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?
Answers
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
Related Questions
A company has a net income of $190,000, a profit margin of 9.40 percent, and an accounts receivable balance of $106,351. Assuming 72 percent of sales are on credit, what is the company's days' sales in receivables?
Answers
Answer:
The company's days' sales in receivables is 22 days
Explanation:
In order to calculate the company's days' sales in receivables we would have to calculate first the total sales with the following formula:
Total Sales = Net Income / Profit Margin
= $190,000/9.4%=$2,021,276
Hence, Credit Sales = $2,021,276*0.85= $1,718,085
Accounts receivable turnover ratio = Credit sales / Accounts Receivable
= $1,718,085 /$106,351
= 16.15485
Therefore, Days sales in receivables = 365/16.15485= 22.59 days
The company's days' sales in receivables is 22 days
QS 3-7 Adjusting prepaid (deferred) expenses LO P1 For each separate case, record the necessary adjusting entry. On July 1, Lopez Company paid $2,900 for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31. Zim Company has a Supplies account balance of $8,400 at the beginning of the year. During the year, it purchased $3,700 of supplies. As of December 31, a physical count of supplies shows $1,650 of supplies available. Prepare the year-end adjusting entries to reflect expiration of the insurance and correctly report the balance of the Supplies account and the Supplies Expense account as of December 31.
Answers
Answer:
Adjusting Journal Entries:
December 31:
Debit Insurance Expense $2,900
Credit Prepaid Insurance Account $2,900
To record the insurance expense for the year.
Debit Supplies Expense $10,450
Credit Supplies Account $10,450
To record the supplies expense for the year.
Explanation:
a) The whole portion of Prepaid Insurance has expired since payment was made for 6 months on July 1. This covers the period from July 1 to December 31.
b) The total supplies inventory for the year will be $12,100 ($8,400 + 3,700). Since the physical count shows $1,650 of supplies available, it means that the difference $10,450 ($12,100 - 1,650) had been used. This portion is therefore expensed in accordance with the accrual concept.
The constraint at Johngrass Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: UE BI CR Selling price per unit $335.18 $228.46 $199.21 Variable cost per unit $259.26 $173.08 $159.61 Minutes on the constraint 7.50 4.30 5.50 Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?
Answers
Answer:
Explanation:
UE BI CR
Selling price per unit $335.18 $228.46 $199.21
Variable cost per unit $259.26 $173.08 $159.61
Contribution margin $75.92 $55.38 $39.60
Per unit (a)
Amount of constraint 7.50 4.30 5.50
resources required to
produced one unit (b)
Contribution margin
per unit of the $10.12 $12.86 $7.20
constraint resources
(a) / (b)
Ranking 2 1 3
The company should be willing to pay up $7.20 per minute to produce more CR
The common stock of Sweet Treats is selling for $45.65 per share. The company is expected to have an annual dividend increase of 2.6 percent indefinitely and pay a dividend of $3.30 in one year. What is the total return on this stock
Answers
Answer:
9.83%
Explanation:
The computation of the total return on the stock is shown below:
As we know that
Share price = Next year dividend ÷ (Required rate of return - growth rate)
$45.65 = $3.30 ÷ (Required rate of return - 2.6%)
Let us assume the required rate of return be X
So,
$45.65 × X - 1.1869 = $3.30
$45.65 × X = $3.30 + $1.1869
So, the X is 9.83%
Hence, the total return on the stock is 9.83%
The Solow model predicts that, over time, real GDP in developing economies could potentially converge to the same level of real GDP as developed economies. Which of the following is not consistent with convergence?
a. Investors seeking to build new factories would likely build those factories in developing economies that have some political stability.
b. Developing nations should converge because they can take advantage of technological discoveries made by developed economies.
c. Over time, developing economies become richer, and developed economies become poorer, until they reach the same level of wealth.
d. Because investment in developing nations yields relatively greater returns, capital will flow into developing economies, leading to relatively greater economic gro
Answers
Answer: c. Over time, developing economies become richer, and developed economies become poorer, until they reach the same level of wealth.
Explanation:
The Solow model which is a neoclassical framework focuses on long term Economics and does indeed speak to the convergence of the Real GDPs of Developed Countries with that of Developing countries.
However, of all the options listed, Option C goes against the model because convergence cannot happen if the Developed Countries keep getting richer while Developing countries keep getting poorer. Should that happen, they will never get to the same level of wealth and indeed might end up on opposite sides of the wealth spectrum with Developed Countries being extremely wealthy and Developing countries being extremely poor.
For convergence to happen, the conditions in A, B and D are preferable as they can indeed bring about the said convergence.
