the required rate of return to be,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free raterM is the return on marketr = 0.04 + 0.4 * (0.11 - 0.04)
r = 0.068 or 6.8%
As the firm is expected to generate a constant cash flow forever, it can be treated as a perpetuity. To calculate the value of the firm, we use the present value of perpetuity. The formula for present value of perpetuity is,
PV = Cash flow / r
Where,
r is the required rate of returnPV or value of the firm = 10000 / 0.068
PV or value of the firm = $147058.8235
Delta Corporation (a U.S. company) has several transactions with foreign entities. On December 2, 20X1, Delta bought items from foreign company at a price of 300,000 yen when the direct exchange rate was 1 yen = $1.17. Delta made payment to the foreign company on December 20, 20X1, when the exchange rate had changed to 1 yen = $1.21. The foreign exchange gain or loss reported by Delta from this transaction will be:
Answer:
$12,000 gain
Explanation:
From the above information given the yen has depreciated relative to the dollar amount between the date of the transaction and the date of payment.
The Amount of the gain will be:
Price = 300,000
Direct exchange rate( 1 yen )= $1.17
Change in exchange rate ( 1 yen)= $1.21
Hence:
($1.21x 300,000) – ($1.17x 300,000)
=$363,000-$351,000
=$12,000 gain
The annual fixed costs for a plant are $100,000, and the variable costs are $140,000 at 70% utilization of available capacity, with net sales of $280,000. What is the breakeven point in units of production if the selling price per unit is $40
Answer:
With the production 5000 units the plant will achieve it's break even point
Explanation:
Solution
The break even points is the point in a business when the total revenue is exactly the same to the equal expenditure.
The formula is given below:
D' = Cy/(p-cy)
Here
D' =the demand at break even point
p = the selling price
cy= the variable costs per unit
Cy = the total fixed cost
Thus
The total cost of the plant = $100,000
The variable costs = $140,000
The net sales = $280,000
The selling price per unit = $40
The total no units sold per year is given as :
Annual sale (units) = Total sales/Sale per unit
Now,
By the method of substitution we have the following.
Annual sale (units) = $280,000/40
=7000 units/year
The formula for variable cost per unit cy is
cy = Cy/Annual sale (units)
Now,
We substitute in the above equation the value of Cy as $140,000 and annual sale as 7000 units/per year
cy = $140,000/7000
=$20 units
For the demand at break even point D', we have the following:
D' = Cy/(p-cy)
We We substitute in the above equation the value of Cy as $100,000 and p as $40/unit and cy as $20 /unit
D' = 100000/(40 -20)
=5000 units/year