The EARs for each case are: 9.49%, 19.39%, 14.64%, and 11.74% respectively. To find the Effective Annual Rate (EAR) in each case, we can use the formula.
EAR = (1 + (APR / n))ⁿ - 1
where APR is the Stated Rate and n is the number of times the interest is compounded per year.
Case 1: EAR with APR of 9.1% and compounded quarterly (n = 4):
EAR = (1 + (0.091 / 4))⁴ - 1 = 0.0949 or 9.49%
Case 2: EAR with APR of 18.1% and compounded monthly (n = 12):
EAR = (1 + (0.181 / 12))¹² - 1 = 0.1939 or 19.39%
Case 3: EAR with APR of 14.1% and compounded daily (n = 365):
EAR = (1 + (0.141 / 365))³⁶⁵ - 1 = 0.1464 or 14.64%
Case 4: Infinite compounding (n = infinity):
[tex]EAR = (1 + (APR / infinity))^infinity - 1[/tex]
In this case, the EAR approaches the continuous compounding formula:
[tex]EAR = e^(APR) - 1[/tex]
Using the APR of 11.1%:
[tex]EAR = e^(0.111) - 1 = 0.1174 or 11.74%[/tex]
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Imagine that you oun a vending machine. You are trying to figure out how much to charge for candy ban. After spending a few wecks experimenting. you find that different quantities are sold at different price. You use this information to construct the demand curve helaw Answer the following questions to help you determine the beit price to charge 1. You want to find how total revenue is affected when you drop the price from 51.00 to 80 cents. Find the price elasticity of demand when moviag from point A to point B. Over thit rathe, is the demand elautic, inelastic, or neither (unit elastic)? 2. Find the price elasticity of demand when moving from point B to point C over this range, is the deanand elastic, tinelastic or unit elastic? 3. Find the price elasticity of dernand when moving from point C to point D. Over this range, is the demand elastic, inclastic or anit clastic? 4. If your goal is to maxiraire total revenue, over which range do you thirk you should set your price? teratistatism
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Let's answer each question one by one:
1. To find the price elasticity of demand when moving from point A to point B (from $1.00 to $0.80), calculate the percentage change in quantity demanded and the percentage change in price. Then, use the formula mentioned above to find the price elasticity of demand.
2. To find the price elasticity of demand when moving from point B to point C, repeat the same steps as in question 1.
3. To find the price elasticity of demand when moving from point C to point D, repeat the same steps as in questions 1 and 2.
4. To maximize total revenue, you should set your price within the range where demand is relatively inelastic. Inelastic demand means that a change in price has a smaller percentage change in quantity demanded. This range can be identified by looking for the portion of the demand curve with a price elasticity of demand less than 1 (inelastic).
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Innovative Designs recently reported $230,000 of sales, $140,500 of operating costs other than depreciation, and $9,200 of depreciation. The company had $35,250 of outstanding bonds that carry a 6.75% interest rate. and its tax rate was 35%. In order to sustain its operations, the firm spent $15,250 on new fixed assets (capital expenditures) and invested an additional $6,800 in net operating working capital. What was the firm's free cash flow (FCF)? Your answer should be between 38000 and 42000, rounded to even dollars (although decimal places are okay). with no special characters.
Rounding this to the nearest even dollar, the firm's free cash flow is $48,938. So, the firm's free cash flow (FCF) is approximately $48,938.
To calculate the free cash flow (FCF), we need to subtract the capital expenditures and the change in net operating working capital from the operating cash flow.
Sales: $230,000
Operating costs (excluding depreciation): $140,500
Depreciation: $9,200
Interest expense: $35,250 at a 6.75% interest rate
Tax rate: 35%
Capital expenditures: $15,250
Change in net operating working capital: $6,800
First, let's calculate the operating cash flow (OCF):
OCF = Sales - Operating costs (excluding depreciation) - Depreciation
OCF = $230,000 - $140,500 - $9,200
OCF = $80,300
Next, let's calculate the interest expense after tax:
Interest expense after tax = Interest expense * (1 - Tax rate)
Interest expense after tax = $35,250 * (1 - 0.35)
Interest expense after tax = $22,912.50
Now, we can calculate the FCF:FCF = OCF - Interest expense after tax - Capital expenditures + Change in net operating working capital
FCF = $80,300 - $22,912.50 - $15,250 + $6,800
FCF ≈ $48,937.50
Rounding this to the nearest even dollar, the firm's free cash flow (FCF) is $48,938.
Therefore, the firm's free cash flow (FCF) is approximately $48,938.
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DKM Digitals Ltd is a retail business that sells 134 units of one particular brand of computers per week. The company purchases computers from Deggs Company and the purchase-order lead time is 4 weeks, and the economic-order quantity has been computed as 313 computers. Calculate the reorder point of computers for DKM Digitals.
The reorder point of computers for DKM Digitals Ltd is 542.92 units.
The reorder point for DKM Digitals Ltd can be calculated as follows:Reorder Point = (Average Daily Usage x Lead Time in days) + Safety Stock
The first step is to calculate the average daily usage, which can be found by dividing the weekly usage by 7 (since there are 7 days in a week):Average Daily Usage = 134 units / 7 days = 19.14 units/day
The lead time is given as 4 weeks, which means the lead time in days is 4 x 7 = 28 days.Safety stock is the extra inventory that a company keeps on hand to protect against unexpected demand or supply chain disruptions. It is usually expressed as a percentage of the average daily usage.
Let's assume a safety stock of 10%. Therefore, Safety Stock = 0.1 x 19.14 units/day = 1.91 units/daySubstituting the values into the reorder point formula:Reorder Point = (19.14 units/day x 28 days) + 1.91 units/day = 542.92 units
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Lab R Doors' year-end price on its common stock is $40. The firm has total assets of $75 million, the debt ratio is 60 percent, there is no preferred stock, and there are 4 million shares of common stock outstanding. Calculate the marketto-book ratio for Lab R Doors. Multiple Choice 2.13 3.20 5.33 10.00
The market-to-book ratio for Lab R Doors can be calculated based on the given information. The market-to-book ratio measures the market value of a company's common stock relative to its book value.
