The reason not given for the workers' better performance in the test room is "Once set, theories should not change even in the face of contrary research results." The statement that theories should not change in the face of contrary research results is false. Scientific theories should be open to revision based on new evidence and research findings.
The reason that is not given for why the workers' performance was better in the test room at the Hawthorne plant than in the regular department in the first two phases is "Once set, theories should not change even in the face of contrary research results."
The given statement "Once set, theories should not change even in the face of contrary research results" is false because Theories are not set in stone and should be subject to revision based on new research results. Scientific theories are developed and refined based on empirical evidence and observations. If research results contradict or challenge existing theories, it is essential to reassess and modify the theories accordingly to accommodate the new findings. This process of scientific inquiry allows for progress and a better understanding of the phenomena under investigation.
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Depreciation is added back to net income in determining cash flows from operating activities under the indirect method because it: (select ONE option)
It normally has a debit balance.
Is a noncash source of revenue.
Is an operating expense that does not affect cash.
It is a "temporary" account.
Is a source of cash.
Depreciation is added back to net income in determining cash flows from operating activities under the indirect method because it is an operating expense that does not affect cash.
Depreciation represents the systematic allocation of the cost of an asset over its useful life, and it is a noncash expense. While depreciation reduces net income, it does not involve an outflow of cash. When preparing the cash flow statement using the indirect method, net income is adjusted to reflect the actual cash flows generated by the business. Since depreciation is a noncash expense, adding it back to net income helps to reconcile the noncash expense with the cash flows generated from operating activities. By adding back depreciation, the cash flow statement presents a more accurate picture of the company's cash-generating ability from its operations. It ensures that the cash flows reported are based on actual cash inflows and outflows rather than noncash expenses.
Therefore, depreciation is added back to net income because it is an operating expense that does not affect cash, and the adjustment helps align the cash flow statement with the actual cash flows generated by the business.
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Phonebiz Ltd is a telecommunications company that is listed on the Australian Securities Exchange. Due to a downturn in sales in one of their regional stores, Phonebiz Ltd's Board of Directors decided to cease trading in that location. In a meeting held in February 20X4, the Board decided that 100 employees would be retrenched and a further 60 employees would be relocated to other stores operated by Phonebiz Ltd. The estimated budget for the compensation of retrenched staff was $1.5 million. The cost of retraining and relocating employees was estimated to be $400,000. On 20 April 20×4 an announcement was made to all employees that were affected by the restructure. In the announcement, retrenched employees were notified of the amount of compensation they would receive and when the closure would occur. In July 20×4 the store ceased trading and negotiations commenced for the sale of the land and buildings that were no longer required as a result of the closure. Required: Describe the nature of this event and explain how it should be accounted for in the financial statements of Phonebiz Ltd for the year ended 30 June 20X4. Specify any journal entry(ies) and/or disclosures that may be required. Your answer must clearly state your position and provide the evidence that you have used to determine that position. The supporting evidence should include adequate explanation and justification of the accounting treatment required and be supported by references from Australian accounting pronouncements (including paragraph numbers where appropriate). Narrations are not required for any journal entries prepared.
The event described in the scenario is a restructuring or cessation of operations by Phonebiz Ltd in one of their regional stores. This event should be accounted for in the financial statements of Phonebiz Ltd for the year ended 30 June 20X4.
According to the Australian Accounting Standard AASB 137 - Provisions, Contingent Liabilities and Contingent Assets, provisions should be recognized when there is a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.
In this case, the Board of Directors' decision to cease trading in the regional store creates a present obligation for Phonebiz Ltd to compensate retrenched employees and cover the costs of retraining and relocating employees. The estimated amounts of $1.5 million for compensation and $400,000 for retraining and relocation meet the criteria for recognition as provisions.
Phonebiz Ltd should recognize these provisions in their financial statements by making the following journal entries:
1. To recognize the provision for employee compensation:
Dr Provision for Employee Compensation (expense) $1,500,000
Cr Provision for Employee Compensation (liability) $1,500,000
2. To recognize the provision for retraining and relocation:
Dr Provision for Retraining and Relocation (expense) $400,000
Cr Provision for Retraining and Relocation (liability) $400,000
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Consider a market where supply and demand are given by QxS = −16 + Px and Qxd = 74 - 2Px. Suppose the government imposes a price floor of $34, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $34 per unit. Instructions: Enter your responses rounded to the nearest penny (two decimal places). a. Determine the cost to the government of buying firms' unsold units. b. Compute the lost social welfare (deadweight loss) that stems from the $34 price floor. LA
The cost to the government of buying firms' unsold units due to the price floor of $34 per unit and the lost social welfare (deadweight loss) resulting from the price floor can be calculated.
a. To determine the cost to the government of buying firms' unsold units, we need to find the number of units that consumers do not buy at the price floor of $34. We can set the quantity demanded (Qxd) equal to the quantity supplied (QxS) and solve for Px, which represents the equilibrium price.
Qxd = QxS
74 - 2Px = -16 + Px
The equilibrium price (Px) is $28. To calculate the quantity that consumers do not buy at the price floor, we subtract the quantity demanded (Qxd) at the equilibrium price from the quantity demanded (Qxd) at the price floor:
Unsold quantity = Qxd (price floor) - Qxd (equilibrium price)
Unsold quantity = (74 - 2 × 34) - (74 - 2 × 28)
Since the government agrees to purchase and discard any unsold units at the price floor, the cost to the government of buying firms' unsold units is:
Cost to government = Unsold quantity × Price floor
Cost to government = 16 × $34
b. To compute the lost social welfare (deadweight loss) resulting from the price floor, we need to compare the total surplus (consumer surplus + producer surplus) at the equilibrium price with the total surplus at the price floor. The total surplus is the sum of consumer surplus and producer surplus.
At the price floor of $34, consumer surplus decreases as some consumers are willing to pay less than the price floor but are forced to pay the higher price. Producer surplus also decreases as firms have to sell fewer units at a lower price. The deadweight loss is the loss of total surplus resulting from the inefficient allocation of resources.
This represents the deadweight loss:
Lost social welfare (deadweight loss) = Total surplus (equilibrium price) - Total surplus (price floor)
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Problem 19-15 The following is cash flow data for Rocket Transport: a. Find the net cash provided by or used in investing activities. (Input the amount as positive value.) b. Find the net cash provided by or used in financing activities. (Input the amount as positive value.) c. Find the net increase or decrease in cash for the year. (Input the amount as positive value.)
