Answer:
The correct answer is the option A: Business alignment.
Explanation:
To begin with, the concept known as "Business Alignment" refers to the process by which the managers of a company tend to use the information technology in order to obtain certain business objectives inside the organization that are the goals that they looked for. In addition, this process sometimes tend to focus more on the financial improvement of the company as well as its marketplace competitiveness. Therefore that this type of term gives a good approach and frame of reference for the managers who are looking for conduct project management activities inside the company.
The following data are for Paso Robles Company for the year ended 2009 December 31: Costs: Direct material $ 90,000 Direct labor 130,000 Manufacturing overhead: Variable 45,000 Fixed 90,000 Sales commissions (variable) 25,000 Sales salaries (fixed) 20,000 Administrative expenses (fixed) 35,000 Selling price per unit $ 10 Units produced and sold 60,000 Assume direct materials and direct labor are variable costs. Prepare a contribution margin income statement and a traditional income statement.
Answer:
Net operating income= 165,000
Explanation:
Giving the following information:
We need to make a contribution format income statement.
First, we will calculate the total variable cost:
Direct material= 90,000
Direct labor= 130,000
Variable overhead= 45,000
Sales commissions (variable)= 25,000
Total variable cost= 290,000
Contribution margin income statement:
Sales= 60,000*10= 600,000
Total variable cost= (290,000)
Total contribution margin= 310,000
Fixed overhead= (90,000)
Sales salaries (fixed)= (20,000)
Administrative expenses (fixed)= (35,000)
Net operating income= 165,000
Listed below are certain costs (or discounts) incurred in the purchase or construction of new plant assets. Indicate whether the costs should be expensed or capitalized (included in the cost of the plant assets on the balance sheet.) For costs that should be included in plant assets. Indicate in which category of plant assets (Equipment. Building. or Land) the related costs should be recorded on the balance Sheet.
a. Invoice cost to purchase Equipment
b. Sales tax on new equipment purchased
c. Cost to lay foundation for a new building
d. Repair costs to fix new equipment damaged by the crew that unpacked it
e. Charges incurred to train employees to use new equipment
f. Construction costs for a new building to be used in operations
g. Attorney fees incurred to complete the purchase documents for a new plant warehouse
h. Freight costs to ship the equipment From the manufacturer to the warehouse
Answer:
a. Capitalized : Equipment
b. Expensed
c. Capitalized : Building
d. Expensed
e. Capitalized : Equipment
f. Capitalized : Building
g. Capitalized : Building
h. Capitalized : Equipment
Explanation:
The Cost of Property, Plant and Equipment item according to IAS 16 includes, the Purchase Cost and any cost directly incurred in putting the assets in location and condition intended for use by management.
The costs exclude amounts collected in tax on behalf of third parties
Also not Capital expenditures increase the earning ability of the asset whilst revenue expenditure is the maintenance of such asset.
Stu deposited $400 in an account three years ago. Last year, he deposited $250 and plans to deposit $300 next year. The rate is 3 percent. Which one of these correctly states a portion of the formula needed to compute the future value five years from today
Answer and Explanation:
Future value = Present value x (1+i)^n, where
n = number of years
I = interest rate
From the question n = 8 years for the amount $400 ,
n= 7years for $250 ,
n=4years for $300
interest = 3%= 0.03
Future value of $400 = 400 (1 + 0.03)^8 = $506.71
Future value of $ 250 = 250 (1+0.03)^7 = $307.47
Future value of $ 300 =300(1+0.03)^4 = $337.65
Assume that over the past 85 years, the total annual returns on large-company common stocks averaged 12.3 percent, small-company stocks averaged 17.4 percent, long-term government bonds averaged 5.7 percent, and U.S. T-bills averaged 3.8 percent. What was the average risk premium earned by long-term government bonds, and small-company stocks respectively?
