Answer:
B
Explanation:
Depreciation is the uniform decrease in the value of an asset over a period until the salvage value is reached.
It is given by :
Annual depreciation expense = (cost of asset - salvage)÷ useful life of the asset
Therefore the accumulated depreciation would not equal the original cost of the asset at the end of its estimated useful life because the salvage value will be deducted from cost of asset under declining-Balance.
The Productive Declining-Balance method would result in accumulated depreciation equaling the original cost of the asset at the end of its useful life.
Explanation:The depreciation method that would result in the accumulated depreciation equaling the original cost of the asset at the end of its estimated useful life with a 15 percent salvage value is Productive Declining-Balance method.
In the Productive Declining-Balance method, the depreciation expense is calculated as a percentage of the asset's net book value. The net book value is calculated by subtracting the accumulated depreciation from the original cost. This method allows for a higher depreciation expense in the earlier years of the asset's life, which gradually decreases over time.
With a salvage value of 15 percent, the accumulated depreciation would equal the original cost of the asset at the end of its useful life because the depreciation expense would be higher in the early years, gradually decreasing over time, until it reaches the salvage value.
Could I Industries just paid a dividend of $1.62 per share. The dividends are expected to grow at a rate of 20 percent for the next four years and then level off to a growth rate of 4 percent indefinitely. If the required return is 12 percent, what is the value of the stock today
Answer:
Explanation:
Using the dividend growth model = Do(1+g)/Ke-g
Do=1.62$
G=4%
Ke=12%
Do(1+g)/Ke-g = 2.0736(1+4%)/12%-4%
= 1.6848
/8%
= 53.916
Year Year Year Year Year
0 1 2 3 4
20% 20% 20% 20%
Dividend 1 1.2 1.44 1.728 2.0736
Ifninty dividend 55.91*
Total Cashflows 1 1.2 1.44 1.728 55.98
Pres.Val @12% 1 1.07142 1.14795 1.22995 35.583
Value of stock 40.030
An increase in the demand for movies also increases the salaries of actors and actresses. Is the long-run supply curve for movies likely to be horizontal or upward sloping? Explain. If an increase in the demand for movies also increases the salaries of actors and actresses, then the long-run supply curve for movies is likely to be
Answer:
Upward sloping because increases in output raise input prices.
Explanation:
If an increase in the demand for movies also increases the salaries of actors and actresses, then the long-run supply curve for movies is likely to be upward sloping because increases in output raise input prices.
Hancock Machining manufactures A, B, and C, all of which are joint products, and D, which is classified as a by-product. If joint manufacturing costs amount to $450,000 and the company is using a popular accounting method, the firm will:a. allocate $450,000 among A, B, and C.b. allocate $450,000 among A, B, C, and D.c. increase $450,000 by the net realizable value of D and then allocate the total among A, B, and C.d. decrease $450,000 by the net realizable value of D and then allocate the total among A, B, and C.
Answer: D
Explanation:
decrease $450,000 by the net realizable value of D and then allocate the total among A, B, and C
Which of the following terms refers to a goal-oriented process that is directed toward ensuring that organizational processes are in place to maximize the productivity of employees, teams, and the organization? career development team strategic management performance management organization development
Answer:
Performance management
Explanation:
Performance management is a corporate management tool that aids managers to monitor and measure employees' work. Performance management's goal is to create an enabling environment where people can perform their to the best of their abilities to produce quality result.
Performance management is the activities and processes that focus mainly on areas to maintain and improve employee performance in line with an organisation's objectives.
Answer:
The correct answer is: performance management.
Explanation:
Performance management can be defined as a process that takes place in an organization that provides essential information for monitoring quality, time, cost, capacity, etc. in order to control workflow and processes so that there is greater support for information to aid decision making that will impact on improving the productivity of employees, teams and the organization so that the achievement of the established organizational goals is more effective.
call option exists on British pounds with an exercise price of $1.60, a 90-day expiration date, and a premium of $.03 per unit. A put option exists on British pounds with an exercise price of $1.60, a 90-day expiration date, and a premium of $.02 per unit. You plan to purchase options to cover your future receivables of 700,000 pounds in 90 days. You will exercise the option in 90 days (if at all). You expect the spot rate of the pound to be $1.57 in 90 days. Determine the amount of dollars to be received, after deducting payment for the option premium.
Solution:
The amount of dollars to be received, after the deduction of payment for the option premium is calculated as follows:
= ( Exercise price subtract Option premium ) multiply with the amount that is receivable
As per the given data,
Exercise price = $1.60, Option premium = 0.02, Amount which is receivable = 700000 pounds, expiration date = 90-days
Putting these figures in formula, we get,
= [tex](\$ 1.60-\$ 0.02) * 700000[/tex] pounds = $1106000.