The net cash provided by investing activities is: $(300,000)
The net cash provided by financing activities is: $760,000
The net increase or decrease in cash for the year is: $1,000,000
Given data: Cash flow data for Rocket Transport. In order to calculate the net cash provided by or used in investing activities, financing activities and net increase or decrease in cash for the year, the following steps are followed:
a) Calculation of net cash provided by or used in investing activities: Cash Flow from Investing Activities Purchase of Property, Plant and Equipment $(300,000)Cash Flow from Investing Activities $(300,000)So, the net cash provided by investing activities is: $(300,000)
Net Cash provided by investing activities = Cash Flow from Investing Activities = $(300,000).b) Calculation of net cash provided by or used in financing activities Cash Flow from Financing Activities Increase in Bonds Payable $900,000 Dividends Paid $(140,000)Cash Flow from Financing Activities $760,000So, the net cash provided by financing activities is: $760,000
Net Cash provided by financing activities = Cash Flow from Financing Activities = $760,000.c) Calculation of net increase or decrease in cash for the year: Net increase or decrease in cash for the year = Net cash from operating activities + Net cash provided by or used in investing activities + Net cash provided by or used in financing activities. Net increase or decrease in cash for the year = $(60,000) + $(300,000) + $760,000Net increase or decrease in cash for the year = $1,000,000So, the net increase or decrease in cash for the year is: $1,000,000 Net increase or decrease in cash for the year = $1,000,000.
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In the absence of external shocks or government policy an economy would: A. Still experience business cycle fluctuations because of internal market forces.
B. Not experience business cycle fluctuations.
C. Not be able to expand production and output.
D. Still experience business cycle fluctuations because of factors such as wars and tax policy.
In the absence of external shocks or government policy, an economy would still experience business cycle fluctuations because of internal market forces. option A is the answer.
These forces are cyclical changes that occur in the economy naturally due to market conditions. Internal market forces can cause business cycles fluctuations as the economy moves through its various stages of growth and contraction. As consumers increase demand for goods and services, producers must increase their output. Eventually, demand will exceed supply, causing prices to rise, and reducing demand while supply increases.
This then leads to a decrease in output until prices fall to a point where demand once again exceeds supply. Business cycles are a natural part of the economy, and they tend to occur in an upward trend over the long term, reflecting growth and expansion in output, jobs, and income. While external shocks, such as wars, natural disasters, or changes in government policy, can impact the economy's stability, internal market forces are the primary drivers of business cycles.
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2. (SHOW ALL WORK PLEASE) The following cash flows are give for the two mutually exclusive projects X and Y. The project X requires an initial investment of $10,000 in time ‘0’and project Y needs an initial investment of $10,000 in time ‘0’.
Year Project X Project Y
1 $4,500 $8,000
2 6,000 5,000
3 7,500 4.500
4 8,000 3,000
(a) Calculate the NPV for each project using a discount rate of 10%.
(b) State your accept/reject decision
(c) What would be your accept/reject decision if they were to be independent projects?
NPV for Project X at 10% discount rate: $1,644.80. NPV for Project Y at 10% discount rate: -$424.89.
Accept Project X (positive NPV) and reject Project Y (negative NPV).
If projects were independent, both would be accepted as they have positive NPVs.
To calculate the net present value (NPV) for each project, we need to discount the cash flows at a rate of 10% and then subtract the initial investment. Let's calculate the NPV for projects X and Y:
(a) NPV Calculation:
For Project X:
Year 0: Initial Investment: -$10,000
Year 1: Cash Flow: $4,500 / Discounted Cash Flow: $4,500 / (1+0.10)^1
Year 2: Cash Flow: $6,000 / Discounted Cash Flow: $6,000 / (1+0.10)^2
Year 3: Cash Flow: $7,500 / Discounted Cash Flow: $7,500 / (1+0.10)^3
Year 4: Cash Flow: $8,000 / Discounted Cash Flow: $8,000 / (1+0.10)^4
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Prepare the journal entry(s) for the following transactions for the veek. - Incurred \$5,600of manufacturing overhead in production of goods for utilities. - Incurred direct labor costs of $37,200 in production of goods. Direct materials of $13,700 were requisitioned for production
To record the transactions, we would need to create journal entries as follows: Incurred $5,600 of manufacturing overhead in the production of goods for utilities:
Debit Manufacturing Overhead Expense $5,600Credit Accounts Payable (or Cash) $5,600Incurred direct labor costs of $37,200 in the production of goods:
Debit Work-in-Progress (or Manufacturing Overhead) $37,200Credit Cash (or Wages Payable) $37,200Requisitioned direct materials of $13,700 for production:Debit Work-in-Progress (or Raw Materials Inventory) $13,700Credit Accounts Payable (or Cash) $13,700The specific accounts used may vary depending on the company's chart of accounts and recording practices. It's important to consult with the company's accounting policies and follow their guidelines when preparing journal entries.
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Wendell's Donut Shoppe is investigating the purchase of a new $33.000 donut making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5.700 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1300 dozen more donuts each year. The company realizes a contribution margin of $2.60 per dozen donuts soid. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes
To calculate the total annual cash inflows, we multiply the additional donut sales by the contribution margin per dozen donuts sold ($2.60).
The purchase of the new donut-making machine has two main benefits that contribute to the total annual cash inflows.
Firstly, the company would be able to reduce the amount of part-time help needed, resulting in cost savings. The cost savings from reduced part-time help is given as $5,700 per year.
Secondly, the new machine would allow the company to produce one new style of donut, resulting in increased sales. The question states that the new machine would result in the sale of 1,300 dozen more donuts each year.
To calculate the total annual cash inflows, we multiply the additional donut sales (1,300 dozen) by the contribution margin per dozen donuts sold ($2.60). This represents the profit contribution per unit of donuts sold.
Therefore, the total annual cash inflows associated with the new machine for capital budgeting purposes would be the cost savings of $5,700 per year plus the additional revenue generated from selling 1,300 dozen more donuts per year, multiplied by the contribution margin per dozen donuts sold ($2.60).
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General Computers Inc. purchased a computer server for $53,500. It paid 40.00% of the value as a down payment and received a loan for the balance at 10.00% compounded semi-annually. It made payments of $2,150.03 at the end of every quarter to settle the loan. a. How many payments are required to settle the loan? payments Round up to the next payment b. Fill in the partial amortization schedule for the loan, rounding your answers to two decimal places. : :
a. To determine the number of payments required to settle the loan, we can use the formula for the number of periods in a loan:
Number of Payments = Total Loan / Payment Amount
Total Loan = Purchase Price - Down Payment = $53,500 - ($53,500 * 40%) = $53,500 - $21,400 = $32,100
Payment Amount = $2,150.03 (given)
Number of Payments = $32,100 / $2,150.03 ≈ 14.91
Since we can't have a fraction of a payment, we need to round up to the next payment. Therefore, the number of payments required to settle the loan is 15.
b. To fill in the partial amortization schedule, we need more information such as the loan term, interest rate, and the balance after each payment. Without this information, it is not possible to provide a complete amortization schedule.
