On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31, McGuire earned income of $48,000 and paid dividends of $14,000. Required: Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.
Jan. 2__________
Dec. 31 _________
Dec. 31__________

Answers

Answer 1

Answer:

Dr equity investment  $205,000

Cr cash                                          $205,000

Dr equity investment           $19200

Cr share of net income of affiliate company $19200

Dr cash                 $5,600

Cr equity investment       $5,600

Explanation:

The cash of $205,000 paid for the equity investment would be credited to cash account while equity investment is debited with the same amount.

The share of Todd Company from the earned income is 40% of the earned income of $48,000 which is $19200 .

The share of dividends that accrued to Todd is 40% of $14,000 dividends paid which is $5,600


Related Questions

Bergstrom accepted the return of merchandise by a customer. The merchandise had been sold on account, and payment had not been received on the date of return. The returned goods retailed for $400, but cost Bergstrom only $300. The appropriate journal entry for Bergstrom is:

Answers

Answer:

Debit Sales Return and allowances $400

Credit Accounts receivable $400

Explanation:

In the given scenario the sale was made on account. That means that no money was collected for the transaction.

So we do not consider the $300 it would cost Bergstrom.

When a good is sold on account, the accounts receivable is debited for the sale amount ($400). As the customer pays the money owed the account is credited to balance it up.

In this case however the good is being returned. So we will debit the Sales Return and Allowance account to recognise the returned item.

Accounts receivable is credited to remove the credit sale since the product has been returned.

The trial balance of Rachel Company at the end of its fiscal year, August 31, 2017, includes these accounts: Inventory $29,200; Purchases $144,000; Sales Revenue $190,000; Freight-In $8,000; Sales Returns and Allowances $3,000; Freight-Out $1,000; and Purchases Returns and Allowances $5,000. The ending inventory is $25,000. Prepare a cost of goods sold section for the year ending August 31.

Answers

Answer:

$151,200

Explanation:

The cost of goods sold is the beginning inventory plus purchases  plus freight-in, minus purchases returns and allowances minus ending inventory

Cost of goods sold extract of income statement:

Beginning inventory                                                                             $29,200

Purchases                                                                      $144,000

Freight-in                                                                        $8,000

Purchases returns and allowances                             ($5,000)

Net purchases                                                                                    $147,000

cost of goods available for sale                                                         $176,200  

ending inventory                                                                               ($25,000)

cost of goods sold                                                                               $151,200

The cost of goods sold is $151,200,which would be deducted from net sales in order to arrive at gross profit

As you negotiate with a potential employer, you ask for an additional $3,000 in annual salary. The employer asks why you why you want this increase, and learns that you need to begin repaying a student loan. The employer states that he cannot increase your salary, but that his company can assume your loan at a 0% interest rate. In this example, the employer has identified your . . .?

Answers

Answer:

Employer has identified your Interest.

Explanation:

During any course of negotiation, parties have two sets of interests to consider: personal interests and the interests of the other side (employer).

Interests are a party's underlying reasons, values or motivations. It explains why someone is trying to take a particular position.

From the question, an increase in salary by $3000 is needed to pay off student loan. This is the point of interest. The employer identifies this and offers to assume the loan at 0% interest rate instead.

________ can track customer satisfaction directly, measure repurchase intention and also gauge a consumer's willingness to recommend the company and brand to others.
A) Periodic surveys
B) Mystery shoppers
C) Customer loss rates
D) Customer focus statements
E) Sales summary reports

Answers

Answer:

A) Periodic surveys

Explanation:

The periodic survey is the survey which takes place after delivering the product and services to the customer. It can be in the form of customer feedback with respect to the satisfaction level, repurchase intention, worth of mouth, etc

By maximizing the customer satisfaction the company can able to achieve their sales targets that results into capture a maximum share in the market

Hence, the first option is correct

A supermarket uses a periodic review system to manage inventory of gallons of drinking water. Average demand is 152 gallons of water per day with standard deviation of 33 gallons per day. It costs ​$57 to order water from the​ supplier, and orders are delivered after 4 days. The holding cost for a gallon of water is ​$0.11 per year. The supermarket is open 360 days per year. If the supermarket aims for a 94.5% service level for gallons of drinking water (z = 1.6), what value should be used for T, the target inventory position at the time of ordering?

The target inventory position is T= ______ gallons.

Answers

Answer:

The target inventory position is T= 713.6 gallons.

Explanation:

Given:

Average demand =per day = D = 152 Gallons

Standard deviation of demand = σ = 33 Gallons per day

Lead time for delivery = L = 4 days

Z value for 94.5% service level = 1.6

The target inventory position  = (Average demand x Lead time) + Safety stock

= (D × L) + (Z× σ × [tex]\sqrt{L}[/tex])

= (152 × 4) + (1.6 × 33 × [tex]\sqrt{4}[/tex])

= (152 × 4) + (1.6 × 33 × 2)

= 608 + 105.6

= 713.6

The value of the target inventory position will be 713.6 gallons.

