Stated Rate (APR) Compounded Semiannually: 15.54%, Stated Rate (APR) Compounded Monthly: 9.13%, Stated Rate (APR) Compounded Weekly: 9.70%, Stated Rate (APR) Compounded Daily: 16.15%
To find the Stated Rate (APR), we can use the formula for the Effective Annual Rate (EAR) and solve for the Stated Rate. The formula for EAR is:
EAR = (1 + r/n)ⁿ - 1
Where r is the Stated Rate (APR) and n is the number of compounding periods per year.
For the given cases:
In the first case, the EAR is 15.3%. Since the compounding is done semiannually (twice a year), we can set n = 2 in the formula. Rearranging the formula to solve for r, we have:
15.3% = (1 + r/2)² - 1
Solving this equation yields r ≈ 15.54%.
In the second case, the EAR is 8.7%. With monthly compounding (12 times a year), we set n = 12 and solve the equation:
8.7% = (1 + r/12)¹² - 1
Solving for r gives us r ≈ 9.13%.
For the third case, the EAR is 9.4% with weekly compounding (52 times a year). Setting n = 52 and solving the equation:
9.4% = (1 + r/52)⁵² - 1
We find r ≈ 9.70%.
Lastly, in the fourth case, the EAR is 14.9% with daily compounding (365 times a year). Setting n = 365 and solving the equation:
14.9% = (1 + r/365)³⁶⁵ - 1
Solving for r yields r ≈ 16.15%.
Therefore, the Stated Rates (APR) for the respective compounding periods are approximately 15.54%, 9.13%, 9.70%, and 16.15%.
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What is the link between innovation and entrepreneurship?
A. All of the above
B. Innovation is necessarily the way by which entrepreneurs create new organizations.
C. Entrepreneurs drive innovation in an attempt to change conditions in markets, as part of endless cycles of creative destruction.
D. Both innovation and entrepreneurship are two different labels describing the same thing launching new businesses.
Innovation and entrepreneurship are interlinked since entrepreneurs are required to be innovative to compete in their markets. Entrepreneurs, in turn, drive innovation to change the market environment, which is a part of the continuous cycle of creative destruction. The correct Option is (C).
Entrepreneurs drive innovation in an attempt to change conditions in markets, as part of endless cycles of creative destruction. The link between entrepreneurship and innovation is very close. Entrepreneurs need to be innovative to compete in their markets. Innovation is a major contributor to the establishment of new companies and organizations.
Entrepreneurs' entrepreneurial spirit and innovation are the two fundamental elements that push the economic system to grow and prosper. In practice, entrepreneurs are responsible for generating revenue and creating new jobs and employment opportunities. Innovation, on the other hand, contributes to economic growth by expanding markets, increasing productivity, and improving quality of life through scientific and technological advances.
Entrepreneurs often make use of technological advancements and innovations to find new market opportunities, providing their customers with better quality goods and services.
As a result, entrepreneurs are a major driving force behind innovation. To summarize, innovation and entrepreneurship are the two essential pillars of a dynamic economy. Therefore, The correct Option is (C)
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Which of the following do NOT make sense?
One way to value a company is to look at the PE ratio of comparable firms, and the apply it to the firm we are trying to value,
O Jetblue's international flights made up most of its revenues
O Jetblue was able to take advantage of economies of scale by focusing on high demand routes and maintaining only one type of aircraft
O Jetblue's earnings were pretty good compared to its competitors
O All of these choices make sense
The option that does NOT make sense is : option (A). "O One way to value a company is to look at the PE ratio of comparable firms, and the apply it to the firm we are trying to value" because the explanation for the method of valuing a company's stock is not complete. It should have been "One way to value a company is to look at the PE ratio of comparable firms, and then multiply it by the expected earnings of the company in question."
When valuing a company, it is important to consider various aspects of the company that could influence its stock price. The price-to-earnings (PE) ratio is a useful measure of the company's value in the market. The PE ratio is the ratio of the current stock price to the earnings per share (EPS) of the company. It shows how much investors are willing to pay for each dollar of earnings that the company generates. The higher the PE ratio, the more expensive the stock is in the market. Therefore, it is important to compare the PE ratio of the company to that of other similar companies in the market to determine whether it is overvalued or undervalued.
Multiplying the average PE ratio of comparable firms by the company's expected earnings per share gives an estimate of the company's stock price. However, the explanation for this method of valuing a company's stock is not complete in option a. Therefore, it is the option that does not make sense. On the other hand, the other three options make sense because they are complete statements that provide useful information about Jetblue Airways' operations and performance.
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Abrupt and turbulent change tends to create anxiety and stress in organizational members, for example since taking office president biden has implemented many turbulent changes in our country. select a change that has been implemented by this administration and analyze and evaluate that change. Explain why you think it is occurring and comment on how you can respond to such change.
Rejoining the Paris Climate Agreement demonstrates President Biden's proactive approach to addressing climate change, requiring organizations to respond effectively through resource provision, employee training, and enhanced stakeholder communication.
One of the turbulent changes implemented by President Biden's administration is his decision to rejoin the Paris Climate Agreement. This move aims to address the growing concerns about climate change and its devastating effects on the planet.
The Paris Climate Agreement was a treaty signed by almost all nations of the world to tackle climate change. It was signed in 2016 and marked an essential step toward addressing global warming. However, the US, under the leadership of the former president, withdrew from the agreement in 2017.
Biden's administration has decided to rejoin the agreement, as he believes that addressing climate change is one of the critical challenges facing humanity. The decision to rejoin the Paris Climate Agreement is an excellent example of proactive change. The administration recognizes the imminent danger of climate change and its impact on the environment, and its decision to act is both timely and necessary.
The implementation of such a turbulent change may create anxiety and stress among members of organizations. Therefore, leaders and managers must respond effectively to reduce the negative impact of such change. Some of the ways organizations can respond to change include providing resources and support, training employees, and facilitating communication between stakeholders.
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The School District is considering the purchase of two school buses. At present, school children are transported to and from the schools in the area using private bus drivers. The new school buses will cost US$54,530 and will have a useful life of 11 years. They will have negligible scrap value, which can be ignored. The new school buses would be more cost-effective, resulting in labor savings of $10,000 per year. What are the Factor of the Internal Rate of Return, and the discount factor (%) that will give a Net Present Value of 0?
The factors of the Internal Rate of Return (IRR), and the discount factor (%) that will give a Net Present Value (NPV) of 0 for the purchase of two school buses by the School District are as follows:NPV is a method of calculating the present value of cash flows. It is calculated as follows:NPV = present value of future cash flows - cost of investment.
Given below is the calculation for the NPV of the new school buses for 11 years, and the factor of the Internal Rate of Return (IRR):Step-by-step explanation:Calculation for NPVThe cost of two school buses = $54,530 × 2 = $109,060Annual savings in labor costs = $10,000Total savings for 11 years = $10,000 × 11 = $110,000NPV = -$109,060 + $110,000 / (1 + i)11Where i = the discount rateNPV = 0Thus, -$109,060 + $110,000 / (1 + i)11 = 0$110,000 / (1 + i)11 = $109,0601 + i = (110,000 / 109,060)(1/11)1 + i = 1.00526973i = 0.00526973 × 100i = 0.52697%.
