Answer and Explanation:
The Journal entries are shown below:-
1. Cash Dr, $2,800,000 (400,000 × $7)
To Common stock $2,800,000
(Being issue of common stock is recorded)
Here we debited the cash as as it increased the assets and we credited the common stock as it also increased stockholder equity
2. Organisation expenses Dr, $7,000 (1,000 × $7)
To Common stock $7,000
(Being issue of common stock for organisation expenses is recorded)
Here we debited the organization expenses as it increased the expenses and we credited the common stock as it also increased stockholder equity
3. Land Dr, $250,000
Building Dr, $400,000
Equipment $70,000
To Common stock $560,000
To Paid in capital in excess of par value- Common stock $160,000
(Being exchange of common stock with Land, building and equipment is recorded)
Here we debited the land, building, equipment as it increased the assets and we credited the common stock and paid in capital in excess of par value as it also increased stockholder equity
4. Cash Dr, $1,100,000 (25,000 × $44)
To Preferred stock $1,000,000 (25,000 × $40)
To Paid in capital in excess of par value-preferred stock $100,000
(Being issue of preferred stock is recorded)
Here, we debited the cash as it increased the assets and we credited the preferred stock and paid in capital in excess of par value as it also increased stockholder equity
If the Apple corporation sells a bond it is a. selling shares of ownership directly to the public. b. borrowing indirectly from the public. c. borrowing directly from the public. d. selling shares of ownership indirectly to the public.
Answer:
c. borrowing directly from the public.
Explanation:
If the Apple corporation sells a bond it is borrowing directly from the public. That is because corporate bonds are exactly that, they are bonds issued by a corporation in which the individual buying them is basically loaning money to the corporation which they will receive back the full amount that they loaned out as soon as the bond matures. Therefore by buying a corporate bond you are directly loaning that corporation money to finance their operations.
If Apple Corporation sells a bond, it is borrowing indirectly from the public. Therefore, the correct option is b.
A bond is a debt instrument issued by a corporation or government entity to raise funds. When Apple sells a bond, it is essentially borrowing money from investors or the public. In return, Apple promises to repay the principal amount of the bond along with periodic interest payments. Bonds do not involve selling shares of ownership in the company, as in the case of issuing stocks. Instead, bonds represent a form of debt financing for the issuer.
Thus, the ideal selection is option b.
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Sterile Feral, Inc. is a nonprofit organization that catches wild or stray cats, and then neuters, vaccinates, and releases them back into the wild. In recent years, nonprofit organizations such as Sterile Feral have turned to marketing to help:__________.
a. receive additional government funding.
b. expand its business to stray dogs.
c. maintain its nonprofit status.
d. achieve organizational goals.
e. compete with other similar organizations.
Answer:
d. achieve organizational goals.
Explanation:
Sterile Feral, Inc. being a non-profit organization that catches wild or stray cats, and then neuters, vaccinates, and releases them back into the wild.
If Sterile Feral Inc. then turns to marketing, this simply means that they're more interested in achieving organizational goals of saving endangered cats.
Also, as a non-profit organization, Sterile Feral Inc. isn't operating solely to make money or profits, it is rather literally trying to impact positively the cat world.
Zeke Company sells 26,900 units at $16 per unit. Variable costs are $9 per unit, and fixed costs are $38,100. The contribution margin ratio and the unit contribution margin, respectively, are
Answer:
Contribution margin ratio= 0.4375
Contribution margin= $7
Explanation:
Giving the following information:
Zeke Company sells 26,900 units at $16 per unit. Variable costs are $9 per unit, and fixed costs are $38,100.
To calculate the contribution margin per unit, we need to use the following formula:
Contribution margin= selling price - unitary variable cost
Contribution margin= 16 - 9= $7
Now, we can calculate the contribution margin ratio:
Contribution margin ratio= contribution margin/ selling price
Contribution margin ratio= 7/16
Contribution margin ratio= 0.4375
Way Cool produces two different models of air conditioners. The company produces the mechanical systems in their components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.Process Activity Overhead Cost Driver Quantity Components Changeover $ 500,000 Number of batches 800 Machining 279,000 Machine hours 6,000 Setups 225,000 Number of setups 120 $ 1,004,000 Finishing Welding $ 180,300 Welding hours 3,000 Inspecting 210,000 Number of inspections 700 Rework 75,000 Rework orders 300 $ 465,300 Support Purchasing $ 135,000 Purchase orders 450 Providing space 32,000 Number of units 5,000 Providing utilities 65,000 Number of units 5,000 $ 232,000 Additional production information concerning its two product lines follows.Model 145 Model 212 Units produced 1,500 3,500 Welding hours 800 2,200 Batches 400 400 Number of inspections 400 300 Machine hours 1,800 4,200 Setups 60 60 Rework orders 160 140 Purchase orders 300 150 1. Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimals places.)2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212. (Round your final answers to 2 decimals places.)3. Assume if the market price for Model 145 is $820 and the market price for Model 212 is $480, determine the profit or loss per unit for each model. (Round your final answers to 2 decimals places.)