The following can be illustrated from the information given:

Average demand per day, D = 152Standard deviation of demand, σ = 33Lead time for delivery, L = 4Z value for 94.5% service level = 1.6

Therefore, the target inventory position will be:

= (Average demand x Lead time) + Safety stock

= (D × L) + (Z× σ × ✓L )

= (152 × 4) + (1.6 × 33 × ✓4 )

= (152 × 4) + (1.6 × 33 × 2)

= 608 + 105.6

= 713.6

Therefore, the target inventory position will be 713.6 gallons.

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In the real world, we find that dividends Group of answer choices Tend to be a lower percentage of earnings for mature firms. Are usually changed every year to reflect earnings changes. Usually exhibit greater stability than earnings. Are usually set as a fixed percentage of earnings. Fluctuate more widely than earnings.

Answers

Answer: Usually exhibit greater stability than earnings.

Explanation:

A dividend is a distribution of profits to the shareholders by a corporation. When a profit is earned by a corporation, the corporation pays a proportion of its profit as dividend to the shareholders.

Although dividends should be distributed in relation to the earnings for the year, that is, when earnings fall, the dividends should fall and vice versa. In real world, dividends are usually stable because a regular dividend paying company is seeen to be a better firm and also investor friendly. Therefore, even if the earnings fall, the dividend yield usually remain stable.

So, correct option is option 1) usually exhibit greater stability than earnings

S13-15 (similar to) Young Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of $ 95 comma 000 for utilities expense. The correct amount of the utilities expense was $ 20 comma 000. Requirements 1. Determine the effect of the error on the accounting equation in 2018. 2. How should this error be reported in the 2019 financial​ statements?

Answers

Answer and Explanation:

1. The effect of the error on the accounting equation in 2018 is shown below:-

Error utilities expenses = Correct utilities expenses in 2018 - Wrongly entered utilities expenses

= $95,000 - $20,000

= $75,000

Here due to an increase in utilities expenses,  so the net income will be decreased.

Now, the Decrease in net income, there will be decrease in stockholders equity

2. The error should be reported for the year 2019 financial statements as a prior period adjustment. It is an adjustment to the beginning balance in the retained earning account

And it will be an addition of the $20,000

True or False : When you are thinking of something you want to predict, measure, or change in your business, you are probably thinking of a dependent variable.

Answers

Answer:

True

Explanation:

Dependent variables are variables which are altered by the changes to the independent factors or variables.

The following are instances of dependent and independent variables:

       

Dependent Variable (DV): Profit, Product Quality, Staff Attrition during a recession.

Profit (DV) depends on sales, expenses, the economy, the proficiency of the sales staff, the quality of the product.

The Quality of the Product (DV) depends on the production process, product design, quality of raw materials etc

So, many of the factors highlighted above, which affect the dependent variables are called Independent variable.

Profit, for instance, can be forecasted or changed IF changes are made to sales.

It is possible to measure the quality of a product or service. It can also be altered by increasing or decreasing the quality of raw material input.

Cheers!

Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: The reporting statement of revenue and expense data is shown. A table with three columns is shown. There is no heading in the first column; the second column heading in the current year; the third column heading is the previous year. The headings, Current Year and Previous Year, are set in bold. The first line (below the heading) shows Sales is $ 4,000,000 and $ 3,600,000; the second line shows Cost of goods sold is 2,280,000 and 1,872,000; the third line shows Selling expenses is 600,000 and 648,000; the fourth line shows Administrative expenses is 520,000 and 360,000;the fifth line shows Income tax expense is 240,000 and 216,000. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage. Answer Check Figure: Current year net income: $360,000; 9% of sales Pencil Comment on the significant changes disclosed by the comparative income statement.

Answers

Answer:

Innovation Quarter Inc.

Income Statement

For the Years Ended

                                         Current Year ($)            Previous Year  ($)

Sales                            4,000,000 100% 3,600,000 100%

Cost of goods sold    2,280,000 57%          1,872,000 52%

Gross profit                    1,720,000 43%          1,728,000 48%

Expenses:    

Selling expenses             600,000 15%    648,000 18%

Administrative expenses   520,000 13%    360,000 10%

Total expenses             1,120,000 28%           1,008,000 28%

Income from operations    600,000 15%            720,000 20%

Income tax expense     240,000 6%            216,000 6%

Net income                      360,000 9%            504,000 14%

Explanation:

                                            Current Year              Previous Year

Sales                                  $ 4,000,000               $ 3,600,000

Cost of goods sold             $ 2,280,000                $ 1,872,000

Selling expenses                $ 600,000                    $ 648,000

Administrative expenses    $ 520,000                    $ 360,000

Income tax expense            $ 240,000                    $ 216,000

Employees at Diving Swallow Custom Tattoo in Oakland, California, practice an age-old art. They may use electric equipment today, but their business still involves crafting a design and inking it into skin, as all tattoo artists have done for generations. Fortunately, there are no shortages of ink, artists, or clients for the Diving Swallow.At Diving Swallow, the environment is____________(stable or dynamic) because of the __________(number of factors that are changing or pace of change) and ___________(complex or simple) because of the____________(pace of change or number of factors that are changing). Resources are________(scarce or abundant).The managers at Diving Swallow are facing conditions of _______(low or high) uncertainty. This means that it will be__________(difficult or easy) for them to make strategic decisions about the types of products the company will offer in the future.