John, a manager with Whole Foods Grocery Company, has just participated in a meeting that looked at future trends in the grocery business, and identified new challenges and opportunities for Whole Foods. John's participation in this meeting is an example of the __________ function of management.
Answers
Answer:
Planning
Explanation:
Planning is a management function that involves creation of a detailed plan of action in order to attain a set goals.
Planning is a continous process that management performs to modify mode of operations so that goals are better achieved.
In this scenario John participated in a meeting that looked at future trends in the grocery business, and identified new challenges and opportunities for Whole Foods.
This is an action that involves planning for future growth of the company, while identifying challenges and opportunities that will be faced.
Analyzing Adjusting Journal Entries, Prepaid Asset and Deferred Revenue Voss Inc., an accounting firm, adjusts and closes its accounts each December 31. Below are two situations requiring adjusting entries.
During the current year, supplies were purchased for $1,125 cash. The inventory of supplies at the prior year-end was $225. At the current year-end, inventory remaining was $360. Prepare the adjusting entry required for each of the following separate cases.
a. Case A-the $1,125 was debited to Supplies Expense. What is the balance of Supplies at year-end?
General Journal
Ref. Account Name Dr. Cr.
Case A Supplies 225 0
Supplies Expense 0 225
Case A: Balance of Supplies at year-end: $ 225
b. Case B the $1,125 was debited to supplies. What is the balance of Supplies at year-end?
General Journal
Ref. Account Name Dr. Cr.
Case B Supplies 900 0
Expense Supplies 0 900
Case B: Balance of Supplies at year-end: $ 225
Answers
Answer:
a. Case A-the $1,125 was debited to Supplies Expense. What is the balance of Supplies at year-end?
The previous balance was Supplies $225
If the following was made:
Dr Supplies expense 1,125
Cr Supplies 1,125
Then the ending balance of Supplies would be = -$900
b. Case B the $1,125 was debited to supplies. What is the balance of Supplies at year-end?
The previous balance was Supplies $225
If the following was made:
Dr Supplies 1,125
Cr Supplies expense 1,125
Then the ending balance of Supplies would be = $1,350
Explanation:
During the current year, supplies were purchased for $1,125 cash. The inventory of supplies at the prior year-end was $225.
Adjusting entry to record supplies expense = $1,125 + $225 - $360
Dr Supplies expense 990
Cr Supplies 990
Ending balance of supplies inventory = $360
On October 1, Natalie King organized Real Solutions, a new consulting firm. On October 31, the company's records show the following items and amounts.
Cash $2,000 Cash dividends $3,360
Accounts receivable 13,000 Consulting fees earned 15,000
Office supplies 4,250 Rent expense 2,550
Land 36,000 Salaries expense 6,000
Office equipment 28,000 Telephone expense 660
Accounts payable 7,500 Miscellaneous expenses 680
Common stock 74,000
Also assume the following:
a. The owner’s initial investment consists of $37,720 cash and $45,940 in land in exchange for its common stock.
b. The company’s $17,710 equipment purchase is paid in cash.
c. The accounts payable balance of $8,230 consists of the $2,990 office supplies purchase and $5,240 in employee salaries yet to be paid.
d. The company’s rent, telephone, and miscellaneous expenses are paid in cash.
e. No cash has been collected on the $13,800 consulting fees earned.
Required:
Using the above information to prepare an October 31 statement of cash flows for Real Solutions.
Answers
Answer:
Statement of cash flows for Real Solutions for the year ended October 31 .
Cash flow from Operating Activities
Net Profit $14,660
Adjustment for Changes in Working Capital :
Increase in Accounts receivable ($13,000)
Increase in Accounts Payable $7,500
Net Cash from Operating Activities $9,160
Cash flow from Investing Activities
Purchase of Equipment ($17,710)
Net Cash from Investing Activities ($17,710)
Cash flow from Financing Activities
Cash dividends ($3,360)
Net Cash from Financing Activities ($3,360)
Movement during the Period ($11,910)
Cash and Cash Equivalents at Beginning of the year $37,720
Cash and Cash Equivalents at End of the year $25,810
Explanation:
The Indirect Method has been used for the Preparation of Cash flow from Operating Activities. (opt for this as it is easier to deal with the information given).
