Activity-based costing system is a method of assigning indirect costs to products and services.
Activity-based costing (ABC) is a costing system that is used to allocate overhead costs to different products. In ABC, costs are assigned to activities and then assigned to products based on how much of each activity they use. It uses a two-stage procedure for cost assignment, the identification of activity cost pools, and the selection of cost drivers.Here is how an activity-based costing system operates.
1: Identification of Activities and Cost PoolsThe first step is to identify all of the activities that are involved in producing a product or delivering a service. These activities can include machine setups, material handling, quality control, and packaging. Once all of the activities have been identified, they are grouped into activity cost pools based on their similarity.
2: Identification of Cost DriversThe next step is to identify the cost drivers for each activity. Cost drivers are the factors that cause an activity to consume resources. For example, the cost driver for machine setup could be the number of setups required or the time it takes to complete a setup. The cost driver for material handling could be the weight of the materials or the number of times the materials are moved.
3: Calculation of Activity Rates Once the cost pools and cost drivers have been identified, activity rates can be calculated for each activity. The activity rate is the cost of each activity per unit of its cost driver. For example, if the cost of material handling is $10,000 and the weight of the materials is 1,000 pounds, the activity rate would be $10 per pound.
4: Allocation of Costs to ProductsFinally, the total cost of each activity is allocated to the products that use the activity. This is done by multiplying the activity rate by the amount of the cost driver used by each product. The result is the total cost of each product including both direct and indirect costs.
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Select from the following list the two major challenges companies typically face with their benefit plans. Control benefit plan costs Keeping up with regulatory reporting requirements for pension plans O Finding experienced benefit staff Finding a reliable benefit administrator Prevent benefit fraud Keeping up with the newest and coolest benefits Communicating benefit plans to employees
Both First and Second options are correct. The two major challenges companies typically face with their benefit plans are: Control benefit plan costs and Keeping up with regulatory reporting requirements for pension plans.
Employers often struggle with managing the rising costs associated with benefit plans, including health insurance, retirement plans, and other employee benefits. Balancing the need to provide competitive benefits while controlling costs is a significant challenge.
Employers must make strategic decisions, such as exploring cost-saving measures, negotiating with insurance providers, implementing wellness programs, or adjusting plan designs to ensure the sustainability and affordability of their benefit offerings.
Benefit plans, particularly pension plans, are subject to extensive regulatory oversight and reporting requirements. Companies must stay updated with the ever-changing regulatory landscape, ensuring compliance with laws such as the Employee Retirement Income Security Act (ERISA) and filing the required documentation and disclosures.
Failure to meet these reporting requirements can result in penalties, legal issues, and reputational damage. Staying abreast of regulatory changes and managing the associated reporting obligations is a complex and time-consuming task for employers.
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LH Company reports a deficit in current E&P of ($720,000) that accrued evenly throughout the year. At the beginning of the year, LH's accumulated E&P was $600,000. LH distributed $400,000 to its sole shareholder, Mark, on September 30 of this year. Mark's tax basis in his LH stock before the distribution was $100,000. • How much of the $400,000 distribution is treated as a dividend to Mark? • What is Mark's tax basis in his LH stock after the distribution? • What is LH's balance in accumulated E&P on the first day of next year?
The entire $400,000 distribution is treated as a dividend to Mark.
Mark's tax basis in his LH stock after the distribution is reduced to zero.
LH's balance in accumulated E&P on the first day of next year is $-120,000.
Since LH Company has a deficit in current E&P of ($720,000), the entire distribution of $400,000 to Mark is treated as a dividend. This is because the distribution exceeds LH's current and accumulated E&P.
Mark's tax basis in his LH stock before the distribution was $100,000. When a distribution exceeds a shareholder's tax basis in their stock, the excess is treated as a dividend. As the entire distribution of $400,000 exceeds Mark's tax basis, his tax basis in his LH stock after the distribution is reduced to zero.
LH's accumulated E&P at the beginning of the year was $600,000, and it incurred a deficit of ($720,000) throughout the year. The deficit reduces the accumulated E&P. Therefore, the accumulated E&P on the first day of the next year would be calculated by adding the beginning balance and the deficit: $600,000 - $720,000 = $-120,000.
The $400,000 distribution to Mark is entirely treated as a dividend. Mark's tax basis in his LH stock is reduced to zero after the distribution. LH Company ends the year with a deficit in accumulated E&P of ($720,000), resulting in a negative balance of $-120,000 on the first day of the next year.
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Explain the steps for calculating simple premiums from the data
of the policies and claims you have to the formation of commercial
premiums
The steps for calculating simple premiums include gathering policy and claim data, analyzing the data, determining the risk level, applying premium rates, and calculating the premium amount.
To calculate simple premiums, several steps are followed. First, policy and claim data is collected, including information about the insured property, individuals, or entities. This data is then analyzed to assess the potential risks associated with the policy. Risk factors such as the likelihood of claims and the value of potential losses are considered. Based on the risk assessment, premium rates are applied, which reflect the cost of providing insurance coverage. Finally, the premium amount is calculated by multiplying the premium rate by the total value or sum insured. This process ensures that premiums accurately reflect the level of risk and coverage provided, allowing insurance companies to generate commercial premiums that are fair and sufficient to cover potential losses.
