Answer: 18.6%
Explanation:
Degree of operating leverage = % change in Operating cash flow / % change in output
% change in Output
= [tex]\frac{48,000 - 45,000}{45,000}[/tex]
= 6.7%
Degree of operating leverage = % change in Operating cash flow / % change in output
2.79 = % change in Operating cash flow/ 6.7%
% change in Operating cash flow = 2.79 * 6.7%
% change in Operating cash flow = 18.6%
Astro Co.sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2018's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $200,000. The maximum output capacity of the company is 40,000 units per year.
ASTRO COMPANY
Contributed Margin Income Statement
For Year Ended December 31, 2017
Sales $ 1,000,000
Variable costs 800,000
Contribution margin 200,000
Fixed costs 250,000
Net loss $ (50,000)
Required:
1. Compute the break-even point in dollar sales for year 2017.
2. Compute the predicted break-even point in dollar sales for year 2018 assuming the machine is installed and there is no change in the unit selling price.
3. Prepare the forecasted contribution margin income statement for 2018 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due.
Compute the sales level required in both dollars and units to earn $200,000 of target pretax income for 2018 with the machine installed and no change in unit sales price.
4. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 5. Assume no income taxes will be due. (Round your intermediate calculation and final answer to the nearest whole dollar.)
Answer:
1. $1,250,000
2. $750,000
3. Forecasted contribution margin income statement for 2018
Sales $ 1,000,000
Variable costs ($400,000 )
Contribution margin $600,000
Fixed costs ($250,000 + $200,000) ($450,000)
Net Income /( loss) $150,000
Sales to meet target profit (dollars) = $1,083,333
4. Forecasted contribution margin income statement
Sales $1,083,333
Variable costs ($400,000 )
Contribution margin $683,333
Fixed costs ($250,000 + $200,000) ($450,000)
Net Income /( loss) $233,333
Explanation:
Break even point is the level of activity where a firm neither makes a profit nor a loss.
Break-even point in dollar sales = Fixed Cost ÷ Contribution Margin Ratio
Where, Contribution Margin Ratio = Contribution margin ÷ Sales
= $200,000 ÷ $ 1,000,000
= 0.20
Thus, Break-even point in dollar sales = $250,000 ÷ 0.20
= $1,250,000
Predicted break-even point in dollar sales for year 2018
New Contribution Margin :
Sales $ 1,000,000
Less Variable Cost $800,000 × 50% ($400,000)
New Contribution Margin $600,000
New Contribution Margin Ratio
New Contribution Margin Ratio = $600,000 ÷ $ 1,000,000
= 0.60
New Break-even point in dollar sales
Break-even point in dollar sales = ($250,000 + $200,000) ÷ 0.60
= $750,000
Sales to meet target profit = (Fixed Cost + Target Profit) ÷ Contribution Margin Ratio
= ($450,000 + $200,000) ÷ 0.60
= $1,083,333
Forecasted contribution margin income statement
Sales $1,083,333
Variable costs ($400,000 )
Contribution margin $683,333
Fixed costs ($250,000 + $200,000) ($450,000)
Net Income /( loss) $233,333
Moe's Pizza Shop sells a large pizza for $12.00. Unit variable expenses total $8.00. The breakeven sales in units is 7,000 and budgeted sales in units is 8,000. What is the margin of safety in dollars?
Answer:
$12,000
Explanation:
Margin of safety = Current sales level - Break even point
=(8,000 ×12) - (7,000 × 12)
= 96,000 - 84,000
= $12,000
The amount of safety time needed to protect a particular path in a project is less than the sum of the safety times required to protect the individual activities making up the path.
a. True
b. False
Answer:
a. True
Explanation:
For computing the amount of safety time required for protecting a specific path we need to subtract the total of safety time in order to protect the individual activities who are making the path so that the path should be secure, safe and protected
Hence, the given statement is true
Therefore the correct option is a. True
RPJ co has net income of $2,937, a profit margin of 6.3 percent, a retention ratio of 45 percent, total assets of $52,800, and total debt of $24,300. Assets, current liabilities, and costs are proportional to sales. The company maintains a constant dividend payout ratio and debt-equity ratio and is operating at full capacity. What is the maximum dollar Increase In sales that can be sustalned next year assuming no new equity is Issued?
a. $2151.
b. $1,211.
c. $2.804.
d. $2.267.
e. $1,667.