To calculate the market-to-book ratio, we need to determine the book value of Lab R Doors' common stock and the market value of the common stock.
The book value of the common stock is calculated by dividing the total equity by the number of shares outstanding. Since there is no preferred stock, the total equity is equal to the total assets minus the total debt. In this case, the book value of the common stock is:
Book Value per Share = (Total Assets - Total Debt) / Number of Shares Outstanding
The market value of the common stock is simply the year-end price of the stock per share.
Once we have the book value per share and the market value per share, we can calculate the market-to-book ratio by dividing the market value per share by the book value per share.
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Football is widely accepted as the "world’s game". Based on the course lectures and readings, answer the following: a. What factors have pushed football to be so popular around the world? b. Name three (3) of football’s major global events and briefly describe the competition format of each. c. Name three (3) issues facing football and how they are relevant to the wider international sport world.
a. Football's popularity around the world can be attributed to several factors. b. Three major global events: the FIFA World Cup, the UEFA Champions League, and the Copa America.c. Three issues are corruption, inequality, and player welfare.
a. Football's popularity around the world can be attributed to several factors. Firstly, its simplicity and accessibility make it easy for people of all ages and backgrounds to play.
Additionally, football has a rich history and tradition, with passionate fans and iconic clubs that generate a sense of community and identity. The competitive nature of the sport, with its exhilarating matches and unpredictable outcomes, also adds to its appeal. Furthermore, the global reach of media and broadcasting platforms has helped popularize football by making it easily accessible to audiences worldwide.
b. Three major global events in football are the FIFA World Cup, the UEFA Champions League, and the Copa America. The FIFA World Cup is a tournament held every four years, where national teams from around the world compete for the title.
It features a qualification process and a final tournament with multiple rounds leading to the final match. The UEFA Champions League is an annual competition among the top football clubs in Europe. It involves a group stage followed by knockout rounds, culminating in a final match. The Copa America is the oldest international football tournament in the world, featuring national teams from South America. It follows a similar format to the World Cup, with group stages and knockout rounds.
c. Three issues facing football are corruption, inequality, and player welfare. Corruption scandals within football governing bodies have raised concerns about the integrity of the sport and the fairness of decision-making processes. Inequality is a significant issue, with a few wealthy clubs dominating resources and talent, limiting the competitiveness of smaller clubs and leagues.
Player welfare is also a concern, with issues such as player safety, excessive workload, and inadequate support for mental health. These issues resonate with the wider international sports world as they highlight the need for transparency, fairness, and the prioritization of player well-being in sports governance and management. Efforts are being made to address these issues through reforms, regulations, and collective actions by stakeholders in the football community.
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Analyzing Mixed Costs
The Metropolis Health System has a system-wide training course for nurse aides. The course requires a packet of materials that MHS calls the training pack. Due to turnover and because the course is system-wide, there is a monthly demand for new packs. In addition, the local community college also obtains the training packs used in their credit courses from MHS.
The Education Coordinator needs to know how much of the cost is fixed and how much of the cost is variable for these training packs. She decides to use the high-low method of computation.
Required
Using the monthly utilization information presented below, find the fixed and variable portion of costs through the high-low method.
Number of
Month Training Packs Cost
January 1,000 $6,200
February 200 1,820
March 250 2,350
April 400 3,440
May 700 4,900
June 300 2,730
July 150 1,470
August 100 1,010
September 1,100 7,150
October 300 2,850
November 250 2,300
December 100 1,010
The fixed cost for the training packs is $1,000, with a variable cost of $4.50 per unit.
1. Identify the highest and lowest activity levels:
In this case, the highest activity level is 1,000 training packs in January, while the lowest activity level is 100 training packs in August.
2. Calculate the change in cost and activity:
The change in cost is $6,200 (January cost) - $1,010 (August cost) = $5,190.
The change in activity is 1,000 (January packs) - 100 (August packs) = 900.
3. Calculate the variable cost per unit:
Divide the change in cost by the change in activity:
$5,190 / 900 = $5.77 per training pack.
4. Calculate the fixed cost:
To find the fixed cost, we can use either the highest or lowest activity level and its corresponding cost. Let's use the lowest activity level:
Fixed Cost = Cost at Lowest Activity - (Variable Cost per Unit * Lowest Activity)
Fixed Cost = $1,010 - ($5.77 * 100)
= $1,010 - $577
= $433.
Therefore, the fixed cost for the training packs is $433, and the variable cost per unit is $5.77.
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Write a review report based on this article: "Market Concentration in Pakistan’s Cement Industry by "Saira Hannan, Syeda Zehra Abbas, Syyeda Farwah Naqvi"
Requirements:
1) Make glossary and mention the definitions/formulas of all the indices which are used in the article.
2) Write review for the article which must have study location, time frame, data sources, methodology, results and conclusion.
Glossary and definitions/formulas of indices used in the article are mentioned below: Concentration Ratio (CR)The Concentration Ratio (CR) is calculated by adding the market shares of the top (i.e. largest) firms in the market and it shows the degree of concentration in the market.
For example, the CR4 is the market share of the top four firms in the industry.Hirschman-Herfindahl Index (HHI)The Herfindahl-Hirschman Index (HHI) is calculated by summing the squared market shares of all the firms in the market. It measures the level of market concentration in the industry, where HHI values above 0.18 are considered highly concentrated. The formula for HHI is: HHI = ∑Si2 where Si
= market share of firm iStudy location, time frame, data sources, methodology, results and conclusion of the article are mentioned below:Study Location:The study is based on the cement industry of Pakistan.
Time Frame:The article is based on a recent data of the fiscal year 2015-16.Data Sources:Secondary data sources including industry publications, reports of State Bank of Pakistan, the All Pakistan Cement Manufacturers Association and company annual reports were used to analyze the data.Methodology:Descriptive statistics, concentration ratios (CR) and Herfindahl-Hirschman Index (HHI) were used to analyze the market structure of the cement industry.
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Zelda purchases $10,000 of supplies on account. the effects of this transaction are to?