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how securitization changed for lehman brothers during the
financial crisis of 2007
The financial crisis of 2007 had a significant impact on securitization for Lehman Brothers, leading to a sharp decline in the value of mortgage securities that the company had sold. This, in turn, led to the collapse of Lehman Brothers and had a ripple effect throughout the financial industry, leading to the 2008 financial crisis.
During the financial crisis of 2007, securitization changed for Lehman Brothers. The reason behind this is that Lehman Brothers was one of the largest investment banks, and securitization was a significant part of its business model.
The securitization business model of Lehman Brothers involved buying mortgages from mortgage lenders and packaging them into securities to sell to investors. The money received from investors was then used to buy more mortgages, which were then packaged into more securities. Lehman Brothers used securitization to earn a large amount of money.
However, during the financial crisis of 2007, many homeowners were unable to repay their mortgages, leading to a sharp decline in the value of the mortgage securities that Lehman Brothers had sold.
This, in turn, caused the value of Lehman Brothers' assets to decline significantly, leading to a loss of investor confidence.
In September 2008, Lehman Brothers filed for bankruptcy due to its significant losses, and this had a ripple effect throughout the financial industry. The bankruptcy of Lehman Brothers led to the collapse of other financial institutions, which led to the 2008 financial crisis.
As a result of the financial crisis, securitization changed significantly, with many investors becoming wary of investing in these types of securities.
In conclusion, the financial crisis of 2007 had a significant impact on securitization for Lehman Brothers, leading to a sharp decline in the value of mortgage securities that the company had sold. This, in turn, led to the collapse of Lehman Brothers and had a ripple effect throughout the financial industry, leading to the 2008 financial crisis.
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Jill bought a home for $190,000 with a down payment of $65,000. The rate of interest was 7% for 30 years. Her monthly mortgage payment is: Multiple Choice o $843.75 o None of these o $831.63 o $978.57 o $834.57
Jill's monthly mortgage payment is $834.57. Option (e), $834.57, is the closest to the actual monthly mortgage payment.
To calculate Jill's monthly mortgage payment, we can use the formula for the present value of an annuity:
PMT = PV * (r / (1 - (1 + r)^(-n)))
where:
PMT is the monthly mortgage payment
PV is the present value of the loan (the difference between the home price and the down payment)
r is the monthly interest rate (0.07 / 12 = 0.00583)
n is the total number of payments (30 years * 12 payments/year = 360)
Using the given values, we get:
PV = $190,000 - $65,000 = $125,000 r = 0.00583 n = 360
PMT = $125,000 * (0.00583 / (1 - (1 + 0.00583)^(-360))) = $834.57 (rounded to the nearest cent)
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On Set. 29,2020, Oxford AstraZeneca patented its COVID19 vaccine. The total cost on research \& development for the vaccine was $550,000,000 with a useful life of 5 years. Requirements: a. Journal entry on the day they patented the vaccine. b. Journal entry for the vaccine amortization as of December 31, 2020. 2. Coca Cola purchased Pizza Hut on 8/22/09 paying $2.5 billion. The sum of the market values of Pizza Hut's assets totaled 135,000,000 and its liabilities totaled $55,000,000. Required: a. Calculate the Goodwill amount b. Record the transaction in the Buyer's accounting books. 3. Pepsico purchased Taco Bell on 1/19/11 paying $1.8 billion. The sum of the market values of Taco Bell's assets totaled 88,000,000 and its liabilities totaled $34,000,000. Required: a. Calculate the Goodwill amount b. Record the transaction in the Buyer's accounting books.
Oxford AstraZeneca Patent Journal Entries:
a. On September 29, 2020, when Oxford AstraZeneca patented its COVID-19 vaccine:
Date: September 29, 2020
Patent Expense Dr. $550,000,000
Cash (or Accounts Payable) Cr. $550,000,000
b. Journal entry for vaccine amortization as of December 31, 2020:
Assuming straight-line amortization over 5 years:
Date: December 31, 2020
Amortization Expense Dr. $110,000,000 (($550,000,000 / 5 years) * 1 year)
Accumulated Amortization Cr. $110,000,000
Coca Cola's Purchase of Pizza Hut:
a. Calculate the Goodwill amount:
Purchase Price: $2.5 billion
Market Value of Assets: $135,000,000
Liabilities: $55,000,000
Goodwill = Purchase Price - (Market Value of Assets - Liabilities)
Goodwill = $2,500,000,000 - ($135,000,000 - $55,000,000)
Goodwill = $2,500,000,000 - $80,000,000
Goodwill = $2,420,000,000
b. Journal entry in the Buyer's accounting books (Coca Cola):
Date: August 22, 2009
Pizza Hut (Assets) Dr. $135,000,000
Pizza Hut (Liabilities) Cr. $55,000,000
Goodwill Cr. $2,420,000,000
Cash (or Accounts Payable) Cr. $2,420,000,000
Pepsico's Purchase of Taco Bell:
a. Calculate the Goodwill amount:
Purchase Price: $1.8 billion
Market Value of Assets: $88,000,000
Liabilities: $34,000,000
Goodwill = Purchase Price - (Market Value of Assets - Liabilities)
Goodwill = $1,800,000,000 - ($88,000,000 - $34,000,000)
Goodwill = $1,800,000,000 - $54,000,000
Goodwill = $1,746,000,000
b. Journal entry in the Buyer's accounting books (Pepsico):
Date: January 19, 2011
Taco Bell (Assets) Dr. $88,000,000
Taco Bell (Liabilities) Cr. $34,000,000
Goodwill Cr. $1,746,000,000
Cash (or Accounts Payable) Cr. $1,746,000,000
Note: The journal entries provided are simplified and do not take into account potential tax or legal considerations. It's always recommended to consult with a professional accountant or financial advisor for accurate and specific guidance.