Answer:
1. Overhead cost per unit for Model 145 is $515.59, and overhead cost per unit for Model 212 is $265.12.
2.Total cost per unit for Model 145 is $765.59, and total cost per unit for Model 212 is $445.12.
3. Profit per unit for Model 145 is $54.41, while profit per unit for Model 212 is $34.88.
Explanation:
1. Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimals places.)
Note: See the attached excel file for the computation.
2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212. (Round your final answers to 2 decimals places.)
Total cost per unit for each model = Overhead cost per unit + direct labor and direct materials costs per unit.
Therefore, we have:
Total cost per unit for Model 145 = $515.59 + $250 = $765.59
Total cost per unit for Model 212 = $265.12 + $180 = $445.12
3. Assume if the market price for Model 145 is $820 and the market price for Model 212 is $480, determine the profit or loss per unit for each model. (Round your final answers to 2 decimals places.)
Profit or loss per unit for each model = Market price per unit - Total cost per unit.
Therefore, we have:
Profit or loss per unit for Model 145 = $820 - $765.59 = $54.41 profit
Profit or loss per unit for Model 212 = $480 - 445.12 = $34.88 profit
Composing powerful paragraphs is essential when striving for dear communication. Familiarize yourself with basic paragraph elements, various paragraph patterns, and strategies for building coherence. Use the following paragraphs to answer the questions that follow
Paragraph A: Last week, three of our Xdite executives closed a lucrative merger deal with Editionplus. The merger will add more than 500 accounts to our business and will increase our profits by 39 percent in less than a year. Additionally, the executives met with several Editionplus product designers and agreed on three new computer prototypes that we will produce during the next five years. This means we will expand our business to both Los Angeles and Las Vegas.
Paragraph B: Employee reaction has been mixed about our recent plans to expand to Las Vegas and Los Angeles. Many Xcite employees are concerned that the Los Angeles site will not have the same relaxed corporate environment as the current site. However, this is not the case: The relaxed corporate environment at the San Francisco site will be replicated in Los Angeles. The culture we have developed works for the company and our employees, and we don't plan to change it. Human resources executives are already interviewing San Francisco employees so they can capture and replicate the culture with ease.
Answer: 1. A, C
2. "Everyone in senior-level positions has worked his or her way up the corporate ladder and has contributed greatly to the company's success. This team has increased our profits by 6 percent, expanded office space, hired additional IT support, and strengthened our IT infrastructure. These are just a few of this leadership team's many accomplishments."
Explanation:
1. The Direct Approach is also known as a Deductive Approach. This is because when using the Direct Approach, the writer or speaker begins with the main point of the article and then gives supporting evidence and explanations as they go further along.
Paragraph A uses the Direct approach because the writer began by talking about the main point of the sealing of the deal with Editionplus. It then speaks on how it will increase their profits and how they even met with some of their product designers.
Paragraph C also uses the Direct Approach as it speaks to the effectiveness of the leadership first and then gives evidence of why they are effective by stating that they worked hard for it and that they have increased profits, office space and strengthened infrastructure.
2. Supporting sentences are made with the purpose of supporting the main point. They expound on the point and give it meaning by showing evidence of the original point.
Option C would be the correct answer because it gave evidence of the main point in Paragraph C. The Main Point noted how the leadership in San Francisco has been phenomenal for the past decade. Option C then speaks on how they have done so by stating that they had worked their way up and contributed to the success of the company by having increased profits by 6 percent, expanded office space, hired additional IT support, and strengthened IT infrastructure.
I have attached the full question to this answer.
Due to a recession, expected inflation this year is only 3.75%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.75%. Assume that the expectations theory holds and the real risk-free rate (r*) is 3.5%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 0.5%, what inflation rate is expected after Year 1
Answer:
5.25%
Explanation:
To calculate the inflation for the year 3, we will have to calculate the yield on 1 Year treasury bond.
The yield is calculated using the following formula:
Nominal Yield on Bond = Real risk free rate + Inflation for the year
Here
Inflation for Year One is 3.75%
Real Risk-Free Rate is 3.5%
Nominal yield on bond is Y for year 1
By putting values, we have:
Y = 3.5% + 3.75% = 7.25%
For 3 years treasury bond,
Nominal Yield on Treasury Bond for 3 years = Yield on year 1 + Inflation
Y3 = 7.25% + 1.5% = 8.75 %
Now if we deduct the real risk free rate from the 3 year yield on the treasury bond, then the resultant rate would be the inflation rate for the year 3.