Answers

Answer:

1. Dynamic

2. Number of factors that are changing

3. Complex

4. Pace of change

5. Abundant

6. Low

7. Easy

Under a partnership agreement, Sherry is to receive 25% of the partnership income, but not less than $10,000. The partnership has net income of $30,000 for Year 1 before any allocation. Calculate Sherry’s guaranteed payment from the partnership for Year 1.

Answers

Answer:

$2,500

Explanation:

since Sherry will receive at least $10,000 or 25% of the partnership's net income, then the guaranteed payment = $10,000 - ($30,000 x 25%) = $10,000 - $7,500 = $2,500

When partnerships include guaranteed minimum payments, he/she will receive that amount even if the partnership's net income is not high enough. If the partnership's net income would have been $40,000 or more, then there would be no guaranteed payment (= $40,000 x 25% = $10,000).

A metal-cutting operation has a target value of 20 and consistently averages 19.8 with a standard deviation of 0.5. The design engineers have established an upper specification limit of 22 and a lower specification limit of 18. What is the process capability index? A) 1.20 B) 1.33 C) 1.46 D) 1.66 12. Following Q11, what is the process capability ratio? A) 1.33 B) 1.50 C) 1.66 D) 2.00

Answers

Answer:

process capability  index =  Cpl ( lower ) = 1.20 ( A )

The process capability ratio = 1.33

Explanation:

Target value = 20

mean = 19.8

standard deviation = 0.5

upper specification limit = 22

lower specification limit = 18

The process capability index =

Cpu = [tex]\frac{22- 18}{6(0.5)}[/tex]   = 4 / 3 = 1.33

Cpk ( upper ) = (22 - mean ) / 3 * std

                      = ( 22 - 19.8 ) / ( 3 * 0.5 ) = 2.2 / 1.5 = 1.47

Cpl ( lower ) = ( mean - 18 ) / ( 3 * 0.5 ) = ( 19.8 - 18 ) / 1.5

                    = 1.8 / 1.5 =  1.2

hence the process capability index is Capability index with the minimum value which is Cpl ( lower ) = 1.20 ( A )

The process capability ratio = 1.33 refer to Cpu equation

                             

g You want to save sufficient funds to generate an annual cash flow of $50,000 a year for 20 years as retirement income. You currently have no retirement savings but plan to save an equal amount each year for the next 30 years until your retirement. How much do you need to save each year if you can earn 8 percent on the savings? (10 Points)

Answers

Answer:

You need to save $4,012.45 each year

Explanation:

Pertiuty in 20 years  is $50,000.

So the amount must be in account after 30 years saving to enough for above pertiuty is calculated as below:

= $50000/(1+8%)+ $50000/(1+8%)^2+......+$50000/(1+8%)^20

= $50,000 * Annuity Factor ( 1-20 years) of 8%

=$50000*9.818

= $490,907

To have $490,907 (FV) in account after 30 years (tenor), now you have save an amount each year (PMT) calculated as below:

$490,907 = PMT*(1+8%)^30+....PMT*(1+8%)^2 + PMT*(1+8%)

