Answer:
The correct answer is letter "B": The agent has different incentives than does the principal.
Explanation:
Incentive conflicts more often called principal-agent problems arise when a principal (stakeholder) hires an agent (manager) to handle businesses on behalf of the principal but the principal's interest is different from the agent's purpose.
Agents are paid for following the principal's instructions but in most cases, when it comes to decision-making, the point of view of the agent differs from the position of the principal. The principal's point of view is typically self-biased.
Final answer:
An incentive conflict happens when the agent's incentives differ from the principal's, creating a divergence in their goals and interests.
Explanation:
An incentive conflict occurs when the agent has different incentives than does the principal, leading to a divergence in goals between the two parties. For instance, employees may waste time on personal activities during work hours, or attorneys may avoid settling a case promptly to generate more fees, both of which demonstrate the agent acting against the principal's best interests. This misalignment of incentives is a core issue in agency theory, where the principal-agent problem is a part of economic studies regarding contracts and incentive structures designed to align the agent's actions with the principal's goals.
Pick an industry that typically has strong cyclical (peaks when the economy is strong) or counter-cyclical (peaks when the economy is weak) employment. Find an online article that supports your identification of the industry. Why do you suppose this industry has cyclical (or counter-cyclical) employment?
Answer:
At the point when an economy gets, a business downturn is experienced. Yield agreements and business falls. As work falls, salary of the individuals falls since they are currently jobless. Hence, their discretionary cash flow additionally falls which implies they will request less merchandise. The makers creating these merchandise will confront deficiency of interest and acclimate to it by chopping down creation and laying off laborers. Subsequently, unemployment rises further. This is what is known as patterned unemployment.
Unemployment is counter repeating on the off chance that it falls when the economy contracts. Medicinal services for example. Consider individuals being laid off from work during monetary crunch. The distress of the individuals considering losing their positions causes a few ailment. Which additionally implies that they should spend more on medicinal services with the goal that they are fit to work and can look through occupations quicker. Here, regardless of whether the economy is crunching, it is the human services segment that gets a lift. Subsequently, unemployment in human services industry is counter recurrent.
Stacy Monroe wants to create a fund today that will enable her to withdraw $35,000 per year for 6 years, with the first withdrawal to take place 4 years from today. Click here to view factor tables If the fund earns 15% interest, how much must Stacy invest today? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
Final answer:
To calculate how much Stacy must invest today to be able to withdraw $35,000 per year for 6 years, starting 4 years from today, we can use the present value of an annuity formula.
Explanation:
To calculate how much Stacy must invest today, we can use the formula for present value of an annuity. The formula is:
PV = A * (1 - (1+r)^(-n)) / r
Where PV is the present value, A is the amount that Stacy wants to withdraw each year, r is the interest rate, and n is the number of years. In this case, Stacy wants to withdraw $35,000 per year, the interest rate is 15%, and she wants to withdraw for 6 years starting 4 years from today. Let's substitute these values into the formula:
PV = 35000 * (1 - (1+0.15)^(-6)) / 0.15 = $146,049.21
Therefore, Stacy must invest $146,049.21 today in order to be able to withdraw $35,000 per year for 6 years, starting 4 years from today.
Tom Owens has made a presentation to his prospect, Zero Enterprises. No matter how he has tried to move the call forward, he has been unable to, despite Zero telling him they like what they hear. It is likely that Tom is encountering
Passive Resistance
Forceful Resistance
Active Resistance
None of the above
Tom Owens is encountering Passive Resistance from Zero Enterprises, characterized by a lack of progress despite positive feedback. To overcome this, he should engage the prospect in uncovering underlying concerns and address them.
Explanation:Tom Owens is likely encountering Passive Resistance. This type of resistance involves a scenario where the prospect, in this case, Zero Enterprises, appears to be interested and expresses liking what they hear, yet does not move forth with the deal or the proposal they are being presented with. The characteristic sign of passive resistance in a sales context is when a prospect provides no firm commitment or objection, often resulting in stalled progress despite positive feedback.