Inflation Rate for Year 3 = Y3 - Real Risk-Free Rate
Inflation Rate for Year 3 = 8.75% - 3.5%
Inflation Rate for Year 3 = 5.25%
During 2021, a company sells 500 units of inventory for $95 each. The company has the following inventory purchase transactions for 2021:Calculate cost of goods sold and ending inventory for 2021 assuming the company uses the weighted-average cost method
Answer:
cost of goods sold = $36,285
ending inventory = $1,742
Explanation:
when you use the weighted average cost method you have to calculate the COGS using the total number of units and the total amount paid for them.
beginning inventory = 71 units for $5,325
purchase 1 = 262 units for $18,864
purchase 2 = 187 units for $13,838
total 524 units for $38,027
cost per unit = $38,027 / 524 units = $72.57
cost of goods sold = 500 units x $72.57 = $36,285
ending inventory = 24 units x $72.57 = $1,741.68 ≈ $1,742
Dell Computer buys computer chips from Intel for the purpose of making computers to be sold to consumers and other organizations. Dell is an example of which type of organizational buyer?
a. Intermediary
b. Producer
c. Wholesaler
d. Institution
Answer:
b. Producer.
Explanation:
Organizational buying deals with the process of purchasing products and services after duly identifying, evaluating and choosing which company to buy from.
Organizational buying is mainly classified into four categories, these are;
1. Producer.
2. Intermediary or Retailers.
3. Wholesaler.
4. Institution.
In this scenario, Dell Computer buys computer chips from Intel for the purpose of making computers to be sold to consumers and other organizations. Dell is an example of a producer organizational buyer because it bought computer chips, so it can be used to manufacture a computer.
Hence, the producers usually buy raw materials, components or other parts, from other manufacturers to use in producing goods for their consumers or end users.
Caroline runs her own business selling horse related products (saddles, boots, bridles, etc.). She is considering investing $70,000 into an operating systems for security and data management for online ordering. After 8 years the equipment has a salvage value of $18,000. In the third year a major update is expected to cost $5,000. The operating costs per year are $2,000 for license and IT contracts.
a) Draw the cash flow diagram.
b) What is the present value the expected costs of the new security and data management system (including salvage value) using a 5% interest rate?
Answer:
The present value the expected costs of the new security and data management system is $-75,062.5
Explanation:
Kindly check attached picture for explanation
Firms HD and LD are identical except for their level of debt and the interest rates they pay on debt—HD has more debt and pays a higher interest rate on that debt. Based on the data given below, what is the difference between the two firms' ROEs? Applicable to Both Firms Firm HD's Data Firm LD's Data Assets $200 Debt ratio 50% Debt ratio 30% EBIT $40 Interest rate 12% Interest rate 10% Tax rate 35%
Answer:
2.41%
Explanation:
The difference between the two firms' ROEs is shown below:-
Particulars Firm HD Firm LD
Assets $200 Debt ratio 50% Debt ratio 30%
EBIT $40 Interest rate 12% Interest rate 10%
Tax rate 35%
Debt $100 $60
Interest $12 $6
($100 × 12%) ($60 × 10%)
Taxable income $28 $36
($40- $12) ($40 - $6)
Net income $18.2 $22.1
$28 × (1 - 0.35) $36 × (1 - 0.35)
Equity $100 $140
($200 - $100) ($200 - $60)
ROE 18.2% 15.79%
($18.2 ÷ $100) ($22.1 ÷ $140)
Taxable income = EBIT - Interest
Net income = Income - Taxable income
Equity = Assets - Debt
ROE = Net income ÷ Equity
Difference in ROE = ROE Firm HD - ROE Firm LD
= 18.2% - 15.79%
= 2.41%
So, for computing the difference between the two firms' ROEs we simply deduct the ROE firm LD from ROE firm HD.
TOMS is a shoe company that, since its inception, has given away one pair of shoes to someone in need for every pair purchased by a customer. They have expanded their philanthropy and now support programs designed to provide eye exams and glasses, clean drinking water, and safe birthing services to people in need in various parts of the world. Customers loyal to the TOMS brand believe the company is _____________, fill in the blank, through their participation in these charitable efforts.
Answer:
Socially responsible
Explanation:
A socially responsible company is one that seeks to identify as well as relieve the social needs in its business environment.
A major social problem or need around the world is the lack of clean drinking water and birthing services. Thus, by proffering solutions to this problem loyal customer of TOMS shoe company could notice that the company takes seriously its responsibility to the society.