= PMT * Discount Factor ( 1-30 years) of 8%

$490,907 = PMT * 122.346

-> PMT = $490,907/ 122.346

= $4,012.45

Moonlight Bay Inn is incorporated on January 2, 2014, by its three owners, each of whom contributes $20,000 in cash inexchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during the month ofJanuary:
January 2: A Victorian inn is purchased for $50,000 in cash. An appraisal performed on this date indicates that the land is worth $15,000, and the remaining balance of the purchase price is attributable to the house. The owners estimate that the house will have an estimated useful life of 25 years and an estimated salvage value of $5,000.
January 3: A two-year, 12%, $30,000 promissory note was signed at the Second State Bank. Interest and principal will be repaid on the maturity date of January 3, 2019.
January 4: New furniture for the inn is purchased at a cost of $15,000 incash. The furniture has an estimated useful life of 10 years and no salvage value.
January 5: A 24-month property insurance policy is purchased for $6,000 in cash.
January 6: An advertisement for the inn is placed in the local newspaper. Moonlight Bay pays $450 cash for the ad, which will run in the paper throughout January.
January 7: Cleaning supplies are purchased on account for $950. The bill is payable within 30 days.
January 15: Wages of $4,230 for the first half of the month are paid in cash.
January 16: A guest mails the business $980 in cash as a deposit for a room to be rented for two weeks. The guest plans to stay at the inn during the last week of January and the first week of February.
January 31: Cash receiptsfrom rentals of rooms for the month amount to $8,300.
January 31: Cash receiptsfrom operation of the restaurant for the month amount to $6,600.
January 31:. Each stockholder is paid $200 in cash dividends.
Required 1. Prepare journal entries to record each of the preceding transactions. Don’t forget the stock.
2. Post each of the journal entries to T accounts.
3. Prepare adjusting journal entries for each of the following transactions as of January 31.
a. Depreciation of the house
b. Depreciation of the furniture
c. Interest on the promissory note
d. Recognition of the expired portion of the insurance
e. Recognition of the earned portion of the guests’ deposit
f. Wages earned during the second half of January amount to $520 and will be paid on Feb. 3
g. Cleaning supplies on hand on January 31 amount to $230
h. A utility bill is received amounts to $740 and is payable by Feb. 5
i. Income taxes are to be accrued at a rate of 30% of income before taxes
4. Post each adjusting journal entry to T accounts
5. Prepare the following financial statements: a. Income statement for month ended January 31 b. Statement of retained earnings for the month ended January 31 c. Balance sheet at January 31
6. What are your reactions to Moonlight’s first month of operations? Is the bank comfortable with the loan it made?

Answers

Answer:

1. Prepare journal entries to record each of the preceding transactions.

January 2, 2014, Moonlight Bay Inn is incorporated

Dr Cash 60,000

    Cr Common stock 60,000

January 2, 2014, a Victorian Inn is purchased

Dr Land 15,000

Dr Building 35,000

    Cr Cash 50,000

January 3, 2014, promissory note signed at bank

Dr Cash 30,000

    Cr Notes payable 30,000

January 4, 2014, furniture is purchased

Dr Furniture 15,000

    Cr Cash 15,000

January 5, 2014, insurance policy is purchased

Dr prepaid insurance 6,000

    Cr cash 6,000

January 6, 2014, advertisement is placed in the local newspaper

Dr Advertising expense 450

    Cr Cash 450

January 7, 2014, cleaning supplies purchased on account

Dr Cleaning supplies 950

    Cr Accounts payable 950

January 15, 2014, wages for first 15 days are paid

Dr Wages expense 4,230

    Cr Cash 4,230  

January 16, 2014, check received form customer

Dr Cash 980

    Cr Unearned revenue 980

January 31, 2014, cash receipts from room rentals are accounted for

Dr Cash 8,300

    Cr Rental revenue 8,300

January 31, 2014, cash receipts from restaurant are accounted for

Dr Cash 6,600

    Cr Restaurant revenue 6,600

January 31, 2014, dividends are distributed

Dr Retained earnings 600

    Cr Dividends payable 600

Dr Dividends payable 600  

    Cr Cash 600

2. Post each of the journal entries to T accounts.

I used an excel spreadsheet to post the T accounts (attached file).    

3. Prepare adjusting journal entries for each of the following transactions as of January 31.

a. Depreciation of the house

depreciation expense per month = $30,000 x 1/25 x 1/12 = $116.67 ≈ $117

Dr Depreciation expense 117

    Cr Accumulated depreciation - building 117

b. Depreciation of the furniture

depreciation expense per month = $15,000 x 1/10 x 1/12 = $125

Dr Depreciation expense 125

    Cr Accumulated depreciation - furniture 125

c. Interest on the promissory note

interest expense per month = $30,000 x 12% x 28/365 = $276.16 ≈ $276

Dr Interest expense 276

    Cr Interest payable 276

d. Recognition of the expired portion of the insurance

insurance per month = $6,000 /24 = $250

Dr insurance expense 250

    Cr Prepaid insurance 250

e. Recognition of the earned portion of the guests’ deposit

Dr Unearned revenue 490

    Cr Rental revenue 490

f. Wages earned during the second half of January amount to $520 and will be paid on Feb. 3

Dr Wages expense 520

    Cr Wages payable 520

g. Cleaning supplies on hand on January 31 amount to $230

cleaning supplies expense = $950 - $230 = $720

Dr Cleaning supplies expense 720

    Cr Cleaning supplies 720

h. A utility bill is received amounts to $740 and is payable by Feb. 5

Dr Utilities expense 740

    Cr Accounts payable 740

i. Income taxes are to be accrued at a rate of 30% of income before taxes

Dr Income taxes expense

    Cr income taxes payable

4. Post each adjusting journal entry to T accounts

I used an excel spreadsheet to post the T accounts (attached file).    