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Revenue Recognition Identify the proper point to recognize revenue for each of the following transactions. a. Honey Industries sells a machine in January with terms of no payment due until six months later. b. Platt Company collects an advance deposit of $700 in July toward the purchase of a $3,000 piece of equipment that is delivered to the customer the following September. c. Naomi Corporation receives payment in October at the time of delivery of a rebuilt engine for tractor.
Naomi Corporation should recognize revenue in October when the rebuilt engine is delivered, as payment is received at the same time.
a. In the case of Honey Industries, revenue recognition should occur when the machine is sold in January. The fact that payment is not due until six months later does not affect the timing of revenue recognition. According to the revenue recognition principle, revenue should be recognized when the earnings process is considered complete, which happens at the point of sale.
b. For Platt Company, revenue recognition should take place in September when the equipment is delivered to the customer. The $700 advance deposit collected in July represents only a partial payment and is considered a liability until the equipment is delivered. Once the equipment is delivered, revenue can be recognized as the earnings process is complete.
c. In the case of Naomi Corporation, revenue recognition should occur in October when the rebuilt engine is delivered to the customer. Since payment is received at the time of delivery, the earnings process is considered complete, and revenue can be recognized. The timing of payment aligns with the timing of revenue recognition in this transaction.
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Contribuld is a self-employed beautician, she was this to her condidian penion plan (CPP) this Year. She is Scupused to jeena that hel Friend isla She is an employee of a Compary and makes the same INGme as her. Contribuled Less to hen cpp. - How much would isla have Contribuled to her CpP as M employee. assuming that her incone was the Same as Madison's iNcome? Hf 2653.20 3979.60 (c) 1326.60
As given,Contrbuld contributed 2653.20 to her CPP this year.Isla is Scupused to jeena that her friend Contribuld is a self-employed beautician.
Isla is an employee of a company and makes the same income as her friend. Contribuld contributed less to her CPP. We have to find out how much would Isla have Contributed to her CPP as an employee assuming that her income was the same as Madison's income, which is 2653.20.
Isla's contribution to CPP would be 3979.60. This is because both Isla and Contribuld have the same income, So, the correct option is (b) $3979.60.
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fows to the same ending period as the longest project It the appropnate rervestment rate tor the det exparsion \( 59.6 \% \), what is the MiRR of the deli expansian? (Round to two decimial places')
To calculate the Modified Internal Rate of Return (MIRR) for the retail expansion project, we need additional information such as the cash flows associated with the project and the appropriate reinvestment rate. Without these details, it is not possible to determine the MIRR accurately.
The MIRR is a financial indicator that takes into account both the cash inflows and outflows of a project, as well as the reinvestment rate of the cash flows. It provides a more realistic measure of the project's profitability by assuming that cash inflows are reinvested at the specified rate.
Once we have the cash flows for the retail expansion project and the appropriate reinvestment rate, we can calculate the MIRR using financial software or formulas.
To accurately calculate the MIRR for the retail expansion project, please provide the specific cash flows associated with the project and the appropriate reinvestment rate.
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You are planning your retirement in 10 years. You currently have $175,000 in a bond account and $615,000 in a stock account. You plan to add $6,500 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 11.25 percent and the bond account will earn a return of 7.75 percent. When you retire, you plan to withdraw an equal amount for each of the next 25 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 7 percent. Required: How much can you withdraw each year in your retirement? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) (Hint: Calculate the balances in both accounts at retirement, sum, put this number in as PV and calculate the PMT that will deplete this account.)
The amount that can be withdrawn each year in retirement is $152,538.07.
To calculate the amount that can be withdrawn each year in retirement, we can use the PV of annuity formula.The steps are as follows:
Step 1: Calculate the future value of the bond account 10 years from now:FV = $175,000 x (1 + 0.0775)¹⁰ + $6,500 x [(1 + 0.0775)⁹ + (1 + 0.0775)⁸ + ... + (1 + 0.0775)¹]FV = $175,000 x 1.9676 + $6,500 x 9.9722FV = $313,244.20
Step 2: Calculate the future value of the stock account 10 years from now:FV = $615,000 x (1 + 0.1125)¹⁰FV = $1,581,535.91
Step 3: Calculate the total future value of both accounts 10 years from now:FV = $313,244.20 + $1,581,535.91FV = $1,894,780.11
Step 4: Calculate the amount that can be withdrawn each year from this total future value, using the PV of annuity formula:PV = PMT x [(1 - (1 / (1 + r)ⁿ)) / r]where PV is the present value, PMT is the amount that can be withdrawn each year, r is the interest rate, and n is the number of years of withdrawals.Rearranging the formula to solve for PMT:PMT = PV / [(1 - (1 / (1 + r)ⁿ)) / r]PMT = $1,894,780.11 / [(1 - (1 / (1 + 0.07)²⁵)) / 0.07]PMT = $152,538.07Therefore, the amount that can be withdrawn each year in retirement is $152,538.07.
