Answer:
The answer is option D) Norway has a comparative advantage producing oil because it can produce more oil.
Explanation:
Norway currently produces 1,398 thousand barrels of crude oil per day. At this capacity, it can produce more oil in comparison to United Kingdom that produces 1000 thousand barrels per day.
This statistics gives Norway a comparative advantage over United Kingdom.
Also comparing the consumption rate for both countries with Norway having a population of 5,421,241 which is far less than 66, 650,000 of the United Kingdom, shows that Norway will have enough to cater for her citizens as well as for exports.
Selected comparative financial statements of Korbin Company follow.
KORBIN COMPANY
Comparative Income Statements
For Years Ended December 31, 2017, 2016, and 2015
2017 2016 2015
Sales $ 555,000 $ 340,000 $ 278,000
Cost of goods sold 283,500 212,500 153,900
Gross profit 271,500 127,500 124,100
Selling expenses 102,900 46,920 50,800
Administrative expenses 50,668 29,920 22,800
Total expenses 153,568 76,840 73,600
Income before taxes 117,932 50,660 50,500
Income taxes 40,800 10,370 15,670
Net income $ 77,132 $ 40,290 $ 34,830
Required:
a. Calculate the income statement data in common-size percents.
Answer and Explanation:
The computation is shown below:
Particulars 2015 % 2014 % 2013 %
Sales $555,000 100 $340,000 100 $278,000 100 Less
COGS $283,500 51.08 $212,500 62.5 $153,900 55.36 Gross profit $271,500 $48.92 $127,500 37.5 $124,100 44.64 Less:
Selling expenses $102,900 18.54 $46,920 13.8 $50,800 18.27 Administrative expenses $50,668 9.13 $29,920 8.8 $228,00 8.20
total expenses $153,568 27.67 $76,480 22.49 $736,00 26.47 Income before tax $117,932 21.25 $50,660 14.9 $50,500 18.16 Income taxes $40,800 7.35 $10,370 3.05 $15,670 5.64
Net income $77,132 13.90 $40,290 11.85 $34,830 12.53
For cost of goods sold percentage we simply divide the cost of goods sold by the sales and the same is applied for other items
If the distribution of water is a natural monopoly, then a. a single firm cannot serve the market at the lowest possible average total cost. b. multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. c. allowing for competition among different firms in the water-distribution industry is efficient. d. average cost increases as the quantity of water produced increases.
Answer:
The correct option is C) If the distribution of water is a natural monopoly, average cost increases as the quantity of water produced increases.
Explanation:
Natural monopoly occurs when there is a hig cost of entry into a particular market niche. The high cost is usually caused by expensive equipment and infrastructural set up for manufacturing as well as maintenance costs.
Therefore, If the distribution of water is a natural monopoly, average cost increases as the quantity of water produced increases.
Distribution of water falls into the category of natural monopoly. Due to the prevailing circumstances, Fixed cost is larger comparable to variable cost such that it is cheaper for a single firm to serve the market.
The following data from the just completed year are taken from the accounting records of Mason Company: Sales $ 656,000 Direct labor cost $ 89,000 Raw material purchases $ 137,000 Selling expenses $ 106,000 Administrative expenses $ 48,000 Manufacturing overhead applied to work in process $ 206,000 Actual manufacturing overhead costs $ 226,000 Inventories Beginning Ending Raw materials $ 8,200 $ 11,000 Work in process $ 5,600 $ 20,500 Finished goods $ 80,000 $ 25,800 Required: 1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials. 2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. 3. Prepare an income statement.
Answer:
Cost of Goods Manufactured $ 434,300
Adjusted Cost of Goods Sold $ 488,500
Operating Income $ 13,500
Explanation:
We do the following additions and subtractions to find the cost of goods manufactured.
Mason Company:
Schedule of Cost of Goods Manufactured
Inventories Beginning Raw materials $ 8,200
Add Raw material purchases $ 137,000
Less Inventories Ending Raw materials $ 11,000
Direct Materials Used $134,200
Add Direct labor cost $ 89,000
Add Actual manufacturing overhead costs $ 226,000
Total Manufacturing Costs $449,200
Add Inventories Beginning Work in process $ 5,600
Cost of Goods Available for Manufacture 454,800
Inventories Ending Work in process $ 20,500
Cost of Goods Manufactured $ 434,300
The cost of goods manufactured is again added and subtracted with finished goods inventories to prepare the schedule of cost of goods sold.
Mason Company:
Schedule of Cost of Goods Sold
Inventories Beginning Raw materials $ 8,200
Add Raw material purchases $ 137,000
Less Inventories Ending Raw materials $ 11,000
Direct Materials Used $134,200
Add Direct labor cost $ 89,000
Add Applied manufacturing overhead costs $ 206,000
Total Manufacturing Costs $429,200
Add Inventories Beginning Work in process $ 5,600
Cost of Goods Available for Manufacture 434,800
Inventories Ending Work in process $ 20,500
Cost of Goods Manufactured $ 414,300
Add Inventories Beginning Finished goods $ 80,000
Cost of Goods Available for Sale $ 494,300
Less Inventories Ending Finished goods $ 25,800
Un adjusted Cost of Good Sold $ 468,500
Add Under-applied Manufacturing Overhead 20,000
Adjusted Cost of Goods Sold $ 488,500
If we add the applied manufacturing overhead then the cost of goods sold is adjusted by adding the amount underapplied.
