Answer:
20%
Explanation:
The computation of rate of return on the fund is shown below:-
Net assets value at the beginning = Total assets ÷ Number of shares
= $390 million ÷ 15 million
= $26 million
Net assets value at the end of the year = (Total assets - Expenses) ÷ Number of shares
= ($440 million - ($440 million × 2%)) ÷ 16 million
= ($440 million - $8.8 million) ÷ 16 million
= $26.95 million
Now,
Rate of return = (Net assets value at the end of the year - Net assets value at the end of the year + Income distribution + Capital gain distribution) ÷ Net assets value at the beginning
= ($26.95 million - $26 million + $4 per share + $0.25 per share) ÷ $26 million
= $5.2 million ÷ $26 million
= 20%
According to the Core Reading, which of the following is NOT a threat presented by rising income inequality? Select one: a. Higher than optimal tax rates on the rich b. All of these are threats presented by rising income inequality. c. Falling support for globalization d. Unintended consequences of government policies to moderate the effects of stagnant wages e. Falling support for a market-based economy
Answer:
Option B
Explanation:
In simple words, Income inequality refers to the severe imbalance in wealth levels typically in the possession of a limited minority of a community with a large accumulation of wealth.
If wealth disparity exists, there is indeed a wide difference in the resources of one group of the society and that of another. Specific forms of discrimination and study of wage differences should be used to explain economic inequality.
Thus, from the above we can conclude that the correct option is B .
Managers must chart a company's strategic course by Multiple Choice ensuring excess production capacity and/or inventory. building a bigger dealer network. ensuring that marketing and promotion programs are state-of-the-art. developing a thorough understanding of the company's external and internal environments. competing fiercely for a share in the market.
Answer:
The correct answer is the fourth option: developing a thorough understanding of the company's external and internal environments.
Explanation:
To begin with, in order to understand that a company's strategy must be guided by thorough understanding of its external and internal environments it is necessary to understand that the system proposed is formed by several factors that influence it and therefore that a manager must study carefully those factors and that system in order to guide the company to a successful work and accomplish the goals by using a strategy that compresses all the information about those factors.
During its first year of operations, a company granted its employees vacation privileges and pension rights estimated at a cost of $23,125 and $15,073, respectively. The vacations are expected to be taken in the next year, and the pension rights are expected to be paid in the future 5-30 years. What is the total cost of vacation pay and pension rights to be recognized in the first year
Answer:
$38,198
Explanation:
Recognization principle state that the total amount paid in the first year will be the sum of the amounts given as a whole which will inturn be considered as paid for the employees.
Therefore for the first year, the vacation pay and the pension right will be :
$23,125 +$15,073
=$38,198
Therefore the total cost of vacation pay and pension rights to be recognized in the first year will be $38,198
Peggy sells pistachios and almonds at the farmer’s market. She currently prices pistachios at $7 per bag and almonds at $4 per bag. She observes that every hour, 4 people each buy one bag of pistachios and 2 people each buy one bag of almonds. Having surveyed them, she learns that 2 of the pistachio buyers would be willing to pay $2 for the bag of almonds while the other two would only be willing to pay $1. Both almond buyers would be willing pay $5 for the bag of pistachios. Suppose Peggy decides to sell a bundle containing one bag of pistachios and one bag of almonds in addition to selling them separately. What price should she charge for the bundle in order to maximize revenue?
Answer:
The price she should charge for the bundle in order to maximize profit is 9
Explanation:
Solution
The total pistachios sold = 7 * 2 =14
The total almonds sold is = 4*1 = 4
So,
The total of both pistachios and almonds = 14 + 4 + 18
Thus,
we solve for getting average of the two which is:
Getting the average of the two in the bundle = 18/2
=9
Therefore p =9
During June, Zinc Company produced 10,000 chainsaw blades. The standard quantity of material allowed per unit was 2 pounds of steel per blade at a standard cost of $10 per pound. Zinc determined that it had a favorable materials usage variance of $1,600 for June. Calculate the actual quantity of materials used by Zinc Company in June. Group of answer choices 19,840 pounds 19,660 pounds 19,680 pounds 19,860 pounds
Answer:
19,840 pounds
Explanation:
The computation of actual quantity of materials is shown below:-
Materials usage variance = (Selling quantity - Actual quantity) × Standard Price
= (10,000 × 2 - Actual quantity) × $10 = $1,600
= (20,000 - Actual quantity) × $10 = $1,600
= 20,000 - Actual quantity = $160
Actual quantity = 20,000 - $160
= $19,840 pounds
Therefore for computing the actual quantity of materials we simply applied the above formula.