Factor of the Internal Rate of Return (IRR)The internal rate of return (IRR) is the interest rate at which the NPV of all cash flows (positive and negative) equals zero. The NPV of the investment is zero in this situation.The formula for calculating the Internal Rate of Return (IRR) for an investment is as follows:0 = -C0 + CF1 / (1+IRR)1 + CF2 / (1+IRR)2 + ... + CFn / (1+IRR)nWhere,C0 = Initial InvestmentCF1, CF2, ..., CFn = Cash Flows for Each YearIRR is the interest rate that makes the present value of all cash flows zero. Thus, we need to find the IRR value that makes the NPV equal to zero:0 = -109060 + 10000 / (1+IRR) + 10000 / (1+IRR)² + ... + 10000 / (1+IRR)11Using a spreadsheet program like Excel, this can be solved using the formula: =IRR(range of cash flows, guess rate).
In this case, using Excel, the internal rate of return (IRR) is found to be 9.33%.Therefore, the factors of the Internal Rate of Return (IRR), and the discount factor (%) that will give a Net Present Value (NPV) of 0 for the purchase of two school buses by the School District are as follows:Factor of the Internal Rate of Return (IRR) = 9.33%Discount factor = 0.52697% or 0.53% (rounded to two decimal places)
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How many stages are there in the new product/service process? Name each stage and describe them briefly.
2. What are the five stages of adoption process? List and describe each stage briefly.
The new product/service process consists of several stages: idea generation, idea screening, concept development and testing, business analysis, product development, market testing, and commercialization.
The adoption process for new products/services involves five stages: awareness, interest, evaluation, trial, and adoption.
Stages in the New Product/Service Process:
a. Idea Generation: This stage involves generating new ideas for products or services. Ideas can come from various sources, such as customers, employees, market research, or technological advancements.
b. Idea Screening: In this stage, the generated ideas are evaluated to determine their feasibility and alignment with the company's objectives and resources. Ideas that are not viable or do not fit the organization's strategy are eliminated.
c. Concept Development and Testing: At this stage, the selected ideas are further developed into product or service concepts. These concepts are then tested with target customers to gather feedback and evaluate their desirability and potential market acceptance.
d. Business Analysis: In this stage, a detailed analysis is conducted to assess the financial viability of the product or service concept. Factors such as costs, pricing, potential sales volume, and profitability are evaluated to make informed business decisions.
e. Product Development: Once the business analysis is favorable, the product or service concept moves into the development stage. Here, the idea is transformed into a tangible product or service, involving design, prototyping, manufacturing, or service development.
f. Market Testing: Before a full-scale launch, the product or service is tested in a real market environment with a specific target audience. This helps gather additional feedback, measure customer response, identify potential issues, and make necessary adjustments.
g. Commercialization: This is the final stage where the product or service is officially launched and made available to the broader market. It involves marketing, distribution, sales, and customer support activities to drive adoption and achieve market success.
Five Stages of Adoption Process:
a. Awareness: The first stage involves the potential customers becoming aware of the existence of a new product or service. They may learn about it through various channels like advertising, word-of-mouth, or promotional activities.
b. Interest: In this stage, individuals develop an interest in the new product or service. They seek more information, explore its features, benefits, and how it can address their needs or wants.
c. Evaluation: During this stage, individuals assess the new product or service by comparing it with alternatives. They consider factors such as quality, price, convenience, and how well it meets their requirements.
d. Trial: In this stage, individuals make the decision to try the new product or service on a small scale. They may purchase it or avail a trial offer to experience its benefits firsthand.
e. Adoption: The final stage occurs when individuals fully accept and integrate the new product or service into their routine or lifestyle. They become regular users and advocate for it, influencing others' adoption decisions.
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Dallas Inc. reported $2,536,460 of profit for 2020. On November 2, 2020, it declared and paid the annual preferred dividends of $195,000. On January 1, 2020, Dallas had 100,000 and 480,000 outstanding preferred and common shares, respectively The following transactions changed the number of shares outstanding during the year: Feb. 1 Declared and issued a 10% common share dividend. Apr. 30 Sold 155,000 common shares for cash. May I Sold 50,000 preferred shares for cash. Oct. 31 Sold 40,000 common shares for cash. REQUIRED a. What is the amount of profit available for distribution to the common shareholders? b. What is the weighted-average number of common shares for the year? c. What is the earnings per share for the year? (Round the final answer to 2 decimal places.)
Earnings per share (EPS) is a financial indicator of a company's profitability that shows how much of its profit is distributed to each outstanding share of common stock.
a. The amount of profit available for distribution to the common shareholders is calculated as follows:
Net income available to common shareholders = Net income - Preferred dividends declared
= $2,536,460 - $195,000
= $2,341,460
b. The weighted-average number of common shares for the year is calculated as follows:
Weighted-average number of common shares= (Number of common shares × Fraction of year they are outstanding)
Common shares outstanding from January 1 to January 31 = 480,000
Common shares outstanding from February 1 to April 29 = 480,000 × 110%
= 528,000
Common shares outstanding from April 30 to October 31 = 373,000 [480,000 + (155,000 − 40,000)]
Weighted-average number of common shares= [(480,000 × 31/365) + (528,000 × 90/365) + (373,000 × 91/365)
= (125,041.1 + 130,260.8 + 93,563.7)
= 348,865.6≈ 348,866 shares (rounded to the nearest whole number)c. The earnings per share for the year are calculated as follows:
Earnings per share = Net income available to common shareholders / Weighted-average number of common shares
= $2,341,460 / 348,866
= $6.71 (rounded to two decimal places
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Of the four factors of production that provide income, rent,
wages, interest, and profit, under which does the corporate income
tax fall? Explain.
The corporate income tax falls under the factor of production known as profit.
The corporate income tax is a tax imposed on the profits earned by corporations. It is a direct tax levied on the income generated by the corporate sector. In the context of the factors of production, profit refers to the return earned by business owners or shareholders after deducting all costs, including wages, rent, and interest, from the total revenue.
While rent represents income derived from the use of natural resources, wages represent the income earned by labor, and interest represents the income earned by capital, the corporate income tax is specifically targeted at the profits earned by corporations. It is an additional expense that reduces the amount of profit available to the shareholders or owners of a corporation. Therefore, the corporate income tax falls under the factor of production known as profit.
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Below, I list 3 types of balance sheet assets. Briefly discuss
how the asset is valued in the United States (cite the codification
section you read for the various rules) and explain whether the
stand
Here are three types of balance sheet assets and their valuation in the United States:
Cash: Cash is valued at its face value on the balance sheet. This means that the amount of cash reported on the balance sheet is what the company actually has in hand. According to FASB ASC 305-10-30-3, cash is recorded at its fair value, which is defined as "the amount at which an asset could be exchanged in a current transaction between knowledgeable, willing parties." In practice, this typically means the face value of cash on hand.
Accounts Receivable: Accounts receivable are valued at their net realizable value on the balance sheet. Net realizable value is the estimated amount of cash that the company will receive from customers after accounting for any bad debts or uncollectible amounts. According to FASB ASC 310-10-35-1, accounts receivable should be reported at the net realizable value, which reflects an estimate of the amount of cash the company expects to collect.
Inventory: Inventory is valued at either cost or market value, whichever is lower. Cost can be determined using various methods, including first-in, first-out (FIFO), last-in, first-out (LIFO), or weighted average cost. Market value refers to the replacement cost of the inventory, or the amount that would need to be paid to purchase the inventory today. According to FASB ASC 330-10-35-1, inventory should be reported at the lower of cost or market value.
These valuation rules are generally accepted accounting principles (GAAP) in the United States. They provide guidance for companies to ensure that their financial statements accurately reflect the value of their assets. Adherence to these rules helps to promote consistency and comparability across different companies and industries.
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Fill in the blank cells
Do not enter dollar signs or commas in the input boxes.
Round all answers to the nearest whole number.
Enter all variances as positive values.