Answer:
d. $2.267.
Explanation:
We have to calculate first sustainable growth rate
For sustainable growth rate, we need ROE & Retention Ratio
Total Assets 52,800
Less: Total debt 24,300
Total Equity 28,500
ROE= Net income / Equity
ROE= 2937 / 28500 * 100
ROE= 10.305%
Retention Ratio = 45 %
Hence, Sustainable Growth Rate = (ROE * b) / (1-ROE*b)
Sustainable Growth Rate = (10.31% * 0.45)/(1-{10.31% * 0.45})
Sustainable Growth Rate = 4.863%
Profit Margin = Net Income / Sales * 100
6.3 = 2,937 / Sales * 100
Sales = $46,619
Therefore Maximum dollar increase in sales = Sales * Sustainable growth rate
= $46,619 * (4.863%)
= $2,267.08
Therefore, Maximum dollar increase = $2267.08
Colin thinks of a new concept for a palm-sized computer notebook. He also thinks of a new, faster process for producing the notebooks. Federal copyright law protects:______
Answer: neither Colin's concept nor his process.
Explanation:
The Copyright law in the United States is a a law that gives monopoly protection to the original works of an author. The copyright law was put in place in order to prevent people from copying the works of other people.
In this case, we are told that Colin thinks of a new concept for a palm-sized computer notebook and also thinks of a new, faster process for producing the notebooks. Therefore based on the explanation given above, the Federal copyright law protects neither Colin's concept nor his process.
A newspaper advertisement for Cashmere Closet states "This Saturday 9 a.m., 1 Red Cashmere Scarf, worth $299.95… $10.00 First Come First Served." Which of the following statements is false?
A. The ad is clear and specific about what was being offered and asked for in exchange.
B. The ad lacks intent to constitute an offer.
C. The number of people who have the power of acceptance is limited.
Answer:
Option B
Explanation:
In simple words, The seller must have intention of making the offer. These are determined first from offeree 's place that there is intention to make an bid. When a fair person in the offerer 's position assumes that the terms or acts of the offeror represent an offer, that is an bid. It is an empirical, and not a moral, criterion for deciding that there is an desire to accept an bid.
Thus, from the above we can conclude that the correct option is B .
Andrew founded and operated a wedding planning agency, which specialized in celebrity weddings. When he died, his business was dissolved because there was no plan for control after his death.
Type of business:___________
Answer:
Sole proprietorship
Explanation:
The sole proprietor is a single owner of a business. He bears the loss of From the business alone and also enjoys gains from the business alone. There is no distinction between the business and it's owner. Such a business is easy to form and dismantle because the government has no involvement in it.
From the question since Andrews business was dissolved when he because there was no plan for control after his death, this signifies a sole proprietorship.
You would like to have $50,000 in 15 years. To accumulate this amount you plan to deposit each year an equal sum in the bank, which will earn 7% interest annually. Your first payment will be made at the end of the year.
Required:
A) How much must you deposit annually to accumulate this amount?
B) If you decide to make a lump-sum deposit today instead of the annual deposits, how large should this lump-sum deposit be?
C) At the end of five years, you will receive $10,000 and deposit this in the bank towards your goal of $50,000 at the end of 15 years. In addition to this deposit, how much must you deposit in equal annual deposits in order to reach your goal?
Answer:
ah
Explanation:
._.