The effects of Zelda's purchase of $10,000 of supplies on account are an increase in Supplies (asset) and an increase in Accounts Payable (liability).
The effects of Zelda's purchase of $10,000 of supplies on account would typically include the following:
1. Increase in Supplies: The transaction would increase the Supplies account by $10,000. Supplies are considered an asset on the balance sheet, so the asset side of Zelda's balance sheet would increase by $10,000.
2. Increase in Accounts Payable: Since Zelda purchased the supplies on account, she has an obligation to pay the supplier at a later date. The transaction would increase the Accounts Payable account by $10,000. Accounts Payable is a liability on the balance sheet, so the liability side of Zelda's balance sheet would also increase by $10,000.
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HiTech Manufacturing Company has 1,000,000 shares of $1 par value capital stock outstanding on January 1. The following equity transactions occurred during the current year:
Apr. 30 -Distributed additional shares of capital stock in a 2-for-1 stock split. Market price of stock was $35 per share.
June 1 -Declared a cash dividend of $0.60 per share.
July 1 -Paid the $0.60 cash dividend per share to stockholders.
Aug. 1 -Declared a 5 percent stock dividend. Market price of stock was $19 per share.
Sept. 10 - Issued shares resulting from the 5 percent stock dividend declared on August 1.
Dividends-
Dividends Payable-
Dividends Payable-
Cash-
Retained Earnings-
Stock Dividend to be distributed-
Common Stock-
Debit Dividends account, Credit Cash account.
Debit Dividends Payable account, Credit Dividends account.
Debit Retained Earnings account, Credit Dividends Payable account.
Debit Retained Earnings account, Credit Cash account.
Debit Retained Earnings account, Credit Stock Dividend to be distributed account.
Debit Retained Earnings account, Credit Common Stock account.
Debit Common Stock account, Credit Stock Dividend to be distributed account.
The equity transactions for HiTech Manufacturing Company during the current year are as follows:
1. April 30: Distributed additional shares of capital stock in a 2-for-1 stock split. The market price of the stock was $35 per share.
2. June 1: Declared a cash dividend of $0.60 per share.
3. July 1: Paid the $0.60 cash dividend per share to stockholders.
4. August 1: Declared a 5 percent stock dividend. The market price of the stock was $19 per share.
5. September 10: Issued shares resulting from the 5 percent stock dividend declared on August 1.
The accounting entries to record these transactions are as follows:
- Dividends: Debit Dividends account, Credit Cash account.
- Dividends Payable: Debit Dividends Payable account, Credit Dividends account.
- Dividends Payable: Debit Retained Earnings account, Credit Dividends Payable account.
- Cash: Debit Retained Earnings account, Credit Cash account.
- Retained Earnings: Debit Retained Earnings account, Credit Stock Dividend to be distributed account.
- Stock Dividend to be distributed: Debit Retained Earnings account, Credit Common Stock account.
- Common Stock: Debit Common Stock account, Credit Stock Dividend to be distributed account.
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The following information was taken from the books and records of Eurton Corp: 1. Net income, 2017 $4,500 2. Capital structure: a. Convertible bonds: 30 bonds issued and outstanding. Each $100 par value bond is convertible into 10 shares of common. $3,000 b. Noncumulative $50 par value preferred stock, 20 shares outstanding $1,000 c. Common stock, \$1 par, 2,000 shares issued and outstanding $2,000 3. Other data: a. The bonds, preferred, and common shares were outstanding for all of 2017. b. None of the bonds were converted during the year. c. The income tax rate is 30%. d. The bonds carry a 5% interest rate ( $150 total per year). e. Preferred has a 4% annual dividend requirement. No dividends are in arrears. f. Dividends paid during 2017: Preferred $40; Common $120. a. Compute basic and diluted earnings per share for 2017. Carry all answers to three decimal places. (10 pts) Basic EPS Calculations: Diluted EPS Calculations: b. Find diluted earnings per share for 2017, now assuming that the convertible debt was issued on December 01, 2017. All other facts remain unchanged. (5 pts) Diluted EPS Calculations:
The diluted eps is still $2.250.
a. basic eps: $2.250; diluted eps: $2.250.
a. to calculate basic eps, divide the net income ($4,500) by the weighted average number of common shares outstanding (2,000). basic eps = $4,500 / 2,000 = $2.250.
to calculate diluted eps, we need to consider the potential conversion of the convertible bonds. since none were converted, the diluted eps is the same as the basic eps: $2.250.
b. diluted eps: $2.184.
b. with the assumption that the convertible debt was issued on december 01, 2017, we need to consider its potential impact on diluted eps. since the bonds were issued after the income statement date, we exclude them from the calculation.
the weighted average number of common shares outstanding remains the same (2,000 shares). however, if any bonds were converted during the year, the potential additional common shares would be considered in the diluted eps calculation. since no conversions occurred, the diluted eps remains $2.
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When the owner of a proprietorship invests personal cash in the business, the two accounts affected are cash and:_____.
When the owner of a proprietorship invests personal cash in the business, the two accounts affected are cash and the owner's equity or capital account.
The cash account is debited to increase the cash balance in the business, reflecting the inflow of personal funds. On the other hand, the owner's equity or capital account is credited to represent the increase in the owner's investment.
This increase in equity indicates that the owner has contributed personal resources to the business, thereby increasing their ownership stake. By debiting cash and crediting the owner's equity, the accounting records accurately reflect the infusion of personal funds into the proprietorship, maintaining the balance between assets (cash) and equity (owner's investment) in the accounting equation.
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Len and Joan intend to invest $200,000 in their CompuTech Sales and Service retail store. Their financial projections show that during the first year of operations, CompuTech will generate $25,000 in profit, with subutantial increases in the following years. To finance their business, Len and Joan will need $100,000 in loans (shont tem and long term borrowings) from the bank at 6% (after taxes). The other $100,000 will come from their savings. The Millers are currently earning 8% (after taxes) on their savings. Len and Joan intend to invest $200,000 in their CompuTech Sales and Service retail store. Their financial projections show that during the first year of operations, CompuTech will generate $25,000 in profit, with substantial increases in the following years. To finance their business, Len and Joan will need $100,000 in loans (short term and long term borrowings) from the bank at 6% (after taxes). The other $100,000 will come from their savings. The Millers are currently earning 8% (after taxes) on their savings.