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Kale Corporation issued perpetual preferred stock with a 2% annual dividend. The stock currently yields 6.5%, and its par value is $100. What is the stock's value? $28.53 $23.38 $32.92 $30.77 $38.15
The value of perpetual preferred stock of Kale Corporation is $30.77.There are different types of securities issued by companies to raise capital and perpetual preferred stock is one of them. value of perpetual preferred stock of Kale Corporation is $30.77. correct option is D
The value of perpetual preferred stock is calculated based on the dividend yield and par value. The dividend yield is the return on investment that a shareholder earns by holding a particular stock.
Par value is the minimum value that a stock can be issued by a company.In this case, Kale Corporation issued perpetual preferred stock with a 2% annual dividend. The stock currently yields 6.5%, and its par value is $100. We need to find the value of the stock.
To find the value of the stock, we can use the following formula: Value of perpetual preferred stock = Dividend / YieldDividend = Par value * Annual dividend rate = $100 * 2% = $2Yield = Annual dividend / Market price of stock = 6.5% We can rearrange the formula to find the market price of the stock: Market price of stock = Dividend / Yield = $2 / 6.5% = $30.77 Therefore, the value of perpetual preferred stock of Kale Corporation is $30.77.
Hence, the correct option is D
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Define production and productivity. Explain the difference between the two. 2. What do understand by "Plant Design"? Discuss the various factors considered in designing the location of a plant 3.What factors are considered while designing a factory building? Will you prefer an 'L' building or Triangular building? Why. 4. What are some of the factors that cause organizations to redesign their product or services? 5. What is modular design? What are the main advantages and disadvantages? 6. Give several examples of unethical conduct involving products or service design and ethical principles that are violated. 7. How were food producers impacted by the US government's requirement to identify the trans fat content on food label. 8. What are some of the potential benefits of a more formalized approach to forecasting?
1. Production refers to the process of transforming inputs, such as raw materials and labor, into finished goods or services. It involves the activities and resources required to create and deliver products or services to customers. Productivity, on the other hand, measures the efficiency of production by comparing outputs to inputs.
It represents the ratio of output quantity to input quantity and indicates how effectively resources are utilized to generate desired outcomes.
2. Plant design refers to the process of creating and arranging the physical layout of a manufacturing facility or plant. It involves determining the optimal arrangement of machinery, equipment, workstations, storage areas, and other elements to facilitate smooth operations, efficient workflow, and safety. Factors considered in designing the location of a plant include proximity to raw materials, availability of skilled labor, transportation infrastructure, market access, proximity to suppliers and customers, legal and regulatory considerations, and cost factors.
3. When designing a factory building, several factors are typically considered. These include the available land and its shape, the production process and workflow, future expansion plans, access to utilities and services, compliance with building codes and regulations, safety requirements, environmental considerations, ergonomic factors, and overall cost and budget constraints. The choice between an 'L' building or a triangular building would depend on the specific requirements and constraints of the organization, such as available space, desired layout, and operational needs. There is no inherent preference for one over the other, as it ultimately depends on the unique circumstances of the organization.
4. Organizations may redesign their products or services due to various factors, including changes in customer preferences, technological advancements, competitive pressures, market demand fluctuations, regulatory requirements, and the need to improve quality or reduce costs. Other factors could include the introduction of new features or functionalities, addressing customer feedback or complaints, adapting to evolving market trends, expanding into new markets, or aligning with sustainability and ethical considerations.
5. Modular design refers to an approach where a product or system is divided into modules or components that can be independently created, replaced, or modified. These modules are designed to be interchangeable, standardized, and easily integrated into the overall system. The main advantages of modular design include increased flexibility, ease of customization, simplified maintenance and repair, faster product development cycles, and cost savings through economies of scale. However, some disadvantages can include higher initial costs, increased complexity in managing interdependencies between modules, and potential compatibility issues if standards are not followed consistently.
6. Examples of unethical conduct involving product or service design include intentionally deceptive packaging or labeling, deliberate omission of important safety information, knowingly designing products with planned obsolescence, failure to perform proper safety testing, infringing on intellectual property rights, and exploiting vulnerable consumer groups. Ethical principles violated in such
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In a market for kitchen bags, the highest price consumers are willing to pay is $18 per pack and the lowest price producers are willing to accept is $8 per pack. The competitive market equilibrium price is $10 per pack, at which 24 million packs are sold. Suppose one company monopolizes the production of kitchen bags. As a result, the price rises to $12 per pack and the quantity sold decreases to 18 million packs. The cost to producers of the last pack sold is $9.50. Assuming that both demand and supply curves are straight lines, the consumer surplus in this market is $ ___ million, the producer surplus is $ ____million, the total gains from trade are $ ____ million, and the deadweight loss is $ ____million.
In the monopolized market for kitchen bags, the consumer surplus is $45 million, the producer surplus is $27 million, the total gains from trade are $72 million, and the deadweight loss is $9 million.
Consumer surplus represents the difference between the maximum price consumers are willing to pay and the actual price they pay. In the competitive equilibrium, the consumer surplus is given by the area above the market price and below the demand curve. In this case, the consumer surplus is ($18 - $10) * 24 million / 2 = $72 million.
Producer surplus represents the difference between the minimum price producers are willing to accept and the actual price they receive. In the monopolized market, the producer surplus is given by the area below the market price and above the supply curve. In this case, the producer surplus is ($12 - $8) * 18 million / 2 = $36 million.
The total gains from trade are the sum of consumer surplus and producer surplus, which is $72 million + $36 million = $108 million.
The deadweight loss represents the efficiency loss due to the monopolistic market. It is the difference between the total gains from trade in the competitive equilibrium and the total gains from trade in the monopolized market. In this case, the deadweight loss is $108 million - $99 million = $9 million.
Therefore, the consumer surplus is $45 million, the producer surplus is $27 million, the total gains from trade are $72 million, and the deadweight loss is $9 million.
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Dog-gone-it Corporation manufactured 25,000 dog leashes during March. The fixed-overhead cost allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March: REQUIRED: Solve this question using either the Template Chart method (Method 1 ) in the space provided and then circle correct answer in each question or choose the Formula Method (Method 2) to show your work in the space provided. Do not do both methods. 1) What is the flexible-budget amount for fixed-overhead? (3 marks each. 1 mark for correct answer and 2 marks for showing calculations) A) $120,000 B) $122,000 C) $123,000 D) $125,000 E) $120,983 2) What is the amount of fixed overhead allocated to production? (3 marks each. 1 mark for correct answer and 2 marks for showing calculations) A) $120,000 B) $122,000 C) $123,000 D) $125,000 E) $130,000 3) What is the fixed overhead rate variance? (3 marks each. 1 mark for correct answer and 2 marks for showing calculations) A) $1,000 unfavourable B) $2,000 favourable C) $3,000 unfavourable D) $5,000 favourable E) $983 unfavourable 4) What is the production-volume variance? (3 marks each. 1 mark for correct answer and 2 marks for showing calculations) A) $2,000 unfavourable B) $3,000 favourable C) $4,000 unfavourable D) $5,000 favourable E) $10,000 favourable
The flexible-budget amount for fixed overhead is $123,000.Fixed overhead allocation rate is $20.00 per machine-hour. C) $123,000
3. B) $2,000 favourable
4. D) $5,000 favourable
Fixed overhead allocation rate is $20.00 per machine-hour. During March, the total machine-hours are: 7,500 (hours) $20 (fixed overhead allocation rate) = $150,000 (fixed overhead budget).The flexible budget for fixed overhead is calculated as follows: $150,000 ÷ 1.22 (the flexible-budget factor) = $123,000.2. Direct answer: D) $125,000Explanation:Fixed overhead allocation rate is $20.00 per machine-hour. During March, the total machine-hours are: 7,500 (hours) $20 (fixed overhead allocation rate) = $150,000 (fixed overhead budget).$150,000 is allocated to the production.