When dealing with passive resistance, it's important for salespeople like Tom to try and identify the underlying reasons behind the lack of progress. This could involve asking open-ended questions to encourage the prospect to share any concerns or reservations. The goal is to get the prospect to express any hidden objections that might not have been previously voiced. Once these concerns are out in the open, Tom can then address them directly, hopefully moving the sales process forward.
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Simon Inc. currently produces 110,000 units at a cost of $440,000. The cost is variable. Next year Simon Inc. expects to produce 115,000 units. Simon's relevant range for production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is the expected variable cost
Final answer:
To calculate the expected variable cost for producing 115,000 units, the variable cost per unit ($4) is multiplied by the number of units (115,000), equaling $460,000.
Explanation:
When determining the expected variable cost of producing 115,000 units at Simon Inc., we first need to establish the variable cost per unit. Given that Simon Inc. is currently producing 110,000 units at a variable cost of $440,000, the unit variable cost is calculated by dividing the total variable costs by the number of units produced. This results in a cost of $4 per unit ($440,000 / 110,000 units).
Since variable costs vary directly with the level of production within the relevant range, and Simon Inc. is expected to produce 115,000 units next year which falls within the relevant range of 100,000 to 120,000 units, we can simply multiply the unit variable cost by the number of units expected to be produced.
Therefore:
Variable cost per unit = $440,000 / 110,000 = $4 per unitExpected variable cost for 115,000 units = 115,000 units * $4 per unitExpected variable cost = $460,000Final answer:
The expected variable cost for Simon Inc. to produce 115,000 units next year, based on the current production of 110,000 units at a cost of $440,000, is calculated to be $460,000.
Explanation:
To calculate the expected variable cost for producing 115,000 units next year when Simon Inc. currently produces 110,000 units at a variable cost of $440,000, we need to use a cost-variable relationship based on the principle of proportionality within the relevant range. The given relevant range is from 100,000 to 120,000 units, which Simon Inc. is within. Thus, to find the variable cost per unit, we divide the total variable cost by the number of units currently produced:
Total Variable Cost / Number of Units = Variable Cost per Unit.$440,000 / 110,000 units = $4 per unit.Next, we multiply the cost per unit by the new production amount:
Variable Cost per Unit x Number of Units (next year) = Expected Total Variable Cost Next Year.$4 per unit x 115,000 units = $460,000Therefore, if Simon Inc. produces 115,000 units next year, the expected variable cost is $460,000.
Career Situation: What Would You Do? For some years now, you’ve owned a small specialty bookshop in a college town. You sell some textbooks but mainly cater to a broader customer base. Your store always stocks the latest fiction, nonfiction, and children’s books. Recent numbers show a steep decline in sales, including of books that would normally be considered best sellers. You suspect this is because of the growing popularity of e-books and e-readers such as the Amazon Kindle and Barnes & Noble Nook. Some of your friends say it’s time to close up because your market is dying. Is it hopeless, or is there a business strategy that might yet save the store?
Answer:
Considering the current market and the wide growth of e-books, I would prefer to close the bookstore and establish a new business.
Explanation:
The bookstore shown in the question above has a greater focus on academic books, since it is established in a university city.
As we know, academic books tend to have high economic value, in addition to being heavy and intended for university students, who generally have reduced and weakened economic power. In this scenario, these students will prefer to use digital books, as they are cheaper, do not take up space and can all be taken to class through a digital reader.
In other words, students will prefer to buy digital books, which shows the impending decline in bookstore sales, which even if it offered discounts and promotions would not be able to compete with the attractive prices of digital books.
In that case, I would prefer to close the bookstore and start a more profitable and promising new business.
At the end of the year, the deferred tax asset account had a balance of $12 million attributable to a cumulative temporary difference of $30 million in a liability for estimated expenses. Taxable income is $35 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%. Prepare the journal entry(s) to record income taxes assuming it is more likely than not that one-fourth of the deferred tax asset will not ultimately be realized.
Answer:
please see explanation
Explanation:
The following journal entry shall be booked in respect of income taxes to be recognized in the accounts of the corporation given in the question
Debit Credit
Deferred tax asset $12 million
Income taxes expense $2 million
($30 million*40%)
Income taxes payable $14 million
($35 million*40%)
Since, it is probable that the company will not be able to realize the 1/4th of the deferred tax asset which has been recognized by it, therefore the deferred tax asset shall be accordingly reduced through following journal entry:
Debit Credit
Profit or loss(tax expense) $3 million
(12*1/4)
Deferred tax asset $3 million
1.