The preliminary 20 21 income statement of Alexion Systems, Inc., is presented below: ALEXIAN SYSTEMS, INC. Income Statement For the Year Ended December 31, 2021 ($ in millions, except earnings per share) Revenues and gains: Sales revenue 437 Interest revenue 5Other income 127Total revenues and pains Expenses: 569 Cost of goods sold 246Selling and administrative expense 151Income tax expense 43 Total expenses 440Net Income 129Earnings per share 12.90Additional Information: 1. Selling and administrative expense includes $27 million in restructuring costs. 2. Included in other income is $120 million in income from a discontinued operation. This consists of $90 million in operating income and a $30 million gain on disposal. The remaining $7 million is from the gain on sale of investments 3. Cost of goods sold was increased by $10 million to correct an error in the calculation of 2020's ending inventory. The amount is material Required: Prepare a revised income statement for 2021 reflecting the additional facts.
Answer:
Alexion Systems, Inc.
Income Statement
For the Year Ended December 31, 2021
(in $ millions)
Sales revenue $437
Cost of goods sold ($256)
Gross profit $181
Operating expenses:
S&A expense ($124)Restructuring costs ($27)Income from continuing operations b/ Taxes $30
Income tax expense ($7,5)
Income from continuing operations $22.5
Other revenues and expenses:
Interest revenue $5Gain on sale of investments $7Income tax for other revenues ($3)Other revenues and expenses $9
Discontinued operations:
Operating income $90Gain on disposal $30Income tax on discontinued operations ($30)Income from discontinued operations $90
Net income $121.50
Earnings per share $12.15
Explanation:
I assumed income tax rate = 25% (I divided $43 / $172)
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows: 0 1 2 3 4 Project X -$1,000 $100 $320 $400 $700 Project Y -$1,000 $1,000 $110 $55 $45 The projects are equally risky, and their WACC is 13%. What is the MIRR of the project that maximizes shareholder value
Answer:
Project X maximizes shareholder value (highest NPV) and has a MIRR of 14.27%.
Explanation:
year cash flow project X cash flow project Y
0 -1,000 -1,000
1 100 1,000
2 320 110
3 400 55
4 700 45
WACC = 13%
Using an excel spreadsheet I calculated the projects' NPV, IRR and MIRR
NPV IRR MIRR
project X $45.65 15% 14.27%
project Y $36.82 16% 14.03%
The modified internal rate of return (MIRR) considers that the project's cash inflows are invested at the company's WACC and the initial investment is financed at a certain debt rate (in this case the same WACC).
A short forward contract that was negotiated some time ago will expire in three months and has a delivery price of $40. The current forward price for three-month forward contract is $42. The three month risk-free interest rate (with continuous compounding) is 8%. What is the value of the short forward contract?
Answer:
-$1.96 is the value.
Explanation:
The contract gives obligation to sell for $40 when a forward price negotiated today would give one obligation to sell for $42.
The value of contract is present value of
40 - 42= -$2
The rate is at 8%
8%= 0.08
3 months= 3/12= 0.25 years
The present value can be calculated as
Value of present contract= -2e^(0.08 x 0.25)
Value of present contract= -$1.96
Spin Cycle Architecture uses three activity pools to apply overhead to its projects. Each activity has a cost driver used to allocate the overhead costs to the projects. The activities and related overhead costs are as follows: initial concept formation $52,960; design $420,000; and construction oversight $118,650. The cost drivers and estimated use are as follows.
Activities Cost Drivers Estimated Use of Cost Drivers per Activity
Initial concept formation Number of project changes 16
Design Square feet 140,000
Construction oversight Number of months 105
Required:
a. Compute the predetermined overhead rate for each activity.
b. Classify each of these activities as unit-level, batch-level, product-level, or facility-level.
Answer:
a. predetermined overhead rate for each activity
initial concept formation = $3,310 per Project Change
design = $3 per Square feet
construction oversight = $1,130 per Month
b. Classification
unit-level activities :
design
batch level activities :
initial concept formation
Product level activities :
design
Facility level activities :
initial concept formation
construction oversight
Explanation:
This question requires application of Activity Based Costing (ABC) method of allocating overheads.