Calculation of Net Income for the Year Ended October 31
Revenue :
Consulting fees earned 15,000
Consulting fees accrued 13,800
Total Revenue 28,800
Less Expenses ;
Office supplies 4,250
Rent expense 2,550
Salaries expense 6,000
Telephone expense 660
Miscellaneous expenses 680 (14,140)
Net Income 14,660
On January 1, 2009, a U.S. firm made an investment in Germany that will generate $5 million annually in depreciation, converted at the current spot rate. Projected annual rates of inflation in Germany and in the United States are 5 percent and 2 percent, respectively. The real exchange rate is expected to remain constant, and the German tax rate is 50 percent. Required: Calculate the expected real value (in terms of January 1, 2009, dollars) of the depreciation charge in year 2013. Assume that the tax write-off is taken at the end of the year.
Answers
Answer:
The expected real value (in terms of January 1, 2009, dollars) of the depreciation charge in year 2013 will be $1,958,815.416.
Explanation:
It is expected that the value of the dollar in the German market will fall at the same rate as that of the real market value of the dollar when we envisage the exchange rate will remain the same. Thus the depreciation of the tax write-off in terms of its real value in dollars will fall at 5% every year from 2009 to 2013.
Therefore, at a tax rate of 50% in Germany, a $2.5 million charge on depreciation on the investment of $5 million will result in 2013.
To calculate the real value of the dollar at an inflation of 5% yearly in 2013
When the tax rate in German is 50%, then charges of depreciation of $5 million will equal4$2.5 million in 2013 dollars. When the dollar's real value of this write-off is declining due to the inflation at 5% annually, the real value in 2013 will be calculated as:
Given: $2,500,000 (P/F , 5%, 5years) ; 0.78356 (factor for calculating the amount to be recieved after 5years)
= $2,500,000 * 0.78356
= $1,958,815.416
Oriole Distribution Co. has determined its December 31, 2020 inventory on a LIFO basis at $1007000. Information pertaining to that inventory follows: Estimated selling price $1050000 Estimated cost of disposal 43000 Normal profit margin 123000 Current replacement cost 927000 Oriole records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2020, the loss that Oriole should recognize is
Answers
Answer:
At December 31, 2020, the loss that Oriole should recognize is $123,000
Explanation:
Given:
Estimated selling price = $ 1,050,000
Estimated cost of disposal = $43,000
Normal profit margin = $123,000
Current replacement cost = $927,000
Net realizable value of the inventory = Estimated selling price - Estimated cost of disposal
Net realizable value = $1,050,000 - $43,000 = $1,007,000
Replacement cost = $927,000
Net realizable value - Normal profit = $1,007,000 - $123,000 = $884,000
The replacement cost will be taken as the market value of the inventory because it is higher than the floor (net realizable value - normal profit) and lower than ceiling (net realizable value).
Cost of inventory = $1,007,000
Loss to be recognized using lower of cost or market rule = Cost - market value
= $1,007,000 - $884,000 = $123,000
Kier Company issued $600,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 5-year term to maturity. The bonds have a 6.00% stated rate of interest and interest is payable in cash on December 31 each year. Based on this information alone, what are the amounts of interest expense and cash flows from operating activities, respectively, that will be reported in the financial statements for the year ending December 31, Year 1
Answers
Answer:
interest expense = $36,000
cash flows from operating activities = - $36,000
Explanation:
issued $600,000 in 6% bonds, with a 5 year maturity with an annual coupon paid December 31.
since bonds were issued at face value, interest expense = face value x bonds payable = 6% x $600,000 = $36,000
cash flows from operating activities related to this operation = -$36,000
interest expense is part of operating activities, so they decrease the cash flow from operating activities.
T-bills currently yield 5.0 percent. Stock in Danotos Manufacturing is currently selling for $87 per share. There is no possibility that the stock will be worth less than $80 per share in one year.
Required:
a. What is the value of a call option with a $76 exercise price?
b. What is the intrinsic value?
c. What is the value of a call option with a $68 exercise price?
d. What is the intrinsic value?
e. What is the value of a put option with a $76 exercise price?
f. What is the intrinsic value?
Answers
Answer:
a) Call option = Stock price - present value of the exercise price
= $87 – [$76 ÷ 1.05]
= $14.62
b) The intrinsic value is the amount by which the stock price exceeds the exercise price of the call, so the intrinsic value is
= $87 - $76
=$11
c) Call option = Stock price - present value of the exercise price
= $87 – [$68 ÷ 1.05]
= $22.24
d) The intrinsic value is the amount by which the stock price exceeds the exercise price of the call, so the intrinsic value is
= $87 - $68
=$ 19.
e) The value of the put option is $0 because there's no chance the put exhausts the money.
f) The intrinsic value is also $0
Explanation:
Consider the following cost function. a. Find the average cost and marginal cost functions. b. Determine the average and marginal cost when xequalsa. c. Interpret the values obtained in part (b)
Answers
Answer:
a) Average Cost function = 0.1 + (1000/x)
Marginal Cost function = 0.1
b) At x = a = 2000
Average Cost = 0.6
Marginal Cost = 0.1
c) The average cost calculate at x = 2000 in (b) represents the average cost of producing the first 2000 units of product and the marginal cost calculated at x = 2000 in (b) represents the cost of producing the 2001th unit of product.