Mason Company:
Income Statement
Sales $ 656,000
Less Cost of Goods Sold $ 488,500 (as calculated above)
Gross Profit $ 167,500
Less Selling expenses $ 106,000
Less Administrative expenses $ 48,000
Operating Income $ 13,500
At the beginning of last year, Tarind Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Tari's fixed manufacturing overhead budget variance was $12,000 favorable. Its fixed manufacturing overhead volume variance was $19,200 favorable. Actual direct labor-hours for the year were 625,000. What was Tari's total standard machine-hours allowed for last year's output?
Answer:
The answer is 612800 hours
Explanation:
Solution
Recall that:
At the start of last year, Tari Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours.
At the end of the year, Tari's fixed manufacturing overhead budget variance was $12000 favorable. Its fixed manufacturing overhead volume variance was $19200 favorable. The direct actual labor-hours for the year were 625,000. What was Tari's standard total machine-hours allowed for last year's output?
Now,
The Budgeted at beginning of the year = $900,000
fixed manufacturing overhead for = 600,000 machine hours
Thus,
The Standard = $900,000 / 600,000 hours = $1.5 fixed overhead / machine/machining hour
So,
At end of year, manufacturing overhead volume was $19,200 favorable which means that,
$19200 / $1.5 = 12800 additional hours.
Total Standard Machine Allowance Allowed for output = 600,000 +12800 = 612800 hours
Therefore, Tari's total standard machine-hours allowed for last year's output is 612800 hours
If Tarind Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Its fixed manufacturing overhead volume variance was $19,200 favorable. What Tari's total standard machine-hours allowed for last year's output will be is: 612,800 machine hours
Using this formula
Total standard machine-hours=Machine -hours level of activity+ [Fixed manufacturing overhead volume variance÷(Fixed manufacturing overhead÷ Machine -hours level of activity)]
Where:
Machine -hours level of activity=600,000
Fixed manufacturing overhead volume variance=$19,200
Fixed manufacturing overhead=$900,000
Let plug in the formula
Total standard machine-hours=600,000+[$19,200÷($900,000÷600,000)]
Total standard machine-hours=600,000+($19,200÷1.5)
Total standard machine-hours=600,000+12,800
Total standard machine-hours=612,800 machine hours
Inconclusion if Tarind Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Its fixed manufacturing overhead volume variance was $19,200 favorable. What Tari's total standard machine-hours allowed for last year's output will be is: 612,800 machine hours
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In conducting the audit procedures for the search for unrecorded liabilities, the materiality/scope for this area was accessed by the auditors at $5,000. Adjustments are only recorded for individual items equal to or exceeding materiality. The company fiscal year end is December 31, 2019 and the last day of fieldwork is estimated to be February 1, 2020. Below is an item from the check/cash disbursement register, which is not recorded in the accounts payable subsidiary ledger at December 31, 2019. Daniel Breen, Esquire Check Number 1334 Check Date 1/6/2020 Amount $6,000 Nature of the Expenses: Corporate legal services for December 2019 Required: Determine if this check/cash disbursement is recorded in the proper accounting period. This transaction requires an accounting adjustment to the financial statements for the fiscal year ending 12/31/2019 - If you believe that statement is correct - answer "Yes" This transaction does NOT require an accounting adjustment to the financial statements for the fiscal year ending 12/31/2019 - If you believe that statement is correct - answer "No."
Answer:
"No."
This transaction does NOT require an accounting adjustment to the financial statements for the fiscal year ending 12/31/2019 - If you believe that statement is correct - answer "No."
Explanation:
The check disbursement does not require an adjustment to the financial statements for the fiscal year ending 12/31/2019, because the check is dated 1/6/2020.
Adjusting entries are changes to the journal entries which tries to match transactions to their correct accounting periods. A check dated January 6, 2020 does not belong to the fiscal year ending December, 2019.
Adjusting entries are usually for Accrued Revenue, Accrued Expenses, Deferred Revenue, Prepaid Expenses, and Depreciation Expenses.
An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data: Accounts receivable: $800,000 Allowance for doubtful accounts per books before adjustment (credit): $50,000 Amounts expected to become uncollectible : $65,000 What is the cash realizable value of the accounts receivable at December 31, after adjustment? Select one: a. $685,000. b. $750,000. c. $800,000. d. $735,000.
Answer:
The correct option is D,$735,000
Explanation:
The cash realizable value of accounts receivable for the year is the accounts receivable of $800,000 less the amount expected to become uncollectible in the current year which $65,000.