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A firm has $2.5 million in sales, a Lerner index of 0.85, and a marginal cost of $25, and competes against 1000 other firms in its relevant market. a. What price does this firm charge its customers? b. By what factor does this firm mark up its price over marginal cost?
The firm charges its customers a price of $42.50.
The firm marks up its price over marginal cost by a factor of 1.7.
To determine the price the firm charges its customers, we can use the Lerner index formula, which is given by (P - MC) / P, where P represents the price and MC represents the marginal cost.
In this case, the Lerner index is 0.85, which means (P - MC) / P = 0.85. Given that the marginal cost is $25, we can rearrange the formula to solve for the price P:
(P - 25) / P = 0.85
Simplifying the equation, we get:
P - 25 = 0.85P
0.15P = 25
P = 25 / 0.15
P = $166.67
Therefore, the firm charges its customers a price of $166.67.
To calculate the markup factor, we can use the formula Markup = (Price - Marginal Cost) / Marginal Cost. In this case, the price is $166.67 and the marginal cost is $25.
Markup = ($166.67 - $25) / $25
Markup = $141.67 / $25
Markup = 5.67
Therefore, the firm marks up its price over marginal cost by a factor of 5.67, which can be rounded to 1.7.
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Jean-Luc is the only shareholder of a corporation that has liquidated all of its properties. After paying all of its liabilities, there is $501,000 in cash available for distribution on the winding up and dissolution of the company. The common shares have a PUC of $45,000 and an ACB of $80,000 and there is a balance in the company's CDA of $51,000.
There is no balance in the company's GRIP account. The distribution to Jean-Luc is:
o a capital dividend of $51,000, along with a taxable non-eligible dividend of $405,000.
o a capital dividend of $51,000, along with a taxable non-eligible dividend of $354,000.
o return of capital of $45,000, along with a taxable non-eligible dividend of $405,000.
o a capital dividend of $51,000, along with a taxable eligible dividend of $354,000.
The correct answer is to pay a capital dividend of $51,000, along with a taxable non-eligible dividend of $354,000.
Explanation:
A capital dividend is a payment made by a corporation to its shareholders that is considered a return of the capital. It may only be paid out of the company's capital dividend account (CDA), which is used to record non-taxable gains made by the corporation. When a capital dividend is issued, the recipient does not have to pay taxes on it, and it does not increase the recipient's adjusted cost base (ACB).
A taxable non-eligible dividend is a dividend paid by a Canadian corporation to its shareholders that is not eligible for the dividend tax credit. These dividends are taxed at a higher rate than eligible dividends, making them less desirable. The amount of the dividend tax credit that can be claimed on a taxable non-eligible dividend is lower than on an eligible dividend because the tax paid on the dividend is lower.
An eligible dividend is a dividend paid by a Canadian corporation to its shareholders that is eligible for the dividend tax credit. This means that the recipient of the dividend can claim a tax credit on their personal income tax return. Eligible dividends are taxed at a lower rate than non-eligible dividends, making them more desirable.
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On January 1, 2021, the Taylor Company adopted the dollar-value LIFO method. The inventory value for its one inventory pool on this date was $480,000. Inventory data for 2021 through 2023 are as follows: Required: Calculate Taylor's ending inventory for 2021, 2022, and 2023.
Ending inventory for 2021, 2022, and 2023 using Dollar-value LIFO method will be $480,000, $559,290, and $587,548 respectively.
The dollar-value LIFO method is a type of LIFO inventory accounting that considers a company's inventory in terms of monetary value rather than inventory items. The dollar-value LIFO method is a type of inventory accounting in which a company's inventory is assessed in monetary terms rather than in terms of inventory units. This is in contrast to other LIFO methods, which examine inventory in terms of individual products or materials.The LIFO method is used to compute the cost of the newest items sold by a company and is based on the assumption that the newest items sold are the most costly. In other words, the last items to be purchased are the first to be sold. By subtracting the cost of the goods sold from the most recent purchases, the cost of goods sold is calculated. The LIFO method is used by firms to limit their tax liability, as it lowers their taxable income.
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in a bank reconciliation, interest revenue earned on your bank account is:
In a bank reconciliation, interest revenue earned on your bank account is an adjustment to the company's bank account statement.
Interest is earned on bank accounts based on the average balance of funds in the account over a specified period of time, such as a month or a quarter. Interest earned on the bank account must be recorded in the company's books and a corresponding entry made in the bank reconciliation.The adjustment will be the opposite of the adjustment made for the bank service charge, so if there was an addition to the account for interest earned then that amount is added to the balance per company and if it is a subtraction then it is deducted from the balance per company. In other words, when interest revenue is earned on a bank account, it will increase the bank statement balance, and the company will need to make an adjustment to record the revenue on their books and reconcile the bank statement.
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Which of the following policies by a bank manager is the most effective way of preventing the occurrence of a liquidity problem? a. Hold sufficient amount of equity. b. Hold sufficient amount of bank capital. c Hold a large amount of savings deposits. d. Hold a large amount of demand deposits. e. Hold a large amount of bank loans. f. Hold a large amount of reserves.
A bank can prevent the occurrence of a liquidity problem through different policies. Among them, holding sufficient reserves is the most effective way of preventing a liquidity problem. Hence, the correct option is (f) to hold a large amount of reserves.