The retail store CompuTech Sales and Service generated $227,000 in total net cash flow during its first full year of operation.
In order to improve their retail CompuTech Sales and Service location, Len and Joan plan to invest $200,000. According to their financial estimates, CompuTech will make a profit of $25,000 in the first year of operations, with significant growth in the succeeding years.
Len and Joan will require $100,000 in loans (short- and long-term borrowings) from the bank at 6% (after taxes) to fund their firm. They will draw the remaining $100,000 from their savings, which currently generate 8% (after taxes).
Let's now determine how much net cash flow was generated by financing and investment activities:
Financial activity net cash flow: Loan proceeds equal $100,000 * (1 - 0.06) = $94,000.
Cash flow generated through investing: Savings from $100,000 multiplied by (1 + 0.08) equals $108,000.
Now that we know the overall net cash flow for the first year, we can compute it:
Profit plus net cash flow from financing operations plus net cash flow from investment activities equals total net cash flow.
$25,000 plus $94,000 plus $108,000 equals total net cash flow.
Consequently, the retail store CompuTech Sales and Service generated a total net cash flow of $227,000 during its first year of operation.
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What do you see as the role of probability concepts in business decision making?
Probability concepts play a crucial role in business decision-making by providing a framework for assessing and managing uncertainty.
They allow businesses to quantify and analyze risks, forecast future outcomes, and make informed decisions based on available information. Probability theory enables businesses to evaluate the likelihood of various scenarios, estimate potential gains or losses, and determine optimal strategies.
From financial planning and investment analysis to market forecasting and product development, probability concepts help businesses make rational choices, allocate resources effectively, and mitigate risks.
By understanding the probabilistic nature of business environments, decision-makers can make more informed and robust decisions to drive success and competitiveness.
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Suppose the price of gelatin falls, all other things equal. What is going to happen in the leather market? The ff leather is going to and shift to the As a result, the new equilibrium price of leather will be than before, and the new equilibrium quantity will be Hint: These are very useful questions. You must be able to analyze them using your shifters, and explain your logic in writing. You must also be able to draw the graph for each market and show which curve shifts, and what happens from E
1
to E
2
.
If the price of gelatin falls, all other things being equal, the price of leather is also going to fall. The decrease in the price of gelatin, a key input in the production of leather, will reduce the cost of producing leather, which will shift the supply curve for leather to the right, resulting in a fall in the price of leather, while the quantity of leather demanded and supplied will rise.
Therefore, the price of leather will drop, and the quantity of leather traded will increase as a result of this scenario.
Furthermore, the leftward shift of the supply curve will result in a new equilibrium price of leather that is lower than the old equilibrium price of leather, as the supply curve shifts to the right in response to the decline in gelatin prices. Meanwhile, the new equilibrium quantity will be higher than the old equilibrium quantity.
In conclusion, as the price of gelatin drops, the cost of producing leather declines, causing a shift in the supply curve for leather to the right. This shift results in a drop in the price of leather and a rise in the quantity of leather traded. Furthermore, the new equilibrium price of leather will be lower than before, while the new equilibrium quantity will be greater than before.
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A firm invests in a project that will produce a steady yearly savings of $112,000 starting one year from now. The investment needed for the project is $852,000. The required rate of return is 8%.
What is the NPV of the project?
The NPV of the project is $548,000. Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows that occur as a result of a project.
To calculate the Net Present Value (NPV) of the project, we need to discount the future savings back to the present value using the required rate of return.
NPV = Present Value of Cash Flows - Initial Investment
The yearly savings of $112,000 is a cash inflow, and it will occur for multiple years. Let's assume the savings will continue indefinitely. The present value of an indefinite cash flow stream can be calculated using the formula:
Present Value = Cash Flow / Discount Rate
In this case, the cash flow is $112,000 per year, and the discount rate is 8%. Therefore, the present value of the yearly savings is:
Present Value = $112,000 / 0.08 ⇒ $1,400,000
Next, we subtract the initial investment of $852,000:
NPV = $1,400,000 - $852,000 ⇒ $548,000
The NPV of the project is $548,000.
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Given the following information, calculate the materials price variance:
Direct material purchased and used 45 000 kg
Cost of direct material $126 000
Unfavourable direct materials usage variance $4500
Standard quantity of direct materials allowed for August production 43 500 kg
Select one:
$4200 (U)
$9000 (U)
$4200 (F)
$9000 (F)
The materials-price-variance is $4,200 (F) or $4,200 unfavorable.
Actual cost of direct materials purchased = $126,000
Standard cost of direct materials allowed = Standard price per unit * Standard quantity of direct materials allowed
First, let's calculate the standard price per unit:
Standard price per unit = Actual cost of direct materials purchased / Direct material purchased and used
Standard price per unit = $126,000 / 45,000 kg
Standard price per unit = $2.80 per kg
Next, let's calculate the standard cost of direct materials allowed:
Standard cost of direct materials allowed = Standard price per unit * Standard quantity of direct materials allowed
Standard cost of direct materials allowed = $2.80 per kg * 43,500 kg
Standard cost of direct materials allowed = $121,800
Finally, let's calculate the materials price variance:
Materials price variance = Actual cost of direct materials purchased - Standard cost of direct materials allowed
Materials price variance = $126,000 - $121,800
Materials price variance = $4,200 (F)
Therefore, the materials price variance is $4,200 (F) or $4,200 unfavorable.
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2.Suppose that Mack Industries has annual sales of $10 million, cost of goods sold of $6.5 million, average inventories of $1 million, and average accounts receivable of $600,000. Assuming that all of Mack's sales are on credit, what will be the firm's operating cycle
Mack Industries' operating cycle is approximately 78.05 days. This means that, on average, it takes the company 78.05 days to convert its inventory into cash through the sales process, considering the average age of inventory and the average collection period.