5. Prepare the following financial statements: a. Income statement for month ended January 31

Income Statement

Rental revenue                       $8,790              

Restaurant revenue               $6,600

Wages expense                    ($4,750)

Advertising expense               ($450)

Depreciation expense            ($242)

Insurance expense                 ($250)

Cleaning supplies expense    ($720)

Utilities expense                      ($740)

EBIT                                        $8,238

Interest expense                     ($276)

Net income before taxes      $7,962

Income taxes                        ($2,389)

Net income after taxes         $5,573

b. Statement of retained earnings for the month ended January 31

Retained earnings at the beginning of the period:               $0

Net income:                                                                       $5,573

Dividends distributed:                                                      ($600)

Retained earnings at the end of the period                    $4,973

c. Balance sheet at January 31

Assets:

Cash $29,600

Prepaid insurance $5,750

Cleaning supplies $230

Furniture $14,875

Land $15,000

Building $34,883

Total Assets: $100,338

Liabilities and Stockholders' Equity:

Accounts payable $1,690

Unearned revenue $490

Wages payable $520

Interest payable $276

Income tax payable $2,389

Notes payable $30,000

Common stock $60,000

Retained earnings $4,973

Total Liabilities and Stockholders' Equity: $100,338

6. What are your reactions to Moonlight’s first month of operations? Is the bank comfortable with the loan it made?

Yes, the bank should be OK with the loan since the Inn was able to make a profit during the first month of operations (something very uncommon).

MC algo 3-13 Equity Multuiplier Use the following information to answer this question Windswept, Inc. 2017 Income Statement ($ in millions) $ 8.700 Net sales Cost of goods sold 7,250 350 Depreciation Earnings before interest and taxes Interest paid $ 1,100 83 $ 1,017 Taxable income 356 Taxes 661 Net income Windswept, Inc. 2016 and 2017 Balance Sheets ($ in millions) 2017 2016 2017 2016 $ 1070 $ 1,212 Cash $ 140 120 Accounts payable Long-term debt Accounts rec. 800 720 980 1,213 1,510 1,535 Inventory Common stock 3,150 450 2,890 $2.450 $ 2,375 Retained earnings Total 700 Net fixed assets 3,200 3,640 $ 6,015 $5,650 5,650 6,015 Total liab. & equity Total assets What is the equity multiplier for 2017? a) 2.08 times b) 2.42 times c) 3.01 times d) 1,68 times e) 1,26 times

Answers

Answer:

The answer is Option D. 1.68 times

Explanation:

The formula for equity multiplier is:

Equity Multiplier = Total assets ÷ Total stockholder's equity

In 2017:

Total stockholder's equity = Common stock + Retained earnings

Total stockholder's equity = $2890 + $700 = $3590

Total assets = $6,015

Now, putting these values in the above formula, we get,

Equity multiplier = $6,015 ÷ $3,590 = 1.68 times

Variable costs as a percentage of sales for Lemon Inc. are 62%, current sales are $563,000, and fixed costs are $189,000. How much will operating income change if sales increase by $39,200

Answers

Answer:

Effect on income= $14,896 increase

Explanation:

Giving the following information:

Variable costs= 62% of sales

Current sales are $563,000

Fixed costs are $189,000.

Sales increase by $39,200.

To calculate the effect on income, we need to use the following formula:

Effect on income= sales increase*contribution margin ratio

Effect on income= 39,200*(1 - 0.62)

Effect on income= $14,896 increase

Prove:

Actual income= 563,200*0.38 - 189,000= 25,016

New income= 602,400*0.38 - 189,000= 39,912

Difference= $14,896 increase

uppose McKnight ​Corp.'s breakeven point is revenues of $ 1 comma 100 comma 000. Fixed costs are $ 660 comma 000. Requirements 1. Compute the contribution margin percentage. 2. Compute the selling price if variable costs are ​$16 per unit. 3. Suppose 65 comma 000 units are sold. Compute the margin of safety in units and dollars. 4. What does this tell you about the risk of McKnight making a​ loss? What are the most likely reasons for this risk to​ increase?

Answers

Answer:

1. Compute the contribution margin percentage.

40%

2. Compute the selling price if variable costs are ​$16 per unit.

$26.67

3. Suppose 65 comma 000 units are sold. Compute the margin of safety in units and dollars.

margin of safety in $ = $633,550margin of safety in % = 36.55%

4. What does this tell you about the risk of McKnight making a​ loss? What are the most likely reasons for this risk to​ increase?

Since the contribution margin is relatively high, this means that the production costs are relatively low (compared to selling price). The associated risks may come from high leverage, e.g. machinery purchased on credit that results in high interest expense. For the most part, having a high contribution margin is generally very good, just ask Apple.