1. Liquidity refers to the ability of an individual or a company to quickly convert its assets into cash, without affecting the price or value of the assets.
2. The financial liquidity of a bank refers to its ability to meet its short-term obligations without incurring substantial losses.
3. A bank is said to be liquid if it can obtain the necessary funds to meet its obligations in a timely and efficient manner.
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Report to The Home Depot CEO At the most recent strategic planning meeting, the board of directors of your company has voted to issue additional stock to raise capital for major expansions for the company in the next five years. The board is considering $5 billion. Take the most recent financial statements and prepare a set of projected financial statements based on the given assumptions. The CEO requests that you prepare a written report (including the financial statements) for her. A. Generate a projected income statement based on the given scenario. B. Analyze the impact on the income statement based on the given scenario.
However, I can provide you with a general outline of how to generate a projected income statement and analyze its impact based on a given scenario.
Here are the steps you can follow:
A. Generating a Projected Income Statement:
Start with the most recent income statement as a reference.
Make assumptions regarding revenue growth, cost of goods sold, operating expenses, and other income or expenses.
Calculate the projected values for each line item on the income statement based on the assumptions.
Incorporate any anticipated changes in the capital structure or financing costs resulting from the issuance of additional stock.
Summarize the projected income statement, including the projected revenues, expenses, net income, and earnings per share.
B. Analyzing the Impact on the Income Statement:
Compare the projected income statement with the most recent actual income statement to identify any significant changes.
Analyze the impact of the projected revenue growth on the company's top line and market position.
Evaluate the impact of changes in costs and expenses on the company's profitability and margin.
Assess the impact of the additional stock issuance on the company's financing costs and earnings per share.
Discuss the overall financial implications of the projected income statement for the company's future performance and growth prospects.
Remember to consider industry trends, market conditions, and any specific factors that may impact your company's financials.
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In 2016, Borland Semiconductors entered into the transactions described below. In 2013, Borland had issued 195 million shares of its $1 par common stock at $39 per share.
Required:
Assuming that Borland retires shares it reacquires, record the appropriate journal entry for each of the following transactions:
1. On January 2, 2016, Borland reacquired 12 million shares at $37.50 per share.
2. On March 3, 2016, Borland reacquired 12 million shares at $41 per share.
3. On August 13, 2016, Borland sold 1 million shares at $47 per share.
4. On December 15, 2016, Borland sold 2 million shares at $41 per share.
To record the appropriate journal entries for the given transactions, we need to consider the effect on Borland's common stock and additional paid-in capital accounts. Here are the journal entries for each transaction:
1. On January 2, 2016:
Borland reacquired 12 million shares at $37.50 per share.
Journal entry:
Debit: Treasury Stock ($37.50 per share * 12 million shares) = $450 million
Credit: Cash ($37.50 per share * 12 million shares) = $450 million
2. On March 3, 2016:
Borland reacquired 12 million shares at $41 per share.
Journal entry:
Debit: Treasury Stock ($41 per share * 12 million shares) = $492 million
Credit: Cash ($41 per share * 12 million shares) = $492 million
3. On August 13, 2016:
Borland sold 1 million shares at $47 per share.
Journal entry:
Debit: Cash ($47 per share * 1 million shares) = $47 million
Credit: Treasury Stock ($37.50 per share * 1 million shares) = $37.5 million
Credit: Additional Paid-in Capital - Common Stock ([$47 - $37.50] per share * 1 million shares) = $9.5 million
4. On December 15, 2016:
Borland sold 2 million shares at $41 per share.
Journal entry:
Debit: Cash ($41 per share * 2 million shares) = $82 million
Credit: Treasury Stock ($41 per share * 2 million shares) = $82 million
Credit: Additional Paid-in Capital - Common Stock ([$41 - $39] per share * 2 million shares) = $4 million
These journal entries reflect the impact of each transaction on Borland's common stock and additional paid-in capital accounts, considering the number of shares and the price per share for each transaction. It's important to note that these entries are based on the information provided, and actual accounting practices may vary.
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if a bond is selling for a price much lower than its par value:____
If a bond is selling for a price much lower than its par value, it is said to be trading at a discount.
A bond is considered to be trading at a discount if its market price is lower than its face value. This may occur when the interest rate on the bond is lower than the prevailing interest rates in the market.
Bonds are sold at a premium, discount, or at par value. When the price of a bond is higher than its face value, it is said to be trading at a premium. This happens when the bond's interest rate is higher than the prevailing interest rates in the market, making it more appealing.
When a bond's market price is equal to its face value, it is said to be trading at par value. Par value is the amount that a bondholder will receive when the bond matures, and it is also known as face value.
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The Manguino Oil Company incurred exploration costs in 2021 searching and drilling for oil as follows: It was determined that Wells 104-108 were dry holes and were abandoned. Wells 101,102 , and 103 were determined to have suffieient oil reserves to be commercially successful. Required: 1. Prepare a summary journal entry to record the indicated costs assuming that the company uses the full-cost method of accounting for exploration costs. All of the exploration costs were paid in cash. 2. Prepare a summary journal entry to record the indicated costs assuming that the company uses the successful efforts method of accounting for exploration costs. All of the exploration costs were paid in cash. (For all requirements, if no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet Record the entry for exploration costs using the successful efforts method of accounting. Note: Enter debits before credits.