Answer:
1.9%
13.6%
Explanation:
Average risk premium earned by long-term government bonds =
long term average returns on Government bonds - average returns on US T-bills = 5.7% - 3.8% = 1.9%
Average risk premium earned by small-company stocks =
average returns on Company stock - average returns on US T-bills = 17.4% - 3.8% = 13.6%
Mike Flannery holds the following portfolio: Stock Investment Beta A $150,000 1.40 B 50,000 0.80 C 100,000 1.00 D 75,000 1.20 Total $375,000 What is the portfolio's beta?
Answer: 1.174
Explanation:
Portfolio beta is the weighted-average of the beta coefficient of all the individual stocks in a portfolio.
As per given , we have
Stock Investment Weight (W) Beta(B) (W) x (B)
[tex]\text{(Investment}/\text{Total investnment})[/tex]
A 150,000 0.40 1.40 0.56
B 50,000 0.13 0.80 0.104
C 100,000 0.27 1.00 0.27
D 75,000 0.20 1.20 0.24
Total 375,000 1.00 1.174
Hence, the portfolio's beta = 1.174
If you deposit $1000 in a bank account that pays 12% interest compounded annually, how much would be in your account after 6 years?
Answer:
The amount in the account after 6 years is $ 1,973.82
Explanation:
The future value at year 6 can be computed using the future value formula below:
FV=PV*(1+r)^n
PV is the amount deposited which is $1000
r is the interest rate of 12%
n is the number of years which is 6
FV=$1000*(1+12%)^6
FV=$1000*1.973822685
FV=$ 1,973.82
Sales 22160 units Cash, beginning balance $34000 Selling and administrative (of which depreciation, $5,000) $53000 Required minimum cash balance $66480 If necessary, the company will borrow cash from a bank on the first day of March. Assume that the borrowing can be made in any (exact) amount, but bears interest at 3% per month. The March interest will be paid during subsequent months. Q: What is the closest amount of cash that must be borrowed on March 1 to cover all cash disbursements and to obtain the desired March 31 cash balance
Answer:
Loan taken: 58,320
Explanation:
We add up the beginning cash with the receipts and subtract the expenses.
Then, we compare agaisnt the mnimum required balance
Beginning Cash 34,000
Cash Receipts
Sales 22,160
Total cash form operations: 56,160
Cash disbursements
S&A expense (w/o depreciations) 48,000
Ending Cash from operations 8,160
Minimum Balance: 66,480
Loan taken: 58,320
"According to Google's 2013 Study on the Incremental Clicks Impact of Mobile Search Advertising, the vertical with the highest CTR was"
The available options are:
a)Classified and Local
b) Education and Government
c)Media and Entertainment
d)Technology
Answer:
a)Classified and Local
Explanation:
Google's 2013 Study on the Incremental Clicks Impact of Mobile Search Advertising, was conducted from March 2012 to April 2013, on more than 300 U.S. AdWords accounts from 12 verticals.
The results, which shows the verticals range from 82 percent incremental clicks in the general service industry to 97 percent in the classified ad vertical.
This infographic provides details on the 12 different verticals which are:
1. Classified and Local - 97
2. Business and Industrial - 94%
3. Education and Government - 94%
4. Technology - 90%
5. Finance - 87%
6. Automative - 86%
7. Consumer Packaged Goods - 86%
8. Media and Entertainment - 86%
9. Retail - 86%
10. Travel - 85%
11. Healthcare - 83%
12. Service in all Veriticals - 82%
Hence, the right answer is CLASSIFIED AND LOCAL with 97%
The beta of an all equity firm is 2.3. If the firm changes its capital structure to 50% debt and 50% equity using 8% debt financing, what will be the equity beta of the levered firm
The beta of an all equity firm is 2.3. If the firm changes its capital structure to 50% debt and 50% equity using 8% debt financing, what will be the equity beta of the levered firm? The beta of debt is 0.2. (Assume no taxes.) Provide your answer with 2 digits after the comma.
