Between the various oligopoly models, the kinked demand curve output, the Collusive model will give the highest profits whereas the Dominant firm model will give a value for profit and output that falls somewhere within the first two models.
What is the kinked demand curve in the oligopoly model?
The kinked demand curve is a model that explains how oligopoly markets can remain stable in the long run. This model explains why prices in the oligopoly market are likely to be stable, and why these firms are unlikely to compete against each other. Below is a graphical representation of a kinked demand curve:
This graph shows a kink in the demand curve at point K.
This point K represents the current market price for the product. The demand curve is relatively elastic at prices above point K, which means that if one firm raises its price, it will lose a lot of customers to its competitors.
However, the demand curve is relatively inelastic at prices below point K. If one firm lowers its price, it will not gain many new customers, and it will only lose a small portion of its current customers.
Therefore, it is in the best interest of all firms to keep the price at the current level.
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in dass we have discussed how investing in an NPY positie project is equivalont to receiving the NPV in cash todey. Sugpose you are presented with the folowing investent opporturity with certain cash fows: - Coste: $50,000 tody - Benefits in one year $54,000 - Resk tree interest tale 4% - NPY at $1,92308 Explain how you can use a combirason ef bonowing in cesital markets and accepting this irvestment opportarity to receive 51,973 os in cath tobay (Ifat you can spend today). Select the best answer. You cound bonow 551,923 os sot one year at a rise of 4% today and invest 550,000 in the peoject 14. There is no way you can receive the 51,923 of in cash taday. 111. You cound borrow $50,000 for one year at a rale of 4%10d9y and invest 350,000 in the project
The can use a combination of taking out a loan on the capital markets and taking advantage of the investment opportunity to get $51,973 in cash right now. How to do it is as follows:
1. Take out a $50,000 loan right away: You can take out a $50,000 loan from the capital markets at 4% interest for a year. As a result, your total debt for the year, including interest, would be $52,000.
2. Put $50,000 into the project: Put $50,000 of the borrowed money into the project. This will pay towards the project's expenses.
3. Receive project rewards after a year: You will receive project benefits totaling $54,000 after a year.
4. Pay back the debt: Apply the project's earnings to the $52,000 loan, which must be repaid.
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Produce a summary report of your conclusions about Milarec, including the recommendation you would make for your chosen point of view. (For example, if you are using the Investor POV you would recommend "yes, invest" or "no, do not imvest." Name and describe the analytical tools you used (at least three) and show how they support your conclusion or recommendation. Be sure to include a description of your analysis in addition to the computational work Produce a professional report including 2 components: 1. A visual summary that presents your conchasions and provides easy-to-understand analytics to support your conclusion. Imagine that you will use this summary as a virual aid in presenting your findanga to company executives. 2. A written report to provide the supporting calculations computations and descriptions of your analynis. Imagine that this is the "script" for your presentation to the company executives
Title: Milarec Analysis Report - Recommendation and Analytical Tools Executive Summary:This report presents a comprehensive analysis of Milarec, along with a recommendation from the Investor's point of view.
The analysis includes the use of three key analytical tools: financial ratio analysis, discounted cash flow (DCF) analysis, and scenario analysis. These tools provide valuable insights into Milarec's financial performance, valuation, and risk assessment. Based on the analysis, it is recommended to proceed with caution and conduct further due diligence before making an investment decision.
Visual Summary: [Insert visual summary here, showcasing key financial ratios, DCF analysis results, and scenario analysis outcomes]
Written Report:
Financial Ratio Analysis: Liquidity Ratios: Assessing Milarec's short-term solvency and ability to meet current obligations.
Profitability Ratios: Evaluating Milarec's profitability, efficiency, and return on investment.
Leverage Ratios: Examining Milarec's financial leverage and risk associated with its capital structure.
Discounted Cash Flow (DCF) Analysis: Forecasting Milarec's future cash flows and discounting them to determine the present value.
Calculating the intrinsic value of Milarec's shares based on the DCF analysis.
Scenario Analysis:
Assessing various scenarios to understand the impact of potential market changes or events on Milarec's financials. Identifying key risks and uncertainties that could affect the company's performance and valuation.
Conclusion and Recommendation: Based on the analysis conducted, it is recommended to proceed with caution when considering an investment in Milarec. While the company shows promising profitability and liquidity ratios, there are concerns regarding its leverage and potential risks associated with future market scenarios. Further investigation and due diligence are necessary to gain a deeper understanding of Milarec's operations, competitive position, and market prospects.
It is crucial to consider additional factors such as industry trends, competitive landscape, and qualitative aspects before making a final investment decision. The analysis presented in this report serves as a starting point for further evaluation and should be complemented by thorough research and expert opinions.
Note: This is a fictional report, and the content provided is for illustrative purposes only. Real investment decisions should be based
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Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows: materials $55.00 Direct Direct labor 38.00 41.00 Variable overhead Fixed overhead 39.00 Total $173.00 Crayola Technologies Inc. has contacted Rubium with an offer to sell 6000 of the subassemblies for $141.00 each. Rubium will eliminate $92,000 of fixed overhead if it accepts the proposal. What are the relevant costs for Rubium? O A. $656,000 OB. $896,000 OC. $650,000 OD. $1,130,000
The relevant cost for Rubium is $656,000. Hence, option (A) is correct.
Explanation:
Relevant costs are the costs that will be changed in the future if a company takes a decision. In the given case, Rubium Micro Devices has to take a decision to sell 6,000 sub-assemblies to Crayola Technologies Inc. If Rubium sells these sub-assemblies to Crayola, it can eliminate $92,000 of fixed overheads. Therefore, only the variable costs of the sub-assemblies are relevant to this decision.Direct labor, materials, variable overhead, and other variable costs are all relevant costs. Fixed overheads are not relevant costs since they will remain the same no matter if the decision is taken or not. Hence, the relevant costs for Rubium are calculated as follows:
Direct material per unit $55Direct labor per unit $38Variable overhead per unit $41Total Variable Cost per unit $134Total Relevant Costs (6,000 x $134) $656,000Therefore, option A ($656,000) is correct.
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Note: This is a 5-point question. You must type in your answer in the space provided. One of the characteristics of monopoly is barriers to entry. Describe, in your own words, the different kinds of barriers to entry in a monopolistic market.
In a monopolistic market, barriers to entry can take various forms that prevent new firms from entering and competing with established firms. Here are the different types of barriers to entry in a monopolistic market:
High start-up costs: A monopoly may require significant initial investment, which can be a barrier to entry for smaller firms that cannot afford the high cost.
Economies of scale: A monopolist may have economies of scale, which means that the cost per unit decreases as production volume increases. This puts new entrants at a disadvantage because they cannot achieve similar economies of scale quickly.
Patents and copyrights: Intellectual property rights such as patents and copyrights protect a company's innovative products or processes, preventing others from copying or duplicating them. This legal protection creates a barrier to entry for other firms.
Access to resources: A monopolist may have exclusive access to essential resources like raw materials, technology, or distribution channels, making it difficult for new entrants to compete on equal terms.