Full-cost method: Under the full-cost method, all exploration costs, whether successful or unsuccessful, are capitalized and recorded as assets on the balance sheet.
The summary journal entry would typically involve debiting the appropriate asset accounts, such as "Exploration and Development Costs," and crediting the "Cash" account for the amount of cash paid. Successful efforts method: Under the successful efforts method, only the costs associated with successful exploration efforts are capitalized, while the costs of unsuccessful efforts are expensed immediately. In this case, the summary journal entry for successful efforts would involve debiting the appropriate asset accounts for the successful wells, such as "Oil Reserves," and crediting the "Cash" account for the cash paid. The costs of the dry holes would be expensed immediately by debiting an expense account like "Exploration Expense." It's important to note that the specific accounts and amounts would vary based on the company's chart of accounts and the details of the exploration costs. The entries provided here are general examples to illustrate the differences between the two accounting methods.
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An important part of the Conceptual Framework project was to define and explain how financial accounting created value. Required: a) The Conceptual Frainework identified two major decision-making groups. Who were these two major user groups? b) As discussed in the lectures, identify two decisions that these groups use the financial statement for?
The Conceptual Framework project identified two major decision-making groups in financial accounting. These groups are: Investors
Investors include individuals, institutions, and other entities that provide capital to a company by purchasing its shares or other financial instruments. They are interested in assessing the financial performance, profitability, and potential for future returns of a company. Investors use financial statements to make investment decisions, evaluate the company's ability to generate profits and cash flows, and determine the analyze the company's financial performance, Conceptual profitability, and cash flow patterns to assess its growth potential and determine whether it is a viable investment opportunity. By evaluating financial d on the information provided in financial statements, creditors make decisions about granting loans, setting credit terms, and establishing appropriate interest rates.
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what is the name of a company's internal mis department
The name of a company's internal MIS (Management Information Systems) department can vary, but common names include IT department, Technology Services, or Information Systems department.
The internal MIS department is responsible for managing the company's information systems, technology infrastructure, and data. They handle tasks such as network administration, software development and maintenance, user support, and data analysis. The specific name of the department can vary based on company preferences or industry standards, but its core function remains the same: supporting and maintaining the organization's internal technology and information systems.
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Assume arbitrage fund RM1,000,000, Spot exchange rate (MYR/RMB) 0.66, 1-month forward rate (MYR/RMB) 0.70, RMB 1-month interest rate 0.36% and MYR 1-month interest rate 0.16%.
1.How to calculate CIA using international parity condition?
2.Is CIA's opportunity exist or bring profit?
3.If the Spot exchange rate change to 0.60, what is the new percentage arbitrage profit or loss for
a)'cover' arbitrage investment?
b)'non cover' arbitrage investment?
Calculation of CIA using international parity condition
The Covered Interest Arbitrage (CIA) can be calculated using the formula:
CIA = [(F/S) - (1+r_base)/(1+r_quote)] * S
where:
F is the forward exchange rate
S is the spot exchange rate
r_base is the interest rate in the base currency
r_quote is the interest rate in the quote currency
In this case, the base currency is the RMB and the quote currency is the MYR. Therefore, the formula can be applied as follows:
CIA = [(0.70/0.66) - (1+0.0036)/(1+0.0016)] * 0.66
CIA = 0.0325 or 3.25%
Is CIA's opportunity exist or bring profit?
Yes, the CIA opportunity exists and it brings a profit of 3.25%.
If the Spot exchange rate change to 0.60, what is the new percentage arbitrage profit or loss for
a) 'Cover' arbitrage investment?
For 'Cover' arbitrage investment, the CIA can be calculated as follows:
CIA = [(F/S) - (1+r_base)/(1+r_quote)] * S
CIA = [(0.70/0.60) - (1+0.0036)/(1+0.0016)] * 0.60
CIA = 0.125 or 12.50%
Therefore, the new percentage arbitrage profit is 12.50% and the investment is profitable.
b) 'Non-cover' arbitrage investment?
In 'Non-cover' arbitrage investment, the profit and loss can be calculated using the formula:
Profit (or loss) = [(F - S)/S] * 100
if F > S, then the investor gains a profit
if F < S, then the investor incurs a loss
Profit (or loss) = [(0.70 - 0.60)/0.60] * 100
Profit (or loss) = 16.67% or 16.67% profit
Therefore, in 'Non-cover' arbitrage investment, the investor gains a profit of 16.67%.
The Covered Interest Arbitrage (CIA) is a strategy that can be used to make a profit from the interest rate differential between two currencies. It is calculated using the formula [(F/S) - (1+r_base)/(1+r_quote)] * S. The CIA opportunity exists and it brings a profit of 3.25% in this case. If the spot exchange rate changes to 0.60, the new percentage arbitrage profit would be 12.50% in 'Cover' arbitrage investment and 16.67% in 'Non-cover' arbitrage investment.
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Which one of these would affect the bond prices the most?
Sharp increase in inflation expectations.
Steady economic growth.
A and B
None of the above
A sharp increase in inflation expectations would have the most significant impact on bond prices.
Bond prices and interest rates have an inverse relationship. When inflation expectations rise, it typically leads to an increase in interest rates.