Explanation:
The complete question
Consider the following cost functions.
a. Find the average cost and marginal cost functions.
b. Determine the average and marginal cost when x=a.
c. Interpret the values obtained in part (b).
C(x)=1000+0.1x, 0≤x≤5000, a=2000
Solution
a) The average cost is given as the total cost divided by the quantity produced.
A(x) = C(x) ÷ x
C(x) = 1000 + 0.1x
A(x) = (1000 + 0.1x) ÷ x = (1000/x) + 0.1
A(x) = 0.1 + (1000/x)
The marginal cost is given as the first derivative of the cost function with respect to the quantity of products produced.
M(x) = (dC/dx)
C(x) = 1000 + 0.1x
M(x) = (d/dx) (1000 + 0.1x) = 0.1
b) To calculate these values at x = a = 2000
Average cost at x = 2000
A(x) = 0.1 + (1000/x) = 0.1 + (1000/2000) = 0.1 + 0.5 = 0.6
Marginal Cost at x = 2000
M(x) = 0.1
c) The average cost is the cost per unit of producing a particular quantity of product.
The marginal cost is the cost of producing an extra unit of product.
Hence, the average cost calculate at x = 2000 in (b) represents the average cost of producing the first 2000 units of product and the marginal cost calculated at x = 2000 in (b) represents the cost of producing the 2001th unit of product.
Hope this Helps!!!
Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales $ 7,500,000 Net operating income $ 600,000 Average operating assets $ 5,000,000 Required: 1. Compute the margin for Alyeska Services Company. 2. Compute the turnover for Alyeska Services Company. (Round your answer to 1 decimal place.) 3. Compute the return on investment (ROI) for Alyeska Services Company. (Do not round intermediate calculations.)
Answers
Answer:
1. The margin for Alyeska Services Company is 0.08
2. The turnover for Alyeska Services Company is 1.50
3. The return on investment for Alyeska Services Company is 12%
Explanation:
1. In order to calculate the margin for Alyeska Services Company we would have to calculate the following:
Margin=Net operating Income / Sales
Margin=$600,000 /$7,500,000
Margin=0.08
2. In order to calculate the turnover for Alyeska Services Company we would have to calculate the following:
Turnover= Sales/Average operating assets
Turnover=$7,500,000 /$5,000,000
Turnover=1.50
Turnover of the company is 1.50
3. In order to calculate the return on investment for Alyeska Services Company we would have to calculate the following:
Return on Investments= Net operating Income /Average operating Assets
Return on Investments=$600,000 /$5,000,000
Return on Investments= 12%
The Return on investments is 12%
Henry Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the machine-hours for the upcoming year at 20,000 machine-hours. The estimated variable manufacturing overhead was $9 per machine-hour and the estimated total fixed manufacturing overhead was $600,000. The predetermined overhead rate for the recently completed year was closest to:__________
Answers
Answer:
Estimated manufacturing overhead rate= $39 per machine hour
Explanation:
Giving the following information:
Estimated machine-hours= 20,000
The estimated variable manufacturing overhead was $9 per machine-hour.
The estimated total fixed manufacturing overhead was $600,000.
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= (600,000/20,000) + 9
Estimated manufacturing overhead rate= $39 per machine hour
An inexperienced accountant for Riverbed Corp showed the following in the income statement: income before income taxes $258,000 and unrealized gain on available-for-sale securities (before taxes) $94,900. The unrealized gain on available-for-sale securities and income before income taxes are both subject to a 34% tax rate. Prepare a correct statement of comprehensive income.
Answers
Answer:
Kindly check attached file for the Comprehensive report
The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI’s capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 40%.
a. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Cost of equity capital %
b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
Answers
Answer:
Cost of equity is 11.2%
WACC is 8.74%
Explanation:
The formula for cost of equity is given below:
Cost of equity=risk free rate+(Beta *risk premium)
risk free rate is the treasury bill rate of 4%
Beta is 0.9
market risk premium is 8%
cost of equity=4%+(0.9*8%)=11.2%
WACC=Ke*E/V+Kd*D/V*(1-t)
Ke is the cost of equity of 11.2%
Kd is the cost of debt of 5%
t is the tax rate of 40% or 0.4
E is the equity weighting of 70% or 0.7
D is the debt weighting of 30% or 0.3
V is the E+D=0.7+0.3=1
WACC=11.20% *0.7/1+(5%*0.3/1*(1-0.4)
WACC=7.84% +0.90% =8.74%
Grouper Company issued $612,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semiannually on July 1 and January 1. Grouper Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%.