Debit Income tax expense 2
Debit Deferred tax asset 12
Credit Income tax payable 142
2.
Debit Income tax expense 3
Credit Valuation allowance—Deferred tax asset 3
Explanation:
Deferred tax asset ($30 × 40%) = $12 million
Income tax payable ($35 × 40%) = $14 million
Valuation allowance – deferred tax asset (1/4 × $12) = $3 million
A company sells two models of a product—basic and premium. The basic model has a variable cost of $75 and sells for $100. The premium model has a variable cost of $100 and sells for $150. Fixed costs are $15,000. If the company usually sells 5,000 basic models and 2,500 premium models, then the break-even point in composite units is _________ units.
What are the steps?
Answer:
Beak-even point = 450 units
Explanation:
The break-even point is the level of activity where a business makes no profit or loss. At this level of activity, the total contribution equals the total fixed costs.
To calculate the break even point in a multi product scenario, we use the formula below:
Break-even point = Fixed cost for the period / average contribution per unit
Average contribution per unit = Total contribution in a mix/ units in a mix
We will follow the steps below to work out the Break-even point:
Step 1
Calculate the average contribution per unit
contribution per unit for each product= selling price - variable cost
Basic model = 100- 75 = $25
Premium model = 150 - 100 = $50
Average contribution per unit = ( 5000 × $25) + (2500 × $50)
( 5000 + 2500) units
= $33.33 per unit
Step 2
Calculate the Break-even point
Break even point = $15,000/ $33.33
= 450 units
Answer:
BEP MIX = 450
Explanation:
[tex]\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}[/tex]
Where:
[tex]Sales \: Revenue - Variable \: Cost = Contribution \: Margin[/tex]
The contribution represent the value of the sale after deducting the cost to generate the sale:
Item A
100 - 75 = 25 dollars
Item B
150 - 100 = 50 dollars
The unit sales ratio is 5,000:2,500 which is 2:1
Thus:
25 x 2/3
+ 50 x 1/3
contribution of the mix:
33.33333333
Now we return to the break even point formula:
[tex]\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}[/tex]
[tex]\frac{15,000}{33.33} = Break\: Even\: Point_{units}[/tex]
BEP = 450
1. Find a site on the Web that offers classified ads for horses. Compare this site to exchangehunterjumper in terms of the services offered (the customer value proposition). What does The Exchange offer that other sites do not?
Answer:
Bigeq.com is a site that also offers classified ads for horses, and is one of the ExchangeHunterJumper.com’s biggest market competitor. One service that the Exchange offers that this site does not is that the Exchange professionally screens horses that are listed, while Bigeq.com allows anyone to post sales ads. Therefore, the horses on the Exchange are more likely to be appropriately described and have a better track record than those on Bigeq.com. However, this does mean that Bigeq.com typically has more horses listed than the Exchange does.
Another service that the Exchange provides is that all of the horses listed have high-quality videos and photos within the site that the customer can view, while not all of the horses on Bigeq.com have videos or photos, and those that do are linked to outside websites, some of which are not very good quality. The Exchange continually updates information on the horses available, while the ads on Bigeq.com are static once they have been submitted by the seller.
ExchangeHunterJumper is a specialized platform providing niche services for hunter/jumper show horses, emphasizing professional presentation and marketing, unlike broader classified ad sites like EquineNow or HorseClicks.
Explanation:To compare classified ad sites for horses, one would look for reputable platforms such as EquineNow or HorseClicks, which offer a variety of services ranging from ads for selling horses to equipment and even real estate. When compared to ExchangeHunterJumper, which specializes in the sale of hunter/jumper show horses, it's evident that The Exchange offers a more niche service. The Exchange provides a customer value proposition focused on high-caliber show horses and includes services such as professional photography and marketing for each listed horse to ensure they are presented in the best possible way. Other sites may have a broader scope but might not offer the same level of presentation or specialization in the hunter/jumper discipline.