Freeman, Inc., reported net income of $40,000 for 20A. The income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 20B. Assuming a 30% income tax rate, this situation would cause a 20A deferred tax amount of A) $3,000 (debit). B) $3,000 (credit). C) $ 900 (debit). D) $ 900 (credit).
Answer:
The correct option is D,$900(credit)
Explanation:
The revenue omitted would be increase revenue in the year 20B ,as result net income would also be increased,hence the tax impact of it in the future that should be taken record of now is a deferred tax liability,a tax payable in the year 20B.
The amount of tax deferred is the omitted revenue multiplied by the tax rate of 30% i.e
deferred tax =$3000*30%=$900
This would be credited to deferred tax liability and debited income tax expense.
Exercise 24-5 Payback period computation; even cash flows LO P1 Compute the payback period for each of these two separate investments: A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation.
Answer and Explanation:
The computation of the payback period is shown below:
1. Payback period = Initial investment ÷ Net cash flow
where,
Initial investment is $520,000
Net cash flow is = incremental after-tax income + depreciation expense
= $150,000 + $85,000
= $235,000
The depreciation expense is
= ($520,000 - $10,000) ÷ (6 years)
= $85,000
Now the payback period is
= $520,000 ÷ $235,000
= 2.21 years
2. Payback period = Initial investment ÷ Net cash flow
where,
Initial investment is $380,000
Net cash flow is = incremental after-tax income + depreciation expense
= $60,000 + $45,000
= $105,000
The depreciation expense is
= ($380,000 - $20,000) ÷ (8 years)
= $45,000
Now the payback period is
= $380,000 ÷ $105,000
= 3.62 years
On January 1, 2021, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $600,000. Additionally, Blackstone paid a real estate brokerâs commission of $36,000, legal fees of $6,000, and title insurance of $18,000. The closing statement indicated that the land value was $500,000 and the building value was $100,000. Shortly after acquisition, the building was razed at a cost of $75,000.
Blackstone entered into a $3,000,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2021, for the construction of an office building on land site 11. The building was completed and occupied on September 30, 2022. Additional construction costs were incurred as follows:
Plans, specifications, and blueprints .....................$ 12,000
Architectsâ fees for design and supervision ............95,000
To finance the construction cost, Blackstone borrowed $3,000,000 on March 1, 2021. The loan is payable in 10 annual installments of $300,000 plus interest at the rate of 14%. Blackstoneâs average amounts of accumulated building construction expenditures were as follows:
For the period March 1 to December 31, 2021 ...........$ 900,000
For the period January 1 to September 30, 2022 .......2,300,000
Required:
1. Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site 11 as of September 30, 2022.
2. Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2022.
Answer:
Blackstone Corporation
1. A schedule that discloses the individual costs making up the balance in the land account in respect of land site 11 as of September 30, 2022:
Cost of Land = $600,000
Broker's Commission = $36,000
Legal Fees = $6,000
Title Insurance = $18,000
Razing of old building = $75,000
Total = $735,000
2. A schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2022:
Payment to contractor for building = $3,000,000
Plans, specifications, and blueprints = $12,000
Architect's fees (design & supervision = $95,000
Capitalized Interest ($3m x14%/10 x 2) = $84,000
Total = $3,191,000
Explanation:
a) The cost of land to recognize includes the actual cost for the parcel of land, including the building which was razed. All other expenses incurred ordinarily and necessarily in order to put the land to its intended use are also capitalized. The costs for the broker's commission, legal fees, title insurance, and razing of old building were incurred ordinarily and necessarily for the land and are therefore capitalized in determining the value of the land.
b) The capitalized interest portion for the building is the interests paid to date. The contractor's fee, payments for plans, architect's fee, and interests are included as costs of the building.
Purdum Farms borrowed $16 million by signing a five-year note on December 31, 2017. Repayments of the principal are payable annually in installments of $3.2 million each. Purdum Farms makes the first payment on December 31, 2018 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2018, after the first payment is made?
Answer:
Current liabilities $3.2 million
long-term liabilities =$16 million-$3.2 million-$3.2 million=$9.6 million
Explanation:
The amount classified as current liabilities as at 31st December 2018 is the portion of the loan repayable within a year,that the repayment due at 31st December 2019 which is $3.2 million.
The amount to be classified as long term liabilities is the balance of the loan after having taken out the payment in year 1 as well as the repayment to be made in year 2
Indicate the effect—Understate, Overstate, No Effect—that each of the following errors has on 2020 net income and 2021 net income. 2020 2021 (a) Equipment (with a useful life of 5 years) was purchased and expensed in 2018. Select an option Select an option (b) Wages payable were not recorded at 12/31/20. Select an option Select an option (c) Equipment purchased in 2020 was expensed. Select an option Select an option (d) 2020 ending inventory was overstated. Select an option Select an option (e) Patent amortization was not recorded in 2021. Select an option Select an option
Answer: The answer is provided below
Explanation:
The net income is excess of revenues over expenses after the adjustment for depreciation expense and the income tax expense. Net income is also called the net profit.