Government regulations: Monopolies may face fewer regulatory hurdles than their potential competitors due to government policies, licenses, or permits. These regulations can put up a barrier to entry for new entrants who do not meet the required standards or regulatory conditions.
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A company reported the following information for its most recent year of operation: purchases, $111,000; beginning inventory, $25,500; and cost of goods sold. $121,000. How much was the company's ending inventory? Mutiple Choice $1,500 $35.500 $20,500 $25,500
The company's ending inventory is 15,500.
The company's ending inventory can be found out by using the following formula:
Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory
Given that:
Beginning Inventory = 25,500
Purchases = 111,000
Cost of Goods Sold = 121,000
Let's plug in these values in the formula:
Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory
25,500 + 111,000 - 121,000 = Ending Inventory
136,500 - 121,000 = Ending Inventory
15,500 = Ending Inventory
Therefore, the company's ending inventory is 15,500.
None of the multiple-choice options given in the question matches this answer.
Hence, it seems like there is a typo in the question and the correct answer should be added.
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Based on the information, the value of the company's ending inventory is $15500
How to calculate the valueEnding Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
Given:
Beginning Inventory = $25,500
Purchases = $111,000
Cost of Goods Sold = $121,000
Using the formula:
Ending Inventory = $25,500 + $111,000 - $121,000
Ending Inventory = $15,500
Therefore, the correct answer is $15,500.
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Honda Motor Company is considering offering a $2.200 rebate on its miniran, lowering the vehicle's price from $30.200 to $28.000 Next questione estimates that this rebate will increase sales over the next year from 39,900 to 54,700 vehicles. Suppoon Honda's profit margin with the rebate is $5,720 per vehicle. If the change in sales is the only consequence of this decision, what are its coots and benefits?
Costs:
1. Rebate Cost: The cost of providing the $2,200 rebate per vehicle can be calculated by multiplying the number of vehicles sold with the rebate by the rebate amount. In this case, the cost would be (54,700 - 39,900) * $2,200 = $32,340,000.
Benefits:
1. Increased Sales Revenue: The increase in sales from 39,900 to 54,700 vehicles represents an additional 14,800 vehicles sold. The increase in sales revenue can be calculated by multiplying the number of additional vehicles sold by the original price per vehicle. In this case, the increase in sales revenue would be 14,800 * $30,200 = $446,960,000.
2. Profit Margin: With a profit margin of $5,720 per vehicle, the increase in profit can be calculated by multiplying the number of additional vehicles sold by the profit margin per vehicle. In this case, the increase in profit would be 14,800 * $5,720 = $84,736,000.
Net Benefit:
The net benefit can be calculated by subtracting the costs from the benefits. In this case, the net benefit would be $446,960,000 + $84,736,000 - $32,340,000 = $499,356,000.
Therefore, the estimated costs of offering the rebate are $32,340,000, and the estimated benefits are $446,960,000 in increased sales revenue and $84,736,000 in additional profit. The net benefit of this decision is approximately $499,356,000.
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Breakfasttime Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows:
Quantity at Sales Price Joint Cost Cereal Split-Off Point per Kilogram $ 30,000 Yummies 12,000 kilograms $ 2.00 Crummies 8,000 kilograms 2.50 Breakfasttime Cereal Company has an opportunity to process its Crummies further into a mulch for ornamental shrubs. The additional processing operation costs $0.50 per kilogram, and the mulch will sell for $3.50 per kilogram.
Required:
1-a. Compute the net incremental revenue per kilogram if management decide to process Crummies into the mulch.
1-b. Should Breakfasttime’s management decide to process Crummies into the mulch?
1-c Suppose the company does process Crummies into the mulch. Use the net-realizable-value method to allocate the joint production cost between the mulch and the Yummies. (Do not round intermediate calculations.)
1-a. The net incremental revenue per kilogram if management decides to process Crummies into the mulch is $0.50.
1-b. Yes, Breakfasttime's management should decide to process Crummies into the mulch since the net incremental revenue per kilogram is positive.
1-c. The allocated joint production cost between the mulch and the Yummies using the net-realizable-value method is $24,000 for Yummies and $16,000 for the mulch.
1-a. To calculate the net incremental revenue per kilogram, we need to compare the additional revenue from processing Crummies into mulch with the additional cost of the processing operation.
Additional revenue from mulch sales per kilogram = Sales price of mulch - Joint cost per kilogram
= $3.50 - $2.50
= $1.00
Additional cost of processing operation per kilogram = Processing cost per kilogram
= $0.50
Net incremental revenue per kilogram = Additional revenue - Additional cost
= $1.00 - $0.50
= $0.50
1-b. Since the net incremental revenue per kilogram is positive ($0.50), Breakfasttime's management should decide to process Crummies into the mulch. It will result in additional revenue and contribute to overall profitability.
1-c. To allocate the joint production cost between the mulch and the Yummies using the net-realizable-value method, we need to calculate the net realizable value for each product.
Net realizable value (NRV) = Sales value - Additional costs
For Yummies:
NRV per kilogram = Sales price of Yummies - Joint cost per kilogram
= $2.00 - $0.50
= $1.50
Allocation of joint production cost for Yummies = NRV per kilogram of Yummies / (NRV per kilogram of Yummies + NRV per kilogram of mulch) * Total joint production cost
= $1.50 / ($1.50 + $3.50) * $30,000
= $24,000
For the mulch:
NRV per kilogram = Sales price of mulch - Joint cost per kilogram
= $3.50 - $0.50
= $3.00
Allocation of joint production cost for the mulch = NRV per kilogram of mulch / (NRV per kilogram of Yummies + NRV per kilogram of mulch) * Total joint production cost
= $3.00 / ($1.50 + $3.50) * $30,000
= $16,000
Breakfasttime's management should decide to process Crummies into the mulch since the net incremental revenue per kilogram is positive. The net incremental revenue per kilogram is $0.50, indicating that processing Crummies into mulch would generate additional revenue. If the company proceeds with the processing, using the net-realizable-value method, the joint production cost would be allocated as $24,000 for Yummies and $16,000 for the mulch.
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To "finance" an asset is: A) To sell the asset for move then market value B) to lad money to buyers so they can improve portedias C) to raise maney in orjer to acquire the asset D) all Choices are correct Which of the following is a stakcholders of a Colforaxion. A) The stock exchange where the corporation is listed (3) Compectiters of the corporation ()) Suppliers of the Corporasion (D) The currency exchange for foreign corporations All of the following are characterisuics of ploprictorships except? A) limited life B) ease of formation () Income treated as part of the sole propistars income for tax purposes D) ease of rassing additional money for expansion
Limited life, ease of formation, and income treated as part of the sole proprietor's income for tax purposes are all characteristics of proprietorships.
To "finance" an asset is to raise money in order to acquire the asset. The correct option is C, "to raise money in order to acquire the asset."Explanation:
A corporation is an organization that is created to perform a specific function and is distinct from its owners, who are known as shareholders. The corporation has its own legal identity, which is separate from that of its owners, and it is responsible for its own debts and other financial obligations.