For each overhead a rate is determined as follows :
initial concept formation
Predetermined overhead rate = Overhead Cost / Number of Project Changes
= $52,960/ 16
= $3,310 per Project Change
design
Predetermined overhead rate = Overhead Cost / Square feet
= $420,000/ 140,000
= $3 per Square feet
construction oversight
Predetermined overhead rate = Overhead Cost / Number of Months
= $118,650/ 105
= $1,130 per Month
Classification
The way the activity is to be absorbed in costing determine its classification
Job costing, unit cost, ending work in process. Rowan Company produces pipes for concert-quality organs. Each job is unique. In April 2016, it completed all outstanding orders, and then, in May 2016, it worked on only two jobs, M1 and M2: A B C 1 Rowan Company, May 2016 Job M1 Job M2 2 Direct materials $ 75,000 $ 56,000 3 Direct manufacturing labour 275,000 209,000 Direct manufacturing labour is paid at the rate of $25 per hour. Manufacturing overhead costs are allo- cated at a budgeted rate of $22 per direct manufacturing labour-hour. Only Job M1 was completed in May. Required: 1. Calculate the total cost for Job M1. 2. 1,600 pipes were produced for Job M1. Calculate the cost per pipe. 3. Prepare the journal entry transferring Job M1 to finished goods. 4. What is the ending balance in the Work-in-Process Control account?
Answer:
1. The total cost for Job M1 is $592,000
2. Cost per unit is $370
3. Journal
Finished goods inventory 592,000
Work in process inventory 592,000
4. Ending balance in Work-in-Process Control account is $448,920
Explanation:
A B C
1) Rowan Company, May 2016 Job M1 Job M2
2) Direct materials $ 75,000 $ 56,000
3) Direct manufacturing labour 275,000 209,000
Direct manufacturing labour is paid at the rate of $25 per hour
Manufacturing overhead costs are allocated at a budgeted rate of $22 per direct manufacturing labour-hour
1. Direct labor rate = $25 per hour
Direct labor hours used on Job M1 = Direct manufacturing labor ÷ Direct labor rate
= 275,000 ÷ 25
= $ 11,000
Manufacturing overhead applied to Job M1 = Direct labor hours used on Job M1 x 22
= $11,000 x 22
= $242,000
Job cost sheet (Job M1)
Direct material = $75,000
Direct labor = $275,000
Overhead applied = $242,000
Total cost = $592,000
2. Cost per unit = Total cost ÷ Number of units
= 592,000 ÷ 1,600
= $370
3. Journal
Finished goods inventory 592,000
Work in process inventory 592,000
4. Direct labor hours used on Job M2 = Direct manufacturing labor/Direct labor rate
= 209,000 ÷ 25
= $8,360
Manufacturing overhead applied to Job M2 = Direct labor hours used on Job M2 x 22
= $8,360 x 22
= $183,920
Job cost sheet (Job M2)
Direct material = $56,000
Direct labor = $209,000
Overhead applied = $183,920
Total cost = $448,920
Ending balance in work in process control account = $448,920
Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bonds have a carrying value of $990,000. We call these bonds prior to maturity on September 30. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.
Answer and Explanation:
The journal entry is shown below;
Bond payable $1,000,000
Loss on retirement of bond $20,000
To Discount on bond $10,000
To Cash $1,010,000
(Being the loss on retirement of bond is recorded)
For recording this we debited the bond payable and loss as it decrease the current liabilities and it increased the losses at the same time it decreased the discount and decreased the cash so the respective accounts are credited
Which of the following factors has not contributed to the trend towards outsourcing in recent decades: Group of answer choices
a. Increasing turbulence of the business environment.
b. Increasing emphasis on cost efficiency.
c. Increasing emphases on the need for competitive advantage based upon superior capabilities Increasing transaction costs
You run a school in Florida. Fixed monthly cost is $5,435.00 for rent and utilities, $6,171.00 is spent in salaries and $1,545.00 in insurance. Also every student adds up to $91.00 per month in stationary, food etc. You charge $734.00 per month from every student now. You are considering moving the school to another neighborhood where the rent and utilities will increase to $11,679.00, salaries to $6,974.00 and insurance to $2,408.00 per month. Variable cost per student will increase up to $158.00 per month. However you can charge $1,054.00 per student. At what point will you be indifferent between your current mode of operation and the new option?
Answer:
31
Explanation:
The calculation of indifferent between your current mode of operation and the new option is shown below:-
Current Operation
Contribution Margin = Monthly Fees - Variable Cost
= $734.00 - $91.00
= $643.00
Total Fixed Cost = Rent and Utilities + Salaries + Insurance
= $5,435.00 + $6,171.00 + $1,545.00
= $13,151.00
New Operation
Contribution Margin = Monthly Fees - Variable Cost
= $1,054.00 - $158.00
= $896.00
Total Fixed Cost = Rent and Utilities + Salaries + Insurance
= $11,679.00 + $6,974.00 + $2,408.00
= $21,061.00
Here we will assume the indifferent number of students will be X
So,
Income under current option = Income under new option
$643.00 × X - $13,151.00 = $896.00 × X - $21,061.00
$253X = $7,910
X = $7,910 ÷ $253
= 31.26
or
= 31
A steel company manufactures heavy-duty brackets for the shelving industry. The company has budgeted for the production and sale of 1,000,000 brackets and has no beginning or ending inventory. Relevant operational, revenue, and cost data is as follows: Unit selling price of a bracket $22.50 Direct material required per unit 4 pounds Direct labor required per unit 0.15 hours Cost of material per pound $1.75 Direct labor cost per hour $9.00 Total variable selling costs $2,250,000 Total fixed costs $1,500,000 Based on the data provided, what is the unit contribution margin per bracket
Answer:
Contribution margin per unit = $11.90
Explanation:
Given:
Total unit sale = 1,000,000
Unit selling price of a bracket = $22.50
Direct material required = 4 pounds per unit
Direct labor required = 0.15 hours per unit
Cost of material per pound = $1.75
Direct labor cost per hour = $9.00
Total variable selling cost = $2,250,000
Find:
Contribution margin per unit = ?