(a) Equipment (with a useful life of 5 years) was purchased and expensed in 2018.
2020 : It will be overstated in the net income.
2021: It will be overstated in the net income.
b. Wages payable were not recorded at 12/31/20.
2020: It will be overstated in the net income.
2021: It will be understated in the net income.
c. Equipment purchased in 2020 was expensed.
2020: It will be understated in the net income.
2021: It will be overstated in the net income
d. 2020 ending inventory was overstated.
2020: It will be overstated in the net income.
2021: It will be understated in the net income.
e. Patent amortization was not recorded in 2021.
2020: It will be no effect in the net income.
2021: It will be overstated in the net income
Division A sells ground veal internally to Division B, which in turn, produces veal burgers that sell for $ 20.00 per pound. Division A incurs costs of $ 2.25 per pound while Division B incurs additional costs of $ 8.50 per pound. What is Division A's operating income per burger, assuming the transfer price of the ground veal is set at $ 4.00 per burger? A. $ 4.50 B. $ 4.25 C. $ 2.25 D. $ 1.75
Answer:
Division A
Operating Income:
Transfer Price = $4.00
Less Costs = $2,25
Operating Income = $1.75
Explanation:
The Transfer Price of $4.00 per burger to Division B is the selling price for Division A's product.
When the costs of producing Division A's product is subtracted from the selling price (transfer price), the result is the operating income.
Operating income is, therefore, the difference between selling price and costs. These costs include the cost of goods sold and other expenses, like wages and salaries, rent, etc. It is the income subject to taxes and profit distribution.
Market researchers have determined nine categories of lifestyles for computer users. One of the categories is described as "Mouse Potatoes," who like the Internet for entertainment and can't wait to buy the latest in "techno-entertainment." In terms of the diffusion process, how would "Mouse Potatoes" be classified?
Answer: Innovators.
Explanation:
The Diffusion Process defines how new products are able to spread across a market.
It does this by using the Adoption Process to determine the various groups in the market and how fast the product gets to those groups. There are 5 groups in total.
- Innovators
- Early Adopters
- Early Majority
- Late Majority
- Laggards.
In the above scenario, the Mouse Potatoes would be the Innovators. These are the first buyers of a product and as such their opinions are very important as they then tell others how useful the product is. Mouse Potatoes regularly browse the net looking for the latest in "techno-entertainment", so they can buy or use it first thus making them Innovators.
According to an article in the Wall Street Journal, KB Home and other builders found demand for new houses increasing in 2017 as a result of an increase in the formation of new households. In the long run, formation of new households depends on population growth. Source: Laura Kusisto and Sarah Chaney, "U.S. Housing Starts Fell in April for Third Time in Four Months," Wall Street Journal, May 16, 2017. Are firms like homebuilders that sell products whose demand depends partly on demographic factors likely to be more or less affected by the business cycle than are other firms whose products are less dependent on these factors (holding constant other factors that affect the demand for new houses)? Briefly explain.
Answer:
Generally speaking, demographic growth can affect the economy quite a lot, but the economy has a very little effect on demographic growth. E.g. the baby boomers were great for the economy during several decades, but there is no clear relationship between population growth and economic activity.
This means that companies like home builders whose demand depends on other factors besides the economy, will be less affected by economic recessions or expansions. E.g. the demographic growth in America was around 0.7% during 2019 and the economy was growing that year.
Actually, the US population has been declining over the last decades. The real growth factor in population has been immigration in the last decades, and that has also been declining lately.
Pacioli Company developed the following reconciling information in preparing its September bank reconciliation: Cash balance per bank, 9/30 $12,000 Note receivable collected by bank 6,000 Outstanding checks 9,000 Deposits in transit 4,500 Bank service charge 75 NSF check 1,200 Determine the cash balance per books (before adjustments) for Pacioli Company. a. $8,775. b. $16,500. c. $2,775. d. $12,000.
Answer:
c. $2,775
Explanation:
The computation of cash balance per books (before adjustments) is shown below:-
Balance per book = Balance per Bank - Notes Receivable collected by bank - Deposits in transit + Bank service charges + NSF
= $12,000 - $6,000 - $4,500 + $75 + $1,200
= $2,775
Therefore for computing the balance per book we simply applied the above formula.