The realizable value of accounts receivable =$800,000-$65,000=$735,000
The allowance for doubtful accounts before adjustment was already dealt with in previous year,I mean the difference between last year allowance and this year was accounted for by posting $15,000 into allowance account thereby leading a closing balance of $65,000.
Assume that, on January 1, 2021, Sosa Enterprises paid $2,240,000 for its investment in 30,000 shares of Orioles Co. Further, assume that Orioles has 100,000 total shares of stock issued and estimates an eight-year remaining useful life and straight-line depreciation with no residual value for its depreciable assets.
At January 1, 2021, the book value of Orioles' identifiable net assets was $7,260,000, and the fair value of Orioles was $10,000,000. The difference between Orioles' fair value and the book value of its identifiable net assets is attributable to $1,950,000 of land and the remainder to depreciable assets. Goodwill was not part of this transaction. The following information pertains to Orioles during 2021:
Net Income $ 500,000 Dividends declared and paid $ 300,000 Market price of common stock on 12/31/2021 $ 80 /shareWhat amount would Sosa Enterprises report in its year-end 2021 balance sheet for its investment in Orioles Co.?
Answer:
Amount reported in the year-end 2021 is $2,270,375
Explanation:
[tex]\text{The percentage of investment in Orioles} = \frac{30000 \ shares }{100000 \ shares} = 30 \ percent.[/tex]
The difference between fair value and the book value attributable to depreciable assets = $10,000,000 -$7,260,000 -$1,950,000
=$790,000
Attributable to depreciation assets:
[tex]= \frac{790000}{8 \ years} \times 30 percent \\[/tex]
[tex]= 29625 dollars.[/tex]
Balance sheet for its investment in Orioles:
Particulars Amount
Cash paid to Orioles = $2,240,000
Add: net income (500,000 *30%) = $150,000
Less: Dividends(300,000 *30%) = ($90,000)
Less: Attributable to depreciation. = ($29,625)
Amount reported in the year-end 2021. = $2,270,375
In 2020, Sheffield Corp., issued for $102 per share, 97000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Sheffield's $20 par value common stock at the option of the preferred stockholder. In August 2021, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $25 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock
Answer:
Additional paid-in capital is $4,074,000.
Explanation:
In 2020, Sheffield issued $102 per share and there were 97,000 shares of convertible preferred stock.
Preferred stock = 97,000 shares × $102 = $9,894,000
Also we were told that one preferred stock can be converted to 3 common stock i.e. 3 × Preferred stock = Common stock
Therefore, Common stock = [(97000 shares × 3 shares) × $20] = $5,820,000
Additional paid-in capital = $9,894,000 - $5,820,000 = $4,074,000.
Irving Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct labor 0.20 hours $ 29.00 per hour $ 5.80 Variable overhead 0.20 hours $ 6.50 per hour $ 1.30 In November the company's budgeted production was 6,800 units, but the actual production was 6,600 units. The company used 1,510 direct labor-hours to produce this output. The actual variable overhead cost was $9,211. The company applies variable overhead on the basis of direct labor-hours. The variable overhead rate variance for November is:
Answer:
Manufacturing overhead rate variance= $604 favorable
Explanation:
Giving the following information:
Variable overhead 0.20 hours $ 6.50 per hour
The company used 1,510 direct labor-hours to produce this output. The actual variable overhead cost was $9,211.
To calculate the variable overhead rate variance, we need to use the following formula:
Manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity
Actual rate= 9,211/1,510= $6.1
Manufacturing overhead rate variance= (6.5 - 6.1)*1,510
Manufacturing overhead rate variance= $604 favorable
Company A sells paper coffee cups to all Caribou Coffee locations in the US. Company B sells dinner plates to Applebee’s. Company A charges $1 for a pack of 100 cups and Company B charges $3 for 1 dinner plate. Tell us exactly what information you would need to determine whether Company A or Company B has higher annual revenue and explain how you would calculate these two figures.
Answer:
Company A and Company B
Determination of annual revenue:
a) The information needed to determine which company has higher annual revenue include:
i) The annual quantities of packs of paper coffee cups sold to the Caribou Coffee locations in the US for a number of years.
ii) The annual quantities of dinner plates sold to Applebee's for the same years as above.
b) The annual revenues can be calculated by multiplying the price for a pack of 100 cups by the annual quantity sold.
Explanation:
Revenue is a function of price and quantity sold. The price is unit selling price and the quantity depends on the period for which revenue is being computed.
Revenue is the earnings from the sale of goods and services. The excess of revenue over cost of sales gives the gross profit, from which expenses would be deducted to arrive at net income after adding other incomes from non-operational activities.
Holmes Company produces a product that can be either sold as is or processed further. Holmes has already spent $52,000 to produce 2,325 units that can be sold now for $81,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $265 per unit. If Holmes processes further, the units can be sold for $410 each. Compute the incremental income if Holmes processes further.