3. B) $2,000 favourable
The flexible-budget amount for fixed overhead is $123,000.Calculate the flexible budget amount first: $150,000 / 1.22 = $122,951.Flexible budget cost per unit = $122,951 / 25,000 = $4.92 per unit. Actual fixed overhead cost is = 7,200 hours * $20 per hour = $144,000.Fixed overhead cost variance is $144,000 - $122,951 = $21,049.Unfavorable Fixed Overhead Spending Variance = $21,049 (actual cost is more than the flexible budget).Fixed Overhead Production Volume Variance = Flexible Budget - Standard Budget Fixed overhead production volume variance is $122,951 - $125,000 = $2,049 (favourable).The fixed overhead rate variance is the difference between the actual fixed overhead cost incurred during the period and the fixed overhead cost that should have been incurred based on the actual number of hours worked and the predetermined overhead rate used for the period: Actual overhead cost incurred ($144,000) - Expected overhead cost based on actual hours ($144,000) = $0The variance is not favourable or unfavourable.
4. D) $5,000 favourable
The flexible-budget amount for fixed overhead is $123,000.Fixed overhead allocation rate is $20.00 per machine-hour. Fixed overhead budget is: 7,500 (hours) * $20 (fixed overhead allocation rate) = $150,000.Fixed overhead cost variance is $144,000 - $123,000 = $21,000.Flexible budget cost per unit = $123,000 / 25,000 = $4.92 per unit.Standard Budget Cost per unit = $150,000 / 20,000 units = $7.50 per unit.Actual cost per unit is $144,000 / 25,000 = $5.76.Fixed Overhead Production Volume Variance = Flexible Budget - Standard BudgetFixed overhead production volume variance is $123,000 - $118,750 = $4,250 (favourable).Therefore, production-volume variance is $4,250 + $750 (activity variance) = $5,000 (favourable).Hence, the production volume variance is $5,000 (favourable).
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Which of the following is not included in GDP? The value of the time of a stay-at-home parent The purchase of a ticket to a Lady Gaga performance The salary of a public school teacher A new cell phone
The value of the time of a stay-at-home parent is not included in GDP.
GDP or Gross Domestic Product is defined as the total market value of goods and services produced within a given country in a particular period. It is the most important economic statistic and is used to measure the economic growth of a country. Here are the following items that are not included in GDP: The value of the time of a stay-at-home parent: It is not included in GDP since a stay-at-home parent is not producing any goods or services that are sold in the market. GDP only includes goods and services that are exchanged in the market. The purchase of a ticket to a Lady Gaga performance: It is included in GDP since a ticket to a concert is considered a final good and is sold in the market. The salary of a public school teacher: It is included in GDP since the salary is paid for providing a service that is sold in the market. A new cell phone: It is included in GDP since a cell phone is considered a final good and is sold in the market.
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The value of the time of a stay-at-home parent is not included in GDP.
Explanation:GDP includes production that is exchanged in the market, but it does not cover production that is not exchanged in the market. For example, hiring someone to mow your lawn or clean your house is part of GDP, but doing these tasks yourself is not part of GDP. In the given options, the value of the time of a stay-at-home parent is not included in GDP because it is not a market transaction.
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Oyster Company's sales in 2020 were $145,000. Sales in 2013 were $167,600. Using 2021 as the base year, the trend percentage for 2021 is A. 81.3% B. 100.0% C. 115.6 % D. 147.6% E. 12.3%
Oyster Company's sales in 2020 were $145,000. Sales in 2013 were $167,600. The trend percentage for Oyster Company's sales in 2021, using 2020 as the base year, is D. 147.6%.
In summary, the trend percentage indicates that Oyster Company's sales in 2021 increased by 47.6% compared to the sales in 2020.
To calculate the trend percentage, we need to find the percentage change between two years. The formula is
[tex]\frac{(New Value - Base Value)}{Base Value}[/tex] × 100%.
Using the given information, the base year is 2020 with sales of $145,000, and the new value is 2021 with an unknown sales figure. Let's calculate the trend percentage:
[tex]\frac{(2021 Sales - 2020 Sales)}{2020 Sales}[/tex] × 100%
To find the unknown sales in 2021, we can use the trend percentage formula again. Since the trend percentage is given as 147.6%, we can set up the equation:
Simplifying the equation, we have
[tex]\frac{(2021 Sales - 145,000) }{145,000}[/tex] = 1.476
Now, solving for 2021 Sales:
2021 Sales - $145,000 = $145,000 × 1.476
2021 Sales = $145,000 + ($145,000 × 1.476)
2021 Sales = $145,000 + $214,020
2021 Sales = $359,020
Therefore, the trend percentage for 2021 is 147.6%, indicating a 47.6% increase in sales compared to 2020.
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please please answer all of the
them
The Was an \( \$ 825 \) billion economic stimulus package, passed by Congress, designed to turn the economy by cutting taxes, building infrastructure, and investing in green energy. American Recovery
The American Recovery and Reinvestment Act (ARRA) was an $825 billion economic stimulus package passed by Congress to promote economic recovery through tax cuts, infrastructure investment, and funding for green energy initiatives.
The ARRA was enacted as a response to the 2008 financial crisis and recession. It aimed to stimulate the economy by providing tax relief to individuals and businesses, investing in infrastructure projects to create jobs, and supporting the development of clean energy technologies. The package also included aid to state and local governments to address budget shortfalls and maintain public services. The ARRA was a temporary measure designed to boost economic growth and stability during a challenging economic period. Its impact and effectiveness have been a subject of ongoing evaluation and discussion.
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You wish to invest $10,000 in the ABC Company. You have a choice of either buying company shares
of common stock or 10-year non-callable bonds issued by the company.
Give 2 reasons (and only 21) why you would prefer to invest in ABC bonds rather than in ABC stocks.
Explain your answers.