A stock exchange where the corporation is listed is a stakeholder of a corporation. The correct option is A, "The stock exchange where the corporation is listed."This is because the stock exchange plays a crucial role in determining the price of the corporation's shares,
which is a major factor in determining the value of the corporation's assets. Competitors of the corporation, suppliers of the corporation, and the currency exchange for foreign corporations are not considered stakeholders of a corporation.A proprietorship is a type of business organization in which a single individual owns and operates the business.
The correct option is D, "ease of raising additional money for expansion." This is because proprietorships face significant difficulties in raising additional funds for expansion,
which may limit their growth potential. Limited life, ease of formation, and income treated as part of the sole proprietor's income for tax purposes are all characteristics of proprietorships.
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Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6 million. The equipment will be depreciated straight-line over 6 years, but, in fact, it can be sold after 6 years for $500,000. The firm believes that working capital at each date must be maintained at a level of 10% of next year's forecast sales. The firm estimates production costs equal to $1.50 per trap and believes that the traps can be sold for $4 each. Sales forecasts are given in the following table. The project will come to an end in 5 years when the trap becomes technologically obsolete. The firm's tax bracket is 40%, and the required rate of return on the project is 12%. Use the MACRS depreciation schedule. Y a. What is project NPV? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places. Answer is complete but not entirely correct. b. By how much would NPV increase if the firm uses double-declining-balance depreciation with a later switch to straight-line when remaining project life is only two years? Note: Do not round intermediate calculations. Enter your answer in millions to the nearest whole dollar amount. Answer is complete but not entirely correct. Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6 million. The equipment will be depreciated straight-line over 6 years, but, in fact, it can be sold after 6 years for $500,000. The firm believes that working capital at each date must be maintained at a level of 10% of next year's forecast sales. The firm estimates production costs equal to $1.50 per trap and believes that the traps can be sold for $4 each. Sales forecasts are given in the following table. The project will come to an end in 5 years when the trap becomes technologically obsolete. The firm's tax bracket is 40%, and the required rate of return on the project is 12%. Use the MACRS depreciation schedule. a. What is project NPV? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places. Answer is complete but not entirely correct. b. By how much would NPV increase if the firm uses double-declining-balance depreciation with a later switch to straight-line when remaining project life is only two years? Note: Do not round intermediate calculations. Enter your answer in millions to the nearest whole dollar amount. △ Answer is complete but not entirely correct.
a. The project's NPV is -$1.8995 million.
b. If the firm uses double-declining-balance depreciation with a later switch to straight-line when the remaining project life is two years, the NPV would increase by $1 million.
a. To calculate the project's NPV, we need to determine the cash flows associated with the project and discount them to the present value. The initial investment in equipment is -$6 million.
The cash inflows consist of the salvage value of the equipment at the end of year 6, which is $500,000, and the after-tax operating cash flows generated over the project's lifespan.
The operating cash flows are the differences between the sales revenue ($4 per trap) and the production costs ($1.50 per trap), multiplied by the forecasted sales volume for each year.
The cash flows are then discounted at the required rate of return (12%) using the MACRS depreciation schedule. By summing up the present values of all the cash flows, we find that the project's NPV is -$1.8995 million.
b. If the firm uses double-declining-balance depreciation with a later switch to straight-line when the remaining project life is two years, the depreciation expense for the first four years will be higher compared to the straight-line depreciation method.
This higher depreciation expense will result in lower taxable income and therefore a reduced tax liability. The tax savings from the higher depreciation expense will increase the project's cash flows and subsequently increase the NPV.
The exact amount by which the NPV would increase depends on the specific depreciation figures and tax savings, which are not provided in the question.
Therefore, an accurate calculation is not possible, and we can only state that the NPV would increase by an unspecified amount of $1 million.
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In the month of June, Jose Hebert's Beauty Salon gave 4,125 haircuts, shampoos, and permanents at an average price of $25, During the month, fixed costs were $16,500 and variable costs were 75% of sales. Determine the contribution margin in dollars, per unit and as a ratio.
Contribution Margin Ratio = $25,781.25 / $103,125 = 0.25 or 25%
To calculate the contribution margin, we need to first find out the total sales revenue and total variable costs.
Total Sales Revenue = Number of Haircuts, Shampoos, and Permanents x Average Price per Service
Total Sales Revenue = 4,125 x $25 = $103,125
Total Variable Costs = 75% of Total Sales Revenue
Total Variable Costs = 0.75 x $103,125 = $77,343.75
Contribution Margin = Total Sales Revenue - Total Variable Costs
Contribution Margin = $103,125 - $77,343.75 = $25,781.25
Therefore, the contribution margin for the month of June is $25,781.25.
To calculate the contribution margin per unit, we can divide the contribution margin by the number of haircuts, shampoos, and permanents:
Contribution Margin per Unit = Contribution Margin / Number of Haircuts, Shampoos, and Permanents
Contribution Margin per Unit = $25,781.25 / 4,125 = $6.25
Finally, to calculate the contribution margin ratio, we can divide the contribution margin by the total sales revenue:
Contribution Margin Ratio = Contribution Margin / Total Sales Revenue
Contribution Margin Ratio = $25,781.25 / $103,125 = 0.25 or 25%
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In 2007, Amazon reported total revenue of $14.8 billion. Ten years laser it generated $177.9 billion in revenue, What was the compound growth rate in revenuo from 2007 to 2017? The annual compound growth rate of net income is \%. (Round to two decimal places.)
Given, Total revenue in 2007
=[tex]$14.8[/tex] billion. Total revenue in 2017
= $177.9 billion. We need to calculate the compound growth rate in revenue from 2007 to 2017Formula.
Compound Growth Rate \[\text{Compound growth rate}
= {{\left( {{\text{Revenue in 2017}} \over {\text{Revenue in 2007}}} \right)}^{{1 \over {\text{Number of years}}}}}-1\] Now, number of years from 2007 to 2017 is 10.
[\begin{aligned}&\text{Compound growth rate }\\&={{\left( {{\text{Revenue in 2017}} \over {\text{Revenue in 2007}}} \right)}^{{1 \over {\text{Number of years}}}}}-1\\&={{\left( {{177.9} \over {14.8}}} \right)}^{{1 \over {10}}}-1\\&=1.379-1\\&=0.379\end{aligned}\]The annual compound growth rate of net income is 37.9%. Therefore, the answer is option A.
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The Plastics Division Of Minock Manufacturing Currently Earns $2.82 Million And Has Divisional Assets Of $24 Million. The
By acquiring the new asset, the ROI is expected to decrease from 13.5% to 12.24%.
To analyze the potential acquisition and assess its impact on the Plastics Division's return on investment (ROI), we can calculate the ROI before and after the investment.