Answer:
incremental income= $255,625
Explanation:
Giving the following information:
Holmes has already spent $52,000 to produce 2,325 units that can be sold now for $81,500 to another manufacturer.
Process the units further at an incremental cost of $265 per unit. If Holmes processes further, the units can be sold for $410 each.
Sell as-is:
Net income= 81,500 - 52,000= $29,500
Continue processing:
Net income= 2,325*(410 - 265) - 52,000= $285,125
incremental income= 285,125 - 29,500= $255,625
Pricing Strategy, Sales Variances Eastman, Inc., manufactures and sells three products: R, S, and T. In January, Eastman, Inc., budgeted sales of the following. Budgeted Volume Budgeted Price Product R 125,900 $26 Product S 156,500 22 Product T 22,500 21 At the end of the year, actual sales revenue for Product R and Product S was $3,220,000 and $3,358,000, respectively. The actual price charged for Product R was $25 and for Product S was $20. Only $11 was charged for Product T to encourage more consumers to buy it, and actual sales revenue equaled $645,150 for this product. Required: 1. Calculate the sales price and sales volume variances for each of the three products based on the original budget. Sales price variance Sales volume variance Product R $ $ Product S $ $ Product T $ $ 2. Suppose that Product T is a new product just introduced during the year. What pricing strategy is Eastman, Inc., following for this product? Check My Work
Answer:
Check the explanation
Explanation:
Sales price variance = (Actual price - Budgeted price) * Actual units sold
Product R : ($25 - $26) * 123000 = $123000 unfavorable
Product S:($20 - $22) * 162700 = $325400 unfavorable
Product T: ($10 - $20) * 54000 = $540000 unfavorable
Sales volume variance = (Actual units - Budgeted units) * Standard price
Product R : (120000 - 123000) * 26 = $78000 favorable
Product S:(150000 - 162700) * 22 = $279400 favorable
Product T: (20000 - 54000) * 20 = $680000 favorable
Notes:
Actual units:
Product R = $3075000/ $25 = 123000
Product S = $3254000/$20 = 162700
Product T = $540000/$10 = 54000 units
oel purchased 100 shares of stock for $31 per share. During the year, he received dividend checks amounting to $202. Joel recently sold the stock for $58 per share. Joel is in a 35% tax bracket. He would pay $945 in taxes if he held the stock for less than a year. How much would Joel save in taxes if he held the stock for more than a year, assuming he sold it for the same amount?
Answer:
Joel would save tax of $540 if the stock was held for more than a year
Explanation:
If the stock is held for more than one year and then sold then the gain on sale would be long term capital gain
The long term capital gain would be charged at preferential rate of 15%
Calculate long term capital gain tax on sale
Long term capital gain (Sale price - Purchase price)*No of shares
Long term capital gain (58-31)*100
Long term capital gain $2700
Tax on long term capital gain 2700*15%
Tax on long term capital gain $405
Savings in tax 945 - 405
Savings in tax $540
Thus, Joel would save tax of $540 if the stock was held for more than a year
The Donut Stop acquired equipment for $10,000. The company uses straight-line depreciation and estimates a residual value of $2,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,000 from the original estimate of $2,000. Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6.
Answer:
Cost of Equipment: $10,000
Less Accumulated Depreciation ($10,000 - $2,000 / 4*2): $4,000
= Book Value (End of Year 2): $6,000
Less New Residual Value: $-1,000
= New Depreciated Cost: $5,000
Remaining Service Life: 4
Annual Depreciation in Years 3 to 6 ($5,000 / 4): $1,250
What is macroeconomics?
Answer:
Macroeconomics is the study of large scale economic issues such as those which affect the entire economy. This is in contrast to Microeconomics which looks at smaller scale economic principles. Macroeconomics is a highly practical discipline as it deals with principles that directly impact every part of life.
Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows:
Atlantic Wave Pacific Pounder
Sales price $280 $130
Variable cost of goods sold per unit 220 97
Manufacturing margin per unit $60 $33
Variable selling expense per unit 32 18
Contribution margin per unit $28 $15
The sales unit volume for the sales territories and products for the period is as follows:
East Coast West Coast
Atlantic Wave 30,000 21,000
Pacific Pounder 0 21,000
Required:
Prepare a contribution margin by sales territory report. Calculate the contribution margin ratio for each territory as a whole percent
Answer:
Contribution margin ratio:
For East Coast = 10%
For West Coast = 8.05%
Explanation:
As per the data given in the question,
Contribution margin by sales territory report :
C C S Inc.