Week 5 Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. Required:
a) Compute the weights of the assets in Rachel’s portfolio? (2 marks)
b) If Rachel’s portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively, calculate the geometric average return of the portfolio for this period. (2 marks)
c) Assume that expected return of the stock A in Rachel’s portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM). (2 marks)
i need onlu part d)
d) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate the expected return, variance, and standard deviation of the portfolio. (4 marks)
Required: step by step explanation with formula please
Answer: The answer is provided below
Explanation:
The weights of assest in Rachel's portfolio: = amount in each stock ÷ sum of the amounts invested in all stocks.
Share Amount Weight
A. 13500. 0.33
B. 7600. 0.18
C. 14700. 0.36
D. 5500. 0.13
Total 41300
Note that weight = amount/total
Geometric average return of a portfolio:
((1+R1)×(1+R2)×(1+R3)....×(1+Rn))^(1/n) - 1
where,
R1= return of period 1
Rn= return in nth period
Hence, the geometric average return of Rachel's portfolio will be:
((1+9.7%)×(1+12.4%)×(1-5.5%)×(1+17.2%))^(1/4) - 1
= 8.10 % (approximately) per year.
Using the nominal rate of return which includes inflation:
CAPM: Required return will be:
= Risk free return + (Risk premium × Beta)
13.6 = Risk free return + (4.8 × 1.5)
13.6 = Risk free return + 7.2
Risk free return = 13.6 - 7.2
= 6.4% which is not inflation adjusted)
The inflation adjusted rate of return will be:
= (1+return)/(1+inflation rate))-1
= ((1+13.6%)/(1+2.7%))-1
= 10.61%
Using CAPM:
10.61= Risk free return + (4.8 × 1.5)
10.61 = Risk free return + 7.2
Risk free return = 10.61 - 7.2
Risk free return = 3.41% (at real rates)
In practice, the use of inflation adjusted return i.e the real rate of return which is 10.61% is better as it puts forth a long term perspective on how a stock is performing.
One reason that businesspersons may find it difficult to comply with the law is because a. there are so many loopholes in the law. b. business ethicists give conflicting views on what constitutes ethical business behavior. c. gray areas in the law make it difficult to tell how the law will be applied to a specific business situation. d. businesspersons, as a general rule, do not take the time to learn about the laws governing their activities
Answer:
The correct answer is the option C: gray areas in the law make it difficult to tell how the law will be applied to a specific business situation.
Explanation:
To begin with, the business world the companies tend to have several lawyers working for them due to the fact that there are several cases that could happen in different situations and with different conditions and that is because in the law there are a variaty of gray areas that make it more difficult to tell how it will impact in a specific business situation. That is why, the business persons may find it difficult to comply with the law, due to all its extension when it comes to rules.
Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 units of cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $150 Factory overhead $350,000 Direct labor 25 Selling and administrative expenses 140,000 Factory overhead 40 Selling and administrative expenses 25 Total variable cost per unit $240 Smart Stream desires a profit equal to a 30% return on invested assets of $1,200,000. a. Determine the total costs and the total cost amount per unit for the production and sale of 10,000 cellular phones.
Answer:
Smart Stream Inc.
a) Total costs:
Variable costs:
Direct materials = $1,500,000 ($150 x 10,000)
Direct labor = $250,000 ($25 x 10,000)
Factory overhead = $400,000 ($40 x 10,000)
Selling and Administrative = $250,000( $25 x 10,000)
Total variable costs = $2,400,000 ($240 x 10,000)
Fixed Costs:
Factory overhead = $350,000
Selling and admin = $140,000
Total fixed costs = $490,000
I) Total costs = variable plus fixed costs = $2,890,000 ($2,400,000 + 490,000)
II) Total cost per unit = $289 ($2,890,000/10,000)
Explanation:
The total cost method includes all the costs in arriving at the unit cost before adding the desired profit to arrive at the selling price of a product.
Total costs include the cost of goods sold and the expenses incurred in running the business for the period.
It is unlike the product cost-plus and variable cost-plus approaches to product pricing. For the product cost-plus approach, only the costs of production is taken into consideration for arriving at the selling price. In that case, the costs of direct materials and labor, and factory overheads would be considered, while variable and fixed selling and administrative costs are excluded. The unit cost would have been $250.
The variable cost-plus approach considers only the variable elements of costs to arrive at the selling price. These include the direct materials and labor costs, and variable element of the factory overhead and selling and administrative expenses. The unit cost would have been $240 as stated in the question.
These different cost-plus pricing approaches are more suitable for some industries than others. No matter the choice made, it must be noted that they result in different selling prices and can affect the competitiveness of a company.