A regression analysis was performed to determine the relationship between the costs of a product (y), the time to make the product (x1 ), the number of different materials used (x2), and the amount spent on marketing the product (x3). The estimated regression equation is . What is the estimated cost if the time to make the product is 5 hours, the number of different materials used is 4, and the amount spent on marketing is $100? a. 83 b. 205.4 c. 213 d. 185.4
Answer: d. 185.4
Explanation:
x1 = The time to make the product which is 5 hours
x2 = the number of different materials used which is 4
x3 = the amount spent on marketing the product which is $100
The Regression equation is given as;
y = [tex]83 - 2x_{1} + 0.6x_{2} + 1.1x_{3}[/tex]
Cost = 83 - 2(5) + 0.6(4) + 1.1 (100)
Cost = 83 - 10 + 2.4 + 110
Cost = 185.4
Russell Retail Group begins the year with inventory of $45,000 and ends the year with inventory of $35,000. During the year, the company has four purchases for the following amounts.
Purchase on February 17 $200,000
Purchase on May 6 120,000
Purchase on September 8 150,000
Purchase on December 4 400,000
Calculate cost of goods sold for the year.
Answer:
COGS= $880,000
Explanation:
Giving the following information:
Beginning inventory= $45,000
Ending inventory= $35,000
Total Purchase= 870,000
To calculate the cost of goods sold (COGS), we need to use the following formula:
COGS= beginning finished inventory + cost of goods purchased - ending finished inventory
COGS= 45,000 + 870,000 - 35,000
COGS= $880,000
An individual who believes that an action is ethical because others within his or her company and industry regularly engage in the activity is probably a(n)
probably a relativist
Import tariffs generally ________ the output of domestic producers of the affected products and also _________ the output of domestic exporters.
Answer:
increase , decrease
Explanation:
Import tariffs are amount levied on the imports of goods. tariffs makes imports more expensive and discourages import.
if an import tariff is in place for a particular good, the import of that good would reduce and this would increase domestic producers to produce more of the good to meet the demand of the good. so output of domestic producers would increase.
Because output is consumed domestically, exports would reduce.
A parent company exchanges 5,000 shares of its $2 par value common stock, with a market value of $10/share, for all of the shares owned by the subsidiary's shareholders, resulting in a $50,000 total purchase price. On the acquisition date, the subsidiary reported a book value of Stockholders' Equity of $37,500, comprised of $15,000 of Common Stock and $22,500 of Retained Earnings. An examination of the subsidiary's balance sheet revealed that book values were equal to fair values for all assets except for PPE (net), which has a book value of $20,000 and a fair value of $32,500.
a. Prepare the entry that the parent makes to record the investment.
b. Prepare the [E] and [A] consolidation entries.
Answer:
a. The entry that the parent makes to record the investment
Investment in Subsidiary $50,000 (debit)
Common Stocks $50,000 (credit)
b. Consolidation Entries
Common Stock (Subsidiary) $15,000 (debit)
Retained Earnings (Subsidiary) $35,000 (debit)
Investment in Subsidiary $50,000 (credit)
Explanation:
The entry that the parent makes to record the investment
Investment in Subsidiary $50,000 (debit)
Common Stocks $50,000 (credit)
Recognize the Investment in Subsidiary and recognize the Equity element : Common Stocks
Consolidation Entries
Common Stock (Subsidiary) $15,000 (debit)
Retained Earnings (Subsidiary) $35,000 (debit)
Investment in Subsidiary $50,000 (credit)
Eliminate Common Items and recognize Goodwill or Gain on Bargain Purchase if any.
Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit.
It is difficult to implement both of these policies at the same time because reducing taxes on private spending has the effect of the government budget deficit. What would you need to know about private saving to judge which of these two policies would be a more effective way to raise investment?
A. The elasticity of private saving with respect to the after-tax real interest rate
B. The response of private saving to changes in the government budget deficit
C. The elasticity of investment with respect to the interest rate
Answer:
1. Increasing
2. A. The elasticity of private saving with respect to the after-tax real interest rate
B. The response of private saving to changes in the government budget deficit
C. The elasticity of investment with respect to the interest rate
Explanation:
1. It is difficult to implement both of these policies at the same time because reducing taxes on private spending has the effect of Increasing the government budget deficit.
A Government budget deficit is acquired when the government spends more than it earns. The Government earns money from taxes and if it spends more than it receives in taxes, that will lead to a deficit. If taxes on Private spending are reduced, this will lead to less tax revenue for the government thereby increasing the Deficit.