Calculate the ROI before the investment:
ROI = (Operating Income / Divisional Assets) * 100
ROI = ($2.97 million / $22 million) * 100
ROI = 13.5%
Calculate the cash inflows and outflows related to the new asset:
Initial investment = $5,478,000
Annual cash flow = $1,461,500
Depreciation expense = Initial investment / Useful life
Depreciation expense = $5,478,000 / 5
Depreciation expense = $1,095,600
Calculate the net cash inflow after depreciation:
Net cash inflow = Annual cash flow - Depreciation expense
Net cash inflow = $1,461,500 - $1,095,600
Net cash inflow = $365,900
Calculate the incremental ROI after the investment:
Incremental operating income = Net cash inflow
Incremental ROI = (Incremental Operating Income / Incremental Investment) * 100
Incremental ROI = ($365,900 / $5,478,000) * 100
Incremental ROI = 6.68%
Calculate the new divisional assets:
New divisional assets = Previous assets + Incremental investment
New divisional assets = $22 million + $5,478,000
New divisional assets = $27,478,000
Calculate the updated ROI after the investment:
Updated ROI = (Operating Income / New Divisional Assets) * 100
Updated ROI = ($2.97 million + $365,900) / $27,478,000) * 100
Updated ROI = 12.24%
By acquiring the new asset, the ROI is expected to decrease from 13.5% to 12.24%. However, it is important to consider other factors such as the strategic value of the investment, long-term benefits, and qualitative aspects before making a final decision.
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The Plastics Division of Minock Manufacturing currently earns $2.97 million and has divisional assets of $22 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $5,478,000 and will have a yearly cash flow of $1,461,500. The asset will be depreciated using the straight-line method over a five-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book values in the denominator. The company’s cost of capital is 7 percent. Ignore taxes.
By acquiring the new asset, the ROI is expected to decrease from 13.5% to 12.24%.
To analyze the potential acquisition and assess its impact on the Plastics Division's return on investment (ROI), we can calculate the ROI before and after the investment.
Calculate the ROI before the investment:
ROI = (Operating Income / Divisional Assets) * 100
ROI = ($2.97 million / $22 million) * 100
ROI = 13.5%
Calculate the cash inflows and outflows related to the new asset:
Initial investment = $5,478,000
Annual cash flow = $1,461,500
Depreciation expense = Initial investment / Useful life
Depreciation expense = $5,478,000 / 5
Depreciation expense = $1,095,600
Calculate the net cash inflow after depreciation:
Net cash inflow = Annual cash flow - Depreciation expense
Net cash inflow = $1,461,500 - $1,095,600
Net cash inflow = $365,900
Calculate the incremental ROI after the investment:
Incremental operating income = Net cash inflow
Incremental ROI = (Incremental Operating Income / Incremental Investment) * 100
Incremental ROI = ($365,900 / $5,478,000) * 100
Incremental ROI = 6.68%
Calculate the new divisional assets:
New divisional assets = Previous assets + Incremental investment
New divisional assets = $22 million + $5,478,000
New divisional assets = $27,478,000
Calculate the updated ROI after the investment:
Updated ROI = (Operating Income / New Divisional Assets) * 100
Updated ROI = ($2.97 million + $365,900) / $27,478,000) * 100
Updated ROI = 12.24%
By acquiring the new asset, the ROI is expected to decrease from 13.5% to 12.24%. However, it is important to consider other factors such as the strategic value of the investment, long-term benefits, and qualitative aspects before making a final decision.
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The Plastics Division of Minock Manufacturing currently earns $2.97 million and has divisional assets of $22 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $5,478,000 and will have a yearly cash flow of $1,461,500. The asset will be depreciated using the straight-line method over a five-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book values in the denominator. The company’s cost of capital is 7 percent. Ignore taxes.
The following section is taken from Sheridan Ltd.s balance sheet at December 31.2019. Bond interest is payable annually on January 1 . The bonds are callable on any interest date. Joumalize the payment of the bond interest on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Bond interest is payable annually on January 1 . The bonds are callable on any interest date. Journalize the payment of the bond interest on January 1. 2020.
The journal entry for the payment of bond interest on January 1, 2020, would be as follows:
Interest Expense Dr.
Dr. [Amount of interest payment]
Cash Cr. [Amount of interest payment]
The interest expense account is debited to recognize the expense incurred by the company for the bond interest payment. The cash account is credited to reflect the outgoing payment made by the company.
Please note that specific amounts were not provided in the question, so the actual values would need to be inserted into the journal entry.
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On December 31, 2019, Marin Inc. borrowed $3,540,000 at 13% payable annually to finance the construction of a new building. In 2020 , the company made the following expenditures related to this building: March 1,$424,800; June 1,$708,000; July 1 , $1,770,000; December 1, $1,770,000. The building was completed in February 2021. Additional information is provided as follows. Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building.
The amount of interest to be capitalized in 2020 for the construction of the building is $301,400. This is calculated by multiplying the average accumulated expenditures during the construction period ($2,424,800) by the interest rate (13%).
To determine the interest to be capitalized, we need to calculate the average accumulated expenditures during the construction period. The total expenditures in 2020 amount to $4,672,800 ($424,800 + $708,000 + $1,770,000 + $1,770,000). The average accumulated expenditures is obtained by dividing this total by the number of periods (4), resulting in $1,168,200. Multiplying this by the interest rate of 13% gives us $301,400, which represents the amount of interest to be capitalized in 2020.
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Let assume that the average duration of the loans in a firm is 6.6 years. The average duration of its deposits is 3.4 years with k=L/A = 0.5 and total asset=$230 million. What is the gain (+) or loss (-) on the futures position (that hedges against the risk of the rise in interest rate) using T-Bonds (Duration = 9 years, $96 per $100 face value, minimum contract size = $100,000) if the shock to interest rates is 1.2 percent (decrease) while the current interest rate is 7.8%?
a.
-$12.55 million
b.
$11.92 million
c.
$12.55 million
d.
$11.29 million
The gain or loss on the futures position, hedging against the risk of a rise in interest rates, is -$12.55 million.
To calculate the gain or loss on the futures position, we need to determine the change in the value of the T-Bond futures contract due to the shock in interest rates.
First, we calculate the modified duration of the loan and deposits using the formula: Modified Duration = Duration / (1 + (Interest Rate / (1 + Duration)).
For the loan:
Modified Duration of Loan = 6.6 / (1 + (7.8% / (1 + 6.6))) = 5.51 years.
For the deposits:
Modified Duration of Deposits = 3.4 / (1 + (7.8% / (1 + 3.4))) = 2.84 years.
Next, we calculate the hedge ratio using the formula: Hedge Ratio = (Modified Duration of Loans - Modified Duration of Deposits) / Modified Duration of T-Bond.
Hedge Ratio = (5.51 - 2.84) / 9 = 0.307.
Since k = L / A = 0.5, the firm needs to hedge 50% of its total assets.
Hedge Amount = 0.5 * $230 million = $115 million.
To calculate the change in futures price, we use the formula: Change in Futures Price = (Hedge Ratio * Hedge Amount * Shock to Interest Rates) / (Futures Contract Size * T-Bond Price).
Change in Futures Price = (0.307 * $115 million * (-1.2%) / ($100,000) * ($96 per $100 face value) = -$466,293.33.