Last year Ann Arbor Corp had $250,000 of assets (which equals total invested capital), $305,000 of sales, $20,000 of net income, and a debt-to-total-capital ratio of 37.5%. The new CFO believes that a new computer program will enable the company to reduce costs and thus raise net income to $33,000. The firm finances using only debt and common equity. Assets, total invested capital, sales, and the debt to capital ratio would not be affected. By how much would the cost reduction improve the ROE
Answer:
8.32%
Explanation:
The computation of cost reduction improve the ROE is shown below:-
For computing the increase in ROE first we need to follow some steps which is here below:-
Debt = capital × Debt
= $250,000 × 37.5%
= $93,750
Equity = Assets - Debt
= $250,000 - $93,750
= $156,250
New ROE = New Net income ÷ Equity
= $33,000 ÷ $156,250
= 21.12%
Old ROE = Old Net income ÷ Equity
= $20,000 ÷ $156,250
= 12.8%
Increase in ROE = New ROE- Old ROE
= 21.12% - 12.8%
= 8.32%
A firm has cash flow from operations of $500 million, interest expense of $40 million, net capital expenditures of $150 million, net new borrowing of $60 million, and a net increase in working capital of $20 million. The marginal tax rate is 30%. What is the free cash flow to the firm
Answer: $410 million
Explanation:
Cash flow from operation= $500
Interest expense = $40 million
Net capital expenditures = $150 million
Net new borrowing = $60 million, Net increase in working capital = $20 million.
Marginal tax rate = 30%.
The cash flow from operations includes the Net Earnings adjusted for working capital. Also, the net earnings include the impact of interest expense and the tax expense/shield.
Therefore, the cash flow to equity will be:
= Cash Flow from Operations - Capital Expenditure + Net borrowing
Cash flow to equity will now be:
= 500 - 150 + 60
= $410 million
S Corporation makes 35,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials $ 9.40 Direct labor $ 8.40 Variable manufacturing overhead $ 3.40 Fixed manufacturing overhead $ 4.35 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to S Corporation for this motor is $23.65. If S Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: Multiple Choice $204,750 $85,750 $152,250 ($66,500)
Answer:
Advantage $85,750
Explanation:
The calculation of Financial advantage for the company of making rather than buying is shown below:-
Financial advantage for the company of making rather than buying = Relevant cost of buying - Cost of making
Financial advantage = Price offered × Used production - (Direct material + Direct labor + Variable manufacturing overhead) × Used production
= $23.65 × 35,000 - ($9.40 + $8.40 + $3.40) × 35,000
= $827,750 - $21.20 × 35,000
= $827,750 - $742,000
Advantage = $85,750
Here, fixed costs are unavoidable, it is not a relevant cost
Equipment with a book value of $78,000 and an original cost of $168,000 was sold at a loss of $31,000. Paid $106,000 cash for a new truck. Sold land costing $315,000 for $420,000 cash, yielding a gain of $105,000. Long-term investments in stock were sold for $90,000 cash, yielding a gain of $15,500. Use the above information to determine this company's cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
$451,000
Explanation:
The computation of cash flows from investing activities is shown below:-
Sale of equipment $47,000
($78,000 - $31,000)
Purchase of new truck ($106,000)
Sale of land $420,000
Sale of Long-term investments $90,000
Net cash provided by investing activities $451,000
Therefore to reach the cash flows from investing activities we simply added the sale of equipment, sale of land, sale of long term investments and deduct the purchase of new truck.
According to a summary of the payroll of Mountain Streaming Co., $110,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax. Also, $25,000 was subject to state and federal unemployment taxes. a. Calculate the employer's payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.8%. $ b. Journalize the entry to record the accrual of payroll taxes. If an amount box does not require an entry, leave it blank.
Answer:
a. Calculate the employer's payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.8%.
$9,800b. Journalize the entry to record the accrual of payroll taxes. If an amount box does not require an entry, leave it blank.
Dr FICA Social Security expense 6,600Dr FICA Medicare expense 1,650Dr Federal unemployment tax expense 200Dr State unemployment tax expense 1,350 Cr FICA Social Security payable 6,600 Cr FICA Medicare payable 1,650 Cr Federal unemployment tax payable 200 Cr State unemployment tax payable 1,350Explanation:
payroll taxes should be:
social security $110,000 x 6% = $6,600
Medicare $110,000 x 1.5% = $1,650
federal unemployment $25,000 x 0.8% = $200
state unemployment $25,000 x 5.4% = $1,350
total = $9,800
Both employees and employers must pay equal amounts of FICA taxes (social security and medicare), but only employees pay unemployment taxes.