To calculate Mack Industries' operating cycle, we need to consider the time it takes for the company to convert its resources (inventories) into cash through the sales process. The operating cycle consists of two components: the average age of inventory and the average collection period.
First, we calculate the average age of inventory:
Average Age of Inventory = (Average Inventories / Cost of Goods Sold) * 365 days
Average Age of Inventory = ($1,000,000 / $6,500,000) * 365 days
Average Age of Inventory ≈ 56.15 days
Next, we calculate the average collection period:
Average Collection Period = (Average Accounts Receivable / Sales) * 365 days
Average Collection Period = ($600,000 / $10,000,000) * 365 days
Average Collection Period ≈ 21.9 days
Finally, we can calculate the operating cycle:
Operating Cycle = Average Age of Inventory + Average Collection Period
Operating Cycle ≈ 56.15 days + 21.9 days
Operating Cycle ≈ 78.05 days
Therefore, Mack Industries' operating cycle is approximately 78.05 days.
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7 (Tax Preparer's Penalties) For each of the following independent cases, indicate whether you believe any penalty would be assessed under ITA 163.2 on any of the parties involved. Explain your conclusion Case 1 A company has established a limited partnership by acquiring a software application from a non-arm's length individual for $450,000. Units in the limited partnership are being sold by the company The prospectus for the offering states that the fair market value of the acquired application is $10 million, a value based on the work of an independent appraiser. The limited partnership is registered with the CRA as a tax shelter. On audit, the CRA determines that the $450,000 that was paid for the software application is, in fact, its fair market value on the date of the transfer. In questioning the approach used by the appraiser, that individual indicated that his work was based largely on assumptions provided by the company sponsoring the limited partnership offering. The appraiser's fee for the work was $150,000 Case 2 A very successful accountant lives next door to what appears to be a wealthy neighbour. Based on similar properties, his house appears to be worth more than $2 million and he has three cars, including a Ferrari and a Mercedes-Benz In the last two years, the two neighbours have become friends As his accountant has retired, the neighbour asks the accountant to prepare his tax return. To this end, the neighbour provides a T5 that shows income of $90,000. As this appears to be on the low side, the accountant asks if he has any other source of income. The neighbour indicates that he does not, but also noting that a few years ago, he won $20 million in the provincial lottery, The accountant does not ask any further questions and prepares and files the return. When the friend is audited it is discovered that he has over $500,000 in unreported income. Case 3 In preparing a tax return for one of his clients, an accountant uses the financial statements of another accountant to determine the client's business income inclusion. The accountant does not see anything in these statements that seems unreasonable. When his client's return is audited, the CRA finds that the business income financial state- ments prepared by the other accountant contained material misrepresentations, Case 4 In preparing a tax return for a new client, an accountant uses the client's accounting state- ments to calculate the client's net business income. As part of this engagement, the accountant reviews both the expense and revenue information that has been provided to him by the new client. The expenses seem to be related to the type of business of the client and the revenue and expense figures contained in the accounting statements seem reasonable. Given this, the accountant files the required tax return When the client is audited, the CRA finds a large proportion of the expenses claimed cannot be substantiated by adequate documentation and may not have been incurred. Furthermore, it appears that the client has a substantial amount of unreported revenues Case 5 In preparing a tax return for a new client, the accountant determines that his only income is $75,000 in business income. In preparing the Tax Payable figure, the accountant is advised by the client that he made a $110,000 charitable contribution during the current year. However, he has lost the receipt. He has requested a replacement but has not received it yet. As it is now April 29, to avoid a late filing penalty the accountant files the tax return, claiming a tax credit for the contribution without seeing the receipt
In case 1, the appraiser's fee of $150,000 is likely to be considered a "gross entitlement" under ITA 163.2(1)(b).
In Case II, the accountant may be subject to a penalty under ITA 163.2(4).
In Case III, the accountant may not be subject to a penalty under ITA 163.2.
How to analyze the cases ?Case 1:
The company that sponsored the limited partnership offering may also be subject to a penalty under ITA 163.2(1)(a). This is because the company made a false statement in the prospectus for the offering by stating that the fair market value of the acquired application was $10 million. The penalty for the company could be up to $250,000.
Case II:
The accountant knew, or should have known, that the neighbour had unreported income of over $500,000. The penalty for the accountant could be up to $100,000.
Case III:
The accountant did not see anything in the financial statements that seemed unreasonable. However, the accountant may want to consider whether they should have done more to verify the accuracy of the financial statements.
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VariCorp offers employee benefits such as flex-time, sabbaticals, and onsite daycare. VariCorp knows its employees have a need for Mutiplo Chaice meaningful work: a positive work environment. exponding their skils. work-lde balance.
Vari Corp offers a range of employee benefits that cater to their employees' needs for meaningful work, a positive work environment, expanding their skills, and work-life balance.
Flex-time allows employees to have more control over their work hours, enabling them to balance their personal and professional commitments effectively. With flex-time, employees can choose their preferred start and end times within a specified range.
Sabbaticals are extended periods of time off granted to employees, usually after a certain number of years of service. This benefit allows employees to take a break from work and engage in activities such as travel, further education, or personal development. Sabbaticals help employees rejuvenate and come back to work with renewed energy and motivation.
Onsite daycare is an employee benefit provided by Vari Corp that offers childcare services within the workplace premises. This convenience allows working parents to have peace of mind, knowing that their children are nearby and well-cared for while they focus on their work responsibilities.
Vari Corp recognizes that employees value a positive work environment that fosters growth and the opportunity to expand their skills. By creating a supportive and nurturing workplace culture, Vari Corp encourages employees to develop their talents, learn new skills, and enhance their professional capabilities.
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Look for a price ceiling or price floor in the world around you. Your price control example can be from any country. It can be a current one or a historical one. It can be something you experienced personally or something you read about. Remember price controls can be in any market, not just product markets. The more interesting your answer, the better. For full credit, the example must be an actual price control, not some other policy aimed at a certain market.
What market?
Where, when?
How does the price control work?
Who is it meant to benefit? Does it actually benefit that group?