Computation:
Direct material per unit = 4 pounds per unit × $1.75
Direct material per unit = $7
Direct labor per unit = 0.15 hours per unit × $9.00
Direct labor per unit = $1.35
Variable selling cost per unit = Total variable selling cost / Total unit sale
Variable selling cost per unit = $2,250,000 / 1,000,000
Variable selling cost per unit = $2.25
Contribution margin per unit = Sales per unit - Variable cost per unit
Contribution margin per unit = Sales per unit - [Direct material per unit + Direct labor per unit + Variable selling cost per unit]
Contribution margin per unit = $22.50 - [$7 - $1.35 - $2.25]
Contribution margin per unit = $22.50 - [$10.6]
Contribution margin per unit = $11.90
"An investor wishes to buy a new issue of U.S. Government agency bonds. You recommend that the customer purchase Federal Home Loan Bank bonds with a 20 year maturity. An investor who purchases the new issue of Federal Home Loan Bank bonds can expect to pay:"
Answer: A. Par
Explanation:
While US Government bonds are usually sold at auction which means a price different from Par, Federal Agency bonds operate much like Corporate Bonds in their selling procedure. They engage a group of Underwriters called a Selling group which can be made up of large banks and brokers.
These underwriters will then handle everything that have to do with the sale and sell it to the public. Like a Corporate listing, they get a commission from this.
Because of this direct sale by the Underwriter to the public, the Public is most likely to get the offering at Par.
The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments $ 45,000
Accounts receivable (net) 30,000
Inventory 25,000
Property, plant and equipment 210,000
Total Assets $310 000
Liabilities and Stockholders Equity
Current liabilities $ 60,000
Long-term liabilities 95,000
Stockholders' equity-common 155,000
Total Liabilities and Stockholders Equity $310.000
Income Statement
Sales revenue $ 116,000
Cost of goods sold 66.000
Gross margin 50,000
Operating expenses 30.000
Net income $20,000
Number of shares of common stock 6,000
Market pice of common stock $20
Dividends per share on common stock .50
Cash provided by operations $35,000
What is the inventory turnover for this company?
1) 2.6 times
2) 4.6 times
3) 5.3 times
4) 0.38 time
Answer:
1) 2.6 times
Explanation:
The Inventory turnover ratio measures the activity of liquidity of a company`s Inventory.
Inventory turnover = Cost of goods sold / Inventory
= $66,000 / $25,000
= 2.64 times
The risk-free rate of interest, kRF, is 6 percent. The overall stock market has an expected return of 12 percent. Nutshell, Inc. has a beta of 1.2. What is the required return of Nutshell, Inc. stock? *
Answer:required return of Nutshell, Inc. stock = 13.2%
Explanation:The Required return also called Hurdle rate is the minimum return in percentage which an investor should receive from doing business or investing in a business to compensate for the risks associated with the business. The more risky the investment, the more high returns and the less risky investment, the lower the returns.
Required Rate of Return = Risk Free Rate + Beta x (Whole Market Return – Risk Free Rate)
given
risk-free rate = 6%
market return= 12 %
beta = 1.2
Required Rate of Return = Risk Free Rate + Beta * (Whole Market Return – Risk Free Rate
= 6% + 1.2 x (12% - 6%) = 6% + 1.2 x 6% = 0.06 + 1.2x 0.06= 0.06 + 0.072=0.132 x 100 = 13.2%
At an output level of 12,200 units, you have calculated that the degree of operating leverage is 3.20. The operating cash flow is $67,100 in this case. Ignore the effect of taxes. What will be the new degree of operating leverage for output levels of 13,200 units and 11,200 units
Answer:
For 13,200, the Operating Leverage is 3.46.
For 11,200, the Operating Leverage is 2.94.