Contribution margin by Territory
Particulars East Coast West Coast
Sales (a) $8,400,000 $8,610,000
(30,000×$280)+(0×$130)
(21,000×$280)+(21,000×$130)
Less: variable cost of goods sold(b) $6,600,000 $6,657,000
(30,000×$220)+(0×$97)
(21,000×$220)+(21,000×$97)
Manufacturing margin (c=a-b) $1,800,000 $1,953,000
Less: Variable selling expense (d) $960,000 $1,260,000
(30,000×$32)+(0×$28)
(21,000×$32)+(21,000×$28)
Contribution margin (e=c-d) $840,000 $693,000
For East Coast:
Contribution margin ratio = (Contribution margin ÷ Sales revenue)×100
=($840,000÷ $8,400,000)×100
= 10%
For west coast:
Contribution margin ratio = (Contribution margin ÷ Sales revenue)×100
=($693,000 ÷ $8,610,000)×100
= 8.05%
Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in January. The variable overhead rate is $1.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $102,950 per month, which includes depreciation of $19,880. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Answer:
$95,850
Explanation:
To calculate cash disbursements for manufacturing overhead:
Direct labor cost + Fixed manufacturing overhead
where,
direct labor cost = Direct labor hours × per labor rate
= $7,100 x $1.8 =
$12,780
Budgeted fixed manufacturing overhead - depreciation
102,950 - 19880 =
Direct labor cost + Fixed manufacturing overhead =
$83,070 + $12,780
= $95,850
The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $95,850
Answer:
The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $95,850
Explanation:
In order to calculate the the January cash disbursements for manufacturing overhead on the manufacturing overhead budget we would have to use the following formula:
Total cash disbursement for overhead in January =Variable overhead+Cash portion of fixed manufacturing overhead
Variable overhead = 7,100 direct labor-hours × $1.80 = $12,780
Cash portion of fixed manufacturing overhead = $102,950 - $19,880 = $83,070
Therefore, Total cash disbursement for overhead in January = $12,780 + $83,070
Total cash disbursement for overhead in January =$95,850
The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $95,850
Consider a no-load mutual fund with $390 million in assets and 15 million shares at the start of the year and with $440 million in assets and 16 million shares at the end of the year. During the year investors have received income distributions of $4 per share and capital gain distributions of $0.25 per share. Assuming that the fund carries no debt, and that the total expense ratio is 2%, what is the rate of return on the fund
Answer:
20%
Explanation:
The computation of rate of return on the fund is shown below:-
Net assets value at the beginning = Total assets ÷ Number of shares
= $390 million ÷ 15 million
= $26 million
Net assets value at the end of the year = (Total assets - Expenses) ÷ Number of shares
= ($440 million - ($440 million × 2%)) ÷ 16 million
= ($440 million - $8.8 million) ÷ 16 million
= $26.95 million
Now,
Rate of return = (Net assets value at the end of the year - Net assets value at the end of the year + Income distribution + Capital gain distribution) ÷ Net assets value at the beginning
= ($26.95 million - $26 million + $4 per share + $0.25 per share) ÷ $26 million
= $5.2 million ÷ $26 million
= 20%
A company is selling bonds with a face value of $1,000 to raise money for a plant expansion. The bonds pay a coupon rate of 4% per year on a semiannual basis and mature in 5 years. Net of all fees, the company receives $760 from the sale of each bond. What is the company's cost of capital on an annual basis
Answer:
10.26%
Explanation:
According to the scenario, computation of the given data are as follow:-
Net sales = $760
Face value of bonds = $1,000
Coupon rate = 4% = $1,000 × 4 ÷ 100
= 40
N = Number of Years = 5 annually = semiannually = 5 × 2
= 10 years
We assume, interest rate = 10% = 0.10
P = Coupon Rate ÷ 2 × (PVIFA,Interest Rate ÷ 2%,No. of Years) + Future Value(PVIF,Interest Rate ÷ 2%, No. of Years)
=$40 ÷ 2 × [1 - 1 ÷ (1 + Interest Rate)N] ÷ Interest Rate + Future Value[1 ÷ (1 + Interest Rate) × N]
=$40 ÷ 2 × [1-1 ÷ (1 + 0.10 ÷ 2)^10] ÷ 0.05 + $1,000 × [1 ÷ (1 + 0.10 ÷ 2)^10]
=$20 × [1 - 1 ÷ (1.05)^10] ÷ 0.05 + $1,000 × [1 ÷ (1.05)^10]
=$20 × [1 -1 ÷ 1.6288946] ÷ 0.05 + $1,000 × [1 ÷ 1.6288946]
= 420 × 7.72173 + $1,000 × 0.613913
= $154.4346 + $613.913
= $768.3476
= $768.35
But the given value is 760, so we assume interest rate = 11%
=$40 ÷ 2 × [1-1 ÷ (1 + Interest Rate)^N] ÷ Interest Rate + Future Value[1 ÷ (1 + Interest Rate)^N]
= $40 ÷ 2 × [1 - 1 ÷(1 + 0.11 ÷ 2)^10] ÷ 0.055 + $1,000 × [1 ÷ (1 + 0.11 ÷ 2)^10]
= $20 × [1 - 1 ÷ (1.055)^10] ÷ 0.055 + $1,000 × [1 ÷ (1.055)^10]
= $20 × [1 - 1 ÷ 1.70814446] ÷ 0.055 + $1000 × [1 ÷ 1.70814446]
= $20 × 7.5376255 + $1,000 × 0.5854306
= $150.75 + $585.43
= $736.18
At the Interest rate of 10% the price is more than $760 and at the Interest rate of 1% the price is less than $760. So the required rate lies in between 10% to 11%.