Therefore, the amount that will be received will be $1106000
The following two errors were made in the physical inventory counts: 1. 2012 ending inventory was overstated by $33,000. 2. 2013 ending inventory was understated by $28,000. Compute the correct cost of goods sold for both 2012 and 2013.
Answer:
2013: $490,000 2012: $561,000
Question:
Errors in inventory count the following information was taken from the record of Spencer Enterprises
2013 2012
Beginning Inventory $63,000 $83,000
Cost of goods purchased $548,000 $508,000
Cost of goods available for sale $611,000 $591,000
Ending inventory $93,000 $63,000
Cost of goods sold $518,000 $528,000
The following two errors were made in the physical inventory counts:
1. 2012 ending inventory was overstated by $33,000
2. 2013 ending inventory was understated by $28,000.
Compute the correct cost of goods sold for both 2012 and 2013.
Explanation:
Computation of cost of goods sold for the year 2016 and 2015
Particulars 2013 2012
Beginning inventory $63,000 $83,000
Cost of goods purchased $548,000 $508,000
Cost of goods available for sale $611,000 $591,000
Ending inventory (corrected) $121,000 $30,000
Cost of goods sold (corrected) $490,000 $561,000.
note:
In 2013 new ending inventory = $93,000 + $28,000 = $121,000
In 2012 new ending inventory = $63,000 - $33,000 = $30,000
Beginning inventory + Cost of goods purchased = Cost of goods available for sale
Cost of goods available for sale - Ending inventory = Cost of goods sold
Testing is used by many companies during the recruitment process. Tests could include aptitude, psychological, personality, integrity, and drug testing, to name a few. From the viewpoint of the employer, discuss the pros and cons of 4 types of tests that are used.
Personality test is an assessment that provides insight into important but intangible information about candidates such as personality, values, and work preferences.
Explanation:Pros of Personality Testing :
1, Knowing the unique information personality tests provide can help hiring managers to assess a candidate’s fit into the computer any culture.
2. Personality tests allow hiring managers to better understand how to keep individual employees engaged and motivated at work.
3. Well-designed, standardized assessments allow an organization to improve its legal defensibility by providing a fairer method of candidate comparison.
4.Personality tests can reduce the chance of putting the wrong person in the wrong role (a mistake that can be costly)
The cons of personality test:
1.Time: Personality tests can be time-consuming, which may lead to job candidate frustration or even loss to other companies.
2.Money: Personality tests can be costly to administer.
3.Accuracy: While useful for gaining behavioral insight, personality tests are not always the best indicators of how successful an individual will be in a job
4.Reliability: Candidates often answer personality tests by choosing answers they believe employers want to hear. This can make test results difficult to interpret or even invalid.
It’s time for the Bizlaw County auction! For each of the auction items listed below, you will (1) determine which type of property the item is and (2) give an identifier that further describes the nature of the item.
A. A ring Hugh received from his grandmother several months before she died.
B. A motorbike Ned got from the Harley-Davidson store for $53,000.
C. A motorless army jeep left on the plot of land Corey bought.
D. A pair of high-quality cleats that Candace found on the football field after a game.
E. A Sony Walkman that Mary left in her will for her nephew, Zeppelin.
F. The lyrics to an unpublished song that famous rapper 11 Nickels gave to his daughter when he retired.
Answer:
I have formulated the answer in the table and the table is attached in the attachment please refer to the attachment 1.
Explanation:
Please refer to the attachment 1. And here is the explanation
Inherited property is the property which is transferred to ones beloved after she/he passes away or makes a will, so statement A, E and F are inherited properties.
Purchased property are the ones that one acquires after paying certain price of the good, so B is purchased property.
Abandoned property is the goods or intangible thing left somewhere and the owner is not known, so statement C and D are abandoned properties.
Supplies on hand at October 31 total $500. Expired insurance for the month is $100. Depreciation for the month is $50. Services related to unearned service revenue in October worth $600 were performed. Services performed but not recorded at October 31 are $300. Interest accrued at October 31 is $95. Accrued salaries at October 31 are $1, 625. Instructions Prepare the adjusting entries for the items above.