2. All of the listed options are useful in determining which policy would be a more effective way to raise investment.
The elasticity of private saving with respect to the after-tax real interest rate refers to how much private saving changes in reaction to a change in the tax rates. This can enable one decide how much investment will be expected if the Government reduces or increases taxes.
The response of private saving to changes in the government budget deficit is also a useful factor to look at because private savings reduce when government deficits reduce.
Also how much does investment change by due to interest rates. This will be important to note in terms of Private Investment to see if it will be beneficial to use it over reducing the government budget deficit given a certain interest rate.
Process costing typically uses only one Work in Process Inventory account, while job order costing typically uses a separate Work in Process Inventory account for each department.
a. True
b. False
Answer:
False.
Explanation:
Process costing typically uses only one Work in Process Inventory account, while job order costing typically uses a separate Work in Process Inventory account for each department. This is simply a false statement.
Process costing can be defined as a cost accounting method used for assigning manufacturing or production costs to the units of goods produced by a business firm over a specific period of time. It is mostly used by firms that produce a large quantity of homogeneous or similar products on a continuous basis. Process costing typically uses more than one Work in Process Inventory account because costing at each stage of production or manufacturing process.
Job order costing can be defined as a cost accounting method used to determine and accumulation of the cost of manufacturing each product or a single unit of production. Job costing order typically uses only one Work in Process Inventory account for each product.
In conclusion, Process costing typically uses a separate Work in Process Inventory account for each department while job order costing typically uses only one Work in Process Inventory account for each product.
Beck Inc. and Bryant Inc. have the following operating data:__________.
Beck Inc. Bryant Inc.
Sales $1,250,000 $2,000,000
Variable costs 750,000 1,250,000
Contribution margin $500,000 $750,000
Fixed costs 400,000 450,000
Income from operations $100,000 $300,000
a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.
Beck Inc.
Bryant Inc.
b. How much would income from operations increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number.
Dollars Percentage
Beck Inc. $ %
Bryant Inc. $ %
c. The difference in the of income from operations is due to the difference in the operating leverages. Beck Inc.'s operating leverage means that its fixed costs are a percentage of contribution margin than are Bryant Inc.'s.
Answer:
a. Beck Inc. = 5.00 and Bryant Inc. = 2.50
b. Beck Inc. = $100,000 and 100% : Bryant Inc. = $150,000 and 50 %
c. True.
Explanation:
Degree of Operating Leverage shows, the times Earnings Before Interest and Tax (EBIT) would change as a result of a change in Sales contribution.
Degree of Operating Leverage = Contribution ÷ EBIT
Thus,
Beck Inc = $500,000 ÷ $100,000
= 5.00
Bryant Inc. = $750,000 ÷ $300,000
= 2.50
If Sales increased by 20% the effects on Incomes would be :
Beck Inc = 20% × 5.00
= 100%
= $100,000 × 100%
= $100,000
Bryant Inc.= 20% × 2.50
= 50 %
= $300,000 × 50 %
= $150,000
Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.82 percent, a par value of $1,000 per bond, matures in 6 years, has a total face value of $5.2 million, and is quoted at 103 percent of face value. The second issue has a coupon rate of 6.59 percent, a par value of $1,000 per bond, matures in 14 years, has a total face value of $9.5 million, and is quoted at 107 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 35 percent. What is the firm's weighted average aftertax cost of debt
Answer:
3.22%
Explanation:
we must first determine the yield to maturity of both bonds in order to determine their before tax cost of debt:
YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]
YTM Bond₁ = {19.10 + [(1,000 - 1,030)/12]} / [(1,000 + 1,030)/2] = 16.6 / 1,015 = 0.01635 x 2 = 3.27%
YTM Bond₂ = {32.95 + [(1,000 - 1,070)/28]} / [(1,000 + 1,070)/2] = 0.0294 x 2 = 5.88%
firm's weighted after tax cost of debt = {[($5.2 / $14.7) x 3.27%] x (1 - 0.35)} + {[($9.5 / $14.7) x 5.88%] x (1 - 0.35)} = 0.75% + 2.47% = 3.22%