Prepare the journal entries to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(a) The issuance of the bonds.
(b) The payment of interest and related amortization on July 1, 2020.
(c) The accrual of interest and the related amortization on December 31, 2020.
Answers
Answer:
Bond issue:
Dr cash $624,240.00
Cr bonds payable $612,000
Cr premium on bonds payable($624,240.00-$612,000) $ 12,240
On 30 June:
Dr Interest expense $30,495.68
Dr premium on bonds payable $104.32
Cr cash $30,600
On 31 December :
Dr interest $ 30,490.59
Dr premium on bonds payable($30,600-$30,490.59) $109.41
Cr interest payable $30,600
Explanation:
The cash proceeds from the bond issuance is 102% of the face value of $612,000 i.e $ 624,240.00 (102%*$612,000)
The interest payment on 30 June=$612,000*10%*6/12=$30,600.00
The interest expense on 30 June=$ 624,240.00*9.7705%*6/12=$30,495.68
amortization of premium=$30,600.00-$ 30,495.68=$104.32
Carrying value of bond at 30 June=$ 624,240.00+$30,495.68 -$30,600=$624,135.68
Interest expense on 31 December=$ 624,135.688*9.7705%*6/12=$30,490.59
During 2022, Bramble Corp. reported cash provided by operations of $778000, cash used in investing of $672000, and cash used in financing of $186000. In addition, cash spent on fixed assets during the period was $270000. Average current liabilities were $637000 and average total liabilities were $1682000. No dividends were paid. Based on this information, what was Bramble free cash flow
Answers
Answer:
Bramble free cash flow was $508,000
Explanation:
Cash provided by operations = $778,000
Cash used in investing = $672,000
Cash used in financing = $186,000
Cash spent on fixed assets during the period = $270,000
Average current liabilities = $637,000
Average total liabilities = $1,682,000
Free cash flow = Cash flow from operating activities - Capital expenditures
= $778,000 - $270,000
= $508,000
Power Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100.000 shares of common stock outstanding as of the beginning of 2021. Power Drive has the following transactions affecting stockholders' equity in 2021. 0.76 points March 1 Issues 60,000 additional shares of $1 par value common stock for $57 per share. May 10 Purchases 5,500 shares of treasury stock for $60 per share. June 1 Declares a cash dividend of $1.75 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.) July 1 Pays the cash dividend declared on June 1. October 21 Resells 2,750 shares of treasury stock purchased on May 10 for $65 per share Power Drive Corporation has the following beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $5,000,000; and Retained Earnings, $2,500,000. Net income for the year ended December 31, 2021, is $650,000.
Required: Prepare the stockholders' equity section of the balance sheet for Power Drive Corporation as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
Answers
Answer:
Power Drive Corporation
Stockholders' Equity Section
December 31, 2021
Paid in capital:
Common Stock $1 par $160,000
(160,000 shares authorized, 157,250
shares outstanding)
Additional paid in capital, $8,360,000
in excess of par value
Additional paid in capital, $13,750
from Treasury Stock
Total paid in capital $8,533,750
Retained earnings $2,879,625
Sub-total $11,413,375
Treasury Stock ($165,000)
Total Stockholders' Equity $11,248,375
Explanation:
beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000 + $60,000Additional Paid-in Capital, $5,000,000 + $3,360,000 + $13,750Retained Earnings, $2,500,000 + $650,000 - $270,375 treasury stock $330,000 - $165,000Net income for the year ended December 31, 2021, is $650,000.
March 1 Issues 60,000 additional shares of $1 par value common stock for $57 per share.
Dr Cash 3,420,000
Cr Common stock 60,000
Cr Additional paid in capital 3,360,000
May 10 Purchases 5,500 shares of treasury stock for $60 per share.
Dr Treasury stock 330,000
Cr Cash 330,000
June 1 Declares a cash dividend of $1.75 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.)
Dr Retained earnings 270,375
Cr Dividends payable 270,375
July 1 Pays the cash dividend declared on June 1.