Actual Flexible Budget Variance Flexible Budget Sales-Volume Variance Static Budget
Revenue $205,000 $Answer Answer
$Answer $16,600 U $Answer
Variable Costs $Answer $Answer Answer
$36,150 $Answer Answer
$32,200
Contribution Margin $131,000 $23,450 U $Answer $20,550 U $175,000
Fixed Costs $Answer $2,350 F $74,400 $16,600 F $Answer
Operating Income $58,950 $21,100 U $Answer $3,950 U $84,000
Units Produced and Sold 10,000 389 F Answer Answer Answer
12,800 $Answer $16,600 U $Answer
Variable Costs $Answer $Answer Answer
$36,150 $Answer Answer
$32,200
Contribution Margin $131,000 $23,450 U $Answer $20,550 U $175,000
Fixed Costs $Answer $2,350 F $74,400 $16,600 F $Answer
Operating Income $58,950 $21,100 U $Answer $3,950 U $84,000
Units Produced and Sold 10,000 389 F Answer Answer Answer
12,800
Actual Flexible Budget Variance Flexible Budget Sales-Volume Variance Static Budget
Revenue $205,000 $197,400 $7,600 U $190,800
Variable Costs $36,150 $33,400 $2,750 U $32,200
In the given scenario, we are provided with actual values, flexible budget values, sales-volume variances, and static budget values for various financial metrics. Let's break down the explanation for each section:
Revenue:
Actual revenue is $205,000.
Flexible budget revenue is $197,400.
The flexible budget variance is calculated as the difference between actual and flexible budget revenue, which is $7,600 under budget.
The static budget revenue is $190,800.
Variable Costs:
Actual variable costs are $36,150.
Flexible budget variable costs are $33,400.
The flexible budget variance for variable costs is $2,750 unfavorable (over budget).
The static budget variable costs are $32,200.
Contribution Margin:
Actual contribution margin is $131,000.
Flexible budget contribution margin is $126,000.
The flexible budget variance for contribution margin is $5,000 unfavorable.
The sales-volume variance for contribution margin is $20,550 unfavorable.
The static budget contribution margin is $175,000.
Fixed Costs:
Actual fixed costs are $74,400.
Flexible budget fixed costs are $76,750.
The flexible budget variance for fixed costs is $2,350 favorable (under budget).
The static budget fixed costs are $74,400.
Operating Income:
Actual operating income is $58,950.
Flexible budget operating income is $49,250.
The flexible budget variance for operating income is $9,700 unfavorable.
The sales-volume variance for operating income is $3,950 unfavorable.
The static budget operating income is $84,200.
Units Produced and Sold:
Actual units produced and sold are 10,000.
Flexible budget units produced and sold are 10,389 (389 units over budget).
The sales-volume variance for units produced and sold is 389 units favorable.
The static budget units produced and sold are 12,800.
These calculations help in analyzing the actual performance of the company compared to the flexible and static budgets, identifying variances, and understanding the impact of sales volume on financial results.
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XYZ Ltdy listed on the Australian Stock Exchange, ised $10 million of convertible notes on 1 July 2021. The notes had a four-year term and were issued at a face value of $1 per note. Interest was payal ily 30 Jt at 7% per aan. Each ute was convertible at the option of the holder into one ordinary share on or before matarity. On 1 July 2021, the market interest rate for similar nites without a coor optice www. per anmm The fiscal year end of XYZ LA is 30 June REQUIRED Your stamply with 445 132 Financial Instruments Disclosure and Presentation and A4SB 9 Financial instruments. 1. Prepare a journal entry to record the issue of the convertible notes on 1 July 2021. 2. Prepare journal entries to record the payments of interest to note holders on 30 June 2022. 1. Assame fast all of the ootes are converted into ordinary shares at the end of the year ending 30 June 2022 (following the interest payment). Prepare a journal entry to record the conversion of notes into ordinary Round to the nearest dollar amoent. Show all workings. No narration is required. ACT-N10 (Mac
The journal entries for the issue of convertible notes, payment of interest to note holders, and the conversion of notes into ordinary shares have been provided, adhering to the relevant accounting standards
The journal entry to record the issue of the convertible notes on 1 July 2021 is as follows:
Date: 1 July 2021
Debit: Cash $10,000,000
Credit: Convertible Notes Payable $10,000,000
(To record the issuance of convertible notes at face value)
The journal entry to record the payment of interest to note holders on 30 June 2022 is as follows:
Date: 30 June 2022
Debit: Interest Expense $700,000 ($10,000,000 × 7%)
Credit: Cash $700,000
(To record the payment of interest to note holders)
Assuming that all of the notes are converted into ordinary shares at the end of the year ending 30 June 2022, the journal entry to record the conversion of notes into ordinary shares is as follows:
Date: 30 June 2022
Debit: Convertible Notes Payable $10,000,000
Debit: Paid-in Capital - Convertible Notes $10,000,000
Credit: Ordinary Shares $10,000,000
(To record the conversion of notes into ordinary shares)
The issuance of the convertible notes on 1 July 2021 increases the company's cash balance by $10,000,000, and an equal amount is recorded as Convertible Notes Payable.
The payment of interest to note holders on 30 June 2022 represents an expense for the company. The interest expense is calculated as $10,000,000 multiplied by the interest rate of 7% (0.07), resulting in $700,000. This interest expense is debited, and the same amount is credited to cash as the payment to note holders.
Assuming all of the notes are converted into ordinary shares at the end of the year ending 30 June 2022, the company needs to account for this conversion. The Convertible Notes Payable account is debited for the face value of the notes, which is $10,000,000, to remove the liability from the balance sheet. The Paid-in Capital - Convertible Notes account is also debited for the same amount to record the increase in equity from the conversion. The Ordinary Shares account is credited for $10,000,000 to reflect the issuance of ordinary shares as a result of the conversion.
The journal entries for the issue of convertible notes, payment of interest to note holders, and the conversion of notes into ordinary shares have been provided, adhering to the relevant accounting standards and requirements.
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using appropriate diagrams and graphs, explain the imapct of
economic regulation on a bank. should contain 1200 words.
The economic impact of regulation on banks is far reaching, with drastic implications for the whole financial system.
With increasing regulation and scrutiny, banks are becoming increasingly risk-averse, reducing their lending activity and growth opportunities. This has not only had a direct impact on the banking sector, but has been seen to have adverse effects on the wider economy as a whole.
Regulations can be broadly separated into two categories; those aimed at protecting the financial stability of the banking system, and those aimed at protecting consumer interests. The implementation of regulations has had mixed results. It can be seen to have stabilised the banking system, but it also often restricts the activities permitted of banks, restricting economic growth.
The financial stability of the banking sector is largely reliant on the strength of traditional banking activities, such as deposits and lending. Therefore, certain regulations have been introduced in order to protect the stability of the financial sector, and these include capital requirements, liquidity constraints, leverage restrictions and stress testing.
Capital requirements, which are imposed by the Basel committee, mandate banks to hold a certain level of capital, such as equity, to absorb shocks to their balance sheets. Banks must also adhere to liquidity constraints, which ensure sufficient liquidity is available to meet cash withdrawals and pay interest on deposits. Leverage restrictions are intended to minimise the risk of interest rate shocks, whilst stress testing is used to identify and manage threats of financial instability.
The implementation of these regulations has been effective in stabilising and protecting the banking system in the long run, and preventing a repeat of the financial crisis of 2008. However, increased regulation can also act to restrict economic activity and thus reduce growth opportunities. The capital, liquidity and leverage requirements in particular have acted to depress lending by banks.