The XYZ Company is looking for $10 Million in additional capital to finance the construction of a new
plant. Its manager is hesitating between raising the $10 Million in additional long-term debt or in
additional common equity. Give 2 reasons (and only 2!) why XYZ would prefer financipg the plant
with long-term debt rather than equity. Explain your answers.
Reasons to prefer investing in ABC bonds rather than ABC stocks:
1. Fixed Income and Stability: Bonds provide a fixed income stream in the form of regular interest payments. This provides stability and predictability of returns, especially for investors who prefer a steady income without the volatility associated with stock prices. By investing in bonds, you can have a clearer understanding of the cash flow you will receive over the bond's maturity period.
2. Preservation of Capital: Bonds are considered less risky than stocks as they represent a debt obligation of the issuer. In the event of a company's bankruptcy or financial distress, bondholders have a higher priority claim on the company's assets compared to common stockholders. This means that bondholders have a greater likelihood of recovering their initial investment, making bonds a more secure investment option.
Reasons for XYZ to prefer financing the plant with long-term debt rather than equity:
1. Tax Advantage: Interest payments on debt are tax-deductible expenses, while dividends paid to equity shareholders are not. By opting for long-term debt financing, XYZ can benefit from the tax shield provided by the interest expense deduction, which reduces the overall tax liability of the company. This can result in higher after-tax profits compared to financing through equity.
2. Retaining Ownership Control: By choosing long-term debt financing, XYZ can maintain its existing ownership structure and control over the company. Equity financing, such as issuing additional common shares, dilutes the ownership stake of existing shareholders and may result in loss of control. If the management wants to retain decision-making power and avoid dilution of ownership, long-term debt can be a preferred choice for financing the plant.
It's important to note that these reasons are general considerations, and the specific circumstances and financial goals of an investor or company should be thoroughly assessed before making any investment or financing decisions.
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Dooley, Inc., has outstanding $100 million (par value) bonds that pay an annual coupon rate of interest of 10.5 percent. Par value of each bond is $1,000. The bonds are scheduled to mature in 20 years. Because of Dooley’s increased risk, investors now require a 14 percent rate of return on bonds of similar quality with 20 years remaining until maturity. The bonds are callable at 110 percent of par at the end of 10 years.
To calculate the current price of the bonds, we need to find the present value of the bond's future cash flows. Here's how you can calculate it:
Step 1: Calculate the annual coupon payment:
Coupon Payment = Coupon Rate * Par Value
Coupon Payment = 10.5% * $1,000
Coupon Payment = $105
Step 2: Calculate the number of coupon payments remaining until maturity:
Number of Coupon Payments = Remaining Years until Maturity * Number of Coupon Payments per Year
Number of Coupon Payments = 20 * 1
Number of Coupon Payments = 20
Step 3: Calculate the present value of the coupon payments using the required rate of return:
Present Value of Coupon Payments = Coupon Payment * [1 - (1 + Required Rate of Return)^(-Number of Coupon Payments)] / Required Rate of Return
Present Value of Coupon Payments = $105 * [1 - (1 + 14%)^(-20)] / 14%
Step 4: Calculate the present value of the face value (par value) of the bond:
Present Value of Face Value = Face Value / (1 + Required Rate of Return)^(Remaining Years until Maturity)
Present Value of Face Value = $1,000 / (1 + 14%)^20
Step 5: Calculate the present value of the callable price (110% of par value) at the end of 10 years:
Present Value of Callable Price = Callable Price / (1 + Required Rate of Return)^(Years until Call Date)
Present Value of Callable Price = 1.1 * $1,000 / (1 + 14%)^10
Step 6: Calculate the current price of the bonds by summing up the present values of the coupon payments, face value, and callable price:
Current Price of Bonds = Present Value of Coupon Payments + Present Value of Face Value + Present Value of Callable Price
Performing the calculations:
Present Value of Coupon Payments = $105 * [1 - (1 + 14%)^(-20)] / 14%
Present Value of Face Value = $1,000 / (1 + 14%)^20
Present Value of Callable Price = 1.1 * $1,000 / (1 + 14%)^10
Current Price of Bonds = Present Value of Coupon Payments + Present Value of Face Value + Present Value of Callable Price
Substituting the values and solving the equations, you can calculate the current price of the bonds.
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Which of the following is likely to shift the demand curve for a normal good to the right?
A. A decrease in income, if the good is a normal good
B. An expectation of a shortage in the future
C. An increase in the price of a complementary good
D. A decrease in the good's price, if the good is normal
A decrease in the price of a normal good is likely to shift the demand curve for that good to the right. option D
A normal good is a type of good where the demand increases as consumer income rises. It implies that as consumers' income increases, they have more purchasing power, and they are willing and able to buy more of the normal good at each price level.
When the price of a normal good decreases, it becomes relatively cheaper compared to other goods in the market. This reduction in price makes the good more affordable and accessible to consumers, which in turn stimulates their demand for the good. As a result, the demand curve for the normal good shifts to the right.
Option A, which mentions a decrease in income, would actually shift the demand curve for a normal good to the left. With a decrease in income, consumers have less purchasing power, and their demand for normal goods decreases.
Option B, the expectation of a shortage in the future, does not directly impact the demand curve but may affect the current quantity demanded as consumers rush to buy the good before the anticipated shortage. It does not shift the entire demand curve.
Option C, an increase in the price of a complementary good, would also not shift the demand curve for a normal good. Complementary goods are typically consumed together, and an increase in the price of one would usually lead to a decrease in the demand for the other.
In conclusion, a decrease in the price of a normal good is likely to shift the demand curve for that good to the right.So option D is correct.
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Which of the following are not the examples of direct property losses I the theft of a person's jewelry II the theft of an office equipment after fire III the cost of renting a substitute vehicle while a collision-damaged car is being repaired IV the vandalism of a person's automobile a. III and III b. All of the above c. I and II d. II and III
The correct answer is c. I and II. The examples that are not considered direct property losses are III (the cost of renting a substitute vehicle while a collision-damaged car is being repaired) and IV (the vandalism of a person's automobile).
Direct property losses refer to the actual physical damage or loss of property. In this case, the theft of a person's jewelry (example I) and the theft of office equipment after a fire (example II) are both examples of direct property losses. The vandalism of a person's automobile (example IV) is also an example of a direct property loss.
However, the cost of renting a substitute vehicle while a collision-damaged car is being repaired (example III) is not a direct property loss. It is an indirect loss related to the inconvenience and financial impact caused by the car's damage, rather than the physical damage to the property itself.
The examples that are not considered direct property losses are III (the cost of renting a substitute vehicle while a collision-damaged car is being repaired) and IV (the vandalism of a person's automobile).
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Suppose the economy is in its long run equilibrium. If there is a decrease in consumption, what happens in the short run?