Explanation:

break even point is $ = $1,100,000 (= break even point units x selling price)

fixed costs = $660,000

contribution margin % = (total sales - total variable costs) / total sales

total variable costs = $1,100,000 - $660,000 = $440,000

contribution margin % =  ($1,100,000 - $660,000) / $1,100,000 = 40%

variable costs = $16 per unit

0.4 = (x - $16) / x

0.4x = x - $16

$16 = 0.6x

x = $26.67

65,000 x $26.67 = $1,733,550

margin of safety in $ = $1,733,550 - $1,100,000 = $633,550

margin of safety in % = $633,550 / $1,733,550 = 36.55%

"Donald is a 21-year-old full-time college student. During 2019, he earned $2,550 from a part-time job and $1,150 in interest income. If Donald is a dependent of his parents, what is his standard deduction amount

Answers

Answer:

His standard deduction amount would be of $ 2,900

Explanation:

In order to calculate his standard deducion amount If Donald is a dependent of his parents we would have to make the following calculation:

Since His earned income is more than $1,150, therefore, Standard Deduction would be= $2,550 + $350

Standard Deduction would be= $2,900

Therefore, If Donald is a dependent of his parents, his standard deduction amount would be of $ 2,900

A firm wishes to issue new shares of its stock, which already trades in the market. The current stock price is $24, the most recent dividend was $3 per share, and the dividend is expected to grow at a rate of 4% forever. Flotation costs for this issue are expected to be 6%. What is the required rate of return (or financing cost) in this new issue?

Answers

Answer:

17.83%

Explanation:

The computation of required rate of return is shown below:-

Required rate of return = ((Expected dividend ÷ (Current Stock price × (1 - Flotation cost as a percentage of issue price)) + Growth rate)) × 100

= ((Dividend × (1 + Growth rate)) ÷ Current Price of stock × (1 - Flotation cost as a percentage of issue price)) + Growth rate))) × 100

= ($3 × (1.04) ÷ $24 × (1 - 0.06) + 0.04) × 100

= ($3.12 ÷ $22.56 + 0.04) × 100

= (0.138297872  + 0.04) × 100

= 17.82978723

or

= 17.83%

Therefore we have applied the above formula.

Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest will provide $ 9 comma 000 in the first​ year, and will grow by 7 ​% per​ year, forever. If the interest rate is 10 ​%, how much must Martin provide to fund this​ bequest?

Answers

Answer:

$300,00

Explanation:

In a situation where the interest rate is said to be 10% the amount that Martin must provide in order to fund this​ bequest will therefore be:

Bequest first year $9,000/(Interest rate 10%-

Increase of 7 ​% per​ year)

Hence:

$9,000/0.03

=$300,000

Therefore $300,00 will be provided to fund the bequest

For the item below, determine whether the amount would be disclosed in the cash flow statement under: Operating (CFO), Investing (CFI), or Financing (CFF), as well as if would be a net increase (+) or decrease (-) in cash or cash equivalents:
A. Principal payments on long-term borrowings
B. Decrease in accounts receivable
C. Proceeds from long-term borrowings
D. Increase in deferred income tax net liability
E. Net earnings
F. Increase in prepaid expenses
G. Increase in merchandise inventories
H. Cash dividends paid
I. Proceeds from issuance of common stock
J. Increase in accrued salaries, wages, and related benefits
K. Payments for repurchase of common stock
L. Capital Expenditures
M. Increase in accounts payable
N. Depreciation and amortization expenses

Answers

Answer:

Explanation:

Operating Cashflows have to do with the transactions dealing with the day to day activities of the business including calculations of net income and revenue and expenses.

Investing Cashflow has to do with the transactions involving fixed assets such as Property, Land and Equipment since these are Capital Expenditure. Also included are stock ownership and bond holding of other entities.

Financing Cashflows refer to transactions relating to the provision of capital for the business through loans or Equity.

A. Principal payments on long-term borrowings.

FINANCING - decrease (-)

This is a financing transaction that deals with long term loans. It will decrease the cash or cash equivalents held.

B. Decrease in accounts receivable.

OPERATING - Increase +

This is an operating cashflow and it is an increase because Receivables reduce when they pay the business so cash increases.

C. Proceeds from long-term borrowings.

FINANCING - Increase +

This is a financing activity and the increase is due to money from Issuing Bonds or borrowing money coming into the business.

D. Increase in deferred income tax net liability.

OPERATING - Increase +

By reducing the amount that we pay in tax that means that less cash has been paid which also means that more cash is kept in the business which increases the Cash balance.

E. Net earnings.

OPERATING - Increase +

So long as the Net Earnings are positive, they go to the Operating Section and increase the amount of cash and cash equivalents.

F. Increase in prepaid expenses.

OPERATING - Decrease -

By increasing the amount of prepaid expenses, this means that the company used money to pay for expenses it hasn't incurred yet which reduces the cash in hand.

G. Increase in merchandise inventories.

OPERATING - Decrease -

By buying more Inventory, more cash was spent and this therefore reduces the cash and cash equivalents balance.

H. Cash dividends paid.

FINANCING - Decrease -

Dividends relate to equity and Equity is a Financing Cashflow Transaction. Paying Dividends means giving out cash so it reduces the cash and cash equivalents balance.