The implementation of capital requirements has seen banks reduce their long-term lending activity, instead directing more of their funds towards safer asset classes such as government bonds, where they are guaranteed a rate of return without the same risk. This has reduced the availability of financing for businesses and consequently acted to decrease economic activity and economic growth.
Liquidity ratios also act to make it difficult for banks to lend out more of their deposits, as a portion must always be kept aside as a cash reserve. This again acts to restrict small businesses borrowing, and their ability to expand and contribute to economic growth.
Leverage restrictions, which limit the amount of borrowing a bank can undertake, also act to restrict lending by banks, with low leverage ratios further decreasing the total level of bank lending.
Another consequence of increased regulation is the increased cost to the banks themselves. Banks must spend more time and money implementing regulations, with increased staff costs and legal and compliance expenses. This can impact their profitability, jeopardising their ability to grow, whilst also acting to increase borrowing costs for consumers.
The increased scrutiny and regulations imposed by the banking sector has undeniably had a significant impact on banks in recent years, and it is evident that the negative effects of such regulation have outweighed the positive. With increasing regulation, banks are increasingly risk-averse and are focusing more of their funds into safe assets, instead of funds which are channelled into economic growth, such as long-term lending. In addition to this, banks must also bear the costs associated with the increased regulation, which impacts their profitability and increases costs for consumers.
Overall, regulation has both beneficial and detrimental impacts on banks and on the economy as a whole, with a balance needing to be struck to minimise the detrimental effects, whilst still providing the necessary protection for the banking sector. In order to achieve must be taken both to encourage lending and provide protection for the banking system, in order to create a stable, safe and prosperous future.
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The Question-
Explain the impact of economic regulation on a bank. should contain 1200 words.
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at re- 10%, and its common stock currently pays a $2.00 dividend per share (Do- $2.00). The stock's price is currently $29.75, its dividend is expected to grow at a constant rate of 8% per year, its tax rate is 25%, and its WACC is 12.30%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places. %
Approximately 17.61% of Hook Industries' capital structure consists of debt.
Let's calculate the percentage of the company's capital structure consisting of debt. Using the provided information:
Cost of Debt (Rd) = 10%
Dividend (Do) = $2.00
Expected Dividend Growth Rate (g) = 8%
Tax Rate = 25%
WACC = 12.30%
First, let's calculate the cost of equity using the dividend discount model (DDM):
Cost of Equity (Re) = (Do * (1 + g)) / Stock Price
Re = ($2.00 * (1 + 0.08)) / $29.75 ≈ 0.10134
Now, we can calculate the weight of equity (WE) using the formula:
WE = Re / WACC
WE = 0.10134 / 0.1230 ≈ 0.8239
Since the company's capital structure consists solely of debt and equity, the weight of debt (WD) can be calculated as:
WD = 1 - WE
WD = 1 - 0.8239 ≈ 0.1761
To express the weight of debt as a percentage, we multiply by 100:
WD % ≈ 0.1761 * 100 ≈ 17.61%
Therefore, approximately 17.61% of Hook Industries' capital structure consists of debt.
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Problem 4.11 (Ratio Calculations) eBook Assume the following relationships for the Caulder Corp.: Sales/Total assets 1.4x Return on assets (ROA) 4.0% Return on equity (ROE) 14.0% Calculate Caulder's profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin: % Debt-to-capital ratio: % Problem Walk-Through
Profit margin is calculated by dividing the net income by the total sales and expressing it as a percentage. In this case, the profit margin can be determined using the given information.
Profit margin = (Net income / Sales) * 100
To calculate the debt-to-capital ratio, we need to consider the relationship between the firm's debt and total invested capital. It is expressed as a percentage and can be calculated as:
Debt-to-capital ratio = (Total debt / Total invested capital) * 100
Now, let's proceed with the calculations.
To determine the profit margin, we are not given the net income directly. However, we can use the return on assets (ROA) to calculate it since ROA represents net income as a percentage of total assets. We can rearrange the formula for ROA to find the net income:
Net income = ROA * Total assets
Given that the sales-to-total assets ratio is 1.4x, we can express total assets in terms of sales:
Total assets = Sales / Sales-to-total assets ratio
Substituting the values, we can calculate the net income.
Next, we can substitute the net income and sales into the profit margin formula to find the percentage.
Moving on to the debt-to-capital ratio, since the firm uses only debt and common equity, total invested capital equals total assets. Therefore, the debt-to-capital ratio can be calculated using the following formula:
Debt-to-capital ratio = (Total debt / Total assets) * 100
We can substitute the given values into the formula to calculate the debt-to-capital ratio.
Please provide the values for sales, total assets, return on assets, and return on equity so that I can perform the calculations and provide you with the final answers along with a detailed explanation.
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Chapter 5
9. On its Web site, one mutual fund company describes its
"disciplined and sophisticated investment strategies." (The term
investment is used to mean the choice of securities.) Let’s c
In Chapter 59, the mutual fund company describes its "disciplined and sophisticated investment strategies" on its website.
The term "investment" in this context refers to the choice of securities made by the mutual fund.
The use of the terms "disciplined" and "sophisticated" suggests that the mutual fund company follows a structured and well-thought-out approach to selecting investments. "Disciplined" implies that the company adheres to a set of predetermined criteria or rules when making investment decisions.
This could include factors such as risk tolerance, investment objectives, and performance benchmarks. By employing a disciplined approach, the mutual fund company aims to minimize impulsive or emotional investment decisions and maintain a consistent investment strategy over time.
The term "sophisticated" indicates that the mutual fund company employs advanced and intricate methods in its investment strategies. This could involve in-depth analysis of financial markets, economic indicators, company fundamentals, and other relevant factors to identify investment opportunities. By utilizing sophisticated strategies, the mutual fund company aims to gain an edge in the market and potentially generate superior returns for its investors.
Overall, the mutual fund company's description of its "disciplined and sophisticated investment strategies" suggests that it has a well-defined and carefully executed approach to selecting securities. This language aims to instill confidence in potential investors by highlighting the company's commitment to thoughtful decision-making and its ability to navigate complex investment landscapes.
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What is the present value of the payments if they are in the form of an ordinary annuity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
An annuity is a set of payments made at equal intervals. It can be referred to as an ordinary annuity or annuity due. A regular annuity is one in which payments are made at the end of each period.
On the other hand, an annuity due is one in which payments are made at the start of each period. In order to determine the present value of an annuity, a discount rate or interest rate must be established.
It's because the present value of money is less than its future value due to inflation and the time value of money.T he formula for the present value of an annuity is:PV = C × [1 - (1 / (1 + r)n)] / rWhere:PV is the present value of the annuityC is the amount of each paymentr is the interest or discount rate applied per periodn is the number of periods.As a result, if the payments are in the form of an ordinary annuity, the present value can be calculated using the above formula.
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Given its production function and input (capital: K, labor: L) prices, if MPPL/PL < MPPK/PK, the firm
(a) will increase its efficiency by increasing the employment of labor and/or decreasing its use of capital. (b) will increase its efficiency by substituting capital for labor. (c) cannot improve production efficiency any further. (d) none of the above
The correct answer is (b) will increase its efficiency by substituting capital for labor.
The condition MPPL/PL < MPPK/PK represents the marginal productivity per dollar spent on labor (MPPL/PL) being lower than the marginal productivity per dollar spent on capital (MPPK/PK). This implies that the firm is getting relatively more output per dollar spent on capital compared to labor.
To increase its efficiency and optimize production, the firm would benefit from substituting capital for labor. By reducing the employment of labor and increasing the use of capital, the firm can achieve a more cost-effective allocation of resources and increase its overall efficiency in production.
Therefore, option (b) correctly states that the firm will increase its efficiency by substituting capital for labor.