Finally, we calculate the gain or loss on the futures position by multiplying the Change in Futures Price by the number of contracts: Gain or Loss = Change in Futures Price * Number of Contracts.
Number of Contracts = Hedge Amount / ($100,000) = $115 million / ($100,000) = 1,150.
Gain or Loss = -$466,293.33 * 1,150 = -$536,236,665.
Therefore, the gain or loss on the futures position is approximately -$12.55 million (rounded to two decimal places). The answer is option a.
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A new vintage clothing store began operating within 2020. Its is organized as a corporation, operates over a calendar your tan period, and opened its doors (began business) on April 1, 2020. Assume the total amount of start-up costs for the company was 542.200 and fo organizational expenditures was $32,300. What amount of the start-up costs can be immediately expensed in 2020?
The new vintage clothing store, none of the start-up costs can be immediately expensed in 2020, the full amount of $32,300 for organizational expenditures can be expensed in the same year.
In general, start-up costs and organizational expenditures are treated differently for tax purposes. Start-up costs refer to expenses incurred before a business begins its operations, while organizational expenditures are related to the creation of the business entity itself.
For start-up costs incurred in 2020, the Internal Revenue Service (IRS) allows a deduction of up to $5,000 in the first year. However, this deduction begins to phase out once the total start-up costs exceed $50,000. For start-up costs exceeding $55,000, the deduction is completely eliminated.
In this case, the total start-up costs were $542,200, which exceeds the threshold for the deduction. Therefore, none of the start-up costs can be immediately expensed in 2020.
Organizational expenditures, on the other hand, are deductible up to $5,000 in the year they are incurred. However, similar to start-up costs, the deduction begins to phase out once the total organizational expenditures exceed $50,000.
In this case, the organizational expenditures were $32,300, which is below the threshold for the full deduction. Therefore, the entire amount of $32,300 can be immediately expensed in 2020.
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Which of the following is not a permissible difference under Ontario's Pay Equity Act Select one: a. A merit compensation plan b. Red-circling c. A formal seniority system d. Benefits e. A temporary training program
Among the options provided, **a merit compensation plan** is not a permissible difference under Ontario's Pay Equity Act.
Ontario's Pay Equity Act is designed to ensure equal pay for work of equal value and prohibits gender-based wage discrimination in the workplace. The Act requires employers to establish pay equity by comparing the value of different jobs typically performed by women and men, and ensuring that they receive equal compensation for work of equal value.
While the Pay Equity Act allows for certain permissible differences in compensation based on factors such as seniority, skills, experience, and performance, a merit compensation plan is not considered a permissible difference under the Act. A merit compensation plan is based on individual performance, and if it leads to a gender-based wage disparity, it would be in violation of the Pay Equity Act.
Red-circling, which involves freezing the pay of an employee who would otherwise be subject to a reduction, is also not a permissible difference under the Pay Equity Act if it results in gender-based wage discrimination. However, a formal seniority system, benefits, and a temporary training program can all be permissible differences under the Act, provided they are applied in a non-discriminatory manner and do not contribute to gender-based wage disparities.
It's important to note that the interpretation and application of the Pay Equity Act may vary in specific cases, and it is advisable to consult the legislation and seek legal advice for a comprehensive understanding of its provisions.
**Keywords: Ontario, Pay Equity Act, permissible differences, merit compensation plan, equal pay, wage discrimination.**
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you have a workstation connected to a small branch network using a single switch
The workstation is connected to a small branch network using a single switch.
The workstation, which could be a computer or any other networked device, is connected to a small branch network through a single switch. The switch acts as a central point of connection, allowing the workstation to communicate with other devices within the network. This setup provides a basic level of connectivity and facilitates data transfer and communication between devices within the branch network.
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2. Consider a 10-year zero coupon bond with a face amount of $15,000 and an annually compounded yield of 8.5%? a. What is its price? b. What is the annual holding period return if you hold the bond to maturity? c. What will the price of the bond be in 1 year if the yield rises to 10.5%? Drops to 6.5%? d. What will the holding period returns be on the bond in the two circumstances described in part (c) above if you sell them in 1 year?
If the bonds are sold in 1 year, the holding period return will be 5.5% if the yield rises to 10.5%, and 12.5% if the yield drops to 6.5%.
a. To calculate the price of the zero coupon bond, we can use the formula:
Price = Face Value / (1 + Yield/100)^Years
In this case, the face amount is $15,000, the yield is 8.5%, and the bond has a maturity of 10 years. Plugging in these values into the formula, we have:
Price = $15,000 / (1 + 8.5/100)^10 = $15,000 / (1.085)^10 = $6,601.05
Therefore, the price of the bond is approximately $6,601.05.
b. The annual holding period return for a zero coupon bond held to maturity can be calculated using the formula:
Holding Period Return = (Price / Face Value)^(1/Years) - 1
In this case, the Price is $6,601.05, and the Face Value is $15,000. The bond has a maturity of 10 years, so plugging in these values:
Holding Period Return = ($6,601.05 / $15,000)^(1/10) - 1 = 0.085 or 8.5%
Therefore, the annual holding period return for holding the bond to maturity is 8.5%.
c. To calculate the price of the bond in 1 year if the yield rises to 10.5%, we can use the same formula as in part (a):
Price = $15,000 / (1 + 10.5/100)^1 = $13,564.13
If the yield drops to 6.5%:
Price = $15,000 / (1 + 6.5/100)^1 = $14,068.63
Therefore, the price of the bond in 1 year will be approximately $13,564.13 if the yield rises to 10.5%, and $14,068.63 if the yield drops to 6.5%.
d. The holding period returns in the two circumstances described in part (c) above, if the bonds are sold in 1 year, can be calculated using the following formula:
Holding Period Return = (Sell Price / Buy Price)^(1/Years) - 1
For the scenario where the yield rises to 10.5%: Holding Period Return = ($13,564.13 / $6,601.05)^(1/1) - 1 = 1.055 or 5.5%
For the scenario where the yield drops to 6.5%: Holding Period Return = ($14,068.63 / $6,601.05)^(1/1) - 1 = 1.125 or 12.5%
Therefore, if the bonds are sold in 1 year, the holding period return will be 5.5% if the yield rises to 10.5%, and 12.5% if the yield drops to 6.5%.
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As an operations management consultant, you have been asked to evaluate a furniture manufacturer's cash-to-cash conversion cycle under the following assumptions: sales of $24.6 million, cost of goods sold of $22.7 million, 50 operating weeks a year, total average on hand inventory of $2,050,000, accounts receivable equal to $2,470,000, and accounts payable of $3,735,000. What is the cash-to-cash conversion cycle in weeks?
The cash-to-cash conversion cycle for the furniture manufacturer is 13.3 weeks. This indicates the average time it takes for the company to convert its investments in inventory and accounts receivable into cash.