I. Proceeds from issuance of common stock.

FINANCING - Increase

Similar to proceeds from long term borrowings, Equity is a Financing activity as it finds the business, the proceeds received from here increase the cash and cash equivalents balance.

J. Increase in accrued salaries, wages, and related benefits.

OPERATING - Increase +

These are Operating Cashflow transactions and by withholding them, the business does not spend cash on them. That cash that was not paid is an increase to the cash and cash equivalents balance.

K. Payments for repurchase of common stock.

FINANCING - Decrease -

By repurchasing stock which is an Equity transaction, this goes to the Financing Section. The cash spent to repurchase the stock reduces the amount of cash and cash equivalents on hand.

L. Capital Expenditures.

INVESTING - Decrease -

By buying capital items or spending on Capital Investments, the company makes an investment and as such this goes to the Investment Section. The expenses are a reduction on cash.

M. Increase in accounts payable.

OPERATING - Increase +

Accounts Payable are an Operating Activity and when they are increased that means that the company paid less cash and bought more things on credit. That cash that wasn't paid is an increase in the cash balance.

N. Depreciation and amortization expenses.

OPERATING - Increase +

By including depreciation and amortization in the operating cashflow, these increase the Cashflow because they are non cash items. Even though they are recorded, no physical cash actually flows to them. This cash that was supposed to flow to them is in increase.

Kerbow Corporation uses part B76 in one of its products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. An outside supplier has offered to make the part and sell it to the company for $27.40 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $6,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part B76 could be used to make more of one of the company's other products, generating an additional segment margin of $29,000 per year for that product.A. Prepare a report that shows the effect on the company's total net operating income of buying part B76 from the supplier rather than continuing to make it inside the company.B. Identify which alternative the company should choose and explain why.C. Determine what errors managers may make when considering make or buy decisions and basing the decision solely on the data?

Answers

Answer:

12,000 units

outside supplier offers at $27.40 each = $328,800

current relevant costs:

direct materials $7.20 x 12,000 = $86,400direct labor $7.10 x 12,000 = $85,200variable overhead $3.50 x 12,000 = $42,000 supervisor's salary $4.70 x 12,000 = $56,400total = $270,000

only $6,000 of allocated fixed costs can be avoided

additional revenue from using the freed space $29,000

A. Prepare a report that shows the effect on the company's total net operating income of buying part B76 from the supplier rather than continuing to make it inside the company.

                                         Keep              Buy                   Differential

                                        producing       from vendor     amount

production cost               $270,000                       $0     $270,000

purchase cost                              $0          $328,800     ($328,800)

avoidable costs                           $0             ($6,000)          $6,000

additional revenue                      $0           ($29,000)       $29,000

total                                  $270,000          $293,800      ($23,800)

B. Identify which alternative the company should choose and explain why.

The company should keep producing the part because production costs are lower than buying it from an outside vendor.

C. Determine what errors managers may make when considering make or buy decisions and basing the decision solely on the data?

If we had made this decision based on total production costs, then management would have erroneously chosen to purchase the part from an outside vendor. Total production costs are $28.30 per unit, but almost $5.80 per unit are not avoidable (mostly fixed and general overhead), so the company will incur them no matter what. You have to compare only relevant costs or revenues.

How will you use PowerPoint to enhance the presentation of information and engage your audience in your professional or academic life? What are the benefits of using a PowerPoint presentation?

Answers

Answer:

Using power point to enhance the presentation of information certainly come with many different benefits which are discussed as under:

1. Visual impact can help retain the interest of audience.

2. highly flexible and persoanlization is allowed according to the needs.

3. easily embed many different tools directly into the PPT like videos, spreadsheets etc.

4. color schemes can be used and data can be presented in a compact form.

5. easy to convert into any formats like .docs or .pdf.

6. easy to share

7. user friendly

8. tons of automated templates to use on the go.

Earnings per Share and Price-Earnings Ratio A company reports the following: Net income $1,306,000 Preferred dividends $74,000 Shares of common stock outstanding 80,000 Market price per share of common stock $97.02 a. Determine the company's earnings per share on common stock. Round your answer to the nearest cent. Use the rounded answer of requirement a for subsequent requirement, if required. $ b. Determine the company's price-earnings ratio. Round to one decimal place.

Answers

Answer:

(a) The company's earnings per share on common stock is $ 15.40

(b) The company's price-earnings ratio is 6.3

Explanation:

Net income = $1,306,000

Preferred dividends = $74,000

Shares of common stock outstanding = 80,000 shares

Market price per share of common stock = $97.02

(a) Earnings per share = (Net income−Preference dividend ) ÷ Shares outstanding

=  ($1,306,000−$74,000 ) ÷ 80,000 shares

=  $1,232,000  ÷ 80,000 shares

= $ 15.4

(b) Price-Earnings ratio =  Market price per share  ÷ Earnings per share

=  $97.02 ÷ $15.40 per share

= 6.3

What are the principles of logic and critical thinking?​

Answers

Defining a problem, examining evidence, analyzing, and asking questions

The Delta Manufacturing Company has a marginal tax rate of 21 %. The last dividend paid by Delta was $2.60. The expected long-run growth rate is 4%. If investors require 11% rate of return, what is the current price of the stock (P0)?