5) Does the price control bring any negative consequences?
6) If you experienced this price control personally, just tell us the context. If it is from an outside source, please provide a link.
Rent control limits landlord's ability to charge high rents, aiming to provide affordable housing and protect tenants. Examples include New York City and Berlin.
Rent control works by setting limits on rent increases or establishing maximum allowable rents for certain properties. It aims to benefit tenants by ensuring housing affordability, particularly for low-income individuals and families.
The effectiveness and overall impact of rent control policies are debated. While they may help some long-term tenants by keeping rents lower, they can have negative consequences such as a decrease in housing supply, misallocation of housing, and disincentives for investment and maintenance.
The actual benefits and drawbacks of rent control depend on various factors, including market dynamics, implementation, and long-term effects on housing availability and quality.
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Indicate Whether Prepaid Expenses And Accrued Fevenues Result In Deferred Tax Assets (DTAs) Or Deferred Tax Labuities (DTLS):
Prepaid expenses result in deferred tax assets, while accrued revenues result in deferred tax liabilities. Prepaid expenses are considered as future expenses that have been paid in advance.
Prepaid expenses are the expenses that have been paid in a financial year but do not relate to the current year. These expenses are considered as assets in the balance sheet. They are not directly used in the current financial year but can be used for future years.
Accrued revenue is the revenue that has been earned but not yet received in cash or any other form of payment. These revenues are generally reported by businesses in their financial statements. Accrued revenues are also known as unbilled revenues. Accrued revenue is considered a liability in the balance sheet.
DTAs (Deferred tax assets) are created when a company has overpaid taxes or paid taxes in advance. Prepaid expenses result in deferred tax assets because the prepaid expenses have already been paid for, and the tax is already paid on these expenses. These expenses can be used in future years, and the tax on these expenses will be recorded in future years.
DTLs (Deferred tax liabilities) are created when a company has underpaid taxes or has paid taxes in advance. Accrued revenues result in deferred tax liabilities as taxes on revenues earned but not yet received have already been paid, and the revenue is not yet received.
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You will likely be hired by someone (much) older than yourself. How will you market
your skills to their standards? (Are their standards different than your own? If so, how so?
If not, why not?)
What is one way to communicate across generations? Be as specific as possible.
these questions are regarding towards millennials.
While individual preferences may vary, there can be some general differences between generations in terms of communication styles, values, and work approaches.
To effectively market my skills to an older audience, I would consider the following:
1. Adaptation and Understanding: I would take the time to understand the specific needs, preferences, and values of the older individual or generation I am targeting. This involves researching their background, experiences, and professional expectations. By adapting my communication style and approach to align with their preferences, I can establish rapport and effectively convey my skills.
2. Highlighting Relevant Experience: When marketing my skills, I would emphasize experiences and achievements that are relevant and valuable to the older individual or generation. This could include showcasing accomplishments in areas they value, such as extensive industry knowledge, proven track record, or successful projects that align with their priorities.
3. Demonstrating Professionalism: Older individuals may have a preference for more traditional or formal communication styles. To meet their standards, I would ensure professionalism in all interactions, including written communication, presentations, and meetings. Clear and concise language, proper etiquette, and respectful behavior can help establish credibility and gain their confidence.
4. Building Trust and Reliability: Older individuals may prioritize trust and reliability in professional relationships. I would focus on building trust by delivering on commitments, providing consistent and accurate information, and demonstrating integrity in my workplace. Consistency and dependability are essential in establishing credibility and meeting their standards.
To communicate effectively across generations, including millennials, one specific way is to practice active listening. Active listening involves fully engaging with the other person's thoughts, ideas, and concerns while suspending judgment or preconceived notions. Here's a more specific approach:
1. Show genuine interest: Demonstrate curiosity and a willingness to understand the other person's perspective. Ask open-ended questions to encourage them to share their thoughts and experiences.
2. Practice empathy: Put yourself in their shoes and try to understand their feelings, values, and motivations. Validate their experiences and emotions by actively acknowledging and empathizing with their point of view.
3. Reflect and paraphrase: Throughout the conversation, paraphrase or summarize their key points to show that you have been actively listening and comprehending their message. This not only confirms your understanding but also reinforces the idea that their thoughts and opinions are valued.
4. Clarify and seek clarification: If there are any points that are unclear or require further information, ask for clarification in a respectful and non-judgmental manner. This ensures that both parties are on the same page and fosters effective communication.
By practicing active listening, you can bridge the generational gap, foster understanding, and establish meaningful connections with individuals from different age groups, including millennials.
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During the year, CDE Corporation earned enough profits to pay dividends to its shareholders. CDE is a C corporation. What are the tax consequences of this distribution?
The corporation will increase their earnings and profits by the amount distributed.
The corporation will reduce its taxable income by the amount distributed to the shareholders.
The corporation will pay a flat tax of 21% on the amount distributed. The shareholders also include their dividends received in taxable income.
There are no direct tax consequences for either the corporation or the shareholders.
The correct answer is that option D. there are tax consequences for both the corporation and the shareholders.
The tax consequences of distributing dividends to shareholders for CDE Corporation, a C corporation, are as follows:
- The corporation will increase its earnings and profits by the amount distributed.
- The corporation will reduce its taxable income by the amount distributed to the shareholders.
- The corporation will pay a flat tax of 21% on the amount distributed.
- The shareholders will include their dividends received in their taxable income.
Therefore, the correct answer is that there are tax consequences for both the corporation and the shareholders.
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A bank accepts a deposit for $50 million by issuing a 90-day NCD with interest at 6%.
(a) What is the NCD’s face value?
(b) The depositor decides to sell the NCD at a market yield of 6.5% after holding it for 55 days. What proceeds do she receive?
(a) To calculate the face value of the NCD, we need to determine the amount that will be paid back to the depositor after 90 days. The formula to calculate the maturity value of the NCD is:
Maturity value = Principal + (Principal * Interest Rate * Time)
Given:
Principal (deposit) = $50 million
Interest Rate = 6% or 0.06
Time = 90 days
Maturity value = $50 million + ($50 million * 0.06 * 90/365)
Maturity value = $50 million + ($50 million * 0.06 * 0.2466)
Maturity value = $50 million + ($738,900)
Maturity value = $50,738,900
Therefore, the face value of the NCD is $50,738,900.