In 20X1, Waters LLC generates ordinary business income of $40,000 and makes no distributions to its partners. In 20X2, Waters recognizes $0 ordinary income, but makes a $20,000 total cash distribution to its partners. Pink, a 25% member in Waters, has an outside basis in Waters of over $200,000 when 20X1 begins. What amount of income will Pink recognize in 20X1 and 20X2
Answer:
$10,000 in 20X1 and $0 in 20X2
Explanation:
Pink is allocated $10,000 ($40,000 x 25%) of income in 20X1. In 20X2, Pink is allocated $0 income, as distributions are generally NOT taxable if they do not exceed basis
Sampson Company's accounting records show the following at the year ending on December 31, 2014. Purchase Discounts $ 5,600 Freight-In 7,800 Purchases 350,000 Beginning Inventory 23,500 Ending Inventory 28,800 Purchase Returns and Allowances 6,400 Using the periodic system, the cost of goods sold is:
Answer:
$340,500
Explanation:
From the above information, the below data are given;
Purchase discounts $5,600, freight in $7,800, purchases 350,000, beginning inventory $23,500, closing inventory $28,800, purchase returns and allowance $6,400
Therefore, using the periodic system,
Cost of goods sold .
Cost of goods sold using the periodic system is computed by adding beginning inventory and cost of goods purchased( purchases plus freight in minus purchases return minus purchases discount) and then subtracting ending inventory.
= $23,500 + ($350,000 +$7,800 - $6,400 -$5,600) - $28,800
= $340,500
The formula for the simple deposit multiplier is :______
a. Simple Deposit Multiplier = 1/RR
b. Simple Deposit Multiplier = 1/1-RR
c. Simple Deposit Multiplier = -RR/1-RR
d. Simple Deposit Multiplier = (1-RR)/RR
If the required reserve ratio is 0.15, the maximum increase in checking account deposits that will result from an increase in bank reserves of $5,000 is $________
The formula for the simple deposit multiplier is:
B. Simple Deposit Multiplier = 1 / (1 - RR)
Where RR is the required reserve ratio.
How to explainIn your example, the required reserve ratio is 0.15, which means that banks are required to keep 15% of their deposits in reserve. This means that for every $1 in deposits, banks can lend out $0.85.
The maximum increase in checking account deposits is therefore equal to the simple deposit multiplier times the initial increase in bank reserves. In your example, the initial increase in bank reserves is $5,000. So, the maximum increase in checking account deposits is:
$5,000 * 1.176 = $5,882.35
Therefore, the maximum increase in checking account deposits that will result from an increase in bank reserves of $5,000 is $5,882.35
Option B is correct.
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The profit leverage effect (ratio) is calculated by A. dividing 1.0 by the profit margin. B. dividing pretax earnings by the cost of goods sold. C. dividing sales by the cost of goods sold. D. none of the above
Answer:
D. none of the above
Explanation:
The profit leverage effect shows that in order to increase net profits, it is better and more efficient to reduce operating expenses rather than increasing total net sales revenue. I.e. a $1 decrease in costs increases operating profits by $1, which is much more than the increase resulting from increasing sales by $1.
Gingrich Corporation issued $2,000,000 in bonds on January 1, 2020. The bonds have a coupon rate of 1.5% and pay interest semi-annually on July 1st and January 1st. The bonds have a 10 year term. The market rate at the issue date is 3.9%. What amount of interest expense will be recorded on July 1, 2020 (the first interest payment)
Answer:
$31,310.35
Explanation:
Face value = 2,000,000
Semiannual interest = 2,000,000 *0.015 * 6/12= 15,000
Semiannual yield = 3.9*6/12= 1.95%
Semiannual months = 10*2= 20
Issue price =[PVA 1.95%,20 * Interest] + [PVF 1.95%,20 * Face value]
Issue price = [16.43061*15,000]+ [ .67960* 2,000,000]
Issue price = 246459.10+ 1,359,200
Issue price = $1,605,659.10
The amount of interest expense to be recorded on July 1, 2020 (the first interest payment = Issued price * Semi annual yield
= $1,605,659.10 * 1.95%
=$1,605,659.10 * 1.95%
=$31,310.35
Thus, the amount of $31,310.35 will be recorded as the interest expense on July 1, 2020
Airco Company is tempted to consider support department costs to be facility-level costs that do not need to be applied to products. Which of the following explains what is misguided about this approach?