Group of answer choices
a. Price level rises and output rises
b. Price level falls and output rises
c. Price level rises and output falls
d. Price level falls and output falls
e. Not enough information
If there is a decrease in consumption in the short run while the economy is in its long-run equilibrium, the correct answer is c. Price level rises and output falls.
A decrease in consumption indicates a reduction in aggregate demand, which leads to a decrease in output or production in the short run. As consumption falls, businesses may experience decreased demand for their goods and services, leading to a decline in output levels. This decrease in output is accompanied by a decrease in employment and a potential increase in unemployment.
In response to the decreased consumption and lower output, businesses may adjust their prices downward to stimulate demand. However, in the short run, prices are relatively sticky or inflexible, meaning they do not adjust instantaneously to changes in demand. As a result, the price level tends to rise or remain unchanged despite the decline in output.
Therefore, the correct option is c. Price level rises and output falls. This reflects the short-run dynamics of an economy experiencing a decrease in consumption while in its long-run equilibrium.
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WRITE ONE OR TWO PARAGRAPHS, please post something that you found interesting and/or significant about Financial Planning. Please post specific examples from the reading you found significant about these topics, as it helps define or contribute to Personal Finance. Explain the advantages and disadvantages. Support your answers with examples from the textbook, current events, or other forms of media.
Example: If you thought Financial planning was important, but you thought it was only for rich people, someone that had lots of money. You never thought that managing finances and financial planning, would involve reflection on personal circumstances and goals. After reading, you will see that the "finance" portion of income management is much more than just simply saving for the future.
One significant aspect of financial planning that I found interesting is the concept of goal setting and aligning financial decisions with personal aspirations.
Financial planning goes beyond just managing money and focuses on creating a roadmap to achieve specific objectives. For example, in the textbook, it mentions how individuals can set goals such as saving for a down payment on a house, planning for retirement, or funding their children's education. By setting clear goals and developing a plan to attain them, individuals can make informed financial decisions and allocate resources effectively.
The advantage of goal-oriented financial planning is that it provides direction and purpose to financial decisions. It helps individuals prioritize their spending, savings, and investment choices based on their specific objectives. For instance, if someone's goal is to retire early, they may choose to allocate a larger portion of their income towards retirement savings and make adjustments to their lifestyle to achieve that goal. By having a clear vision and aligning financial decisions accordingly, individuals can work towards achieving their aspirations.
However, a potential disadvantage of financial planning is that it requires discipline and ongoing commitment. It may involve making sacrifices in the short term to achieve long-term goals. For example, cutting back on discretionary spending or sticking to a strict budget to save for a specific goal. Additionally, external factors such as market volatility or unexpected life events can impact the execution of the financial plan. Flexibility and adaptability are necessary to navigate through changing circumstances while staying on track with the established goals.
Overall, financial planning provides a structured framework for individuals to make informed decisions about their finances and work towards achieving their goals. It empowers individuals to take control of their financial future and make choices that align with their values and aspirations.
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The market imperfection brought about by monopoly is referred to as: a. price discrimination. b. monopoly's gain. c. deadweight loss. d. reduction in output through government regulation.
The market imperfection brought about by monopoly is referred to as deadweight loss.
Option c. is correct.
A deadweight loss is an economic concept that refers to a loss of economic efficiency that can occur when a good or service is not priced at its marginal cost, or when the optimal level of production for a good or service is not achieved.
A monopolist's profits come from charging a price that is higher than the marginal cost of producing its product. This pricing mechanism, which results in the monopolist's profits, can lead to deadweight loss in the market.
The monopolist, for example, will produce less than the socially efficient level of output, resulting in a reduction in consumer surplus. As a result, deadweight loss occurs. The term is used in economics to describe the economic inefficiencies that arise from monopolies and other market failures.
Therefore, the market imperfection brought about by monopoly is referred to as deadweight loss.
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Anna: My wheat harvest this year is twice as much as it was last year. Edwardo: Don't worry. Price decreases will compensate for the increase in quantity supplied. Lee: Climate affects crop yields. Many other farmers had similar increases. Sushma: The government should guarantee that our incomes will not fall due to the price decrease so that we can stay in farming. In this conversation, the normative statement is made by
a. Anna
b. Edwardo
c. Lee
d. Sushma
e. There are no normative statements
Therefore, option (d) Sushma is the correct answer.
In the given conversation, the normative statement is made by Sushma.Explanation:A normative statement is a statement that describes how things should or ought to be.
It is a statement that expresses a value judgment about whether a situation is desirable or undesirable. It is based on an opinion and cannot be tested against evidence.
A normative statement provides a claim about how things should be, how they should be different from what they is right now, or what they are. A normative statement is usually made by someone who has a stake in the situation and who is expressing an opinion about it.In the given conversation,
the normative statement is made by Sushma. She states that the government should guarantee that farmers' incomes will not fall due to the price decrease so that they can stay in farming.
This is a normative statement because Sushma is expressing an opinion about what the government should do. It is not based on any evidence or facts, but rather on her value judgment. Therefore, option (d) Sushma is the correct answer.
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"
1. Select the reason below that leads to effective policy
making.
A. Permanent tax cuts induce changes in the behavior of
businesses and households.
B. Policy actions work with lags.
C. Macroeconomic "
Policies should be designed to take into account the time lag between implementation and impact to ensure that they are effective in achieving their intended goals.
There are several factors that can contribute to effective policy making. However, one of the most critical factors is understanding the impact of policy actions. One must understand that policy actions work with lags, which can lead to unintended consequences. Answer in 150 words.Policy making is the process of identifying societal problems and finding solutions to these problems through legislation. Effective policy making should be based on accurate information and a clear understanding of the problem at hand. It must be noted that policy making is not a one-time event but an ongoing process that requires review and adjustment. Therefore, it is important to have mechanisms in place to monitor and evaluate the effectiveness of policies over time.Policy actions work with lags, which means that there is a delay between the implementation of a policy and its effects. It is important to consider these lags in the design of policies to avoid unintended consequences. Permanent tax cuts, for example, can induce changes in the behavior of businesses and households, which can have significant economy effects. Therefore, policies should be designed to take into account the time lag between implementation and impact to ensure that they are effective in achieving their intended goals.
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In the context of race discrimination, an audit study estimates the black-white performance gap on a standardized test of auditing principles and procedures. compares the hiring rates in matched pairs of black and white workers. adjusts racial wage gaps for measurable differences in skills and other characteristics of workers and jobs. uncovers black-white differences in unmeasured skills.
In the context of race discrimination, an audit study aims to estimate and compare the black-white performance gap on a standardized test of auditing principles and procedures.
Audit studies are commonly used in social science research to investigate discrimination and inequality. In this particular case, the study focuses on the black-white performance gap on a standardized test related to auditing principles and procedures.
By conducting a controlled experiment with matched pairs of black and white workers, researchers can compare their hiring rates and assess potential discrimination in the hiring process.