Dr Dividends payable 270,375
Cr Cash 270,375
October 21 Resells 2,750 shares of treasury stock purchased on May 10 for $65 per share
Dr Cash 178,750
Cr Treasury stock 165,000
Cr Additional paid in capital 13,750
On January 1, Year 1, Li Company purchased an asset that cost $35,000. The asset had an expected useful life of five years and an estimated salvage value of $7,000. Li uses the straight-line method for the recognition of depreciation expense. At the beginning of the fourth year, the company revised its estimated salvage value to $3,500. What is the amount of depreciation expense to be recognized during Year 4
Answers
Answer:
The amount of depreciation expense to be recognized during Year 4 is $7,350
Explanation:
In order to calculate the amount of depreciation expense to be recognized during Year 4 we would have to calculate first the Depreciation as per straight line method as follows:
Depreciation as per straight line method=(Cost-Residual value)/Useful life
=($35,000-$7,000)/5=$5,600
Hence, book value as on beginning of the fourth year=$35,000-($5,600*3)=$18,200
Hence, depreciation revised for the 2 remaining years=($18,200-$3,500)/2
=$7,350
The amount of depreciation expense to be recognized during Year 4 is $7,350
The following cost data relate to the manufacturing activities of Chang Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials $ 15,000 Indirect labor 130,000 Property taxes, factory 8,000 Utilities, factory 70,000 Depreciation, factory 240,000 Insurance, factory 10,000 Total actual manufacturing overhead costs incurred $ 473,000 Other costs incurred: Purchases of raw materials (both direct and indirect) $ 400,000 Direct labor cost $ 60,000 Inventories: Raw materials, beginning $ 20,000 Raw materials, ending $ 30,000 Work in process, beginning $ 40,000 Work in process, ending $ 70,000 The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $25 per machine-hour. A total of 19,400 machine-hours was recorded for the year.Prepare a schedule of cost of goods manufactured for the year.
Answers
Answer:
Cost of Goods Manufactured $893,000
Explanation:
Chang Company
Schedule of Cost of Goods Manufactured
Inventories: Raw materials, beginning $ 20,000
Add Purchases of raw materials $ 400,000
Less Raw materials, ending $ 30,000
Direct Materials Used $390,000
Direct labor cost $ 60,000
Manufacturing overhead Costs: $ 473,000
Indirect materials $ 15,000
Indirect labor 130,000
Property taxes, factory 8,000
Utilities, factory 70,000
Depreciation, factory 240,000
Insurance, factory 10,000
Total actual Manufacturing Costs 923,000
Add Work in process, beginning $ 40,000
Cost of Goods Available For Manufacture $ 963,000
Less Work in process, ending $ 70,000
Cost of Goods Manufactured $893,000
Applied Overhead = Rate * Hours worked
= 25* 19,400= 485,000
The applied overhead is subtracted or added to the cost of goods sold amount. It is not accounted for in the schedule of cost of goods manufactured.
Match the threats in the left column to appropriate control procedures in the right col-umn. More than one control may be applicable. Threat 1. Failing to take available purchase discounts for prompt payment Control Procedure a. Accept only deliveries for which an ap-proved purchase order exists. 2. Recording and posting errors in accounts payable 3. Paying for items not received 4. Kickbacks 5. Theft of inventory * Life-long learning opportunity: see p. xxx in preface. b. Document all transfers of inventory. c. Restrict physical access to inventory. d. File invoices by due date. e. Maintain a cash budget.
Answers
Answer: Please refer to Explanation
Explanation:
When there are no or relatively low control procedures in a company, there is a threat of financial mismanagement and misdemeanors. This is why control procedures are needed, to address this and stop the leakage of company resources.
1. Failing to take available purchase discounts for prompt payment.
d. File invoices by due date.
e. Maintain a cash budget.
Here two things can be done to control the threat. Firstly, by paying invoices during the discount period, the company can be able to take discounts on goods and services provided to it. Also by maintaining a cash budget, a company can put when a payment is due to be able to claim a discount and act accordingly.
2. Recording and posting errors in accounts payable.
Conduct an automated comparison of total change in cash to total changes in accounts payable.
Using a program to check whether the amounts in the cash account corresponds to the payments on the Accounts payable account will tell you if the amounts tally and will therefore reduce errors.
3. Paying for items not received.
Issue checks only for complete voucher packages (receiving report, supplier invoice, and purchase order).
When issuing checks, make sure that all the above mentioned reports are in order. That way you can check if the goods were delivered as well as if they were even ordered properly in the first place.
4. Kickbacks.
Require purchasing agents to disclose financial or personal interests in suppliers.
Train employees in how to properly respond to gifts or incentives offered by suppliers.
By requiring that purchase agents disclose their relationships with suppliers, you can monitor to check and see if there is a possibility of kickbacks occuring.
Also, by training employees on acceptable methods of receiving gifts, they can know when it is no longer a gift but rather a kickback.
5. Theft of inventory.
b. Document all transfers of inventory. c. Restrict physical access to inventory.