1. Product costs may be inaccurate because straight-line depreciation on factory equipment is treated as a genera and administrative expense on the income statement.
2. Product costs may be inaccurate because support department services may be used more heavily by some products than others.
3. Product costs may be inaccurate because incorrect cost drivers are used.
4. Product costs may be inaccurate because direct labor and direct materials are not correctly accounted for in thu product costing system.
Answer:
Option 2. Product costs may be inaccurate because support department services may be used more heavily by some products than others.
Explanation:
Option 1 is not a misguide about this approach as all the depreciation costs are considered as general or administration expenses.
Option 3 is incorrect because cost drivers of cost pools are always accurate, they can not be used inaccurately while using Activity Based Costing.
Option 4 is also incorrect because direct costs are prime cost which are easily attributable to products and in this scenario, the indirect costs are considered inappropriate to be assigned to the product cost.
Option 2 is correct because considering support department costs to be facility-level costs would result in inappropriate cost allocations to some products as a single appropriate basis would be used to allocate the support department services cost to each product. This means if appropriate basis is not chosen correctly then this would result in inaccurate allocation as some of the products will be using the support services heavily than others.
Suppose you deposit nothing at the beginning and instead you divide up the $600 into 12 envelopes each with $50. Find the balance after one year if you deposit one $50 envelope each month, all year, into an account that pays 5% APR with monthly compounding.
Answer:
$3400.03
Explanation:
The balance one in one year would be the future value of the annuity
The formula for calculating future value of an annuity = A / [B / (r/m) ]
B = [(1 + r/m)^nm] - 1
FV = Future value
P = Present value of annuity = $50
R = interest rate = 5%
N = number of years = 1
m = number of compounding per year
[(1 + 0.004167)^60] - 1 = 0.283359
$50 x (0.283359 / 0.004167) = $3400.03
The CEO of Jamil Circuits is unhappy with the firm's choice of wholly owned subsidiaries as the mode of foreign entry.He has pointed out a number of disadvantages to this mode.However,the CFO of the company is not sure if all of the disadvantages that the CEO is noting are correct.Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?
A) lack of control over quality
B) high costs and risks
C) problems with local marketing agents
D) inability to engage in global strategic coordination
E) lack of control over technology
Answer: high cost and risk
Explanation:
From the question, we are informed that the CEO of Jamil Circuits is unhappy with the firm's choice of wholly owned subsidiaries as the mode of foreign entry and that hee has pointed out a number of disadvantages to this mode.
A disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets is high costs and risks. A lot of risk is involved which may hinder the success of the business.
Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department: Units: Beginning Inventory: 100,000 units, 80% complete as to materials and 25% complete as to conversion. Units started and completed: 290,000. Units completed and transferred out: 390,000. Ending Inventory: 40,000 units, 40% complete as to materials and 10% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $57,200. Costs in beginning Work in Process - Conversion: $99,700. Costs incurred in October - Direct Materials: $828,520. Costs incurred in October - Conversion: $939,300. Calculate the cost per equivalent unit of materials.
Answer:
$2.64 per units
Explanation:
The computation of the cost per equivalent unit of material is shown below:
Cost per equivalent unit is
= (Beginning conversion cost + cost incurred during October) ÷ (Total equivalent units)
= ($99,700 + $939,300) ÷ (390,000 units + (40,000 units × 10%))
= $1,039,000 ÷ 394,000 units
= $2.64 per units
We simply applied the above formula
On January 1, an investment account is worth 300,000. M months later, the value has increased to 315,000 and 15,000 is withdrawn. 2M months prior to the end of the year, the account is again worth 315,000 and 15,000 is withdrawn. On December 31, the account is worth 315,000. The annual effective yield rate, using the dollar-weighted method, is 16%. Calculate M.