Explanation:
The first step is to calculate the Contribution Margin per unit:
Operating Leverage = (# of units * Contribution margin per unit) / Net Operating income
Here,
Number of Units are 12,200 Units
Net Operating income $67,100
Operating Leverage is 3.2
By putting values, we have:
3.2 = (12,200 Units * Contribution margin per unit) / $67,100
(3.2 * $67,100) / 12,200 Units = Contribution margin per unit
Contribution margin per unit = $17.6 per unit
For 13,200 units:
By putting value of units and keeping other variables constant, we have:
Operating Leverage = (13,200 units x $17.60 per unit) / $67,100
Operating Leverage = 3.46
For 11,200 units:
By putting value of units and keeping other variables constant, we have:
Operating Leverage = (11,200 units * $17.60 per unit) / $67,100
Operating Leverage = 2.94
On October 1, Black Company receives a 10% interest bearing note from Reese Company to settle an $21,800 account receivable. The note is due in six months. At December 31, Black should record interest revenue of:
a. $0
b. $450
c. $900
d. $1,800
Answer:
At December 31, Black should record interest revenue of: $545
Explanation:
Black Company receives a 10% interest bearing note from Reese Company to settle an $21,800 account receivable.
The amount of the interest per year = 10% x $21,800 = $2,180
At December 31, following 3 months, the interest accrual = $2,180/12 x 3 = $545
Journal entries to record the interest accrual:
Debit Interest receivable $545
Credit Interest revenue $545
An ordinary annuity selling at $14,130.15 today promises to make equal payments at the end of each year for the next twelve years (N). If the annuity’s appropriate interest rate (IN) remains at 8.00% during this time, the annual annuity payment (PMT) will be
Answer:
PMT = $1875.00
Explanation:
The annuity refers to a series of fixed payments made after an equal interval of time and for a definite time period. The formula for the present value of annuity is,
For ordinary annuity
PV of annuity = PMT * [(1 - (1+IN)^-n) / IN]
Plugging in the values for the available variables. We calculate the PMT to be,
14130.15 = PMT * [(1 - (1+0.08)^-12) / 0.08]
14130.15 = PMT * 7.536078017
14130.15 / 7.536078017 = PMT
PMT = $1875.000493 rounded off to $1875.00
On January 1, 2016, Learned, Inc., issued $70 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay interest semi-annually each June 30 and December 31 and mature on December 31, 2035.
REQUIRED:
A) Using the present value tables, calculate the proceeds (issue price) of Learned, Inc.’s bonds on January 1, 2016, assuming that the bonds were sold to provide a market rate of return to the investor.
B) Assume instead that the proceeds were $72,400,000. Use the horizontal model (or write the journal entry) to record the payment of semi-annual interest and the related premium amortization on June 30, 2016, assuming that the premium of $2,400,000 is amortized on a straight-line basis.
C) If the premium in PART B were amortized using the compound interest method, would interests expense for the year ended December 31, 2016 be more than, less than, or equal to the interest expense reported using the straightline method of premium amortization? Explain.
D) In reality, the difference between the stated interest rate and the market rate would be substantially less than 2% . The dramatic difference in the problem was designed so that you could use present value tables to answer PART A. What causes the stated rate to be different from the market rate, and why is the difference likely to be much less than depicted in the problem?
Answer:
A) $61,654,600
B) June 30, 2016, first coupon payment
Dr Interest expense 4,840,000
Dr Premium on bonds payable 60,000
Cr Cash 4,900,000
C) If you use the effective interest rate, the bond premium is higher, so the actual interest expense would be lower:
June 30, 2016, first coupon payment
Dr Interest expense 4,756,406
Dr Premium on bonds payable 143,594
Cr Cash 4,900,000
D) The actual difference between the coupon rate and the effective interest rate (with a $72,400,000 issue price) = 14% (coupon rate) - 13.93% = 0.07%.
The bond's issue price is generally determined by the market rate, but sometimes a company might believe that the interest rate applicable to them is actually different. A company might under estimate the riskiness of their operations, but the market doesn't. Generally the market rate is correct. So any variation in the coupon rate is due to a mistake by the firm. Usually companies do not make huge mistakes, if they miss on the coupon rate it generally is not significant.