On March 31, 20Y9, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture store, are as follows: Accounts Receivable $ 170,000 Accumulated Depreciation-Building 750,000 Administrative Expenses 435,000 Building 3,500,000 Cash 80,000 Common Stock 300,000 Cost of Goods Sold 5,500,000 Dividends 175,000 Interest Expense 15,000 Inventory 980,000 Notes Payable 250,000 Office Supplies 20,000 Retained Earnings 1,987,000 Salaries Payable 8,000 Sales 8,245,000 Selling Expenses 575,000 Store Supplies 90,000 A. Prepare a multiple-step income statement for the fiscal year ended March 31, 20Y9. Be sure to complete the statement heading. Refer to the information given in the exercise and to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign. B. What is a major advantage of the multiple-step income statement over the single-step income statement?
Answer and Explanation:
A. The preparation of the multiple income statement is presented below:
Royal Furnishings Company
Multiple-step income statement
For the fiscal year ended March 31, 20Y9
Sales $8,245,000
Less: Cost of goods sold -$5,500,000
Gross profit $2,745,000
Less: Operating expenses
Administrative expenses -$435,000
Selling expenses -$575,000
Total operating expenses -$1,010,000
Operating income $1,735,000
Non operating income or others
Less: Interest expense -$15,000
Net income $1,720,000
B. The major advantage of the multi-step income statement represents the relation between the gross profit ratio i.e. gross profit and revenue measured as a percentage and also demonstrates the various types of levels of operating expenses, operating profits, non-operating profits, etc.
Danielle Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 8,200 units, but its actual level of activity was 8,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:
Data used in budgeting
Fixed element per month Variable element per unit
Revenue $34.20
Direct labor $0 $6.20
Direct materials 0 13.80
Manufacturing overhead 37,000 1.70
Total expenses $62,500 $21.90
Selling and administrative expenses 25,500 0.20
Actual results for May:
Revenue $228,900
Direct labor $41,130
Direct materials $93,235
Manufacturing overhead $43,500
Selling and administrative expenses $30,470
The direct materials in the flexible budget for May would be closest to:________.
a. $89,735.
b. $92,230.
c. $90,420.
d. $91,020.
Answer:
$113,850
Explanation:
The computation of the direct material in the flexible budget is shown below:
= Actual level of activity × direct material per unit
= 8,250 units × $13.80
= $113,850
By multiplying the actual level of activity with the direct material per unit we can get the direct material in the flexible budget and the same is shown above
This is the answer but the same is not provided in the given options
For the cost and price functions below, find
a. the number, q, of units that produces maximum profit
b. the price, p, per unit that produces maximum profit
c. the maximum profit, P.
C(q) = 70 + 17q
p = 77 - 2q
Answer:
a) The number, q, of units that produces maximum profit = 15
b) The price, p, per unit that produces maximum profit = 47 (currency not giben in the question)
c) Maximum Profit = P = 380 (currency not given in the question).
Explanation:
The cost function and price per unit function are given respectively as
C(q) = 70 + 17q
p = 77 - 2q
where q = quantity or number of units
a.) the number, q, of units that produces maximum profit
Total cost = C(q) = 70 + 17q
Revenue = (price per unit) × (Number of units) = p × q = (77 - 2q) × q = (77q - 2q²)
Profits = P(q) = (Revenue) - (Total Cost)
P(q) = (77q - 2q²) - (70 + 17q)
P(q) = -2q² + 60q - 70
To maximize the profits, we just obtain the point where the profit function reaches a Maximum.
At the maximum of a function, (dP/dq) = 0 and (d²P/dq²) < 0
Profit = P(q) = -2q² + 60q - 70
(dP/dq) = -4q + 60
At maximum point,
(dP/dq) = -4q + 60 = 0
q = (60/4) = 15
(d²P/dQ²) = -4 < 0 (hence, showing that the this point corresponds to a maximum point truly)
Hence, the number, q, of units that produces maximum profit = 15.
b.) the price, p, per unit that produces maximum profit
The price per unit is given as
p = 77 - 2q
Maximum profit occurs at q = 15
p = 77 - (2×15) = 47
Hence, the price, p, per unit that produces maximum profit = 47 (currency not given in the question)
c.) the maximum profit, P.
The Profit function is given as
Profit = P(q) = -2q² + 60q - 70
At maximum Profit, q = 15
Maximum Profit = P(15)
= -2(15²) + 60(15) - 70
= 380 (currency not given in the question).
Hope this Helps!!!
A) The number, q, of units that produce maximum profit is = 15
B) The price, p, per unit that creates maximum profit is = 47
C) Maximum Profit is = P = 380
What is the cost and price function?