So required rate
Yield To Maturity = Lower Interest Rate + (Difference Between Interest Rate) × Higher Price - Received Price ÷ Higher Price - Lower Price
= 1 0+( 11 - 10) × $768.35 - $760 ÷ $768.35 - $736.18
= 10 + 1 × $8.35 ÷ $32.17
= 10 + 0.26
= 10.26%
Medallion Cooling Systems, Inc., has total assets of $9,800,000, EBIT of $2,050,000, and preferred dividends of $201,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment:
Capital structure/debt Cost of debt Number of stock shares Rate of return
0% 0% 200,000 12.3%
15 7.8 175,000 13.1
30 9.1 140,000 14.2
45 12.1 111,000 16.3
60 15.2 75,000 20.1
Calculate earnings per share for each level of indebtedness.
Answer:
Earnings per share:
0% debt = $5.145 per share
15% debt = $5.487 per share
30% debt = $6.203 per share
45% debt = $6.386 per share
60% debt = $6.570 per share
Explanation:
The earnings per share is the monetary value of how much each share of common stock outstanding has earned. The earnings per share can be calculated by dividing the Net Income attributable to common stockholders by the number of common stock shares outstanding.
Net Income attributable to Common stockholders = Net Income - Preferred stock dividends
Thus, Earnings per share = (Net Income - Preferred stock dividends) / Number of common stock shares outstanding
To calculate Earnings per share at each level of indebtedness, we first need to calculate the net income at each debt level. The net income will change as interest is deducted before calculating net income.
Net Income = EBIT - interest - tax
Total debt = Total assets * weightage of debt in capital structure
Tax = EBT * tax rate
a. 0% debt
Net Income = 2,050,000 - 0 - (2050000 * 0.4) = $1,230,000
Earnings per share = (1230000 - 201000) / 200000 = $5.145 per share
b. 15% debt
Total debt = 9,800,000 * 0.15 = 1470000
EBT = 2,050,000 - (1470000 * 0.078) = $1935340
Net Income = 1935340 - ( 1935340 * 0.4) = $1161204
Earnings per share = (1161204 - 201000) / 175000 = $5.487 per share
c. 30% debt
Total debt = 9,800,000 * 0.30 = 2940000
EBT = 2050000 - (2940000 * 0.091) = $1782460
Net Income = 1782460 - (1782460 * 0.4) = $1069476
Earnings per share = (1069476 - 201000) / 140000 = $6.203 per share
d. 45% debt
Total debt = 9,800,000 * 0.45 = 4410000
EBT = 2050000 - (4410000 * 0.121) = $1516390
Net Income = 1516390 - (1516390 * 0.4) = $909834
Earnings per share = (909834 - 201000) / 111000 = $6.386 per share
e. 60% debt
Total debt = 9,800,000 * 0.60 = 5880000
EBT = 2050000 - (5880000 * 0.152) = $1156240
Net Income = 1156240 - (1156240 * 0.4) = $693744
Earnings per share = (693744 - 201000) / 75000 = $6.570 per share
The conversion rate is restated for all stock dividends and splits. Coffee had the following stock transactions in 2005 and 2006:
1/1/2005 - Sold 30,000 shares of common stock at $20 per share.
1/1/2005 - Sold 10,000 shares of preferred stock at $100 per share.
4/1/2005 - Issued at 50 percent stock dividend when the market price is $26 per share.
9/1/2005 - Purchased 4,000 treasury shares at $30 per share.
10/1/2005 - Sold 1,000 of the treasury shares at $32 per share.
11/1/2005 - Sold 2,000 of the treasury shares at $25 per share.
12/1/2005 - Issued a 2-1 for stock split.
12/20/2005 - Declared the required dividend to preferred stock holders and a $.25 per share dividend to common stockholders. Dividends are payable on 12/31/2005.