By documenting all transfers going in and out of inventory, the true inventory figure can be known from the records and then used to match with the actual inventory to see if they truly tally.
Restricting the amount of people who have access to the inventory to a few trusted people also limits the amount of people who can steal the inventory as well as making it easier to find out who did when it is done because the focus can be on a few people.
Capitan Inc. made an entry to record the return of inventory that the company previously purchased on account. If the company uses a perpetual inventory system, the entry to record the returned inventory includes a:____________
Answers
Answer:
Dr Accounts payable
Cr Merchandise inventory
Explanation:
The original purchase entry using the perpetual should be:
Dr Merchandise inventory XX
Cr Accounts payable XX
If the company returns some or all the merchandise purchased, then the journal entry should be:
Dr Accounts payable YY
Cr Merchandise inventory YY
If the company used the periodic inventory system, then the accounts would be different. Perpetual inventory directly debits or credits merchandise inventory account, it doesn't use the purchases account.
The original purchase entry using the periodic system should be:
Dr Purchases XX
Cr Accounts payable XX
If the company returns some or all the merchandise purchased, then the journal entry should be:
Dr Accounts payable YY
Cr Purchases returns and allowances YY
The assumptions of the production order quantity (EPQ) model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 20 and the daily production rate is 100. What is the optimal order and setup cost?
A) 139.B) 174.C) 184.D) 365.E) 548.
Answers
Answer:
C) 184
Explanation:
Options are inconsistent with data given.
Optimal Order is the level of order that is made to keep the setup cost to a minimum level.
It can be calculated by using following formula.
EPQ = [tex]\sqrt{\frac{2 X K X D}{h X ( 1 - x )}}[/tex]
K = Setup Cost = $50
D = Annual demand = 3,650 units
h = Holding cost = $12
x = daily demand rate/ daily production rate = 20 / 100 = 0.2
Placing values in the formula
EPQ = [tex]\sqrt{\frac{2 X 50 X 3650}{12 X ( 1 - 0.2 )}}[/tex]
EPQ = 194.99 units = 195 units
Answer according to correct data
Question
The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily production rate is 100. The production order quantity for this problem is approximately
Answer
Options are inconsistent with data given.
Optimal Order is the level of order that is made to keep the setup cost to a minimum level.
It can be calculated by using following formula.
EPQ = [tex]\sqrt{\frac{2 X K X D}{h X ( 1 - x )}}[/tex]
K = Setup Cost = $50
D = Annual demand = 3,650 units
h = Holding cost = $12
x = daily demand rate/ daily production rate = 10 / 100 = 0.1
Placing values in the formula
EPQ = [tex]\sqrt{\frac{2 X 50 X 3650}{12 X ( 1 - 0.1 )}}[/tex]
EPQ = 183.84 units = 184 units
Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7.00 % (annual coupon payments) and a face value of $ 1 comma 000. Andrew believes it can get a rating of A from Standard & Poor's. However, due to recent financial difficulties at the company, Standard & Poor's is warning that it may downgrade Andrew Industries' bonds to BBB. Yields on A-rated, long-term bonds are currently 6.50 %, and yields on BBB-rated bonds are 6.90 %.A. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue?
B. What will be the price of the bond if it is downgraded?
Answers
The Bloomington Bicycle Bearing company wishes to use a level output plan to plan for the rest of the year. Here is the forecasted demand for all bearing types: Month Demand May 800 Jun 650 July 720 August 690 Sept 530 Oct 610 Nov 630 Dec 610 If the beginning inventory is 300 units and the desired ending inventory at the end of December is 500 units, how many units will be in inventory at the end of August
Answers
Answer:
August ending Inventory 160 units
Explanation:
It wishes a level output AKAK same production over the rest of the year
total demand:
we add up the demand of the moths and our desired ending inventory
then we subtract the beginning and divide over the eight months
800 + 650 + 720 + 690 + 530 + 610 + 630 + 610 + 500 desired ending - 300 beginning = 5,440
We divide by 8 = 680 per month
Now we can do the budget up to August to solve for the ending inventory
[tex]\left[\begin{array}{ccccc}&Beg&Demand&Production&Ending\\May&300&800&680&180\\June&180&650&680&210\\July&210&720&680&170\\August&170&690&680&160\\\end{array}\right][/tex]
Ending = Beginning + Production - Demand (consumed)
Creative Computing sells a tablet computer called the Protab. The $740 sales price of a Protab Package includes the following: One Protab computer. A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months. A coupon to purchase a Creative Probook e-book reader for $150, a price that represents a 50% discount from the regular Probook price of $300. It is expected that 20% of the discount coupons will be utilized. A coupon to purchase a one-year extended warranty for $70. Customers can buy the extended warranty for $70 at other times as well. Creative estimates that 40% of customers will purchase an extended warranty. Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an extended warranty, but estimates that if it did so, a Protab alone would sell for $720. All Protab sales are made in cash. Required: 1. & 2. Indicated below whether each item is a separate performance obligation and allocate the transaction price of 100,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 100,000 Protab Packages (ignore any sales of extended warranties).