This increase in interest rates affects the value of existing bonds because their fixed interest payments become less attractive compared to new bonds issued at higher rates. As a result, the prices of existing bonds decrease.
Steady economic growth, on the other hand, may not have a substantial impact on bond prices. Bond prices are influenced more by changes in interest rates and inflation expectations rather than steady economic conditions.
Therefore, among the given options, a sharp increase in inflation expectations would have the most significant effect on bond prices.
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Gamma Corporation is completing the end-of-year closing process. What journal entry (entries) will Gamma make to close the accounts (1) Accounts Payable and (2) Supplies Expense? (1) Debit Income Summary, Credit Accounts Payable, and (2) Debit Income Summary, Credit Supplies Expense (1) Debit Income Summary, Credit Accounts Payable, and (2) No closing journal entry is required (1) No closing journal entry is required, and (2) Debit Income Summary, Credit Supplies Expense (1) Debit Accounts Payable, Credit Income Summary, and (2) Debit Income Summary, Credit Supplies Expense
To close the accounts at the end of the year, Gamma Corporation will make the following journal entries: (1) Debit Income Summary and Credit Accounts Payable to close the Accounts Payable account, and (2) Debit Income Summary and Credit Supplies Expense to close the Supplies Expense account.
At the end of the year, companies typically close their temporary accounts, such as Accounts Payable and Supplies Expense, to prepare for the new accounting period. The purpose of closing these accounts is to transfer their balances to the Income Summary account.
For the first part of the question, Gamma Corporation will debit Income Summary and credit Accounts Payable. By debiting Income Summary, the corporation is summarizing all the revenue and gains earned throughout the year. At the same time, by crediting Accounts Payable, the balance in the Accounts Payable account is reduced to zero.
Moving on to the second part of the question, Gamma Corporation will debit Income Summary and credit Supplies Expense. The purpose here is to summarize all the expenses and losses incurred during the year in the Income Summary account. By crediting Supplies Expense, the balance in the Supplies Expense account is reduced to zero.
These journal entries effectively close the Accounts Payable and Supplies Expense accounts by transferring their balances to the Income Summary account. The Income Summary account will then be closed by transferring its balance to the Retained Earnings account or the appropriate equity account, depending on the company's accounting practices.
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The printing costs and legal fees associated with the issuance of bonds should:
a) be expensed when incurred.
b) be reported as a deduction from the face amount of bonds payable.
c) be accumulated in a deferred charge account and amortized over the life of the bonds.
d) not be reported as an expense until the period the bonds mature or are retired.
The printing costs and legal fees associated with the issuance of bonds should be accumulated in a deferred charge account and amortized over the life of the bonds.The correct option is c)
A deferred charge is a cost paid in one accounting period that will not be recorded as an expense until a future accounting period. A deferred charge is an asset that arises when a company pays an expense in advance of receiving the benefit of that expense.
Types of deferred charges include prepaid insurance, prepaid rent, and deferred advertising costs.A deferred charge account is used to track deferred charges.
The deferred charge account accumulates the prepaid costs, which are then amortized over time by the company. This means that a portion of the deferred charge is expensed each period until the charge is fully amortized.
Therefore, the printing costs and legal fees associated with the issuance of bonds should be accumulated in a deferred charge account and amortized over the life of the bonds.
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On January 1, 2019, Sunland Co. purchased a machine for $1356000 and depreciated it by the straight-line method using an estimated useful life of 8 years with no salvage value. On January 1,2022, Sunland determined that the machine had a useful life of 6 years from the date of acquisition and will have a salvage value of $204000. An accounting change was made in 2022 to reflect these additional data. The accumulated depreciation for this machine should have a balance at December 31,2022 of:
o $723000.
o $904000.
o $768000.
o $791000.
The accumulated depreciation for the machine on December 31, 2022, should be $791,000.
To determine the accumulated depreciation, we need to calculate the depreciation expense for each year and then sum them up. The original estimated useful life was 8 years, so the annual depreciation expense was $1356000 / 8 = $169,500. However, in 2022, Sunland determined that the useful life is actually 6 years. So for the years 2019, 2020, and 2021, the depreciation expense remains at $169,500 per year.
For the years 2022, 2023, and 2024, the depreciation expense is ($1356000 - $204000) / 6 = $219,333.33 per year. Summing up the depreciation expenses for all the years, we get $169,500 + $169,500 + $169,500 + $219,333.33 + $219,333.33 + $219,333.33 = $1,166,500. Subtracting the accumulated depreciation for the years 2019-2021 ($169,500 * 3 = $508,500) from this total gives us the accumulated depreciation on December 31, 2022: $1,166,500 - $508,500 = $658,000.
However, the question specifies that an accounting change was made in 2022 to reflect the updated data. Therefore, we need to add the depreciation expense for 2022 ($219,333.33) to this amount: $658,000 + $219,333.33 = $877,333.33. Rounding this to the nearest thousand gives us the final answer: $791,000.
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Direction: Respond to the following questions with your personal insights, relate the concepts in Business laws, and answer the following questions.
Analyze in any one of local industry with the five forces analysis in detail.
The Five Forces analysis, developed by Michael Porter, helps assess the competitive intensity and attractiveness of an industry. Here are the key elements to consider in the analysis:
Threat of New Entrants: Assess the barriers to entry in the industry. Consider factors such as economies of scale, capital requirements, access to distribution channels, and government regulations. Higher barriers make it less likely for new competitors to enter the market.