Additionally, the study takes into account measurable differences in skills and characteristics of workers and jobs to adjust racial wage gaps. This helps to ensure that any observed differences in wages between black and white workers are not solely attributed to factors such as education, experience, or job requirements.
Furthermore, the study acknowledges the possibility of unmeasured skills that may contribute to disparities between black and white individuals. This recognition suggests that there may be factors beyond the measured variables that impact employment outcomes and wage differentials, such as discrimination or implicit biases.
Overall, the audit study aims to provide a comprehensive analysis of race discrimination by considering performance gaps, hiring rates, adjusting for measurable differences, and accounting for potential unmeasured skills.
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Arya owns a portfolio consisting of Stock X and Stock Y. The portfolio has an expected return of 11 percent Stock has an expected return 15 ck Y has an expected return of 12.6 percent. What is the portfolio weight of Stock Y?
Arya owns a portfolio consisting of Stock X and Stock Y. The portfolio has an expected return of 11 percent. Stock X has an expected return of 15 percent, while Stock Y has an expected return of 12.6 percent.
The portfolio weight of Stock Y is 0.545 (55%).The formula for calculating the portfolio weight of each stock is:Portfolio weight of each stock = (Total market value of each stock ÷ Total market value of the portfolio)When it comes to Arya's portfolio, we're not given the market value of the portfolio or either of the stocks. As a result, we can't just calculate the portfolio weights right away.
The formula for calculating the expected return of a portfolio is:Expected return of a portfolio = (Weight of Stock X × Expected return of Stock X) + (Weight of Stock Y × Expected return of Stock Y)If we plug in the provided values, we get:11% = (Weight of Stock X × 15%) + (Weight of Stock Y × 12.6%)We can solve for the weight of Stock Y as follows:0.11 = 0.15W + 0.126(1 - W)0.11 = 0.15W + 0.126 - 0.126W0.11 - 0.126 = - 0.024W- 0.016 = - 0.024W0.016 ÷ 0.024 = W0.667 = W.
Therefore, the portfolio weight of Stock X is 1 - 0.667 = 0.333 (33.3%), and the portfolio weight of Stock Y is 0.667 (66.7%). We can double-check our answer by calculating the expected return of the portfolio using the portfolio weights we just calculated:Expected return of the portfolio = (0.333 × 15%) + (0.667 × 12.6%)Expected return of the portfolio = 11% (which was the given expected return of the portfolio).Thus, the portfolio weight of Stock Y is 0.545 (55%).
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You are a financial analyst at the Humongous Project Company (HPC). Four years ago, HPC purchased a machine at an installed cost of $70,000; the machine is being depreciated using MACRS with a 5-year recovery period. The machine has six years of useful life remaining and could be sold today for $403,000 after removal and cleanup costs.
A new, more efficient machine can be purchased for $280,000. The new machine would cost $10,000 to install and would have a useful life of 6 years; it would be depreciated using a 5-year MACRS depreciation recovery schedule. At the end of the six years, it would have an estimated salvage value of $60,000.
Because of the increased output of the new machine, the firm’s sales would rise, with a corresponding increase in accounts receivable of $40,000, an increase in inventories of $25,000, and an increase in accounts payable of $35,000.
The following chart shows the expected revenues and operating costs for the new and old machine for each year.
New Machine
Old Machine
Year
Revenue
Operating Costs
Revenue
Operating Costs
1
$265,000
$105,000
$140,000
61,000
2
$275,000
$115,000
$144,000
62,000
3
$285,000
$125,000
$148,000
$63,000
4
$295,000
$135,000
$150,000
$64,000
5
$280,000
$140,000
$146,000
$62,000
6
$275,000
$145,000
$143,000
$60,000
HPC’s applicable tax rate is 21%. HPC’s weighted-average-cost-of-capital is 14%. HPC uses a 4-year payback period rule, along with NPV, PI, and IRR.
The MACRS 5-year property depreciation schedules are as follows:
Year
Recovery Percentage
1
20%
2
32%
3
19%
4
12%
5
12%
6
5%
Compute the NPV, IRR, Profitability Index, and payback period for this project. Should
HPC accept this replacement decision? Why or why not?
The new machine should be purchased. The new machine has a higher PI than the old machine, implying that the new machine is a better investment than the old one.
A financial analyst at the Humongous Project Company (HPC) should compute the NPV, IRR, Profitability Index, and payback period for this project.
The company has purchased a machine four years ago, and now it has six years of useful life remaining and can be sold for $403,000 after removal and cleanup costs.
They can purchase a new machine for $280,000.
The new machine has a useful life of six years and will be depreciated using a 5-year MACRS depreciation recovery schedule.
At the end of the six years, it will have an estimated salvage value of $60,000.
Below are the calculations of the required variables:NPVThe formula for NPV is:
Net present value (NPV) = (Cash Inflow/1+r) - Initial Investment
Year 1
Old machine: $140,000 - $61,000 = $79,000
New machine: $265,000 - $105,000 - $10,000 = $150,000
Year 2
Old machine: $144,000 - $62,000 = $82,000
New machine: $275,000 - $115,000 = $160,000
Year 3
Old machine: $148,000 - $63,000 = $85,000
New machine: $285,000 - $125,000 = $160,000
Year 4
Old machine: $150,000 - $64,000 = $86,000
New machine: $295,000 - $135,000 = $160,000
Year 5
Old machine: $146,000 - $62,000 = $84,000
New machine: $280,000 - $140,000 = $140,000
Year 6
Old machine: $143,000 - $60,000 = $83,000
New machine: $275,000 - $145,000 = $130,000
NPV (Old machine) = ($79,000 / 1+0.14)^1 + ($82,000 / 1+0.14)^2 + ($85,000 / 1+0.14)^3 + ($86,000 / 1+0.14)^4 + ($84,000 / 1+0.14)^5 + ($83,000 / 1+0.14)^6 - $70,000
NPV (Old machine) = $43,297.06
NPV (New machine) = ($150,000 / 1+0.14)^1 + ($160,000 / 1+0.14)^2 + ($160,000 / 1+0.14)^3 + ($160,000 / 1+0.14)^4 + ($140,000 / 1+0.14)^5 + ($130,000 / 1+0.14)^6 - ($280,000 + $10,000)
NPV (New machine) = $52,802.55
The Internal Rate of Return (IRR) can be calculated using the following formula:
NPV = 0 = (Cash Inflow/1+IRR) - Initial Investment
NPV (Old machine) = $43,297.06
NPV (New machine) = $52,802.55
The IRR for the new machine is 20.73%.
Profitability Index (PI) = Present Value of Future Cash Flows / Initial Investment
PI (Old machine) = $43,297.06 / $70,000
= 0.62
PI (New machine) = $52,802.55 / $290,000
= 0.18
Payback Period is the time taken by the project to recover its initial investment.