Answers
Answer:
Explanation:
1. Package of $740 sales price includes :
Protab Computer - 1
Limited warranty for 6 month
Coupon to purchase e-book for $150 (represents 50% discount) expected 20% utilized
Coupon to purchase 1-year warranty for $70 regular price $70 expected 40% purchase
Protab Computer price alone is $720.
2.
Performance Stand along Percentage of the Allocation of total
Obligation selling price sum of the stand transactions price to
of the performance alone selling price each performance
obligation of the performance obligation.
obligation
Protab - $72000000 96% $71040000
tablet
Open to $3000000 4% $2960000
purchase
Probook
Option to
purchase $0 0 .00% -
extended
warranty
Total; $75,000,000 100.00% $74,000,000
Protab Selling Price = 100000 units × $720 = $72,000,000
Selling price of option to purchase probook = 100000 units × 20% utilisation * $150 = $3000000
Selling price of option to purchase extended warranty = ($70 -$70)×100000 units * 40% = $0
Total = $75,000,000
Percentage of Protab selling price of Total Selling Price = $72,000,000 /$75,000,000 = 96%
Percentage of Option to purchase Probook of Total Selling Price = $3,000,000 /$75,000,000 = 4%
Percentage of Option to purchase extended warranty of Total Selling Price = 0 .00%
Total Transaction Price = 100000 units × $740 = $74,000,000
Allocation of Total Transaction price to Protab = $74,000,000 * 96% = $71040000
Allocation of Total Transaction price to Option to purchase probook = $74,000,000 * 10% = $2960000
3.
Journal Entry
Account Title Debit Credit
Cash $74,000,000
Sales Revenue $71040000
Deffered Revenue - discount option $2960000
Since the middle of the 20th century, the international global business system has been shaped by global institutions. Countries have established these institutions to address the global issues that span their borders. The functions of these organizations have been established in international treaties. International businesses need to be aware of the functions of these organizations as they can have a profound impact on trade and commerce.
It is critical for businesses to understand which organizations do what. It is also extremely useful to understand when these organizations were created since each emerged in response to changes, crises, or developments in the global business system. Identify the order in which these organizations were created.
a. GATT
b. Bretton Woods Institutions: IMF and the World Bank
c. WTO
d. G20
e. UN
Answers
Answer:
The order in which these organizations were established, from first to last are,
1. Bretton Woods Institution: IMF and the Word Bank
2.United Nations
3. GATT
4. WTO
5. G20
Explanation:
The organizations mentioned above were created on the international forum, either to foster peace or economic growth among the nations involved. In the order in which they were created from first to last, we have;
1. Bretton Woods Institution: IMF and the World Bank- These were created on July 1944, by 43 countries in Bretton Woods, New Hampshire, United States. They were established to rebuild the economy of nations after the World Wars by encouraging cooperation among the economic drivers of these nations.
2. United Nations- This organization was created on 24th October 1945. Its aim is to enhance and promote International Peace through its policies.
3. General Agreement on Tariffs and Trade- This is a legal understanding among several nations with the intention of reducing to reasonable extent, and if possible eliminating trade barriers such as tariffs. It was established on 30th October, 1947.
4. World Trade Organization- It was established with the intention of regulating trade among nations. It was established on 1st January, 1995.
5. G20- Short for Government of 20, this is a meeting meant for both the leaders as well as the Central Bank governors of about 19 countries, along with the European Union. It was established on 20th September, 1999.
(5). The variance of Stock A is .005, the variance of the market is .008 and the covariance between the two is .0026. What is the correlation coefficient
Answers
Answer:
0.4110
Explanation:
The formula and computation of the correlation coefficient is shown below:
Correlation co-efficient = Covariance ÷ (Standard deviation of market × Standard deviation of Stock A)
where,
Covariance between the two = 0.0026
Variance of the stock A = 0.005
And, the variance of the market is 0.008
Now placing these values to the above formula
So, the correlation coefficient is
= 0.0026 ÷ (0.008 × 0.005)^0.50
= 0.0026 ÷ 0.006324555
= 0.411096096
= 0.4110
Hence, the correlation coefficient is 0.4110