Answer:
Supplies on hand at October 31 total $500
Inventory $ 500 (debit)
Income Statement - cost of sales $500 (debit)
Expired insurance for the month is $100
Insurance $ 100 (debit)
Account Payable - Insurance Provider $100(credit)
Depreciation for the month is $50
Depreciation $50 (debit)
Accumulated Depreciation / Asset $50 (credit)
Services related to unearned service revenue in October worth $600 were performed
Trade Receivable $ 600 (debit)
Revenue $ 600 (credit)
Interest accrued at October 31 is $95
Interest expense $95 (debit)
Interest Accrued $95 (credit)
Accrued salaries at October 31 are $1, 625
Salaries and Wages $ 1625
Salaries and Wages Accrued $ 1625
Explanation:
Supplies on hand at October 31 total $500
Recognise an Asset - Inventory and de-recognise an expense - cost of sales in Income statement
Expired insurance for the month is $100
Recognise an expense - Insurance and recognise a liablility - Trade Payable (Insurance Provider)
Depreciation for the month is $50
Recognise an expense - depreciation and de-recognise an asset through the accumulated depreciation account
Services related to unearned service revenue in October worth $600 were performed
Recognise an Asset- Trade Receivable and recognise revenue
Interest accrued at October 31 is $95
Recognise an expense - Interest and a liability - Interest accrued
Accrued salaries at October 31 are $1, 625
Recognise an expense - Salaries and Wages and de-recignise a liability - Salaries and Wages accrued.
To adjust entries, Supplies will be debited and credited by $500, Insurance Expenses will be debited and Prepaid Insurance credited by $100, Depreciation Expenses and Accumulated Depreciation are adjusted by $50, Unearned Service Revenue will be debited and Service Revenue credited by $600, for Services Performed But Not Recorded, Accounts Receivables and Service Revenue is adjusted by $300, Interest Expense and Interest Payable by $95 and for Accrued Salaries, Salaries Expense, and Salaries Payable are adjusted by $1,625.
Explanation:To adjust entries based on your provided information, five main steps are taken into account. These steps include Supplies, expired insurance, depreciation, services related to unearned service revenue, and accrued items. Here is how you can adjust the entries:
Supplies: The entry will be: Debit Supplies Expense $500, Credit Supplies $500.Expired Insurance: We can record this by: Debit Insurance Expense $100, Credit Prepaid Insurance for $100.Depreciation: The adjusting entry is Debit Depreciation Expense $50, Credit Accumulated Depreciation $50.Unearned Service Revenue: This can be recorded as Debit Unearned Service Revenue of $600 and Credit Service Revenue of $600.Services Performed But Not Recorded: The entry here is: Debit Accounts Receivable $300, Credit Service Revenue $300.Accrued Interest: The correct adjustment is: Debit Interest Expense $95, Credit Interest Payable $95.Accrued Salaries: And finally for the salaries, the entry would be: Debit Salaries Expense $1,625, Credit Salaries Payable $1,625.Learn more about Adjusting Entries here:https://brainly.com/question/33175618
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When taxes are levied on transactions, irrespective of the party they are levied on, a. The government can absorb some of the surplus, but also creates a social loss since some of the wealth creating transactions are discouraged b. The government can absorb all the consumer surplus from the transactions as revenue c. The government can absorb all of the surplus (producer and consumer) d. The government can absorb all the producer surplus from the transactions as revenue
Answer:
a. The government can absorb some of the surplus, but also creates a social loss since some of the wealth creating transactions are discouraged.
Explanation:
When a government applies tax levied to all products irrespective not the parties that are being taxed, the poor will be taxed the same way rich people are taxed. This will result in financial hardships for the portion of the population that do not have much resources. It will result in more revenue for the government.
The adverse effect of this is that the lower class will be discouraged from performing transactions that are viewed to be too expensive.
The upper class though will have no problem with this as they can easily bear the tax.
A good strategy will be to implement differential taxing where economic level of the parties performing the transaction is considered.
Jack and Tracy would like to have $10,000 for a down payment on a new condo. A savings account at their local credit union will pay 2% per year compounded monthly. How much should they deposit now in this account to have the down payment in 3 years
Answer:
They should deposit $4,9,02 in the account.
Explanation:
Present value is the value of future cash flow in present term. The amount received in future have more value today than in future because of opportunity of reinvestment of cash flow.
Number of periods = 3 x 12 = 36 months
Present value = Future value / ( 1 + r )^n
Present value = $10,000 / ( 1 + 0.02 )^36
Present value = $10,000 / 2.04
Present value = $4,902.23 = $4,902
An investment project is expected to earn $100,000 on average with a standard deviation of $50,000. Assume the earnings from this investment project is a normal distribution. What is the probability that you will lose money or earn nothing from this project
Answer:
probability that you will lose money is 0.0228
Explanation:
given data
mean = $100,000
standard deviation = $50,000
solution
we get here probability that annual net cash flow will be negative as earn nothing
P(x< 0) = P ( [tex]\frac{x-\mu }{\sigma }[/tex] < [tex]\frac{0-100000}{50000}[/tex] )
and
P(x< 0) = P ( z < -2 )
P(x< 0) = 1 - P( z < 2 )
P(x< 0) = 1 - 0.9772
P(x< 0) = 0.0228
so probability that you will lose money is 0.0228
Which of the following statements about economic activity levels is false? A. Planting and growing crops is a primary economic activity. B. Marketing agricultural products is a secondary economic activity. C. Processing agricultural products, such as canning or freezing in a factory, is a secondary economic activity. D. Raising livestock is a primary economic activity. Please select the best answer from the choices provided. A B C D
Answer: option (A). Marketing agricultural products is a secondary economic activity.