Answer:
4.40
Explanation:
Equity beta, is a term in business or economics, which is.oftemr referred to as Levered beta, which measures the risk of a firm in respect to debt and equity in its capital structure to the volatility of the stock market.
Therefore, Formula for equity beta is giving as = βE = equity firm + (debt/equity)(equity firm - beta of debt)
Given that, equity firm = 2.3
Capital structure to debt = 50% = 0.5
Capital structure to equity = 50% = 0.5
Beta of debt = 0.2
βE = 2.3 + (0.5/0.5)(2.3 - 0.2) =
2.3 + (0.5/0.5)(2.3 - 02) =
= 2.3 + (1)(2.1)=
2.3 + 2.1= 4.40
Hence, the final is 4.40
Describe how communication strengthens relationship at work and as a result increases your productivity
michael's Inc. just paid $2.75 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 5.9 percent. If you require a rate of return of 10.1 percent, how much are you willing to pay today to purchase one share of the company's stock?
Answer:
$69.33
Explanation:
Calculation for how much are you willing to pay today to purchase one share of the company's stock
Using this formula
P(0)=[Annual dividend *(Increase in future dividend)]/ (Rate of return- Increase in future dividend)
Let plug in the formula
P(0)=[$2.75*(1+0.059)]/(0.101-0.059)
P(0)=$2.75*1.059/0.042
P(0)=$2.91225/0.042
P(0)=$69.33
Therefore the amount you are willing to pay today to purchase one share of the company's stock will be $69.33
Suppose the 2017 financial statements of 3M Company report net sales of $21.7 billion. Accounts receivable (net) are $3.40 billion at the beginning of the year and $3.42 billion at the end of the year.
1. Compute 3M’s receivable turnover.
2. Compute 3M’s average collection period for accounts receivable in days.
Answer:
A.Receivable turnover 6.36
B. Average collection period 57.38
Explanation:
A. Computation of 3M Company’s receivable turnover
Using this formula
Receivable turnover= Net annual credit sale / (beginning accounts receivable+ending accounts receivable)/2
Let plug in the formula
Receivable turnover=21.7/ ((3.40 +3.42)/2)
Receivable turnover= 21.7/(6.82/2)
Receivable turnover=21.7/3.41
Receivable turnover=6.36
B. Computation of 3M Company’s average collection period for accounts receivable in days
Using this formula
Average collection period = Number of days in a year/Receivable Turnover
Let plug in the formula
Average collection period=365 /6.36
Average collection period= 57.38
Therefore Receivable turnover will be 6.36 and the Average collection period will be 57.38.
During the first month of operations ended July 31, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold. Operating data for the month are summarized as follows: Sales $2,150,000 Manufacturing costs: Direct materials $960,000 Direct labor 420,000 Variable manufacturing cost 156,000 Fixed manufacturing cost 288,000 1,824,000 Selling and administrative expenses: Variable $204,000 Fixed 96,000 300,000 Required: 1. Prepare an income statement based on the absorption costing concept. YoSan Inc. Absorption Costing Income Statement For the Month Ended July 31 $ Cost of goods sold: $ $ $ 2. Prepare an income statement based on the variable costing concept. YoSan Inc. Variable Costing Income Statement For the Month Ended July 31, 2016 $ Variable cost of goods sold: $ $ $ Fixed costs: $ $ 3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2). The income from operations reported under costing exceeds the income from operations reported under costing by the difference between the two, due to manufacturing costs that are deferred to a future month under costing.
Answer:
1) YoSan Inc.
Income Statement
For the month ended July 31, 202x
Sales revenue $2,150,000
- Cost of goods sold $1,520,000
Gross profit $630,000
- S & A expenses $300,000
Operating profit $330,000
2) YoSan Inc.