(b) To calculate the proceeds received by the depositor when selling the NCD at a market yield of 6.5% after holding it for 55 days, we need to determine the remaining time until maturity and calculate the discounted value of the NCD.
Remaining time until maturity = 90 days - 55 days
Remaining time until maturity = 35 days
To calculate the proceeds, we discount the face value based on the market yield (6.5%) and the remaining time until maturity:
Proceeds = Face value / (1 + Yield/365)^(Remaining time until maturity)
Proceeds = $50,738,900 / (1 + 0.065/365)^35
Proceeds = $50,738,900 / (1 + 0.0001781)^35
Proceeds = $50,738,900 / 1.006235
Proceeds ≈ $50,433,449.47
Therefore, the depositor would receive approximately $50,433,449.
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Megan is already looking ahead to graduation and a job, and she wants to buy a new car not long after her graduation. if after graduation she begins an investment program of $2400 per year in an investment yielding 6 percent, what will be the value of the fund after three years?
The value of the fund after three years will be approximately $7,542.24.
To calculate the value of the fund after three years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount (value of the fund)
P = the principal amount (investment per year)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
In this case, Megan invests $2,400 per year, the annual interest rate is 6% (or 0.06 as a decimal), interest is compounded annually (n = 1), and the investment period is three years (t = 3). Plugging these values into the formula, we get:
A = 2400(1 + 0.06/1)^(1*3)
A = 2400(1 + 0.06)^3
A ≈ 2400(1.06)^3
A ≈ 2400(1.191016)
A ≈ 7,542.24
Therefore, the value of the fund after three years will be approximately $7,542.24.
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Capacity Analysis, multiple products) Jane's Powders Inc. sells two products: cologne and perfume. Cologne has a profit margin of $3 per ounce, and each ounce requires 2 grams of fragrance and 6 grams of intensifier. Perfume has a profit margin of $8 per ounce, and each ounce requires 4 grams of fragrance, 2 grams of intensifier, and 1 gram of stabilizer. Jane has limited supplies. In particular, she has 1600 grams of fragrance per week, 1800 grams of intensifier per week, and 350 grams of stabilizer per week. How many ounces of cologne and perfume should she produce per week to maximize the profit earned from her supplies? Please use Excel Solver to solve this problem.
The aim is to increase profit: Profit = 3x + 8y.
To maximize profit, Jane needs to determine the number of ounces of cologne and perfume she should produce per week. Let's denote the number of ounces of cologne as x and the number of ounces of perfume as y.
For cologne:
- Profit = $3/ounce
- Fragrance required = 2 grams/ounce
- Intensifier required = 6 grams/ounce
For perfume:
- Profit = $8/ounce
- Fragrance required = 4 grams/ounce
- Intensifier required = 2 grams/ounce
- Stabilizer required = 1 gram/ounce
Now, let's set up the constraints based on the limited supplies:
- Fragrance constraint: 2x + 4y ≤ 1600 grams
- Intensifier constraint: 6x + 2y ≤ 1800 grams
- Stabilizer constraint: y ≤ 350 grams
The objective is to maximize profit: Profit = 3x + 8y.
Using this information, you can set up a linear programming problem and solve it using Excel Solver or any other suitable method to find the optimal values of x and y.
In this problem, we need to maximize the profit earned from producing cologne and perfume, given the limited supplies of fragrance, intensifier, and stabilizer. By setting up constraints based on the available supplies and using the profit margins of each product, we can create a linear programming problem. Solving this problem will yield the optimal number of ounces of cologne and perfume to produce per week.
Please note that Excel Solver is a tool that can be used to solve such problems, but its usage is not essential to understanding the concept and solving the problem manually.
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Identify the important elements of sales taxation in the state of Arkansas. What governments levy general and selective sales taxes? Identify the following for the RST: What commodity sales are exempt? Are services taxed? What is the nominal rate? Does your state provide sales tax credit/rebates through its income tax? In regard to selective excises: What selective excises are used? Are they ad valorem or specific? What rates apply?
In the state of Arkansas, the important elements of sales taxation include the levying of general and selective sales taxes by different levels of government.
The general sales tax is levied by the state government, while selective sales taxes may be levied by both the state and local governments.
In terms of the RST (Retail Sales Tax), certain commodity sales are exempt from taxation. These exemptions include sales of groceries, prescription drugs, and agricultural products. However, it's important to note that services are generally taxed in Arkansas.
The nominal rate of the state's retail sales tax is 6.5%.
This rate applies to most taxable sales in the state.
In regards to sales tax credit/rebates through income tax, Arkansas does not provide sales tax credit or rebates.
Moving on to selective excises, Arkansas imposes excise taxes on specific goods such as cigarettes, beer, and gasoline. These selective excises can be ad valorem or specific, depending on the type of product. For example, the excise tax on gasoline is specific, while the excise tax on cigarettes is ad valorem based on the price.
The specific rates for selective excises vary depending on the product. For instance, the excise tax on a pack of cigarettes is $1.15, while the excise tax on gasoline is currently 24.5 cents per gallon.
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Your company wanted to determine its cost of capital. The company is financed through bonds and ordinary shares. The bonds were issued five years ago at a par value of R100 (total funds raised R6 million). They carry an annual coupon of 12 per cent, are due to be redeemed in four years and are currently trading at R110. The company's shares have a market value of R5 million, the return on risk-free government securities is 7 per cent and the risk premium for an average-risk share has been 5 per cent. The company's shares have a lower-than-average risk and its historic beta as measured by the co-movement of its shares and the market index correctly reflects the risk adjustment necessary to the average risk premium - this is 0.90. The corporate tax rate is 25 per cent. The company has a net asset figure of R3.5 million showing in its statement of financial position. 4.1. Calculate the cost of debt capital. 4.2. Calculate the cost of equity capital. 4.3. Calculate the weighted average cost of capital. 4.4. Should the company use the WACC for all future projects and SBUs? Explain your answer.