Explanation: Economic activity refers to the activity of making, providing, purchasing, or selling goods or services. Furthermore, an action that involves producing, distributing, or consuming products or services is an economic activity.
Economic activities levels are divided into 4 they are :-
1). Primary Economic Activity
2). Secondary Economic Activity
3). Tertiary Activities
4). Quaternary Activities
Answer:
A (Planting and growing crops is a primary economic activity) is correct
Explanation:
I just took this quiz.
The following is the Easton Company's adjusted Trial Balance. Easton Company Adjusted Trial Balance December 31, 2018 Account Title Debit Credit Cash $88,665 Accounts Receivable 232,000 Supplies 17,000 Equipment 395,000 Accumulated Depreciation $224,260 Accounts Payable 72,555 Capital Stock 220,000 Retained Earnings 127,145 Service Revenue 877,105 Interest Income 5,500 Dividends 7,000 Rent Expense 59,900 Wages Expense 529,000 Supplies Expense 40,000 Utilities Expense 8,000 Depreciation Expense 150,000 ________ Totals $1,526,565 $1,526,565 Use this information to prepare the Balance Sheet for the fiscal year. There are additional lines in the formatted Balance Sheet form to allow for authorized alternate presentations.
Explanation:
Easton company income statement of 31 December
Sales revenue $877,105
Interest income $5,500
Total revenue $882,605
Less: operating expenses
Rent expense $59,900
Wage expenses $529,000
Supplies expense $ 40,000
Utilities expense $8,000
Depreciation expenses $ 150,000
Total expenses -$786,900
Net income $95,705
Therefore the retained earning ending balance is
retained earnings opening = $127,145
Current net income = $95,705
Less: Dividend = -$7,000
The Retained earnings closing = $215,850
Balance sheet of December 31,2018
Current asset
cash $88,665
accounts receivable $232,000
supplies $17,000
Total current assets $337,665
Fixed assets
Equipment = $395,000
accumulated depreciation = (224,260)
Net fixed assets $170,740
Total assets $508,405
Liabilities and shareholders equity
current liabilities
Accounts payable $72,555
common shareholders equity
Capital stock $220,000
Retained earnings $215,850
Total liabilities and equity $508,405
The adjusted trial balance of Cheyenne Company shows the following data pertaining to sales at the end of its fiscal year, October 31, 2017:
Sales Revenue $728,400, Delivery Expense $12,780, Sales Returns and Allowances $25,320, and Sales Discounts $12,380.
Prepare the revenues section of the income statement.
Answer:
Cheyenne Company
Amount in $ Amount in $
Sales revenue 728,400
Less;
Sales Returns and Allowances 25,320
Sales Discounts 12,380
(37,700)
Net sales 690,700
Explanation:
The revenue section of the income statement shows the computation of the net sales which is the result of the total sales less sales returns, discounts and allowances.
Corona Company is owned equally by Maria, her sister Carlita, her mother Gabriella, and her grandmother Olivia, each of whom hold 100 shares in the company. Under the family attribution rules, how many shares of Corona stock is Maria deemed to own?A. 100B. 200C. 300D. 400
Answer:
B. 200 shares
Explanation:
Under the family attribution rules, attribution is applies who owns more than 50% percentage
Since in the question the percentage is not given but in the company each one has equal owning percentage plus there holding 100 shares in the company each
So in the given case the maria deemed to own her share plus her mother share also as she is the owner of her mother share
So, the total shares owned by her is
= 100 shares + 100 shares
= 200 shares
Extreme examples of unethical and illegal conduct are the exception in the business community. Which of the following statements about this behavior is false? Multiple Choice You can rely on the legal system to manage or assure ethical conduct at work. Even if illegal, few of these acts are prosecuted. Very few unethical acts are also illegal. Unethical behavior negatively affects the offending employee, coworkers, and the employer. Most unethical acts are not punished in any way.
Answer: The correct answer is "You can rely on the legal system to manage or assure ethical conduct at work.".
Explanation: The statement "You can rely on the legal system to manage or assure ethical conduct at work." is FALSE, because the legal system cannot be trusted to manage or ensure ethical conduct at work, since many unethical conduct is not illegal and cannot be punished despite the fact that it is not recommended and inconvenient and is not ethical.
The false statement is that you can rely on the legal system to manage or assure ethical conduct at work. This is due to the fact that although the legal system does deal with illegal activities, not all unethical acts are illegal, meaning that the legal system can't manage all unethical behavior.