When The cost procedure and price per unit procedure are presented respectively as:
C(q) is = 70 + 17q
p is = 77 - 2q
where that q is = quantity or number of units
a.) When the number, q, of units that produce maximum profit
The Total cost is = C(q) = 70 + 17q
When the Revenue is = (price per unit) × (Number of units) that is = p × q = (77 - 2q) × q is = (77q - 2q²)
After that Profits is = P(q) = (Revenue) - (Total Cost)
Then P(q) is = (77q - 2q²) - (70 + 17q)
Now, P(q) is = -2q² + 60q - 70
When To maximize the profits, Then we just obtain the point where the profit function reaches a Maximum.
When At the maximum of a function, (dP/dq) is = 0 and (d²P/dq²) < 0
Profit is = P(q) = -2q² + 60q - 70
(dP/dq) is = -4q + 60
Then At maximum point are:
(dP/dq) is = -4q + 60 = 0
After that, q = (60/4) = 15
Then (d²P/dQ²) = -4 < 0 (hence, showing that this point corresponds to a maximum point truly)
Therefore, the number, q, of units that produce maximum profit is = 15.
b.) When the price, p, per unit that produces maximum profit
The price per unit is given as
p is = 77 - 2q
Then Maximum profit occurs at q is = 15
p is = 77 - (2×15) = 47
Therefore, the price, p, per unit that produces maximum profit is = 47 (currency not provided in the question)
c.) When the maximum profit, P.
The Profit function is given as
Profit is = P(q) = -2q² + 60q - 70
Then At maximum Profit, q = 15
So, The Maximum Profit is = P(15)
Then = -2(15²) + 60(15) - 70
Therefore, = 380 (currency not given in the question).
Find more information Cost and price function here:
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Swim Suits Unlimited is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars): Peak Off-Peak Cash $50 $30 Marketable securities 0 20 Accounts receivable 40 20 Inventories 100 50 Net fixed assets 500 500 Total assets $690 $620 Payables and accruals $30 $10 Short-term bank debt 50 0 Long-term debt 300 300 Common equity 310 310 Total claims $690 $620 From this data we may conclude that a. Swim Suits' current asset financing policy is relatively aggressive; that is, the company finances some of its permanent assets with short-term discretionary debt. b. Without cash flow data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy. c. Swim Suits follows a relatively conservative approach to current asset financing; that is, some of its short-term needs are met by permanent capital. d. Swim Suits' current asset financing policy calls for exactly matching asset and liability maturities. e. Without income statement data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.
Answer:
See explaination
Explanation:
It can be deduced that Swim follows a relatively conservative approach to current asset financing; this implies or entails that some of its short-term needs are met by permanent capita
The MoMi Corporation’s income before interest, depreciation and taxes, was $2.7 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pre tax cash flow each year. The tax rate is 30%. Depreciation was $330,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unlevered cash flow is 12% per year, and the firm currently has debt of $5 million outstanding. Use the free cash flow approach to calculate the value of the firm and the firm’s equity. (Enter your answer in dollars not in millions.)
Answer:
1. The value of the firm is $23,760,000
2. The value of the equity is $18.76m
Explanation:
In order to calculate the value of the firm we would have to use the following formula:
Value of firm = FCF1 / (r - g) = FCF0 x (1 + g) / (r - g)
Operating Cash Flows (OCF) = (EBITDA - Depreciation) x (1 - tax) + Depreciation
= (2,700,000 - 330,000) x (1 - 30%) + 330,000
= $1,989,000
Free Cash Flow (FCF) = OCF - Investment
We know that investment = 15% of EBITDA = 15% x 2,700,000 = 405,000
Current FCF = 1,989,000 - 405,000 = 1,584,000
Therefore, Value of the firm = 1,584,000 x (1 + 5%) / (12% - 5%) = $23,760,000
To calculate the value of equity we would have to use the following formula:
Value of equity = Value of Firm - Value of Debt = 23.76 - 5 = $18.76m
Answer:
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Explanation:
Cash flow from operations = $ 1785000 (1700000 + 5 % of 1700000).
Depreciation = $ 241500. (230000 + 5 % of 230000).
Taxable income = $ 1543500 (1785000 - 241500)
Net income (after tax) = 1543500 - 30 % of 1543500 = $ 1080450.
Cash flow from operations (after tax) = 1080450 + 241500 (Depreciation, being non cash expense). = $ 1321950.
Free cash flow available = Cash flow from operations (after tax) - Income from investment.
= 1321950 - (1700000 * 17 % * 1.05)
= 1321950 - 303450.
= $ 1018500.