Income Statement
For the month ended July 31, 202x
Sales revenue $2,150,000
- Variable costs:
Direct materials $800,000 Direct labor $350,000 Variable manufacturing cost $130,000Variable S & A expenses $170,000 $1,450,000Contribution margin $700,000
- Period costs:
Fixed manufacturing cost $288,000Fixed S & A expenses $96,000 $384,000Operating profit $316,000
3) When you prepare a variable costing income statement, the ending inventory of finished goods and WIP only includes variables costs. All fixed or period expenses are included during the period that they occur and are not carried over to the next period. I.e. the ending inventory (400 units) for next month will be lower under variable costing.
During August, Boxer Company sells $359,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $13,100 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,700 in parts for repairs. The entry to record the customer warranty repairs is:
Answer:
Dr Estimated Warranty Liability $9,700
Cr Parts Inventory $9,700.
Explanation:
Preparation of the entry to record the customer warranty repairs
Based on the information given we were told that Customers had to returned the merchandise for warranty repairs in which the amount of $9,700 was used in parts for repairs this means the journal entry to record the customer warranty repairs will be:
Dr Estimated Warranty Liability $9,700
Cr Parts Inventory $9,700.
If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign.
Answer:
-$1,390
Explanation:
The computation of net income using the accrual method is shown below:-
Net income = Received cash meals to customers + Served a banquet account - Received and paid electricity bill - Accrued salary expense - Prepaid insurance expired
= $470 + $1,530 - $250 - $3,000 - $140
= -$1,390
Therefore for computing the net income using the accrual method we simply applied the above formula.
When a buyer or seller of an agricultural commodity takes action to protect against a future change in the value of the commodity, then the buyer or seller is
Answer: b. Hedging
Explanation:
Hedging is a method of reducing the risk of expected losses in future by using derivative instruments to invest in an opposing strategy to the one you currently have. That way, if losses occur on the one side of the strategy, the other side would still bring you profits.
Granted, this will reduce your profits due to the extra investment but the rationale behind it is to either get some profit or no profit at all. '
A buyer or seller of an agricultural commodity can engage in a forward contract that guarantees that the other party buys the commodity in question for a particular price on a particular date. That way they would not have to worry about a price change.
Royal Lawncare Company produces and sells two packaged products—Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban Greengrow Selling price per unit $ 9.00 $ 39.00 Variable expenses per unit $ 2.70 $ 14.00 Traceable fixed expenses per year $ 131,000 $ 33,000 Last year the company produced and sold 40,500 units of Weedban and 18,500 units of Greengrow. Its annual common fixed expenses are $101,000. Required: Prepare a contribution format income statement segmented by product lines.
Answer:
Royal Lawncare Company
Income Statement
Total Weedban Greengrow
Sales revenue $1,086,000 $364,500 $721,500
Variable costs $368,350 $109,350 $259,000
Contribution $717,650 $255,150 $462,500
margin
Traceable fixed $164,000 $131,00 $33,000
costs
Segment margin $553,650 $124,150 $429,500
Common fixed $101,000
costs
Net income $452,650
g The Fed makes an open market operation purchase of $200,000. The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent. By how much does the quantity of money increase?
Answer: $618,000
Explanation:
From the question, we are informed that the Fed makes an open market operation purchase of $200,000 and that the currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent.
We first have to calculate the money multiplier which will be:
= (1 + the currency drain ratio)/( the currency drain ratio + the reserve ratio)
= (1 + 33.33%)/(33.33% + 10%)
= ( 1 + 0.33)/(0.33 + 0.1)
= 1.33/0.43
= 3.09
The quantity of money increase will be:
= 3.09 × $200,000
= $618,000
A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under:________
a. operating activities
b. investing activities
c. noncash investing and financing activities
d. financing activities
Answer:
b. investing activities
Explanation:
Cash flow can be defined as the net amount of cash and cash-equivalents that is flowing into (received) and out (given) of a business. There are three components of the cash flow;
1. Operating cash flow: all cash generated from the business activities of an organization.
2. Financing cash flow: all payments made by an organization and profits from issuance of debts and equity.
3. Investing cash flow: costs associated with purchasing of capital assets and investments of cash resources in other businesses.