Explanation:The false statement is: 'You can rely on the legal system to manage or assure ethical conduct at work.' While the legal system can prosecute and punish illegal acts, it's important to note that not all unethical behavior is illegal. Thus, relying solely on the legal system to manage or enforce ethical conduct is not efficient or effective.
For example, an employee gossiping about confidential information isn't considered illegal, but it is unethical. The legal system won't typically intervene in these types of scenarios. Therefore, industries often have their own ethical guidelines, or a code of conduct, which sets the standard for ethical behavior within an organization or profession.
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Each payment covers the interest expense plus reduces principal. Consider a 4 year loan with annual payments. The interest rate is 8%, and the principal amount is $4969. What is the annual payment? (in dollars)
Answer:
$1,500
Explanation:
In this question, we are asked to calculate annual interest payment for a loan.
We proceed as follows:
Firstly, let’s assign variables as follows; let the amount of loan is P, monthly interest rate is r and term of loan is n
P = $4,979 , r = 8% =8/100 = 0.08 and n = 4 years
The equated monthly installment is mathematically =
EMI = P *r*[(1+r)^n] /[(1+r)^n -1]
EMI = 4969*0.08*[(1+0.08)^4] / [(1+0.08)^4 - 1]
EMI = 397.52*1.36/1.36048896 - 1
EMI = 540.6272/0.36048896= $1499.71 rounded to $1500
Madisun Company issued common stock for proceeds of $20,000 during 2017. The company paid dividends of $5,000. The company also issued a long-term note payable for $35,000 in exchange for equipment during the year. The company sold treasury stock that had a cost of $3,000 for $9,000 Compute net cash flows from financing activities. Net cash flows from financing activities
Answer:
Net cash flows from financing activities is $24,000
Explanation:
The net cash flow of funding a company is called cash flow from financing activities. It includes the cash flows relating to equity and liabilities.
Cash flows:
Inflows
Stock proceeds = $20,000
Treasury stock proceeds = $9,000
Outflow
Dividend payment = $5,000
Net cash flows = $20,000 + $9,000 - $5,000 = $24,000
The price of apples used to make apple pies has increased. At the same time, people expect the price of apple pies to increase significantly in the future. Given these two effects, what will happen to the current equilibrium quantity and price of apple pies?
Answer:
Equilibrium price will increase and equilibrium quantity will decrease
Explanation:
As the price of a commodity gets higher the demand will reduce. therefore they will be an abundance of the commodity since it is too hig for the consumers to buy.
Carol Cagle has a repetitive manufacturing plant producing trailer hitches in Arlington, Texas. The plant has an average inventory turnover of only 12 times per year. He has therefore determined that he will reduce his component lot sizes. He has developed the following data for one component, the safety chain clip:
Setup Labor Cost: $30 / hr
Annual Holding Cost: $12 / Unit
Daily Production: 976 Units / 8 Hour Day
Annual Demand: 30,000 (250 days each x daily demand of 120 units)
Desired Lot Size: 122 units (One Hour of Production)
To obtain the desired lot size, the set-up time that should be achieved = ___ minutes (round your response to two decimal places).
Answer:
5.22 minutes
Explanation:
Given that,
Average inventory turnover = 12 times per year
Setup Labor Cost (L) = $30 / hr
Annual Holding Cost (H) = $12 / Unit
Daily Production (P) = 976 Units / 8 Hour Day
Annual Demand (D) = 30,000 (250 days each × daily demand of 120 units)
Desired Lot Size (S) = 122 units (One Hour of Production)
Setup cost:
[tex]=\frac{H(S)^{2} }{2\times Annual\ demand} \times \frac{p-Daily\ demand}{p}[/tex]
[tex]=\frac{12(122)^{2} }{2\times 30,000} \times \frac{976-120}{976}[/tex]
= 2.61
Setup time:
[tex]=\frac{Setup\ cost}{Labour\ rate}[/tex]
[tex]=\frac{2.61}{30}[/tex]
= 0.087 hours or we can say that 5.22 minutes.
Therefore, To obtain the desired lot size, the set-up time that should be achieved = 5.22 minutes
The following information is available for Wenger Corporation:
1. Excess of tax depreciation over book depreciation, $43,800. This $43,800 difference will reverse equally over the years 2020–2023.
2. Deferral, for book purposes, of $18,100 of rent received in advance. The rent will be recognized in 2020.
3. Pretax financial income, $302,100.
4. Tax rate for all years, 20%.
Instructions:
(a) Compute taxable income for 2019.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.
(c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income is $325,000.
Answer:
The taxable income for 2019 is $276,000.