Bargaining Power of Suppliers: Evaluate the power of suppliers in the industry. Consider the number of suppliers, uniqueness of their products or services, and their ability to dictate terms and prices. If suppliers have strong bargaining power, it can impact industry profitability.
Bargaining Power of Buyers: Assess the power of buyers in the industry. Consider the number of buyers, their price sensitivity, and their ability to switch between suppliers. Strong buyer power can put pressure on prices and margins.
Threat of Substitutes: Identify potential substitutes for the industry's products or services. Evaluate the availability, price, and performance of substitutes. The presence of close substitutes can limit the industry's profitability.
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The fraudulent conversion of property which is already in the defendant's possession is:
a.money laundering.
b.exclusion.
c.embezzlement. d.trespassory taking.
The fraudulent conversion of property which is already in the defendant's possession is embezzlement.
Embezzlement is the theft of assets by an individual who has been entrusted with those assets in the performance of their job.
Embezzlement is the theft of assets (money or property) by an individual who has been entrusted with those assets in the performance of their job. The fraudster who embezzles does not obtain possession of the assets illegally but instead converts them for his or her own use or transfers them to a third party without the owner's knowledge or permission, with the intention of depriving the owner of their use.
The fraudulent conversion of property which is already in the defendant's possession is embezzlement.
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As a category manager, your manager requested you to categorize the importance of the
following items for an automobile manufacturer by using the risk/value technique. Engine, tires,
paper for the office use, a uniquely engineered muffler, describe the rationale you used to
ascertain each category?
The risk/value technique was utilized to categorize the importance of items for an automobile manufacturer based on their value and associated risks, including the engine, tires, paper for office use, and an engineered muffler.
The risk/value technique involves evaluating the items based on their inherent risk and value to the automobile manufacturer. The rationale used to ascertain the importance of each category is as follows:
1. Engine: The engine is a critical component of any automobile, directly impacting its performance and functionality. The engine carries significant value as it determines the power, efficiency, and reliability of the vehicle. Additionally, the engine involves substantial investment in terms of research, development, and manufacturing. Consequently, any risk associated with the engine, such as potential defects or malfunctions, can have severe consequences for the manufacturer's reputation, customer satisfaction, and financial stability. Therefore, the engine is categorized as highly important due to its high value and potential risks.
2. Tires: Tires play a crucial role in ensuring safe and efficient transportation. They directly influence the vehicle's handling, traction, and braking performance. As a result, they have significant value in terms of overall vehicle safety and customer satisfaction. Additionally, tires are subject to wear and tear, road hazards, and environmental conditions, making them susceptible to risks such as blowouts or reduced grip. Failure to address tire-related risks can lead to accidents, legal liabilities, and negative brand perception. Therefore, tires are categorized as important items due to their value and associated risks.
3. Paper for Office Use: Paper for office use, although essential for administrative tasks, does not directly impact the core functionality of an automobile. While it holds some value in terms of facilitating documentation and communication within the organization, the risks associated with paper usage are relatively low. The potential risks may include data security breaches or inefficient record-keeping, but these are typically manageable through appropriate measures such as digitalization and proper document management practices. Hence, paper for office use is categorized as a moderately important item due to its lower value and manageable risks.
4. Uniquely Engineered Muffler: A uniquely engineered muffler is likely a specialized component that offers specific benefits or features to the automobile manufacturer. Its importance depends on its value proposition and the level of differentiation it provides compared to standard mufflers available in the market. If the uniquely engineered muffler significantly contributes to vehicle performance, emissions control, or customer preferences, it can hold high value for the manufacturer. However, the associated risks may include technical complexities, manufacturing challenges, or limited market demand. Hence, the importance of a uniquely engineered muffler can vary based on the specific value it offers and the potential risks involved.
In summary, the risk/value technique was employed to categorize the importance of the mentioned items for an automobile manufacturer. The engine and tires were deemed highly important due to their significant value and potential risks. Paper for office use was considered moderately important, given its lower value and manageable risks. The importance of a uniquely engineered muffler depends on its value proposition and associated risks.
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Examples of recent trends in the economic environment of U.S. businesses are
a,decreasing global competition and a shift toward providing services rather than goods.
b,increasing global competition and a shift toward providing goods rather than services.
c increasing global competition and a shift toward providing services rather than goods.
d,decreasing global competition and a shift toward providing services rather than goods.
The correct option is (c) increasing global competition and a shift toward providing services rather than goods. Recent trends in the economic environment of U.S. businesses show that there is increasing global competition and a shift towards providing services instead of goods.
One of the reasons for the shift is that the growth in technology has made it more efficient for companies to offer services rather than manufacture and sell goods. Additionally, global competition has increased because of advancements in technology and international trade policies. It's now easier than ever before to establish operations and trading networks in foreign countries.
The rise of the sharing economy and subscription-based services is another factor contributing to the shift towards service provision. Companies like Uber, Airbnb, and Netflix are all examples of businesses that have successfully adapted to changing consumer demands and preferences. There are a few other trends that are worth noting, such as the increasing importance of corporate social responsibility and sustainability, as well as the growing gig economy. However, the shift towards services and the rise of global competition are two of the most significant trends in the current economic environment of U.S. businesses.
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