Explanation:
issued $70 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay interest semi-annually each June 30 and December 31, each coupon = $4,900,000
bonds market price = PV of maturity value + PV of coupons
PV of maturity value = $70,000,000 x 0.04603 = $3,222,100 PV of coupons = $4,900,000 x (8% annuity, 40 periods) = $4,900,000 x 11.925 = $58,432,500total issue price = $61,654,600if instead the issue price was $72,400,000 (resulting in a $2,400,000 premium), then the premium would be amortized by $2,400,000 / 40 = $60,000 during each coupon payment
if the effective interest method, (not the compound interest method), was used to amortize bond premium, then we first need to calculate the effective interest rate:
$72,400,000 - $70,000,000 = $2,400,000 / 40 = $60,000
$4,900,000 + $60,000 = $4,960,000 / {($72,400,000 + $70,000,000) / 2} = 0.0696629
bond premium discount using effective interest rate = ($72,400,000 x 0.0696629) - $4,900,000 = $5,043,594 - $4,900,000 = $143,594
"Addison Corp. is considering the purchase of a new piece of equipment. The equipment will have an initial cost of $522,000, a 3 year life, and no salvage value. If the accounting rate of return for the project is 6%, what is the annual increase in net cash flow
Answer:
$31,320.00
Explanation:
The formula for accounting rate of return is the annual net cash flow divided by the initial investment.
If the initial investment was $522,000 and the accounting rate of return is computed to be 6% per year, hence the annual increase in cash flow accruing from the investment can be calculated by changing the subject of the formula.
ARR=annual increase in cash flow/initial investment
ARR is 6%
initial investment is $522,000
annual increase in cash flow?
6%=annual increase in cash flow/$522,000
annual increase in cash flow=6%*$522,000= $31,320.00
Digger Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year.
Budgeted Actual
Overhead cost $975,000 $950,000
Machine hours 50,000 45,000
Direct labor hours 100,000 92,000
Required:
a. Compute the predetermined overhead rate.
b. Determine the amount of overhead applied for the year.
Answer:
Predetermined overhead rate = $ 9.75 per direct labor hours
Overhead applied = $897,000
Explanation:
Given:
Budgeted Overhead cost = $975,000
Actual Overhead cost = $950,000
Budgeted Machine hours = 50,000
Actual Machine hours = 45,000
Budgeted Direct labor hours = 100,000
Actual Direct labor hours = 92,000
Computation:
(a) Predetermined overhead rate.
Predetermined overhead rate = budgeted overhead cost / budgeted direct labor hours
Predetermined overhead rate = $975,000 / 100,000
Predetermined overhead rate = $ 9.75 per direct labor hours
(b) Amount of overhead applied for the year.
Overhead applied = Actual hours × Predetermined overhead rate
Overhead applied = 92000 × $9.75
Overhead applied = $897,000
Ratio proficiency McDougal Printing, Inc., had sales totaling $ 41 comma 000 comma 000 in fiscal year 2019. Some ratios for the company are listed below. Use this information to determine the dollar values of various income statement and balance sheet accounts as requested. Assume a 365-day year. Calculate values for the following: a. Gross profits b. Cost of goods sold c. Operating profits d. Operating expenses e. Earnings available for common stockholders f. Total assets g. Total common stock equity h. Accounts receivable McDougal Printing, Inc. Year Ended December 31, 2019 Sales $ 41 comma 000 comma 000 Gross profit margin 76% Operating profit margin 39% Net profit margin 7% Return on total assets 13.3% Return on common equity 24% Total asset turnover 1.9 Average collection period 64.3 days
Answer:
a) Gross Profit is $31,160,000
b) Cost of goods sold is $9,840,000
c) Operating profits is $15,990,000
d) Operating Expenses is $15,170,000
e) Earnings available to common stockholders is $2,870,000
f) Total assets is $21,581,947.37
g)Total common stock equity is $11,958,333.33
h) Accounts Receivable is $7,222,739.73
Explanation:
McDougal Printing, Inc.
Year Ended December 31, 2019
Sales = $ 41,000,000
Gross profit margin = 76%
Operating profit margin = 39%
Net profit margin = 7%
Return on total assets = 13.3%
Return on common equity = 24%
Total asset turnover = 1.9
Average collection period = 64.3 days
Calculation of the dollar values of various income statement and balance sheet accounts
a) Gross Profit = Sales × Gross Profit margin
= $41,000,000 × 76%
= $31,160,000
b) Cost of goods sold = Sales - Gross profit
= $41,000,000 - $31,160,000
= $9,840,000
c) Operating profits = Sales × Operating profit margin
= $41,000,000 × 39% = $15,990,000
d) Operating Expenses = Gross profit - Operating profit
= $31,160,000 - $15,990,000
= $15,170,000
e) Earnings available to common stockholders = Sales × Net profit margin
= $41,000,000 × 7%
= $2,870,000
f) Total assets = Sales ÷ Total asset turnover ratio
= $41,000,000 ÷ 1.9
= $21,581,947.37
g)Total common stock equity = Earnings available to common stockholders ÷ Return on common equity %
= $2,870,000 ÷ 24%
= $11,958,333.33
h) Accounts Receivable = (Sales ÷ 365 days) × Average collection period
= ($41,000,000 ÷ 365 days) × 64.3 days
= $7,222,739.73