Explanation:
(a) Calculation of taxable income for 2019:
Pretax financial income $302,100
Less: Excess of tax depreciation over book depreciation ($43,800)
Add: Rent received in advance $18,100
Taxable income for 2019 $276,400
(b) Journal entries for 2019: Debit ($) Credit ($)
Income tax expense ($302,100 x 20%) 60,420
Deferred tax asset ($18,100 x 20%) 3,620
Deferred tax liability ($43,800 x 20%) 8,760
Income tax payable ($276,400 x 20%) 56,800
Recording of income tax expense, deferred income taxes, and income taxes payable for 2019.
(c) Journal entries for 2020:
Income tax expense (65,000 + 3,620 - 2,190) 66,430
Deferred tax asset ($43,800 x 20% / 4) 2,190
Deferred tax liability ($18,100 x 20%) 3,620
Income tax payable ($325,000 x 20%) 65,000
Recording of income tax expense, deferred income taxes, and income taxes payable for 2020.
Answer:
a) taxable income $276,400
b and c Journal entries prepared in the explanation
Explanation:
The first part is to compute the taxable income for 2019 as follows:
Description Amount
Pretax financial income for 2010 302,100
Subtract: Tax dep. excess over book dep. (43,800)
Add: Rent received in advance 18,100
Taxable income 276,400
B) Prepare the journal entry fro 2019 to record income tax expense, deferred income taxes and income taxes payable for 2019
Date Description Debit Credit
2019 Income tax ex. (302,100 x 20%) 60,420
Deferred tax ( 18,100 x 20%) 3,620
Deferred tax liability (43,800 x20%) 8,760
Income tax payable (276,400 x 20%) 55,280
Being the record of income tax expense, deferred tax income taxes and income tax payable
c) Prepare the journal entry fro 2020 to record income tax expense, deferred income taxes and income taxes payable for 2019
Date Description Debit Credit
2020 Income tax ex. (60,420+ 3,620-2,190) 61,850
Deferred tax liab. ( 43,800/4 yearsx 20%) 2,190
Deferred tax Asset (18,100 x20%) 3,620
Income tax payable (325,000 x 20%) 65,000
Being the record of income tax expense, deferred tax income taxes and income tax payable
Ricky is thinking about borrowing $10,000 from Fred. He promises Fred cash flows of $5000 for the next three years. If Fred’s cost of capital is 10%, what is the Net Present Value of the investment for Fred?
Answer:
$2,434.50
Explanation:
The computation of the net present value is shown below:
Net present value = Present value for next three years - initial investment
where,
Present value for next three years is
= Annual payment × PVIFA factor for 10% for 3 years
= $5,000 × 2.4869
= $12,434.50
Refer to the PVIFA table
And, the initial investment is $10,000
So, the net present value is
= $12,434.50 - $10,000
= $2,434.50
Final answer:
The Net Present Value (NPV) of the investment for Fred is -$165.75. NPV is used to assess the profitability of an investment by comparing the present value of expected cash inflows to the initial investment cost.
Explanation:
The Net Present Value (NPV) of an investment is a measure used to assess the profitability of an investment by comparing the present value of expected cash inflows to the initial investment cost. To calculate the NPV, we need to discount the cash flows using Fred's cost of capital, which is 10%.
Using the formula for NPV, we discount the cash flows of $5000 for the next three years back to their present value. The present value of cash flows can be calculated as follows:
Year 1: $5000 / (1 + 10%)^1 = $4545.45
Year 2: $5000 / (1 + 10%)^2 = $4132.23
Year 3: $5000 / (1 + 10%)^3 = $3756.57
Then, we sum up the present values of all three years' cash flows and subtract the initial investment cost of $10,000:
NPV = $4545.45 + $4132.23 + $3756.57 - $10,000 = -$165.75
Therefore, the Net Present Value of the investment for Fred is -$165.75.
Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of .8 and an expected return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk ratios for stocks Y and Z are
Answer:
The reward to risk ratio for stock Y is 7.22%
The reward to risk ratio for stock Z is 5.50%
Explanation:
First and foremost, it is very important to note that the reward-to-risk ratio of a stock is the risk premium paid by the stock divided by its asset Beta.
The risk premium is calculated as stock expected return minus risk free rate
The risk premium is denoted by (rm – rrf) in Capital Asset Pricing Model of Modgiliani and Miller
For stock Y risk premium is 18.2%-5.2%=13%
For stock Z risk premium is 9.6%-5.2%=4.40%
For stock Y reward to risk ratio=13%/1.8=7.22%
For stock Z reward to risk ratio=4.40%/0.8=5.50%
Hence stock Y has a higher reward to risk ratio
Answer:
Y=1.05 Z=0.91
Explanation:
We calculate the risk for the stocks first
Ry=5.2+1.8(6.7)=17.26
Rz=5.2+0.8(6.7)=10.56
Then we calculate the reward for every risk the stock takes
so Y= 18.2/17.26
=1.05
Z=9.6/10.56
=0.91
Why does the explanation for the inverse relationship between the price level and quantity demanded depicted by the aggregate demand curve differ from the relationship between price and quantity demanded depicted by a demand curve for a specific good?