Prepare journal entries to record all of the above business events
Answer and Explanation:
The journal entries are shown below:
On Jan 1
Cash (30,000 Shares × $20) $600,000
To Common Stock (30,000 Shares × $2) $60,000
To Paid In Capital in Excess of Par - Common Stock $540,000
(Being the sale of the common stock is recorded)
On Jan 1
Cash (10,000 Shares × $100) $600,000
To Preferred Stock (10,000 Shares × $100) $1,000,000
(Being the sale of the preferred stock is recorded)
On Jan 4
Retained Earnings (30,000 × 50% × $26) $390,000
To Common Stock (15,000 shares × $2) $30,000
To Paid In Capital in Excess of Par - Common Stock $360,000
(Being the issued of the stock dividend is recorded)
On Jan 9
Treasury Stock (4,000 Shares × $30) $120,000
To Cash $120,000
(Being the purchase of treasury stock is recorded)
On Jan 10
Cash (1,000 Shares × $32) $32,000
To Treasury Stock (1,000 Shares × $30) $30,000
To Paid in Capital from Treasury Stock $2,000
(Being the sale of the treasury stock is recorded)
On Jan 11
Cash (2,000 Shares × $25) $50,000
Paid in Capital - Treasury Stock $2,000
Retained Earnings $8,000
To Treasury Stock (2,000 Shares × $30) $60,000
(Being the sale of the treasury stock is recorded)
On Jan 12
Since the shares are issued for 2 to 1 i.e the number of shares is rises from 29,000 shares to 58,000 shares due to which the par value is decreased from $2 to $1 per share. So the new 29,000 shares were to be distributed
On Dec 20
Retained Earnings $74,500
To Dividend Payable - Preferred Stock (10,000 Shares × 100 × 6%) $60,000
To Dividend Payable - Common Stock (58,000 Shares × $0.25) $14,500
(Being the dividend is declared)
Southern Alliance Company needs to raise $70 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 60 percent common stock, 15 percent preferred stock, and 25 percent debt. Flotation costs for issuing new common stock are 12 percent, for new preferred stock, 9 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use when evaluating its project ?
Answer:
$88,832,487.31
Explanation:
According to the scenario, computation of the given data are as follow:-
FT = flotation cost of new debt percent × target capital debt percent + flotation cost of new common stock percent × target capital common stock percent + flotation cost of new preferred stock percent × target capital preferred stock percent
= 0.02 × 0.25+ 0.12 × 0.60 + 0.09 × 0.15
= 0.005 + 0.072 + 0.135
= 0.212
Now
True initial cost
= $70 million ÷ ( 1 - 0.212)
= $70 million ÷ 0.788
= $88,832,487.31
Service Department Charges In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $64,560, and the Purchasing Department had expenses of $40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: ResidentialCommercialGovernment Contract Sales$2,000,000 $3,250,000 $2,900,000 Number of employees: Weekly payroll (52 weeks per year)400 250 150 Monthly payroll80 30 10 Number of purchase requisitions per year7,500 3,000 2,000 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division.
Answer and Explanation:
The computation of the total amount of payroll checks and purchased requisitions processed per year is shown below:
Particulars Residential Commercial Government Contract Total
Number of payroll checks:
Weekly payroll $20,800) $13,000 $7,800 $41,600
(400 × 52 weeks) (250 × 52 weeks ) (150 × 52 weeks)
Monthly payroll $960 $360 $120 $1,440
(80 × 12) (30 × 12) (10 × 12)
Total $21,760 $13,360 $7,920 $43,040
Number of purchase requisitions per year 7,500 3,000 2,000 12,500
The payroll of Blue Company for September 2016 is as follows. Total payroll was $462,000, of which $108,000 is exempt from Social Security tax because it represented amounts paid in excess of $118,500 to certain employees. The amount paid to employees in excess of $7,000 was $378,000. Income taxes in the amount of $74,400 were withheld, as was $9,600 in union dues. The state unemployment tax is 3.5%, but Blue Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current FICA tax is 7.65% on an employee’s wages to $118,500 and 1.45% in excess of $118,500. No employee for Blue makes more than $135,000. The federal unemployment tax rate is 0.8% after state credit. Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately. (
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
Journal Entry
a).Wages and salaries expenses A/c Dr. $462,000
To withhold tax payable A/c $74400
To FICA taxes payable A/c $28,647
To union dues payable A/c $9600
To cash A/c $349,353
(Being the wages and salaries paid)
b.
Payroll tax expense A/c Dr.
To FICA tax payable Cr. $28,647
To federal unemployment tax payable Cr. $672
To State unemployment tax payable Cr. $1008
(Being the payroll expense is recorded)
(($462,000-$378,000) ×0.8% = $672)
($462,000-$378,000 = $84,000)
($84,000× (3.5% - 2.3%) = $1008)
Working notes:
Calculation of FICA Tax = (Total Payroll - Exempted Tax) × Current FICA Tax Rate
=
($462,000 - $108,000) × 7.65%
= $354,000 × 7.65%
= $27,081
= Exempted Tax × Excess Rate of Employee Wages
= $108,000 × 1.45%
= $1,566
Total FICA Tax Payable Amount
= $27,081 + $1,566
= $28,647
Axsom Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 1,300 direct labor-hours will be required in March. The variable overhead rate is $8.90 per direct laborhour. The company's budgeted fixed manufacturing overhead is $20,020 per month, which includes depreciation of $2,600. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. What should be the predetermined overhead rate for March
Answer:
Estimated manufacturing overhead rate= $24.3 per direct labor hour
Explanation:
Giving the following information:
The direct labor budget indicates that 1,300 direct labor-hours will be required in March.
The variable overhead rate is $8.90 per direct labor hour.