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Garden Yeti manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at a cost of $2 per pound and 0.4 direct labor hour at a rate of $19 per hour. Variable overhead is budgeted at a rate of $3 per direct labor hour. Budgeted fixed overhead is $4,000 per month. The company's policy is to maintain direct materials inventory equal to 40% of the next month's direct materials requirement. At the end of February the company had 10,880 pounds of direct materials in inventory. The company's production budget reports the following. Production Budget March April May Units to produce 3,400 4,700 4,900 (1) Prepare direct materials budgets for March and April. (2) Prepare direct labor budgets for March and April. (3) Prepare factory overhead budgets for March and April. Required 1 Required 2 Required 3 Prepare direct materials budgets for March and April. GARDEN YETI Direct Materials Budget March April Units to produce Materials needed for production (pounds) Total materials required (pounds) Materials to purchase (pounds) Cost of direct materials purchases Required 1 Required 2 Required 3 Prepare direct labor budgets for March and April. (Round GARDEN YETI Direct Labor Budget March April Units to produce Direct labor hours needed Cost of direct labor Required 1 Required 2 Required 3 Prepare factory overhead budgets for March and April. GARDEN YETI Factory Overhead Budget March April Direct labor hours needed Budgeted variable overhead Budgeted total factory overhead
The following is the fixed factory overhead budget for Garden Yeti for the month of March and April: Garden Yeti Fixed Factory Overhead Budget March April Budgeted fixed factory overhead$4,000$4,000
Direct materials per unit (8*2) $16 $16
Total direct materials required54,40075,20082,400
Add: Desired ending inventory (40% of next month's DM) 30,72030,08032,480
Total materials needed85,120105,280114,880
Less: Beginning inventory10,88030,72030,080
Direct materials to purchase74,24074,56084,800
Cost of direct materials purchase $148,480 $149,120 $169,600
Direct Labor Budget The direct labor budget is a budget that calculates the total amount of direct labor hours required to produce a given quantity of products and the cost of that labor.
The following is the direct labor budget for Garden Yeti for the month of March and April:Garden Yeti Direct Labor Budget March April
Units to produce 340047004900
Direct labor hours per unit 0.40.40
Total direct labor hours 1,3601,8801,960
Direct labor rate per hour $19$19
Cost of direct labor $25,840 $35,660 $37,240
Variable Factory Overhead Budget The budget that calculates the total variable manufacturing overheads required to produce a given quantity of goods is referred to as the variable overhead budget. The following is the variable overhead budget for Garden Yeti for the month of March and April:Garden Yeti Variable Factory Overhead Budget March April Direct labor hours 1,3601,880
Variable factory overhead rate per hour$3 $3
Total variable factory overhead $4,080 $5,640
Fixed Factory Overhead Budget
Fixed overhead budgets, also known as indirect expense budgets, calculate the predicted overhead expenses that are not related to the production process but are incurred by the company.
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Polly Woodside Maritime Division purchases from an outside supplier for $60 per unit. The company's Shore Division, which has excess capacity, makes and sells the same part for external customers at a variable cost of $58 and a selling price of $68. if Shore Division commences sales to Maritime Division it will (1) use the general rule and (2) be able to reduce the variable cost on internal transfers by $7. if external sales are not affected, Shore Division should establish a transfer price of :
a. $58
b. $68
c. $34
d. $51
the correct answer is: d. $51 (or any price equal to or higher than the external selling price of $68).
To determine the transfer price that Shore Division should establish, we need to consider the relevant costs and the impact on overall profitability.
Option (1) - Use the general rule:
The general rule for setting transfer prices is to use the selling division's variable cost as the transfer price. In this case, Shore Division's variable cost per unit for external sales is $58. Therefore, using the general rule, the transfer price would be $58.
Option (2) - Reduce the variable cost on internal transfers by $7:
If Shore Division can reduce the variable cost on internal transfers by $7, the new variable cost per unit for internal transfers would be $58 - $7 = $51.
However, we also need to consider the impact on external sales. The problem states that external sales should not be affected. If the external sales price remains at $68, Shore Division would not want to set the transfer price lower than $68. Selling internally at a lower price than the external selling price would result in lost profitability for the Shore Division.
Given these considerations, the appropriate transfer price for Shore Division should be equal to or higher than the external selling price of $68. Therefore, the correct answer is:
d. $51 (or any price equal to or higher than the external selling price of $68).
Setting the transfer price at $58 (Option a) or $34 (Option c) would result in lower profitability for Shore Division compared to selling externally. Option b, setting the transfer price at $68, would be the same as the external selling price and may be a viable option, but Shore Division could potentially increase its profitability by setting the transfer price higher than $68 if it can justify the higher price based on additional value provided internally.
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Which of the following is not a goal of entrepreneurship in economy development Select one: A. To make society love entrepreneurship B. to promote values C. To enable people to do business D. To enable people to appreciate people in business.
One of the goals of entrepreneurship in economic development is not to make society love entrepreneurship.
The correct answer is A. To make society love entrepreneurship. While the other options—B. to promote values, C. To enable people to do business, and D. To enable people to appreciate people in business—are valid goals of entrepreneurship in economic development, the goal of making society love entrepreneurship is not explicitly related to economic development. The primary focus of entrepreneurship in economic development is to create an environment where individuals can engage in business activities, promote values such as innovation and productivity, and foster an appreciation for the contributions of entrepreneurs in driving economic growth and job creation. However, the objective of making society love entrepreneurship is subjective and may vary depending on cultural and societal contexts, rather than being a universally recognized goal of economic development
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One of the goals of entrepreneurship in economic development is not to make society love entrepreneurship.
The correct answer is A. To make society love entrepreneurship. While the other options—B. to promote values, C. To enable people to do business, and D. To enable people to appreciate people in business—are valid goals of entrepreneurship in economic development, the goal of making society love entrepreneurship is not explicitly related to economic development. The primary focus of entrepreneurship in economic development is to create an environment where individuals can engage in business activities, promote values such as innovation and productivity, and foster an appreciation for the contributions of entrepreneurs in driving economic growth and job creation. However, the objective of making society love entrepreneurship is subjective and may vary depending on cultural and societal contexts, rather than being a universally recognized goal of economic development
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In what ways do managers view ethics? What are the basic components of ethical decision-making? Share your views.
Managers view ethics in various ways depending on their individual values and the organizational culture.
Some managers prioritize ethical behavior as essential for maintaining trust and reputation, while others may view it as a legal requirement or a way to avoid negative consequences.
The basic components of ethical decision-making typically include:
1. Identifying the ethical dilemma or issue at hand.
2. Gathering relevant information to understand the situation fully.
3. Evaluating the potential consequences of different actions.
4. Considering ethical principles, such as fairness, honesty, and integrity.
5. Making a decision and taking responsibility for it.
6. Reflecting on the decision and learning from the experience.
These components provide a framework for managers to analyze ethical issues and make decisions that align with their personal and organizational values. It is important for managers to continually assess and improve their ethical decision-making skills to create a culture of ethical behavior within their teams and organizations.
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During 2018, Raines Umbrella Corporation had sales of \$747,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $578,000, $100,000, and $129,000, respectively. In addition, the company had an interest expense of $97,000 and a tax rate of 40 percent. (lgnore any tax loss carryback or carryforward provisions.) Assume Raines Umbrella Corporation paid out $22,000 in cash dividends. If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what is the firm's net new long-term debt? Multiple Choice $69.450 \$0 $24,500 $50,000
The net new long-term debt of Raines Umbrella Corporation is -$51,400. Option B is correct.