Cost of debt capital: 6.91%. Cost of equity capital: 11.5%. Weighted average cost of capital (WACC): 9.21%. The company should use WACC as the discount rate for future projects and SBUs to account for the overall cost of capital and risk.
4.1. To calculate the cost of debt capital, we need to find the yield to maturity of the bonds. The current market price of the bonds is R110, which is higher than the par value of R100. The bonds have four years remaining until maturity and a coupon rate of 12%.
Using the formula for yield to maturity, we can calculate:
PV = C × (1 - (1 + r)^-n) / r + F / (1 + r)^n
Where PV is the present value of the bond's cash flows, C is the coupon payment, r is the yield to maturity, n is the number of years remaining until maturity, and F is the face value of the bond.
Substituting the given values:
110 = 12 × (1 - (1 + r)^-4) / r + 100 / (1 + r)^4
Solving this equation, we find that the yield to maturity (cost of debt capital) is approximately 6.91%.
4.2. The cost of equity capital can be calculated using the Capital Asset Pricing Model (CAPM):
Cost of Equity = Risk-Free Rate + Beta × Equity Risk Premium
Given that the risk-free rate is 7%, the equity risk premium is 5%, and the beta is 0.90, we can calculate:
Cost of Equity = 7% + 0.90 × 5% = 11.5%
4.3. The weighted average cost of capital (WACC) is calculated by weighting the cost of debt and the cost of equity by their respective Zroportions in the company's capital structure.
WACC = (Weight of Debt × Cost of Debt) + (Weight of Equity × Cost of Equity)
Assuming the company's capital structure is 50% debt and 50% equity:
WACC = (0.50 × 6.91%) + (0.50 × 11.5%) = 9.21%
4.4. The company should use the WACC as the discount rate for evaluating future projects and strategic business units (SBUs). WACC represents the average cost of capital for the company, taking into account both debt and equity financing. It reflects the minimum return required by investors to compensate them for the risk associated with investing in the company. By using WACC as the discount rate, the company ensures that the projected cash flows from new projects are appropriately adjusted for their risk and are consistent with the company's overall cost of capital. This allows for consistent decision-making and evaluation of potential investments.
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Problem 4-18
Future Value of an Annuity for Various Compounding Periods
Find the future values of the following ordinary annuities:
A. FV of $200 paid each 6 months for 7 years at a nominal rate of 8%, compounded semiannually. Round your answer to the nearest cent. $
B. FV of $100 paid each 3 months for 7 years at a nominal rate of 8%, compounded quarterly. Round your answer to the nearest cent. $
A. The future value of the annuity is approximately $2,793.30.
B. The future value of the annuity is approximately $2,838.01.
To calculate the future values of the given ordinary annuities:We can use the formula for the future value of an annuity:
FV = P * [(1 + r/n)^(n*t) - 1] / (r/n)
Where:
FV = Future value of the annuity
P = Payment amount
r = Nominal interest rate
n = Number of compounding periods per year
t = Number of years
A. FV of $200 paid each 6 months for 7 years at a nominal rate of 8%, compounded semiannually:
P = $200
r = 8% = 0.08
n = 2 (semiannually compounding)
t = 7
FV = $200 * [(1 + 0.08/2)^(2*7) - 1] / (0.08/2)
Using a calculator, we can evaluate the expression to find the future value:
FV = $200 * [(1 + 0.04)^(14) - 1] / (0.04)
FV ≈ $2,793.30
Therefore, the future value of the annuity is approximately $2,793.30.
B. FV of $100 paid each 3 months for 7 years at a nominal rate of 8%, compounded quarterly:
P = $100
r = 8% = 0.08
n = 4 (quarterly compounding)
t = 7
FV = $100 * [(1 + 0.08/4)^(4*7) - 1] / (0.08/4)
Using a calculator, we can evaluate the expression to find the future value:
FV = $100 * [(1 + 0.02)^(28) - 1] / (0.02)
FV ≈ $2,838.01
Therefore, the future value of the annuity is approximately $2,838.01.
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Use the following items taken from the financial statements of the Postal Service for the year ending December 31, 2019 to answer questions 5:
Accounts payable ........................................................$10,000
Accounts receivable ......................................................11,000
Accumulated depreciation – equipment ....................28,000
Advertising expense ......................................................21,000
Cash ................................................................................14,000
Owner’s capital (12/31/19) .........................................105,000
Owner’s drawings .........................................................14,000
Depreciation expense ..................................................12,000
Insurance expense ..........................................................3,000
Note payable, due 6/30/20 .............................................5,000
Prepaid insurance (6 - month policy).............................6,000
Rent expense .................................................................17,000
Salaries and wages expense ........................................32,000
Service revenue ...........................................................125,000
Supplies (Inventory).........................................................4,000
Supplies expense ............................................................6,000
Equipment (Long-term) ............................................ 210,000
What is the Working Capital of the Postal Service at December 31, 2019?
To calculate the working capital of the Postal Service at December 31, 2019, we need to use the formula:
Working Capital = Current Assets - Current Liabilities
Current assets are assets that are expected to be converted into cash within one year, while current liabilities are obligations that are due within one year.
From the given financial statement items, we can identify the following current assets and liabilities:
Current Assets:
- Accounts receivable: $11,000
- Cash: $14,000
- Prepaid insurance: $6,000
- Supplies (Inventory): $4,000
Current Liabilities:
- Accounts payable: $10,000
Now, let's calculate the working capital:
Working Capital = (Accounts receivable + Cash + Prepaid insurance + Supplies) - Accounts payable
Working Capital = ($11,000 + $14,000 + $6,000 + $4,000) - $10,000
Working Capital = $35,000 - $10,000
Working Capital = $25,000
Therefore, the working capital of the Postal Service at December 31, 2019, is $25,000.
Please note that working capital is an important financial measure that indicates the short-term liquidity and operational efficiency of a business. A positive working capital generally signifies that a company has enough current assets to cover its current liabilities, which is considered favorable.
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