Answer:
Demand curve for individual goods is drawn on assumption that price changes for one good and others remain constant. But for Aggregate demand considers change in price level of multiple goods and services.
Explanation:
When considering demand curve of individual goods there is inverse relationship between price and quantity demanded of a good. The price change is pertaining to one good and the assumption is that all other good's prices remains constant and also that income level remains constant. As the price of a good Y rises quantity demanded for that good falls.
On the other hand considering aggregate demand, it looks at changes in price level. This cuts across various goods and also change in income level. So there is no assumption of price of some products being constant in aggregate demand curve. It however assumes supply of money by the government is constant.
The inverse relationship of price to quantity demanded (downward sloping curve) is affected by wealth effect, interest rate effect, and net exports effect.
Final answer:
The aggregate demand curve reflects the negative relationship between the overall price level and total demand due to the wealth effect, interest rate effect, and international trade effect, which differ from the substitution and income effects seen in individual demand curves.
Explanation:
The explanation for the inverse relationship between the price level and quantity demanded depicted by the aggregate demand curve differs from the relationship between price and quantity demanded depicted by a demand curve for a specific good due to different underlying effects. On a microeconomic demand curve, a decrease in price makes a good less expensive relative to substitutes, increasing its quantity demanded due to the substitution effect and the income effect. However, for the aggregate demand curve, the negative relationship between the price level and quantity of goods and services demanded emerges from broader macroeconomic phenomena, such as the wealth effect, the interest rate effect, and the international trade effect.
Effects Contributing to the Shape of Aggregate Demand Curve:
Wealth effect: As price levels drop, the real value of money increases, making consumers wealthier and more likely to spend, thus increasing consumption.
Interest rate effect: Lower price levels lead to lower interest rates, which encourages investment and spending and hence increases the quantity of goods and services demanded.
International trade effect: When domestic price levels fall, domestic goods become relatively cheaper than foreign goods, boosting exports and reducing imports, which supports greater aggregate demand.
These effects combined result in a rise of total spending, or aggregate demand, not merely because goods are cheaper but due to increased purchasing power, incentivized investments, and competitive exports.
A portfolio manager is considering adding another security to his portfolio. The correlations of the 5 alternatives available are listed below. Which security would enable the highest level of risk diversification
For diversification, one should consider adding the security with the lowest correlation coefficient in the existing portfolio. This reduces risk as low correlation indicates the price movement of these securities is less likely to be identical.
Explanation:The concept of portfolio diversification plays an essential role in minimizing risk and maximizing returns in finance. When introducing a new security to a portfolio, you should consider the correlation of the new security with the ones already present in the portfolio. To achieve the highest risk diversification, the portfolio manager should add the security with the lowest correlation coefficient to the existing ones within the portfolio. A lower correlation coefficient means the securities' prices move less in tandem, thus, if one security performs poorly, it will be offset by the performance of the other securities; this is in line with the proverb 'Don't put all your eggs in one basket'. It's also important to remember that diversification, does not eliminate all risk. It only reduces the unsystematic risk associated with individual securities.
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1. On April 5, purchased merchandise on account from Sheffield Company for $44,600, terms 2/10, net/30, FOB shipping point.
2. On April 6, paid freight costs of $890 on merchandise purchased from Sheffield.
3. On April 7, purchased equipment on account for $44,400.
4. On April 8, returned damaged merchandise to Sheffield Company and was granted a $5,700 credit for returned merchandise.
5. On April 15, paid the amount due to Sheffield Company in full.
Required:
Prepare the journal entries to record these transactions on the books of Kerber Co. under a perpetual inventory system.
Answer:
The Journal entries are as follows:
(1) On April 5,
Merchandise Inventory A/c Dr. $44,600
To Accounts Payable $44,600
(To record the merchandise purchase on account)
(2) On April 6,
Merchandise Inventory A/c Dr. $890
To cash A/c $890
(To record the payment of freight)
(3) On April 7,
Equipment A/c Dr. $44,400
To accounts payable $44,400
(To record the purchasing of equipment)
(4) On April 8,
Accounts Payable A/c Dr. $5,700
To Merchandise Inventory $5,700
(To record the damaged merchandise)
(5) On April 15,
Accounts Payable A/c Dr. $38,900
To Merchandise Inventory $778
To cash $38,122
(To record the payment of due amount)
Workings:
Accounts Payable = $44,600 - $5,700
= $38,900
Merchandise Inventory = 2% of $38,900
= $778
Grady, Renate, and Blake must divide a green shirt, a red shirt, and a blue shirt. They assign points to each item as follows: Gary: green shirt 60, red shirt 20, blue shirt 20 Renate: green shirt 30, red shirt 60, blue shirt 10 Blake: green shirt 10, red shirt 20, blue shirt 70. Which of the following splits is efficient? a.Gary gets the red shirt; Renate gets the blue shirt; Blake gets the green shirt. b.Renate gets all three shirts c.Gary gets the green shirt; Renate gets the blue shirt; Blake gets the red shirt. d.Renate gets the red and blue shirts; Blake gets the green shirt. e.None of these splits are efficient.