Value of the firm = Free cash flow available / (Capitalization rate - Growth rate)
= 1018500 / (0.12 - 0.05)
= 1018500 / 0.07
= $ 14550000.
Value of the firm's equity = Total value of firm - Value of debt of firm
= 14550000 - 3000000
= $ 11550000.
Conclusion :-
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Suppose the market for widgets can be described by the following equations: Demand: P equals 14minus2.00Q Supply: P equals 2.00Qminus4, where P is the price in dollars per unit and Q is the quantity in thousands of units. What is the equilibrium price and quantity? The equilibrium quantity is 4.5 thousand units and the equilibrium price is $ 5. (Enter your responses rounded to two decimal places.) Suppose the government imposes a tax of $1 per unit to reduce widget consumption and raise government revenues. What will be the new equilibrium quantity? What price will the buyer pay? What amount per unit will the seller receive? The new equilibrium quantity will be 4.25 thousand units. (Enter your response rounded to two decimal places.) The price paid by buyers will be $ 5.5. (Enter your response rounded to two decimal places.) The amount kept by sellers will be $ 4.5. (Enter your response rounded to two decimal places.)
Answer:
Explanation:
Demand P = 14 - 2Q
Supply P = 2Q - 4
Since Demand = Supply
14 - 2Q = 2Q - 4
Collect the like terms on either side
-2Q - 2Q = -4 - 14
-4Q = -18
Dividing both sides by -4, we will have
Q = -18/-4
Q = 4.50 units
P = 14 - 2Q
P = 14 - 2(4.5)
P = 14 - 9
P = $5.00
Therefore Equilibrium price is $5.00 and Equilibrium unit is 4.50
If the government impose a tax of $1 per unit. If price paid but buyer is P, then price received by seller will be (P - 1)
for demand
P = 14 - 2Q
2Q = 14 - P
Q = 7 - 0.5P
For supply
P = 2Q - 4
Q = 2 + 0.5P
Q = 2+ 0.5(P - 1)
Q = 2 + 0.5P - 0.5
Q = 2-0.5 + 0.5P
Q = 1.5 + 0.5P
if Demand = Supply
7 - 0.5P = 1.5 + 0.5P
Collect the like terms on either sides
-0.5P - 0.5P = 1.5 - 7
-1P = -5.5
Dividing both sides by -1, we will have
P = -5.5/-1
P = $5.50
Q = 1.5 + 0.5P
If we substitute 5.5 for P in the above eqn, we will have
Q = 1.5 + 0.5(5.5)
Q = 1.5 + 2.75
Q = 4.25 units
c. Assume that neither country experiences population growth or technological progress and that 6 percent of capital depreciates each year. Assume further that country A saves 15 percent of output each year and country B saves 23 percent of output each year. Using your answer from part b and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker (k∗) , income per worker (y∗) , and consumption per worker (c∗) for each country.
Answer:
Check Explanation.
Explanation:
Note that the production function of bother country = Y=F(K,L) = K L c : k^1/2 L^1/2.
Thus Y/L = b; b = k^1/2 L^1/2/ L.
b = k^1/2.
From the question we are given that L = 6% = 0.06.
Country A saves 15% = 15/100 = 0.15 and country B saves 23% = 23/100 = 0.23.
For country A,
(a). the steady state;
∆k = 0 = y - dk.
0 = 0.15 × k^1/2 - 0.06k.
K^1/2 = 2.5, k* = 6.25
(b). y = K^1/2 = (6.25)^1/2.
y* = 2.5
(c). C = 2.5 - (0.15 × 2.5) = 2.5 - 0.375.
C* = 2.125.
Then, for COUNTRY B.
(a). ∆k = 0 = y - dk.
0 = 0.25 × k^1/2 - 0.06k.
K^1/2 = 4.167, k* = 17.36
(b). y = K^1/2 = (17.36)^1/2.
y* = 4.167.
(c). C = 4.167 - (0.25 × 4.167) = 2.5 - 0.375.
C* = 3.127.
C* = 2.125.
Whit Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $380 per month plus $94 per job plus $11 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in October to be 20 jobs and 216 meals, but the actual activity was 19 jobs and 221 meals. The actual cost for catering supplies in October was $4,790. The catering supplies in the flexible budget for October would be closest to:
Answer:
$4,636
Explanation:
The calculation of catering supplies in the flexible budget for October is shown below:-
Catering supplies in the flexible budget for October = Catering supplies + Per Job × October jobs + Per meal × October Meals
= $380 + $94 × 20 + $11 × 216
= $380 + $1,880 + $2,376
= $4,636
Therefore for computing the catering supplies in the flexible budget for October we simply applied the above formula.