The company's budgeted fixed manufacturing overhead is $20,020 per month.
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= (20,020/1,300) + 8.9
Estimated manufacturing overhead rate= $24.3 per direct labor hour
Answer:
Overhead rate = $15.4 per direct labour hour
Explanation:
The predetermined overhead absorption rate = Estimated overhead for march/ Estimated direct labour hours
= $20,020/ 1,300 hours
= $15.4 per hour
Overhead rate = $15.4 per direct labour hour
Note that deprecation is part of the fixed cost and that the examiner included the additional information about it just to distract the student
Crowl Corporation is investigating automating a process by purchasing a machine for $793,800 that would have a 9-year useful life and no salvage value. By automating the process, the company would save $133,000 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $21,200. The annual depreciation on the new machine would be $88,200. The simple rate of return on the investment is closest to
a. 5.80%
b. 11.12%
c. 16.72%
d. 5.12%
Answer:
Simple rate of return is 5.8%
Therefore option (a) is correct option.
Explanation:
It is given that purchase cost = $793800
Company saving per year = $133000
Yielding = $21200
Annual depreciation = $88200
Annual profit = $133000 - $88200 = $44800
Net investment is equal to = $793800 - $21200 = $772600
Simple rate of return [tex]=\frac{44800}{772600}=0.0579[/tex]
= 5.8%
Therefore simple rate of return is 5.8 %
So option (a) is correct.
The focused differentiation strategy differs from the differentiation strategy in that Group of answer choices a. the focused differentiators have a broader competitive scope b. the value-creating activities of focused differentiators are more constrained. c. focused differentiators target a narrower customer market d. there are fewer risks with the focused differentiation strategy.
Answer:
The answer is option C) The focused differentiation strategy differs from the differentiation strategy in that focused differentiators target a narrower customer market.
Explanation:
Product differentiation is a marketing strategy that creates competitive advantage with designing a product superior to that of rivals, priced higher and sometimes created for exclusive users.
However, the focused differentiation strategy takes it a step further by targeting a small group of customers with ostensible goods.
The bourgeoisie are the main target for focused differentiators. They have the economic power to foot the bill and they enjoy the exclusivity of being the few to consume such products. A good example of such products is the Bugatti and Ferrari.
Each year, Grey Mountain Enterprises (GME) prepares a reconciliation schedule that compares its income statement with its statement of cash flows on both the direct and indirect method bases. In its 2021 income statement, GME reported $440,000 for the cost of goods sold. GME paid inventory suppliers $380,000 in 2021, and its inventory balance decreased by $41,000 during the year. In its reconciliation schedule, GME should:
Answer:
The GME should reveal or provide a $19,000 an adjustment positive to net income under the indirect method for the increase in accounts payable.
Explanation:
Solution
Given that:
The Cost of goods sold = $440,000
Less: Inventory balance decrease = $41000
Thus,
The cost of goods - Inventory balance decrease is given as :
$440000-$41000 = $399000
So,
The Inventory purchases during the period =$399000 and the Less: Payment to inventory suppliers= $380000
The increase in accounts payable is calculated as follows:
The inventory purchases during the period - payment to inventory suppliers
=$399000 - $380000 = $19,000
Hence,
The Increase in accounts payable(Current Liabilities) is reported as a positive adjustment to net income under the indirect method
This provide a $19,000 adjustment positive to net income under the indirect method for the increase in accounts payable.
Selected information from Arbon Corporation's accounting records and financial statements for 2021 is as follows ($ in millions): Cash paid to acquire machinery $ 36 Reacquired Arbon common stock 50 Proceeds from sale of land 90 Gain from the sale of land 52 Investment revenue received 66 Cash paid to acquire office equipment 80 In its statement of cash flows, Arbon should report net cash outflows from investing activities of:
Answer:
Arbon should report net cash outflows from investing activities of: ($26)
Explanation:
Arbon Corporation
Statement of cash flows (extract)
Purchase of machinery ($36)
Proceeds from sale of land 90
Cash paid to acquire office equipment (80)
Net cash outflows from investing activities ($26)
Therefore, Arbon should report net cash outflows from investing activities of ($26).
Note that reacquired stock affects the financing section of the cash flows, while gain on sale of land and investment revenue received affect the operating section of the cash flows.
Mobile Sales has five employees which receive weekly paychecks. Each earns $11.50 per hour and each has worked 40 hours in the pay period. Each employee pays 12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in Social Security Tax, 1.5 % of gross in Medicare Tax, and 1/2% in State Disability Insurance. None of the employees is subject to a ceiling amount for Social Security. What is the amount of Sales Wages Expense
Answer:
$2,300
Explanation:
Sales wages expense = Number of employees * Hourly rate * Number of hours worked = 5 * $11.50 * 40 = $2,300
Note: The calculated $2,300 is the actual Sales Wage Expense. Other rates are just withholding tax that will be deducted before the net pay is paid to the employees.