A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under investing activities.
Generally, investing activities comprises of purchasing physical assets, investing in securities and the sale of assets or securities associated with the company.
Hence, a company that purchases equipment for $32,000 cash should show the transaction on the statement of cash flows under investing activities.
From 1991 to 2000, the U.S. economy had an annual inflation rate of around 2.76%. The historical annual nominal risk-free rate for this same period was around 5.71%. Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the real interest rate for that decade. What is the estimated real interest rate using the approximate nominal interest rate equation for that decade?
Answer:
2.95% and 2.87%
Explanation:
The computation of the approximate real rate and the estimated real interest rate is shown below:
The Approximate real rate is
= Historic annual nominal risk free rate - Annual inflation rate
= 5.71% - 2.76%
= 2.95%
And, the estimated real interest rate is
= (1 + historical annual nominal risk free rate) ÷ (1 + annual inflation rate) - 1
= (1 + 0.0571) ÷ (1 + 0.0276) - 1
= 2.87%
We simply applied the above formulas so that each one could be determined
Carla Vista Company has the following information available for September 2020.
Unit selling price of video game consoles $410
Unit variable costs $328
Total fixed costs $36,900
Units sold 600
1. Compute the unit contribution margin.
2. Prepare a CVP income statement that shows both total and per unit amounts.
3. Compute Carla Vista’ break-even point in units.
4. Prepare a CVP income statement for the break-even point that shows both total and per unit amounts.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Unit selling price of video game consoles $410
Unit variable costs $328
Total fixed costs $36,900
Units sold 600
First, we need to determine the unitary contribution margin:
Unitary contribution margin= 410 - 328= $82
Contribution margin income statement:
Sales= 600*410= 246,000
Total variable cost= 600*328= (196,800)
Total contribution margin= 49,200
Fixed costs= (36,900)
Net operating income= $12,300
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 39,200/82
Break-even point in units= 478 units
Finally, the income statement for the break-even point:
Sales= 478*410= 195,980
Total variable cost= 478*328= (156,784)
Total contribution margin= 39,196
Total fixed costs= (39,200)
Net operating income= (4)
The ideal marketing objective is ________. idealistic, quantifiable, and consumer-oriented situational, unattainable, and internal time specific, realistic, and quantifiable realistic, qualitative, and competitive quantifiable, research-based, and without regard to ethics
Answer:
The correct answer is: Time specific, realistic and quantifiable.
Explanation:
To begin with, a good marketing campaign must follow certain objectives in order to be fully successfull or at least as high as possible. Therefore that the best objectives to look for regarding marketing expertises are the facts that the objectives are realistic, so that means that it can be possible done by the budget of the company; quantifiable, so that means that the company can measure the benefits of using the campaign and see that the costs were worthy; and finally, time specific objectives, so that means that the company can know if their goals are being accomplished in the time expected.
Suppose that Second Republic Bank currently has $150,000 in demand deposits and $97,500 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%.
Reserves=__________
Required Reserves=___________
Excess Reserves=__________
Answer:
Reserves= $52,500
Required reserves= $15,000
Excess reserves= $37,500
Explanation:
The Second republic bank has $150,000 in demand deposits
They also have $97,500 in outstanding loans
The reserves can be calculated as follows
Reserves= deposits-loans
= $150,000-$97,500
= $52,500
The required reserves can be calculated as follows
Required reserves= deposits × reserve ratio
= $150,000×10/100
= $150,000×0.1
= $15,000
The excess reserves can be calculated as follows
Excess reserves= reserves-required reserves
= $52,500-$15,000
= $37,500
Hence the reserves, required reserves and excess reserves are $52,500, $15,000 and $37,500 respectively
Patton has acquired several other companies. Assume that Patton purchased Kate for $ 6 comma 000 comma 000 cash. The book value of Kate's assets is $ 15 comma 000 comma 000 (market value, $ 17 comma 000 comma 000 ), and it has liabilities of $ 13 comma 000 comma 000 (market value, $ 13 comma 000 comma 000 ). Requirements 1. Compute the cost of goodwill purchased by Patton . 2. Record the purchase of Kate by Patton .