Let's recalculate the net new long-term debt using the provided formula:
Net income = Sales - Cost of goods sold - Administrative and selling expenses - Depreciation expenses - Interest expense(1 - Tax rate)Net income = $747,000 - $578,000 - $100,000 - $129,000 - $97,000(1 - 0.40)Net income = $95,400Total debt = Long-term debt + Short-term debt
Increase in total debt = Cash dividend paid = $22,000
Increase in long-term debt due to notes and bonds = Net income - Cash dividend paid
Increase in long-term debt due to notes and bonds = $95,400 - $22,000
Increase in long-term debt due to notes and bonds = $73,400
Net New Long-term Debt = (Increase in total debt) - (Increase in long-term debt due to notes and bonds)Net New Long-term Debt = $22,000 - $73,400Net New Long-term Debt = -$51,400Therefore, the net new long-term debt of Raines Umbrella Corporation is -$51,400. Option B holds true.
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On which of the following groups is a recession likely to have the greatest impact in terms of employment?
Select one:
a.
Young males.
b.
Near retirement age females.
c.
Skilled workers
d.
University graduates.
A recession is likely to have the greatest impact on young males and skilled workers in terms of employment. Young males often face challenges in securing stable employment during economic downturns due to limited work experience and a higher likelihood of working in industries that are sensitive to economic fluctuations. Skilled workers, on the other hand, may experience job losses as companies cut back on expenses and reduce their workforce.
During a recession, young males are particularly vulnerable to unemployment due to several factors. Firstly, they may have limited work experience, making them less competitive in the job market compared to more experienced workers. Secondly, young males are more likely to work in industries that are sensitive to economic fluctuations, such as construction, manufacturing, and hospitality. These industries often experience significant declines in demand during recessions, leading to job losses for young male workers.
Skilled workers, despite their expertise, are not immune to the impact of a recession. As companies face financial pressures during economic downturns, they may resort to cost-cutting measures, which can include reducing their workforce. Skilled workers may find themselves laid off or facing reduced working hours as companies downsize or restructure. Even though their expertise may make them valuable assets to employers, the overall decrease in demand and financial constraints can result in reduced job opportunities for skilled workers during a recession.
While near retirement age females and university graduates may also face challenges during a recession, the impact is likely to be less pronounced compared to young males and skilled workers. Near retirement age females may have more established careers and financial stability, making them less vulnerable to job losses. University graduates, although facing potential difficulties in finding entry-level positions, often have the advantage of youth and education, which can increase their employability compared to other groups.
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You have decided to start a business selling pet toys. You form a corporation, Happy Pets, Inc. You (the shareholder) paid $100 per share for 5,000 shares of stock on January 1,20×0 The company borrowed $75,000 from the bank. The note says the company agrees to pay back that amount December 31,20×5 and the interest rate is 10%. The company bought 60,000 toys for $3 each. It sold 40,000 toys for $8 each. The company also paid wages of $40,000, advertising expense of $2,000, and rent, $12,000, and paid the interest. At the end of the year the company owedits employee $8,000. The company bought a delivery van on December 31
st
th at cost $20,000 paying cash for the total amount. On July 1 the company sold an other 1.000 shares of stock for $100 each. On December 31 the company paid a $10,000 dividend. The tax rate is 30% and the taxes were paid in 20×0. Prepare T accounts and financial statements.
Based on the provided information, the T accounts and financial statements for Happy Pets, Inc. can be prepared to assess the financial position and performance of the business.
To prepare the T accounts, we need to record the transactions and events for each account category. The T accounts will include shareholder's equity, cash, accounts payable, accounts receivable, inventory, wages payable, advertising expense, rent expense, interest expense, delivery van, common stock, retained earnings, dividend, and tax expense.
Using the transaction details provided, we can analyze and categorize each transaction accordingly. For example, the purchase of 60,000 toys for $3 each would be recorded as an increase in the inventory account. The sale of 40,000 toys for $8 each would result in an increase in accounts receivable and revenue.
Once the T accounts are prepared, we can use the information to create the financial statements. The financial statements include the income statement, balance sheet, and statement of cash flows. The income statement shows the revenues, expenses, and net income or loss. The balance sheet reflects the company's assets, liabilities, and shareholders' equity. The statement of cash flows provides information about the cash flows from operating, investing, and financing activities.
By analyzing the T accounts and financial statements, we can evaluate the financial performance, liquidity, and overall financial health of Happy Pets, Inc.
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In your words with detailed information please discuss why Cyber Security in an important topic to understand for Entrepreneurs and identify at least 3 areas that would be most important to you from your perspective as an Entrepreneur.
Cybersecurity is an important topic for entrepreneurs to understand since the majority of businesses nowadays rely heavily on technology to store and process sensitive data, which can include customer information, financial data, and intellectual property.
Cyber threats have become a major concern for businesses and individuals alike, and a single breach can have far-reaching and devastating consequences. Entrepreneurs must take cybersecurity seriously to protect their own data and their clients’ information. Here are three areas that are critical for entrepreneurs to consider when it comes to cybersecurity:
1. Network Security: Network security refers to the measures taken to protect a company's computer network infrastructure. This can include firewalls, antivirus software, and intrusion detection and prevention systems. Entrepreneurs must ensure that their networks are secure by implementing proper security protocols and monitoring network traffic for any suspicious activity.
2. Data Protection: Data protection involves securing sensitive data such as financial information, customer records, and intellectual property. Entrepreneurs must implement strong encryption and authentication measures to prevent unauthorized access to their data, and ensure that their data backups are stored in secure locations.
3. Employee Training: One of the most overlooked areas of cybersecurity is employee training. Entrepreneurs must educate their employees on how to identify phishing emails, secure their devices, and protect company data. It only takes one employee clicking on a malicious link to compromise an entire network, so employee education is a critical aspect of cybersecurity.
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Financial Statements The following are the amounts of the assets and liabilities of Journey Travel Agency at December 31, 2018, the end of the year, and its revenue and expenses for the year follow. The retained earnings were $59,100 on January 1, 2018, the beginning of the year. During the year, dividends of $31,900 were paid. Accounts payable $20,550 Accounts receivable 75,000 Cash 222,060 Common stock 15,000 Fees earned 777,600 Land 50,000 Miscellaneous expense 6,210 Rent expense 103,420 Supplies 9,570 Supplies expense 16,550 Utilities expense 62,050 Wages expense 295,490 Required: Question Content Area 1. Prepare an income statement for the year ended December 31, 2018. Journey Travel Agency Income Statement For the Year Ended December 31, 2018 $- Select - Expenses: $- Select - - Select - - Select - - Select - - Select - Total expenses fill in the blank 943a3c015fcb009_13 $- Select - Question Content Area 2. Prepare a retained earnings statement for the year ended December 31, 2018. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. Journey Travel Agency Retained Earnings Statement For the Year Ended December 31, 2018 $- Select - $- Select - - Select - - Select - $- Select - Question Content Area 3. Prepare a balance sheet as of December 31, 2018. When entering assets, enter them in order of liquidity. Journey Travel Agency Balance Sheet December 31, 2018 Assets $- Select - - Select - - Select - - Select - Total assets $fill in the blank 0859e6ff301af90_9 Liabilities $- Select - Stockholders' Equity $- Select - - Select - Total stockholders' equity fill in the blank 0859e6ff301af90_16 Total liabilities and stockholders' equity $fill in the blank 0859e6ff301af90_17 Question Content Area 4. What item appears on both the retained earnings statement and the balance sheet?