Answers

Answer:

The stock price is 38.63

Explanation:

We use the gordon model to calculate the horizon value and with htat the value of the stock:

[tex]\frac{D_1}{r-g} = PV\\\frac{D_0(1+g)}{r-g} = PV\\[/tex]

D1 = 2.60 x 1.04 = 2.704

rate of return 11% = 0.11

grow rate = 4% = 0.04

[tex]\frac{2.704}{0.11-0.04} = PV\\[/tex]

P0 = 38.62857143

The taxes should be ignored as the gordon model do not include them in the calculations

The following information is available for Brendon Company before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained earnings? Retained earnings $ 112,000 Dividends 32,000 Fees earned 187,000 Depreciation Expense—Equipment 12,000 Wages expense 71,400 Interest expense 3,300 Insurance expense 11,700 Rent expense 24,200

Answers

Answer:

$64,400

Explanation:

The amount of in the income summary that would be closed to retained earnings is the fees earned of $187,000 less the depreciation expense of $12,000,wages expense of $71,400,interest expense of $3,300,insurance expense of $11,700 as well as the rent expense of $24,200 as computed thus:

net income from income summary=$187,000-$12,000-$71,400-$3,300-$11,700-$24,200=$64400

Retained earnings closing balance=$112,000-$32,000+$64400 =$ 144,400.00  

15) A market is defined as A) a physical place where people buy only goods. B) a physical place where people buy both goods and services. C) a store where people buy physical goods. D) any arrangement that brings buyers and sellers together. E) a place where one good is bartered for another.

Answers

Answer:

D) any arrangement that brings buyers and sellers together.

Explanation:

In earlier times before now a market has a specific way of defining it. But due to recent advancement in technology, it can be described or defined to be any arrangement that brings buyers and sellers together.

The power of online presence totally altered the initial marker definitions the world know as any physical place where these buyers and sellers meet to do their tradings or businesses or a place where goods are bartered for another. Therefore any arrangement, be it via mail, sms, codes, online stores, video meetings etc are all forms of market places.

Financial aspects of employment
Wang Min and Roger are friends from college and both have received offers for entry level positions at a San Francisco corporation in their related fields. Wang Min and Roger would like to room together in San Francisco.
Consider Wang Min and Roger’s personal situations, assuming the city indices are:
Boston: 151
San Francisco: 135
Cleveland: 99
Consider the following scenarios:
Wang Min
Wang Min Wang Min is from Boston, where the cost of living is higher than it is in San Francisco. Wang Min’s parents are discouraging her from taking the position because they would like her to live at home for a while, find a job in the area, and save some money. Wang Min has already convinced her parents that she will live on her own even if she finds a job in Boston. Wang Min took a personal finance course and knows how to compare salaries in different cities. Wang Min has been offered $25,000 to work in San Francisco.
Roger
Roger is from Cleveland, where the cost of living is lower than it is in San Francisco. Roger’s parents are encouraging him to take the position because jobs are hard to come by in Cleveland and he will be able to get a good start to his career and save some money. Now, he wants to make sure that the offer in San Francisco is worth the move. Roger has been offered $30,000 to work in San Francisco.

Answers

Answer:

Wang Min's situation:

Boston: 151

San Francisco: 135

If Wang Min wishes to consider a similar offer in Boston, the offer should be for at least = ($25,000/135) x 151 = $27,963. Since San Francisco is "cheaper" than Boston, she should earn more money in Boston in order to consider a comparable offer.

Roger's situation:

Cleveland: 99

San Francisco: 135

If Roger wishes to consider a similar offer in Cleveland, the offer should be for at least = ($30,000/135) x 99 = $22,000. Since San Francisco is "more expensive" than Cleveland, he should earn less money in Cleveland in order to consider a comparable offer.

Allowing a tax credit for certain solar energy property can be justified: a.Based on the wherewithal to pay concept. b.As helping small businesses. c.As promoting administrative feasibility. d.As promoting a government policy to use alternative energy sources. e.None of these choices are correct.

Answers

Answer: As promoting a government policy to use alternative energy sources.

Explanation:

A tax credit is a form of tax incentive which can help in the reduction of the amount of money that a taxpayer is owing the government. Here, the taxpayer can just deduct the tax credit from the total amount of taxes that the individual owe thereby leading to him paying a lower amount as tax.

In this case, allowing tax credit for certain solar energy property may be a way the government wants to make people start using other forms of energy. Giving tax credit will lead to a cheaper price for the solar energy products.

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