Answer: E.None of these splits are efficient.
Explanation:
From the above question,
1. Gary: green shirt 60, red shirt 20, blue shirt 20
2. Renate: green shirt 30, red shirt 60, blue shirt 10
3. Blake: green shirt 10, red shirt 20, blue shirt 70
From the above split, we can say that each should get the highest no of shirt assigned to them but the total number of shirts was not stated in the question to aid our sharing of the shirts efficiently.
Final answer:
The efficient split of shirts among Grady, Renate, and Blake is found in option c, where each person receives their most valued shirt, maximizing overall satisfaction without any compromise.
Explanation:
The question revolves around finding an efficient split of shirts among Grady, Renate, and Blake, based on the points they assign to each shirt. The points indicate their preferences, and an efficient split would ensure the highest satisfaction for all with no wastage or redundancy.
By examining the preferences provided: Grady values the green shirt most (60 points), Renate values the red shirt most (60 points), and Blake values the blue shirt most (70 points). Thus, the efficient split is:
Grady gets the green shirt
Renate gets the red shirt
Blake gets the blue shirt
This matches option c, making this the efficient split. This scenario ensures that each person gets their most preferred shirt, maximizing overall utility without any compromise required from any party.
A town is considering investing money into making a public show in a park that can be enjoyed by families during a weekend. The show requires an investment of $950. There are 150 families, each of which is willing to pay up to $6 for the show. There are also 50 additional families each willing to pay $5 for the show. If the money is invested, there is a large capacity so that any number of families can attend, and their enjoyment will not depend on the number of attendees. (a) According to the utilitarian criterion, should the money be invested
Answer:
If 150 are willing to pay $6, amount accumulated = 150 multiply with 6= $900
If 50 family pays & $5 each, amount accumulated = 50 multiply with 5 = $250
Total = $900 + $250 = $1150.
Excess amount = $1150 - $950 = $200
(i) Yes, the money should be invested because after collection from families and investing, there is an excess fund of $200.
Define the following terms: a. Cost of debt b. Cost of equity c. After-tax WACC d. Equity beta e. Asset beta f. Pure-play comparable g. Certainty equivalent
Answer: The answers are explained below.
Explanation:
• Cost of debt: The cost of debt is the interest rate that a company is charged on its debts. It is the interest paid on bonds, loans etc. The cost of debt is usually the before-tax cost of a debt.
• Cost of equity: The cost of equity is the return a firm pays to its equity investors e.g shareholders in order to reward them for the risk taken by investing their capital. Companies need capital to operate and grow hence, individuals and organizations who provide funds to such companies are rewarded.
• After tax WACC: The Weighted Average Cost of Capital (WACC) is a firm's combined cost of capital including preferred shares, common shares, and debt after the deduction of tax.
• Equity Beta: It measures the sensitivity of the stock price to changes in market. Equity Beta is also called levered beta.
• Asset beta: It is the beta of a firm without the effect of debt. It is a company's volatility of returns without its indebtedness.
• Pure play comparable: The pure play comparable is the taking of the beta estimate of another company that is comparable and in same line of business.
• Certainty equivalent: It is the guaranteed return that an individual would take now, rather than awaiting a higher but uncertain return later in the future.
Answer:
Explanation:
A. Cost of debt: This is the rate of a company pays on its debts, such as bonds and loans. Cost of debt is one part of a company's capital structure, with the other being the cost of equity.
B. Cost of equity : This is the return a company needs to decide if an Investment meets capital return requirements.
C. After tax WACC:This is the average after tax cost of a company's various capital sources, including common stocks, preferred stocks, bonds, and any other long term debt. In other words,WACC is the average rate of a company expect to pay to finance its assets.
D. Equity beta:This measures the volatility of the stock to the market that is, how sensitive is the stock price to a change in the overall market. Equity beta is also known as levered beta.
E. Assets beta: This is also known as unlevered beta, this is a beta of a company without the impact of debt. It is also known as the volatility of returns for a company.
F. Pure play comparable :This refers to companies that are in the single line of business. It is also used to find cost of capital for a project that is different from company's mainstream business.
G. Certainty equivalent :This is a guaranteed return that someone would accept now, rather than taking a chance on higher but uncertain, return in the future.