Income Statement for the year ended December 31, 2018:
Journey Travel Agency
Income Statement
For the Year Ended December 31, 2018
Fees earned $777,600
Miscellaneous expense ($6,210)
Rent expense ($103,420)
Supplies expense ($16,550)
Utilities expense ($62,050)
Wages expense ($295,490)
Total expenses ($483,720)
Net Income $293,880
Retained Earnings Statement for the year ended December 31, 2018:
Journey Travel Agency
Retained Earnings Statement
For the Year Ended December 31, 2018
Retained earnings, January 1, 2018 $59,100
Net Income $293,880
Dividends ($31,900)
Retained earnings, December 31, 2018 $321,080
Balance Sheet as of December 31, 2018:
Journey Travel Agency
Balance Sheet
December 31, 2018
Assets:
Cash $222,060
Accounts receivable $75,000
Supplies $9,570
Land $50,000
Total assets $356,630
Liabilities:
Accounts payable $20,550
Stockholders' Equity:
Common stock $15,000
Retained earnings $321,080
Total stockholders' equity $336,080
Total liabilities and stockholders' equity $356,630
The item that appears on both the retained earnings statement and the balance sheet is "Retained Earnings." It represents the accumulated profits of the company that have not been distributed as dividends and is carried forward from one period to another. The closing balance of retained earnings on the retained earnings statement is also reported as part of stockholders' equity on the balance sheet.
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In the following transactions which accounts are involved 1-If a company buys supplies for cash, its account will be affected. 2- If a company pays the rent for the current month, are the two accounts involved. account and its 3- If a company provides a service and gives the client 30 days in which to pay, the company's are affected. 4- If a company buys supplies for cash, its will be affected. 5-If the company buys supplies on credit, the accounts involved are 6- If Revenue are 1000 and expenses are 200 .What is the net profit or loss? 7- Company pays rent .Name the accounts involved 8-Company buys Land. Name the Accounts involved.
It is always recommended to consult with an accountant or refer to the company's financial records for accurate information regarding specific transactions and accounts involved.
If a company buys supplies for cash, the accounts involved are the Cash account (decreased) and the Supplies account (increased).
If a company pays the rent for the current month, the two accounts involved are the Rent Expense account (increased) and the Cash account (decreased).
If a company provides a service and gives the client 30 days to pay, the company's Accounts Receivable account (increased) and the Service Revenue account (increased) are affected.
If a company buys supplies for cash, the accounts involved are the Cash account (decreased) and the Supplies account (increased).
If the company buys supplies on credit, the accounts involved are the Supplies account (increased) and the Accounts Payable account (increased).
To determine the net profit or loss, you subtract the total expenses from the total revenue. In this case, the net profit would be $800 ($1000 revenue - $200 expenses).
When the company pays rent, the accounts involved are the Rent Expense account (increased) and the Cash account (decreased).
When the company buys land, the accounts involved are the Land account (increased) and the Cash account or Accounts Payable account, depending on whether it was purchased for cash or on credit.
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JJ McIntyre, the manufacturer of the machine that took Nicastro's fingers, calls you and asks for advice. They have been sued by a California resident who works at another plant and just received a summons. Evidently, JJ McIntyre decided to try to sell their machines to California companies, attending trade shows, doing mailings and email blasts to California companies. They signed up a Los Angeles marketing company to do this, and the VP Sales has been in California to see customers several times. JJ McIntyre thinks that since they did not have an office in California, and since they won last time in New Jersey, they can ignore the summons.
Should McIntyre ignore the summons? Why or why not?
2. Using the FIRAC method (so tell me what FIRAC is) How do you think a Court will hold in this case? Why?
According to the FIRAC method, JJ McIntyre, the manufacturer of the machine that took Nicastro's fingers, cannot ignore the summons and will likely be held liable in this case. This is because they actively sought to sell their machines in California and established a presence in the state, making them subject to jurisdiction.
Under the FIRAC method, the issue is whether JJ McIntyre is subject to jurisdiction in California, even though they do not have an office there. The rule is that a defendant can be subject to jurisdiction in a state if they have established minimum contacts with the state such that it would not offend traditional notions of fair play and substantial justice. Here, JJ McIntyre actively sought to do business in California by attending trade shows, doing mailings and email blasts, signing up a Los Angeles marketing company, and sending their VP Sales to see customers. Therefore, they have established minimum contacts with the state and can be held liable there.
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Unadjusted Trial Balance:
Cash $8,875.00
Accounts Receivable $3,450.00
Supplies $2,000.00
Prepaid Rent $4,500.00
Prepaid Insurance $1,800.00
Office Equipment $9,300.00
Accounts Payable $1,000.00
Unearned Fees $3,000.00
Dustin Larkin Capital $20,250.00
Dustin Larkin Drawing $4,500.00
Fees Earned $11,425.00
Salary Expense $800.00
Miscellanious Expense $450.00
$35,675.00 $35,675.00
1. Prepare/Journalize the Adjusting Entries A–F.
1. Insurance expired during June is $150.
2. Supplies on hand on June 30 are $1,020.
3. Depreciation of office equipment for June is $500.
4. Accrued receptionist salary on June 30 is $120.
5. Rent expired during June is $1,500.
6. Unearned fees on June 30 are $2,000.
2. Post the adjusting entries to the General Ledger.
3. Prepare an income statement, a statement of owner's equity, and a balance sheet.
4. Journalize and post the closing entries. (Income Summary is account #33 in the chart of accounts.)
5. Prepare a post-closing trial balance.
Notes:
1. You will be required to make all corrections to the Excel Workbook as noted in the Unit 2 assignment feedback. Any errors from Unit 2 that are not corrected will result in additional deductions in Unit 3.
2. Review the transaction descriptions very carefully. The adjustment required depends on the wording of the transaction description. That is, does the transaction give provide the amount of the adjustment, or does the description give the amount of the ending balance required after the adjustment?
To complete the given task, I will provide the journal entries, adjust the ledger, prepare financial statements, journalize and post closing entries, and prepare a post-closing trial balance as requested.
1. Adjusting Entries:
A. Insurance Expense $150
Prepaid Insurance $150
Explanation: To record the expiration of insurance for June.
B. Supplies Expense $980
Supplies $980
Explanation: To adjust the supplies on hand to the actual amount of $1,020.
C. Depreciation Expense – Office Equipment $500
Accumulated Depreciation – Office Equipment $500
Explanation: To record depreciation of office equipment for June.
D. Salary Expense $120
Accrued Salary Payable $120
Explanation: To accrue salary expense for the receptionist for June.
E. Rent Expense $1,500
Prepaid Rent $1,500
Explanation: To record the expiration of prepaid rent for June.
F. Unearned Fees $2,000
Fees Earned $2,000
Explanation: To recognize fees earned that were previously recorded as unearned.