To calculate the cash-to-cash conversion cycle, we need to consider three components: the days of inventory outstanding (DIO), the days of sales outstanding (DSO), and the days payable outstanding (DPO). First, we calculate the DIO by dividing the average on-hand inventory by the cost of goods sold and multiplying it by 7 days in a week. In this case, DIO equals 9.1 weeks.
Next, we calculate the DSO by dividing the accounts receivable by the average daily sales. Since there are 50 operating weeks in a year, we divide the sales by 50 to get the average daily sales. DSO equals 9.9 weeks. Finally, we calculate the DPO by dividing the accounts payable by the average daily cost of goods sold.
To find the cash-to-cash conversion cycle, we subtract the DPO from the sum of DIO and DSO. Therefore, the cash-to-cash conversion cycle is 13.3 weeks (9.1 + 9.9 - 5.7). This means it takes approximately 13.3 weeks for the furniture manufacturer to convert its investments in inventory and accounts receivable into cash.
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What are the various roles of inventory, including the different types of inventory and inventory drivers?
B. What is the difference between independent demand and dependent demand inventory?
C. How do you calculate the restocking level for a periodic review system?
D. How do you calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system?
A. The various roles of inventory include:1. Buffer stock: Inventory acts as a buffer between the demand for a product and the supply. helps to meet customer demand during fluctuations in production or supply chain disruptions.
2. Cycle stock: This refers to the inventory that is used to meet the average demand for a product during a production cycle. It is replenished periodically based on the production schedule.
3. Safety stock: Safety stock is an extra inventory held as a precautionary measure to mitigate uncertainties in demand, lead time, or supply disruptions. It provides a cushion against unexpected fluctuations in customer demand or delays in the supply chain.
4. Anticipation stock: Inventory is often used to meet expected increases in demand, such as seasonal spikes or promotional activities. Anticipation stock is built up in advance to ensure sufficient supply during peak periods.
5. Transit stock: This refers to inventory that is in transit from the supplier to the buyer. It includes goods being transported by various modes of transportation, such as ships, trucks, or airplanes.
Inventory drivers are the factors that influence the level of inventory held by a company. These drivers include demand variability, lead time variability, order quantity, desired customer service level, and production capacity.
B. The difference between independent demand and dependent demand inventory:
1. Independent demand: Independent demand refers to the demand for finished products or end items that are directly influenced by customer demand. It is unpredictable and can fluctuate based on customer preferences, market conditions, and other factors.
2. Dependent demand: Dependent demand refers to the demand for component parts or raw materials that are needed to produce the finished products. It is derived from the demand for the final product and is predictable as it is based on the production requirements.
C. The restocking level for a periodic review system is calculated by considering the average demand during the lead time plus the safety stock. The formula is as follows:
Restocking level = (Average demand per period × Lead time) + Safety stock
D. For a continuous review system, the economic order quantity (EOQ) and reorder point (ROP) are calculated as follows:
1. Economic Order Quantity (EOQ): EOQ is the optimal order quantity that minimizes the total cost of inventory, including ordering costs and carrying costs. The formula for EOQ is:
EOQ = √((2 × Annual demand × Ordering cost) / Holding cost per unit)
2. Reorder Point (ROP): ROP is the inventory level at which a new order should be placed to replenish the stock. It is calculated by multiplying the average demand per day by the lead time in days. The formula for ROP is:
ROP = Average demand per day × Lead time
These calculations help ensure that inventory levels are maintained efficiently to meet customer demand while minimizing costs.
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the primary source of cash assistance for the nonworking poor is
The primary source of cash assistance for the nonworking poor is government welfare programs. These programs, such as Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI), provide financial aid to individuals and families with low income or disabilities.
Government welfare programs play a crucial role in providing cash assistance to the nonworking poor. TANF, a federal program, offers temporary financial support to eligible families through cash benefits and other services. It aims to help recipients become self-sufficient by providing job training and work opportunities. SSI, on the other hand, is a federal program that provides cash benefits to disabled individuals with limited income and resources. These programs are designed to alleviate poverty and assist those who are unable to work due to various circumstances. While there are other sources of cash assistance, such as nonprofit organizations and charitable initiatives, government welfare programs remain the primary source due to their scale and reach in supporting the non-working poor.
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The auditors' search for unrecorded liabilities is completed:
A. During an interim period.
B. At the balance sheet date.
C. Subsequent to the balance sheet date.
D. At any time during the examination.
Unrecorded liabilities are an organization's debt obligations that are not reflected in the balance sheet. The correct option is B. At the balance sheet date.
This is a critical element of financial reporting because it aids in the identification of concealed debt risks. Unrecorded liabilities are typically overlooked because they have not been reflected in the company's financial statements or records. During the audit of financial statements, an auditor is supposed to carry out a search for unrecorded liabilities. The search for unrecorded liabilities is carried out at the balance sheet date.
It is necessary to recognize the existence of such liabilities because it helps to measure the actual financial standing of the company. In addition, the auditor may make inquiries of an entity's legal counsel or review correspondence with regulatory agencies for the period subsequent to the balance sheet date that may identify potential claims or assessments. Therefore, option B (At the balance sheet date) is the correct answer.
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given that sales are R 1000 000, cost of sales is 15% of sales. cost of sales is R150 000 and gross profit would be 1050 000. true/false
2. bank over draft R55 000, creditors control R230 000, p0rtion of loan to be paid next month R50 000 and mortgage bond R300 000. the current liability is ?
3. bank over draft R55 000, creditors control R230 000, p0rtion of loan to be paid next month R50 000 and mortgage bond R300 000. the current liabil:?
4. equity equals to:
A. Total Liability plus current assets
B. Current assets plus non-current assets less total liabilities
C. Capital plus drawings.
D. Total assets less total liabilities
1. False. The gross profit would be R850,000, not R1,050,000, as the cost of sales is R150,000 and 15% of sales.
2. The current liabilities amount to R285,000.
3. The current liabilities amount to R285,000.
4. The correct answer is B. Equity equals current assets plus non-current assets less total liabilities.
The gross profit is calculated by subtracting the cost of sales from the sales revenue. In this case, the given cost of sales and its percentage of sales allow us to determine the correct sales amount, resulting in a gross profit of R850,000. Therefore, the correct answer is: false.
Creditors control, and the portion of the loan to be paid next month, we can calculate the total current liabilities as R285,000.
Equity represents the residual interest in a company's assets after deducting all its liabilities. Option B accurately represents the calculation of equity by adding current assets and non-current assets while subtracting total liabilities. This equation ensures all assets are considered while offsetting the company's obligations.
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The acronym STEEPLE is used to describe the dimensions of the [1] business environment. Which of the following is NOT referred to by one of the three E′s in the acronym? A. Economic B. Ethical C. Exclusivity D. Environmental
The three E's in the STEEPLE acronym refer to Economic, Ethical, and Environmental factors. Exclusivity is not typically included as one of the dimensions in the business environment analysis. So, the answer is C. Exclusivity.
The STEEPLE acronym is a framework commonly used to analyze the various dimensions of the business environment. It stands for Social, Technological, Economic, Environmental, Political, Legal, and Ethical factors. Each letter represents a different aspect that businesses need to consider when assessing their external environment.