Answer:
1. $2,000,000
2. Accounting Entry
Assets $17,000,000 (debit)
Goodwill $2,000,000 (debit)
Liabilities $13,000,000 (credit)
Investment in Kate $6,000,000 (credit)
Explanation:
The Acquisition of Kate must be done at the fair value of Assets and Liabilities at the acquisition date instead of book values.
Goodwill is the excess of the Purchases Price over the Net Identifiable assets acquired.
Calculation of Goodwill :
Purchase Price $6,000,000
Less Net Identifiable Assets
Assets at Fair Value $17,000,000
Less Liabilities at Fair Value ($13,000,000) ($4,000,000)
Goodwill $2,000,000
Accounting Entry
Assets $17,000,000 (debit)
Goodwill $2,000,000 (debit)
Liabilities $13,000,000 (credit)
Investment in Kate $6,000,000 (credit)
Assume that both labor and capital exhibit diminishing returns. Suppose you can hire an additional unit of labor for $10, and she can product 50 units. You could also buy an additional machine at the cost of $200, and that machine would allow you to produce 1000 units.
If your main concern is minimizing average cost, what should you do?
a) Buy the machine, because it will allow you to produce more
b) Nothing, because you are already minimizing cost
c) There is not enough information to make a legitimate response
d) Hire more labor, because it is cheaper
Answer:
b) Nothing, because you are already minimizing cost
Explanation:
cost of producing one additional unit by hiring more workers = $10 / 50 units = $0.20 per unit
cost of producing one additional unit by buying the machine = $200 / 1,000 units = $0.20 per unit
Since labor exhibits a diminishing return, the next unit of labor will produce less than 50 units. This means that if you want to increase production, you should buy the machine.
Using the same logic, the previous units of labor were able to produce more than 50 units, which means that the average total cost was lower using labor than the machine. So if the company's concern is to minimize costs, then they are already doing so.
Estimated cash flows appear below for an investment project. The project is required rate of return (IRR) is 11.40%. What is the discounted payback period for the project in years
Answer: 3.83 years
Explanation:
The Discounted Payback period is used to determine how long it would take a project to payback the investment made in it given required return adjusted cashflows.
Year 1.
= 17,000 / ( 1 + 11.4%)
= $15,260
Year 2
= 20,000/ 1.114²
= $16,116
Year 3
= 27,000/1.114³
= $19,530
Year 4
= 30,000/1.114⁴
= $19,480
Investment Balance up to year 3
= -67,000 + 15,260 + 16,116 + 19,530
= -$16,904
The amount left is smaller than the discounted Cashflow for Year 4 so the Investment will be paid back in year 4.
= 16,904/19,480
= 0.83
0.83 of year 4 will be taken to pay off Investment.
In total;
= 3 complete years + 0.83 in 4th year
= 3.83 years.
Barry Cuda currently has $35,000 in his Roth IRA which has been earning 7%. Barry is planning on depositing $5500 annually for the next 40 years into this IRA. Assuming Barry's IRA continues earning 7% annually, what will Barry's IRA be worth at the end of 40 years?
Answer:
Total worth of worth of investment= $1,622,099.14
Explanation:
The total amount available in his account would be determined as follows:
The value of the existing current amount in 40 years time
FV = PV × (1+r)^ n
FV- future value
PV- current amount in account
r- interest rate
n- number of years
FV = 35,000 × (1.07)^(40=
FV= 524,106.02
The value of the new annual deposit of 5,500 in 40 years time
This represents an annuity. An annuity is series of constant but equal amount occurring for a certain number of years .