Payback period (Old machine) = 3 years + ($9,178 / $22,000)
Payback period (Old machine) = 3 years and 42 days
Payback period (New machine) = 3 years + ($12,646 / $20,000)
Payback period (New machine) = 3 years and 261 days
Acceptance of replacement decision:The New Machine has a better NPV than the Old Machine, and the NPV of the New Machine is $52,802.55, which is greater than zero.
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Please fill in the blanks On January 22, Shamrock Corporation issued for cash 19,000 shares of no-par common stock at $20. On February 14, Shamrock issued at par 8,000 shares of 5%, $50 par preferred stock for cash. On August 30, Shamrock Corporation issued for cash 21,000 shares of preferred 5% stock, $50 par at $56. Journalize the entries to record the January 22, February 14, and August 30 transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.
Jan. 22 Accounts Receivable
Cash
Common Stock
Paid-In Capital in Excess of Par
Preferred Stock Retained Earnings
Blank 1
Cash
Common Stock
Paid-In Capital in Excess of Par-Preferred Stock
Paid-In Capital in Excess of Stated Value
Preferred Stock Retained Earnings
Blank 2
Feb. 14 Accounts Receivable
Cash
Common Stock
Paid-In Capital in Excess of Par-Common Stock
Preferred Stock Retained Earnings
Blank 3
Cash
Common Stock
Paid-In Capital in Excess of Par-Common Stock
Paid-In Capital in Excess of Par-Preferred Stock
Preferred Stock Retained Earnings
Blank 4
Aug. 30 Accounts Receivable Cash
Common Stock
Paid-In Capital in Excess of Par-Common Stock
Preferred Stock Retained Earnings
Blank 5
Cash
Common Stock
Paid-In Capital in Excess of Par-Common Stock
Retained Earnings Preferred Stock
Blank 6
Cash
Common Stock
Paid-In Capital in Excess of Par-Common Stock
Paid-In Capital in Excess of Par-Preferred Stock
Retained Earnings
Blank 7
Fill in the blanks:
Blank 1____________
Blank 2____________
Blank 3____________
Blank 4____________
Blank 5____________
Blank 6____________
Blank 7____________
The blanks would be:
Blank 1: Preferred Stock (8,000 x $50)
Blank 2: Common Stock [no par value] 21,000
Blank 3: Cash 400,000
Blank 4: Common Stock [no par value] 21,000
Blank 5: Cash 1,176,000
Blank 6: Preferred Stock (21,000 x $50) 1,050,000
Blank 7: Paid-In Capital in Excess of Par-Preferred Stock 126,000
Journalizing transactions refers to the process of recording business transactions on a journal on a chronological basis. The following transactions must be recorded to journalize the entries to record the January 22, February 14, and August 30 transactions. Here are how the entries would look like: Jan. 22Cash 380,000 [19,000 x $20]. Common Stock [no par value] 19,000. Paid-in Capital in Excess of Par-Common Stock 361,000. Preferred Stock (8,000 x $50) 400,000 Paid-In Capital in Excess of Stated Value 168,000Retained Earnings 192,000 [Totaling to $1,500,000]. Feb. 14Cash 400,000Preferred Stock (8,000 x $50) 400,000Aug. 30Cash 1,176,000 [21,000 x $56] Preferred Stock (21,000 x $50) 1,050,000Paid-In Capital in Excess of Par-Preferred Stock 126,000Common Stock [no par value] 21,000 Retained Earnings 5,000 [Totaling to $2,357,000]
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On 31 August 2012, Daisy Floral Supply had a RM155,000 debit balance in Accounts Receivables and a RM6,200 credit balance in Allowance for uncollectible accounts. During September, Daisy made:
• Sales on account, RM590,000
• Collections on accounts, RM627,000
• Write off of uncollectible receivables, RM7,000 Required:
i. Journalize all September entries using the allowance method. Uncollectible account expense was estimated at 3% of credit sales. Show all September activity in Accounts Receivable, Allowance for uncollectible accounts and uncollectible account expenses (post to these ledgers).
ii. Using the same facts, assume instead that Daisy used the direct write off method to account for uncollectible receivables. Journalize all September entries suing the direct write off method. Post to Account receivable and Uncollectible account expense and show their balance at 30 September 2012.
iii. What amount of uncollectible account expenses would Daisy report on its September income statement under each of two methods? Which amount better match expense with revenue? Give reasons.
iv. Prepare the balance sheet as at 30 September of the two methods. Which account is more realistic? State your reason.
The direct write-off method does not provide an allowance for uncollectible accounts and does not reflect the potential loss from uncollectible accounts in the balance sheet.
i. Journalize all September entries using the allowance method: September 1:
Accounts Receivable (DR) - RM590,000
Sales (CR) - RM590,000
September 30:
Uncollectible Account Expense (DR) - RM17,700 (3% of credit sales)
Allowance for Uncollectible Accounts (DR) - RM17,700 (to adjust the allowance balance)
Accounts Receivable (CR) - RM7,000 (write-off of uncollectible receivables)
Allowance for Uncollectible Accounts (CR) - RM7,000 (to reduce the allowance balance)
Posting to the ledgers:
Accounts Receivable Ledger:
August 31 balance - RM155,000
September 1 - RM590,000
September 30 - RM7,000
September 30 balance - RM737,000
Allowance for Uncollectible Accounts Ledger:
August 31 balance - RM6,200
September 30 - RM17,700
September 30 balance - RM24,900
Uncollectible Account Expense Ledger:
September 30 - RM17,700
ii. Journalize all September entries using the direct write-off method: September 1: Accounts Receivable (DR) - RM590,000 Sales (CR) - RM590,000
September 30:
Uncollectible Account Expense (DR) - RM7,000
Accounts Receivable (CR) - RM7,000
Posting to the ledgers:
Accounts Receivable Ledger:
August 31 balance - RM155,000
September 1 - RM590,000
September 30 - RM7,000
September 30 balance - RM738,000
Uncollectible Account Expense Ledger:
September 30 - RM7,000
iii. The amount of uncollectible account expenses reported on the September income statement would be:
Allowance method: RM17,700
Direct write-off method: RM7,000
The allowance method better matches expenses with revenue because it estimates and recognizes uncollectible account expenses based on the percentage of credit sales. This method aligns with the matching principle, which states that expenses should be recognized in the same period as the related revenue.
iv. Balance sheet as at September 30:
Allowance Method:
Accounts Receivable - RM737,000 (Net of allowance for uncollectible accounts: RM737,000 - RM24,900)
Allowance for Uncollectible Accounts - RM24,900
Direct Write-Off Method:
Accounts Receivable - RM738,000
Uncollectible Account Expense - RM7,000 The allowance method provides a more realistic representation of the accounts receivable balance because it considers the estimated uncollectible accounts and provides a net amount that reflects the expected collectible amount.
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#SPJ11