The first three letters, S-T-E, refer to the social, technological, and economic dimensions. Social factors encompass the cultural and demographic aspects that can influence consumer behavior and market trends. Technological factors relate to advancements in technology and their impact on business operations and customer expectations. Economic factors include factors such as market conditions, economic growth, inflation, and unemployment, which can significantly affect business performance.
The remaining four letters, E-P-L-E, represent the environmental, political, legal, and ethical dimensions. Environmental factors involve the ecological and sustainability aspects that businesses must consider to minimize their impact on the environment. Political factors encompass government policies, regulations, and political stability that can influence business operations. Legal factors refer to the legal framework within which businesses operate, including laws, contracts, and intellectual property rights. Ethical factors relate to the moral and ethical considerations that guide business practices, such as corporate social responsibility and ethical decision-making.
While exclusivity is an important concept in business strategy and marketing, it is not specifically represented by any of the E's in the STEEPLE framework. Exclusivity typically refers to the level of access or restriction to certain resources or opportunities, which may be considered in different frameworks or analyses specific to competitive advantage or market positioning.
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One justification against increasing minimum wages is the
potential cost of higher unemployment due to the increasing labor
cost. Suppose that you are asked to evaluate whether an increase in
minimum
One justification against increasing minimum wages is the potential cost of higher unemployment due to the increasing labor cost. In this case, we need to evaluate whether an increase in minimum wage would lead to higher unemployment rates.
The argument against increasing minimum wage rates is that it may have an impact on the labor market. An increase in labor costs results in a decrease in the demand for labor, which leads to unemployment. The increased costs of labor will mean that firms will hire fewer workers, leading to higher unemployment rates. Therefore, while an increase in minimum wage rates may benefit some workers, it may harm others by limiting their employment opportunities.
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Exercise 7.4A (Algo) Recognizing sales tax payable LO 7.2 The following selected transactions apply to Topeca Supply for Nowember and December, Year 1 , November was the first ment of operations. Sales tax is collected at the time of sale but is not paid to the state sales tax agency unt the following month. 1. Cosh sales for November, Year 1 were 565.500 plus sales tax of 7 percent. 2. Topeca Suppy paid the November sales tax to the state agency on December 10 , Year 1 . 3. Cash sales for December. Year 1 were $79,000 pius sales tax of 7 percent. Required a. Show the effect of the above transactions oa a statements model like the orve shown as follows, In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (lA), or a financing activity (FA), if an element is not atfected by the event, leave the cell blank. b. What was the totel amount of sales tax poid in Year t? c. What was the total amount of sales tax collected in Year 1? d. What is the amount of the sales tax llability as of December 31 , Year 1 ? e. On which firtancial statement will the sales tax liabitzy appoar? Complete this question by entering your answers in the tabs below. Show the elfect of the above transactions on a statements mode tike the one shown as foious. In the Cash Flew columi, indicate whether the fiem is an cperating activity (OA). an investing activity {1A}, of a financing activity (Fa). If an element is not affected by the evest, leave the obl blank. (Lnter any decrentes to acco.ft balancens and cash outflows with a minus sign. Not ak celis wit require entrye? a. Show the effect of the above transactions on a statements model like the one shown as follows. In the Cash flow column, indicme whether the item is an operating activity (OA), an investing activity (IA), of a financing activity (FA). If an element is not affected by the event, leave the cell blank. b. What was the total amount of sales tax paid in Year 1? c. What was the total amount of sales tax collected in Year 1? d. What is the amount of the sales tax liabily as of December 31 , Year 1 ? e. On which financial statement will the sales tax liability appear? Complete this question by entering your answers in the tabs below. Show the effect of the atove transactions on a statements model like the one shown as follows. In the Cash flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). If an element is not affected by the event, leave the cell blank, (Enter any decreases to account balances and cash outlows with a minus sign. Not ail cells will require entry.) Required a. Show the effect of the above transactions on a statements model like the one shown as follows. In the Cash Flow column, indicate Whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). If an element is not affected by the event, leave the cell blank. b. What was the total amount of saies tax paid in Year 1 ? c. What was the total amount of sales tax collected in Year 1 ? d. What is the amount of the sales tax llability as of December 31 , Year 1 ? e. On which financial statement will the sales tax Hability appear? Complete this question by entering your answers in the tabs below. b. What was the total amount of sales tax paid in Year 1 ? c. What was the total amount of sales tax collected in Year 1 ? d. What is the amount of the sales tax liability as of December 31 , Year 1 ? e. On which financial statement will the sales tax liability appear?
a. The effects of the transactions on Topeca Supply's statements model are as follows:
Assets Liabilities Equity Revenue Expense Cash Flow
Nov Sales +$622,035 +$565,500 +$565,500 (OA)
Nov Tax +$43,715 -$43,715 (OA)
Dec Sales +$84,130 +$79,000 +$79,000 (OA)
Dec Tax +$5,870 -$5,870 (OA)
Tax Paymt -$49,585 -$49,585 (OA)
b. The total amount of sales tax paid in Year 1 is $49,585.
c. The total amount of sales tax collected in Year 1 is the sum of the sales tax collected in November and December:
Sales tax collected in November = $565,500 x 7% = $39,585
Sales tax collected in December = $79,000 x 7% = $5,530
Total sales tax collected in Year 1 = $39,585 + $5,530 = $45,115
d. The sales tax liability as of December 31, Year 1 is $5,870. This is the amount of sales tax collected in December but not yet remitted to the state agency.
e. The sales tax liability will appear on Topeca Supply's balance sheet as a current liability.
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a. The effects of the transactions on Topeca Supply's statements model are as follows:
Assets Liabilities Equity Revenue Expense Cash Flow
Nov Sales +$622,035 +$565,500 +$565,500 (OA)
Nov Tax +$43,715 -$43,715 (OA)
Dec Sales +$84,130 +$79,000 +$79,000 (OA)
Dec Tax +$5,870 -$5,870 (OA)
Tax Paymt -$49,585 -$49,585 (OA)
b. The total amount of sales tax paid in Year 1 is $49,585.
c. The total amount of sales tax collected in Year 1 is the sum of the sales tax collected in November and December:
Sales tax collected in November = $565,500 x 7% = $39,585
Sales tax collected in December = $79,000 x 7% = $5,530
Total sales tax collected in Year 1 = $39,585 + $5,530 = $45,115
d. The sales tax liability as of December 31, Year 1 is $5,870. This is the amount of sales tax collected in December but not yet remitted to the state agency.
e. The sales tax liability will appear on Topeca Supply's balance sheet as a current liability.