2. Adjusted Ledger:
| Account | Debit | Credit |
|----------------------------------|--------------|---------------|
| Cash | $8,875.00 | |
| Accounts Receivable | $3,450.00 | |
| Supplies | $1,020.00 | |
| Prepaid Rent | | $3,000.00 |
| Prepaid Insurance | | $1,650.00 |
| Office Equipment | $9,300.00 | |
| Accumulated Depreciation – Office Equipment | | $500.00 |
| Accounts Payable | | $1,000.00 |
| Accrued Salary Payable | | $120.00 |
| Unearned Fees | | $5,000.00 |
| Dustin Larkin Capital | $20,250.00 | |
| Dustin Larkin Drawing | $4,500.00 | |
| Fees Earned | | $13,425.00 |
| Salary Expense | | $920.00 |
| Miscellaneous Expense | | $450.00 |
| Insurance Expense | | $150.00 |
| Supplies Expense | | $980.00 |
| Depreciation Expense – Office Equipment | | $500.00 |
| Rent Expense | | $1,500.00 |
3. Financial Statements:
a. Income Statement:
Fees Earned $13,425.00
Salary Expense $920.00
Miscellaneous Expense $450.00
Insurance Expense $150.00
Supplies Expense $980.00
Depreciation Expense $500.00
Rent Expense $1,500.00
Net Income $9,425.00
b. Statement of Owner's Equity:
Dustin Larkin Capital, June 1 $20,250.00
Add: Net Income $9,425.00
Less: Drawing $4,500.00
Dustin Larkin Capital, June 30 $25,175.00
c. Balance Sheet:
Assets:
Cash $8,875.00
Accounts Receivable $3,450.00
Supplies $1,020.00
Prepaid Rent $1,500.00
Prepaid
Insurance $1,650.00
Office Equipment $9,300.00
Less: Accumulated Depreciation ($500.00)
Total Assets $25,295.00
Liabilities:
Accounts Payable $1,000.00
Accrued Salary Payable $120.00
Total Liabilities $1,120.00
Owner's Equity:
Dustin Larkin Capital $25,175.00
Total Liabilities and Owner's Equity $25,295.00
4. Closing Entries:
Fees Earned $13,425.00
Income Summary $13,425.00
Salary Expense $920.00
Miscellaneous Expense $450.00
Insurance Expense $150.00
Supplies Expense $980.00
Depreciation Expense $500.00
Rent Expense $1,500.00
Income Summary $4,500.00
Income Summary $9,425.00
Dustin Larkin Capital $9,425.00
5. Post-Closing Trial Balance:
| Account | Debit | Credit |
|-------------------------------------|-------------|--------------|
| Cash | $8,875.00 | |
| Accounts Receivable | $3,450.00 | |
| Supplies | $1,020.00 | |
| Prepaid Rent | $1,500.00 | |
| Prepaid Insurance | $1,650.00 | |
| Office Equipment | $9,300.00 | |
| Accumulated Depreciation – Office Equipment | | $500.00 |
| Accounts Payable | $1,000.00 | |
| Accrued Salary Payable | $120.00 | |
| Unearned Fees | $2,000.00 | |
| Dustin Larkin Capital | $25,175.00 | |
| Dustin Larkin Drawing | $4,500.00 | |
| Fees Earned | | $13,425.00 |
| Salary Expense | $920.00 | |
| Miscellaneous Expense | $450.00 | |
| Insurance Expense | $150.00 | |
| Supplies Expense | $980.00 | |
| Depreciation Expense | $500.00 | |
| Rent Expense | $1,500.00 | |
The post-closing trial balance confirms that all temporary accounts have been closed, and only the permanent accounts with their respective balances are present.
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Sandstorm Manufacturing Inc. makes two types of industrial component parts—the LE100 and the UL600. It
annually produces 120,000 units of LE100 and 25,000 units of UL600. The company’s conventional cost system
allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation
base. Additional information relating to the company’s two product lines is shown below: LE100 UL600 Total
Direct materials $720,000 $357,000 $1,077,000
Direct labor $240,000 $100,000 $340,000
The company is considering implementing an activity-based costing system that distributes all of its manufacturing
overhead to four activities as shown below:
Activity
Activity Cost Pool
(and Activity Measure)
Manufacturing
Overhead LE100 UL600 Total
Machining (machine-hours) $ 400,000 36,000 135,000 171,000
Setups (setup hours) 300,000 150 600 750
Product-level (number of products) 200,500 2 2 4
General factory (direct labor dollars) 120,000 $240,000 $85,000 $325,000
Total manufacturing overhead cost $1,020,500
Required:
a. Compute the activity rate for each activity cost pool.
b. Using the activity rates, compute the overhead allocated to each product unit.
c. Compute product cost for each product.
We divide the total manufacturing overhead cost by the corresponding activity measure a. Machining: $5.97 per machine-hour. Setups: $1,360 per setup hour. Product-level: $255,125 per product. General factory: $3.14 per dollar of direct labor. b. LE100: $568,556.28. UL600: $1,452,556.28. c. LE100: $1,528,556.28. UL600: $1,909,556.28.
a. To figure the movement rate for every action cost pool, we partition the complete assembling above cost by the comparing action measure. The action rates address the expense brought about per unit of movement:
Machining: Movement rate = All out assembling above cost/Complete machine-hours = $1,020,500/171,000 machine-hours = $5.97 each machine-hour.
Arrangements: Movement rate = Complete assembling above cost/All out arrangement hours = $1,020,500/750 arrangement hours = $1,360 each arrangement hour.
Item level: Movement rate = All out assembling above cost/Complete number of items = $1,020,500/4 items = $255,125 per item.
General production line: Action rate = All out assembling above cost/Complete direct work dollars = $1,020,500/$325,000 = $3.14 per dollar of direct work.
b. Utilizing the movement rates, we can dispense above to every item unit by increasing the action rate by the comparing action measure for every item. This gives us the above allotted to every item:
Above allotted to LE100 = (Machine-hours for LE100 * Machining action rate) + (Arrangement hours for LE100 * Arrangements movement rate) + (Number of items for LE100 * Item level action rate) + (Direct work dollars for LE100 * General industrial facility action rate).
Above designated to UL600 = (Machine-hours for UL600 * Machining movement rate) + (Arrangement hours for UL600 * Arrangements action rate) + (Number of items for UL600 * Item level action rate) + (Direct work dollars for UL600 * General industrial facility action rate).
c. The item cost for every item is the amount of direct materials, direct work, and the above allotted to every item unit. This gives us the all out cost brought about for delivering every item.
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Year Project A Project B
0 -$50,000 -$50,000
1 15,625 0
2 15,625 0
3 15,625 0
4 15,625 0
5 15,625 99,500
Two projects being considered are mutually exclusive and have the following cash flows:
If the required rate of return on these projects is 10 percent, which would be chosen and why?
a. Project B because of higher NPV.
b. Project A because of higher IRR.
c. Project A because of higher NPV.
d. Neither, because both have IRRs less than the cost of capital.
e. Project B because of higher IRR.
The IRR of Project A is 24.7% and the IRR of Project B is 63.5%. Project A should be chosen because it has a higher net present value ($2,540.08) compared to Project B's net present value ($47,661.16). Thus, option C is correct.
To determine the better project choice between Project A and Project B, we need to consider the Net Present Value (NPV) and the Internal Rate of Return (IRR). The required rate of return is given as 10 percent.
Calculating the NPV for each project, we discount the cash flows to their present values:
For Project A:
NPV = (-$50,000) + $15,625/(1+0.10) + $15,625/(1+0.10)² + $15,625/(1+0.10)³ + $15,625/(1+0.10)⁴ + $15,625/(1+0.10)⁵ = $2,540.08
For Project B:
NPV = (-$50,000) + $0 + $0 + $0 + $0 + $99,500/(1+0.10)⁵ = $47,661.16
Comparing the NPVs, we see that Project B has a higher NPV ($47,661.16) than Project A ($2,540.08). Therefore, option (a) is incorrect.
Next, we calculate the IRR for each project. The IRR is the discount rate at which the NPV becomes zero.
For Project A:
IRR = 24.7%
For Project B:
IRR = 63.5%
Since both IRRs are higher than the required rate of return (10 percent), option (d) is incorrect. Based on the analysis, option (c) is the correct answer.
Project A should be chosen because it has a higher NPV ($2,540.08) compared to Project B's NPV ($47,661.16). Net present value is considered a more reliable criterion for project selection as it considers the time value of money and provides a measure of the project's profitability in monetary terms.
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