Answer:
M = 3
Explanation:
The first withdrawal takes place 1 - M/12 months until the end of the year. The second withdrawal takes place 2M/12 months before the end of the year.
$315,000 = ($300,000 x 1.16) - {$15,000 x [1 + 0.16(1 - M/12)]} - {$15,000 x [1 + 0.16(2M/12)]}
$315,000 = $348,000 - [$15,000 x (1.16 - 0.16M/12)] - [$15,000 x (1 + 0.32M/12)]
$315,000 = $348,000 - $17,400+ 200M - $15,000 - 400M
$315,000 = $315,600 - 200M
200M = $315,600 - $315,000 = $600
M = 600 / 200 = 3
Italian Stallion has the following transactions during the year related to stockholders' equity.
February 1 Issues 4,100 shares of no-par common stock for $16 per share.
May 15 Issues 200 shares of $10 par value, 3% preferred stock for $13 per share.
October 1 Declares a cash dividend of $0.30 per share to all stockholders of record (both common and pre
October 15 October 15 Date of record.
October 31 Pays the cash dividend declared on October 1.
Required: Record each of these transactions.
Answer:
February 1 Issues 4,100 shares of no-par common stock for $16 per share.
Dr Cash 65,600
Cr Common stock 65,600
May 15 Issues 200 shares of $10 par value, 3% preferred stock for $13 per share.
Dr Cash 2,600
Cr Preferred stock 2,000
Cr Additional paid in capital - preferred stock 600
October 1 Declares a cash dividend of $0.30 per share to all stockholders of record
Dr Retained earnings 1,290
Cr Preferred stock dividends payable 60
Cr Common stock dividends payable 1,230
October 15 October 15 Date of record.
No journal entry required.
October 31 Pays the cash dividend declared on October 1.
Dr Preferred stock dividends payable 60
Dr Common stock dividends payable 1,230
Cr Cash 1,290
Classify the assumptions according to whether or not each item is an assumption made under perfect competition (also known as pure competition or competitive industry).
Assumed in perfect competition Not assumed in perfect competition
a. price-taking behavior
b. a small number of producers
c. firms selling a similar but differentiated good
d. significant barriers to entry
Answer:
Option “A” is the assumption of perfect competition while options B, C, and D are not the assumption of perfect competition.
Explanation:
Option A, is the assumption of perfect competition because, in the perfect competition, the industry decides the price with the help of market forces demand and supply. Moreover, this determined price is followed by firms in the industry. While the other options are not assumed in perfect competition because there are a large number of firms that can be seen in perfect competition and these firms sell homogeneous goods. Furthermore, the firms are free to enter and exit the market.
The following assumption are made under perfect competition:
price-taking behaviorThe following assumption are not made under perfect competition:
small number of producers firms selling a similar but differentiated good significant barriers to entryPerfect competition is a market where there are many buyers and sellers of homogenous goods and services. There are no barriers to the entry or exit of firms into the market. An example of perfect competition is the market for apples. All apples are identical and there are many farmers who sell apples.
The market price of goods in a perfect competition is set by the market forces. So, buyers and sellers are price takers. They take the price as determined by the market forces. There is perfect information in a perfect competition.
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Charlie's adjusted basis in S corporation stock was $12,000. His share of S corporation losses was $22,000. How much of the loss clears the basis limitation and what is the treatment of the remaining loss (if any)
Answer:
1. $12,000 is the amount of the loss that will clear the basis limitation
2.Remaining loss of the amount of $10,000 will be put on hold
Explanation:
Calculation of How much of the loss clears the basis limitation and what is the treatment of the remaining loss
Based on the information given his adjusted basis in S corporation stock was the amount of $12,000 which means that the amount of $12,000 will be the amount of the loss that will clear the basis limitation
Secondly since his share of S corporation losses was the amount of $22,000 which means that the remaining loss will be $10,000($22,000-$12,000).
Based on this the remaining loss of the amount of $10,000 will be put on hold and can be carried forward at unspecified period of time while the amount of $12,000 may be deducted in the current year.