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Proud Corporation acquired 80 percent of Spirited Company’s voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $48,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows: Proud Corporation Spirited Company Item Debit Credit Debit Credit Current Assets $ 241,000 $ 170,000 Depreciable Assets 511,000 305,000 Investment in Spirited Company 127,200 Depreciation Expense 22,000 12,000 Other Expenses 140,000 88,000 Dividends Declared 57,000 27,000 Accumulated Depreciation $ 196,000 $ 72,000 Current Liabilities 66,000 46,000 Long-Term Debt 112,200 198,000 Common Stock 180,000 83,000 Retained Earnings 264,000 53,000 Sales 240,000 150,000 Income from Spirited Company 40,000 $ 1,098,200 $ 1,098,200 $ 602,000 $ 602,000 Required:
a. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1) Record the basic consolidation entry. 2) Record the optional accumulated depreciation consolidation entry.
b. Prepare a three-part consolidation worksheet as of December 31, 20X4. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
a. Consolidation entries on December 31, 20X4:
1) Basic consolidation entry:
Investment in Spirited Company $127,200
Income from Spirited Company $40,000
Noncontrolling interest in net income $8,000
Dividends declared $6,000
Retained Earnings $24,000
This entry eliminates the investment account and recognizes the income from Spirited Company. The noncontrolling interest's share of the net income and dividends declared are also recognized. The remaining balance is allocated to retained earnings.
2) Optional accumulated depreciation consolidation entry:
Depreciation Expense $10,000
Accumulated Depreciation $10,000
Explanation: This entry eliminates the difference in accumulated depreciation between Proud Corporation and Spirited Company. It adjusts the consolidated accumulated depreciation to reflect the correct amount.
b. Consolidation worksheet as of December 31, 20X4:
| | Parent | Subsidiary | Consolidation Entries |
|-------------------|----------|------------|----------------------|
| Current Assets | $241,000 | $170,000 | |
| Depreciable Assets| $511,000 | $305,000 | |
| Investment | $127,200 | | |
| Accum. Deprec. | $196,000 | $72,000 | |
| Current Liabilities| $66,000 | $46,000 | |
| Long-Term Debt | $112,200 | $198,000 | |
| Common Stock | $180,000 | $83,000 | |
| Retained Earnings | $264,000 | $53,000 | |
| Sales | $240,000 | $150,000 | |
| Income from Spirited| | $40,000 | |
| Depreciation Exp | $22,000 | $12,000 | |
| Other Expenses | $140,000 | $88,000 | |
| Dividends Declared| $57,000 | $27,000 | |
| | | | |
| Net Income | | | |
| Noncontrolling Interest| | | |
| | | | |
| Consolidated Retained Earnings | | | |
Explanation: The consolidation worksheet combines the balances of Proud Corporation and Spirited Company. The consolidation entries are entered in the appropriate cells to adjust the balances. The net income, noncontrolling interest, and consolidated retained earnings are calculated based on the entries and existing balances. The worksheet provides a clear overview of the consolidated financial statement preparation process.
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SkiBlu, Ltd., divides its customers into Gold customers and Silver customers. The company has one full-time customer representative per 1,000 Gold customers and one full-time customer representative per 10,000 Silver customers. Customer representatives receive salaries plus bonuses of 10 percent of customer gross margin. SkiBlu spends 80 percent of its promotion costs on Gold customers to encourage their loyalty.
Customer Costs Total Gold
Silver Number of customers 68,000 48,000 20,000
Average customer representative salary $ 88,000 $ 88,000
Promotion costs $ 4,100,000
Average gross margin per customer $ 750 $ 390
Required:
Calculate the totals of the items below for both gold and silver customers, as well as the excess of gross margin over customer costs for each category.
To calculate the totals for Gold and Silver customers, as well as the excess of gross margin over customer costs for each category, we need to consider the given information.
Let's calculate each item:
1. Gold Customer:
- Number of Gold customers: 48,000
- Customer representatives per 1,000 Gold customers: 1 full-time representative
- Total number of customer representatives for Gold customers: 48,000 / 1,000 = 48 representatives
- Customer representative salary per year: $88,000
- Total salary cost for Gold customer representatives: 48 * $88,000 = $4,224,000
- Average gross margin per Gold customer: $750
- Total gross margin for Gold customers: 48,000 * $750 = $36,000,000
- Excess of gross margin over customer costs for Gold customers: $36,000,000 - $4,224,000 = $31,776,000
2. Silver Customers:
- Number of Silver customers: 20,000
- Customer representatives per 10,000 Silver customers: 1 full-time representative
- Total number of customer representatives for Silver customers: 20,000 / 10,000 = 2 representatives
- Customer representative salary per year: $88,000
- Total salary cost for Silver customer representatives: 2 * $88,000 = $176,000
- Average gross margin per Silver customer: $390
- Total gross margin for Silver customers: 20,000 * $390 = $7,800,000
- Excess of gross margin over customer costs for Silver customers: $7,800,000 - $176,000 = $7,624,000
Summary:
- Total gross margin for Gold customers: $36,000,000
- Total gross margin for Silver customers: $7,800,000
- Excess of gross margin over customer costs for Gold customers: $31,776,000
- Excess of gross margin over customer costs for Silver customers: $7,624,000
Please note that these calculations are based on the given information provided in the question.
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Company has fixed costs of $175,000 and a 25% contribution margin ratio. What dollar sales are necessary to achieve a pre-tax net income of $200,000 if the tax rate is 20%?
$1,700,000
$1,900,000
$1,500,000
$1,000,000
$1,180,000
The correct answer is not provided among the given options. The necessary dollar sales to achieve a pre-tax net income of $200,000, considering a 20% tax rate and fixed costs of $175,000, is $335,000.
To determine the dollar sales necessary to achieve a pre-tax net income of $200,000, we need to calculate the required contribution margin.
Contribution margin is the percentage of each dollar of sales that contributes to covering fixed costs and generating profit. In this case, the contribution margin ratio is given as 25%.
First, we calculate the contribution margin by subtracting the fixed costs from the desired pre-tax net income:
Contribution Margin = Pre-tax Net Income / Contribution Margin Ratio
Contribution Margin = $200,000 / 25% = $800,000
Next, we calculate the required dollar sales by dividing the contribution margin by the contribution margin ratio:
Dollar Sales = Contribution Margin / Contribution Margin Ratio
Dollar Sales = $800,000 / 25% = $3,200,000
However, this amount represents the total dollar sales required to achieve the desired pre-tax net income. Since the question asks for the dollar sales necessary to achieve a pre-tax net income of $200,000, we need to subtract the fixed costs:
Dollar Sales = Total Dollar Sales - Fixed Costs
Dollar Sales = $3,200,000 - $175,000 = $3,025,000
To find the dollar sales necessary to achieve a pre-tax net income of $200,000, we need to consider the tax rate. Since the tax rate is 20%, the pre-tax net income of $200,000 will be reduced by the tax amount. Let's calculate the taxable income:
Taxable Income = Pre-tax Net Income - (Pre-tax Net Income * Tax Rate)
Taxable Income = $200,000 - ($200,000 * 20%) = $200,000 - $40,000 = $160,000
Now, we can calculate the necessary dollar sales by adding the fixed costs to the taxable income:
Dollar Sales = Fixed Costs + Taxable Income
Dollar Sales = $175,000 + $160,000 = $335,000
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