FV= A×( (1+r) -1)/r
FV - future value
R - interests rate
n- number of years
A- annual deposit
FV = 5,500 × ((1+0.07)^40 -1)/0.07
FV= 1,097,993.12
Total worth of worth of investment
= 524,106.02 + 1,097,993.12 = 1,622,099.14
Total worth of worth of investment= $1,622,099.14
The refractive index of a rarer medium with respect to a denser medium is.....
A)Greater than 1
B) Smaller Than 1
C) Negative
D)-1
Answer:
B) Smaller Than 1
Explanation:
Snell's Law states that the ratio of the sines of incidence and refraction is equal to the ratio of the phase of velocities in the two phases. When light travels from a rarer medium like air to a denser medium like water, the light would be refracted towards the normal line. For example, the refractive index of air with respect to glass is represented as;
sin i / sin r
If light rays travel from glass which is a denser medium to a rarer medium which is air, the light rays would bend away from the normal line, and then the angle of refraction would be greater than the angle of incidence. So, the refractive index of the rarer medium which is air with respect to the denser medium which is glass will be smaller than 1.
Prepare journal entries to record the following four separate issuances of stock. A corporation issued 8,000 shares of $20 par value common stock for $192,000 cash. A corporation issued 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $47,000. The stock has a $1 per share stated value. A corporation issued 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $47,000. The stock has no stated value. A corporation issued 2,000 shares of $100 par value preferred stock for $247,000 cash.
Answer:
Journal Entries
1. A corporation issued 8,000 shares of $20 par value common stock for $192,000 cash:
Debit Cash Account $192,000
Credit Common Stock $160,000
Credit Paid-in In Excess of Par $32,000
To record the issue of 8,000 shares of $20 par value.
2. A corporation issued 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $47,000. The stock has a $1 per share stated value:
Debit Retained Earnings $4,000
Credit Common Stock $4,000
To record the issue of 4,000 shares of $1 stated value.
3. A corporation issued 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $47,000. The stock has no stated value:
Debit Retained Earnings $47,000
Credit Common Stock $47,000
To record the issue of 4,000 shares of no stated value.
4. A corporation issued 2,000 shares of $100 par value preferred stock for $247,000 cash:
Debit Cash $247,000
Credit Preferred Stock $200,000
Credit Paid-in In Excess of Par $47,000
To record the issue of 2,000 shares of $100 par value.
Explanation:
Shares can be issued at par value, above, or below par value. When they are issued at par value, the Cash Account or Retained Accounts or Asset Account is debited, while the Stock account is credited. If they are above par value, the difference in at par and above is credited to the Paid-in In Excess of Par account or Additional Paid-in Capital account. When they are issued below the par value, the difference between cash received and the stock account is debited to Paid-in In Excess of Par account.
The stated value of a share is like the par value. Some shares have no stated value and are recorded at whichever value is prevailing at the time of the issue.
The Suds Corporation has just suffered significant losses of revenue for three quarters in a row, and the shareholders are furious. Much of the loss can be attributed to the board's decision to change from their traditional lager beer to a lighter and smoother brew. Unfortunately, the new recipe alienated current customers and failed to bring in new customers. Although Suds has announced that it will return to its original product, the shareholders are claiming the board violated its fiduciary duty of care, and they are suing the directors personally for their significant losses. What must the shareholders prove to win their lawsuit
Answer and Explanation:
The fiduciary duty of care also called duty of care is the fudicaiary responsibility that requires board directors of a company to act and make decisions in good faith, having the best interest of the company in mind. This duty(whether written or implied) makes board directors responsible in ensuring that decisions made for the company are sound, ethical and legal.
In the above example, board directors of the suds corporation may have not performed this duty as required but this would depend on thorough investigation to ascertain the method and process by which the decision was arrived on. For instance, we are sure the decision was legal and also ethical(as they were only out to improve on company products and increase revenue likewise), we are not sure however of the soundness of this decision. This leads us to investigate the processes and results obtained from enquiring/researching on this new product decided on by the board. Therefore was it sound according to these results and processes. This is where evidence of a breach of duty by the board may be found