By focusing on quality over quantity and the niche of show horses, The Exchange establishes itself as a premium offering within the equestrian market.
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True or false: Native advertising is being studied by both industry associations and US federal government regulators, who are concerned with the blurring of lines between editorial content and advertising.
Answer:
The statement is: True.
Explanation:
Native advertising refers to matching the form and function of the promotion with the medium it is being published. In other words, it is the type of advertising transmitted in a similar medium of what the product might be used for. Nowadays it is more commonly spread in social media and the products inherent with its use.
The Federal Trade Commission Act (FTC) is in charge of the advertising in the U.S. Along with the government, the FTC reviews deceiving promotion that does not link the content of the products offered with their true form. The Bureau of Consumer Protection is the body that enforces regulation on fraudulent marketing practices granted by the FTC.
Final answer:
Native advertising is being studied by both industry associations and US federal government regulators, who are concerned with the blurring of lines between editorial content and advertising. - True
Explanation:
Native advertising is designed to match the form and function of the platform upon which it appears, leading to a potential conflict of interest for genuine news organizations. The concern arises as these advertisements, which are made to look like editorial content, blur the lines between journalism and promotion, making it challenging for readers to distinguish between unbiased news and paid content.
Legally, there have been a variety of regulations imposed on businesses to prevent false or misleading practices, including the prohibition of false advertising. The federal government and courts have also required disclosures on certain products, like food and tobacco, and have regulated professions such as lawyers in their advertising practices to maintain transparency and prevent fraud.
is starting her own accounting firm and hires , a freelance web designer who specializes in responsive design to build her business’ website. Two weeks into the job, finds a full-time position at an advertising company and assigns her contract obligations to Max, a former college friend to complete the work for Reilly. Based on these facts can, assign her design contract to ?
Answer:
No, contracts for personal services are not assignable.
Explanation:
According to a different source, these are the options that come with this question:
Yes, as long as the assignment does not increases the burden on Max.
Yes, Claire can assign her obligations under the contract to anyone who accepts.
No, contracts for personal services are not assignable.
No, the assignment is not valid since Max did not give any consideration.
This is most likely not a good strategy for this woman. The fact that this woman has been hired as a freelance web designer means thta the woman is beig paid for her professional expertise. No one else can perform the job in the way that she can perform it. Therefore, she cannot assign this duty to another person.
Daba Company manufactures two products, Product F and Product G. The company expects to produce and sell 1,630 units of Product F and 2,060 units of Product G during the current year. The company uses activity-based costing to compute unit product costs for external reports. Data relating to the company's three activity cost pools are given below for the current year:
Total Activity
Activity Cost Pool Total Cost Product F Product G Total
Machine setups $ 37,290 144 setups 195 setups 339 setups
Purchase orders $ 165,240 890 orders 1,150 orders 2,040 orders
General factory $ 123,690 2,440 hours 4,070 hours 6,510 hours
Required:
Using the activity-based costing approach, determine the overhead cost for each product line. (Omit the "$" sign in your response.)
Product F Product G
Total Overhead cost $ _____ $ _____
Answer:
Explanation:
Activity cost pool:
Machine setupsCost = $37,290
Total activity for both products = 339
Overhead rate = $37,290/339 = $110
Purchase ordersCost = $165,240
Total activity for both products = 2040
Overhead rate = $165,240/2040 = $81
General factoryCost = $123,690
Total activity for both products = 6510
Overhead rate = $123,690/6510= $19
Product F total overhead cost:
Machine setups = $110*144 = $15,840
Purchase orders = $81*890 = $72,090
General factory = $19* 2,440 = $46,360
Total = $134,290
Product G total overhead cost:
Machine setups = $110*195= $21,450
Purchase orders = $81*1150= $93,150
General factory = $19* 4070= $77,330
Total = $191,930
Final answer:
To calculate the overhead cost for each product using activity-based costing, calculate the cost per activity, then allocate these costs to each product. Product F's total overhead cost is $134,290, and Product G's total overhead cost is $191,930.
Explanation:
To determine the overhead cost for each product line using activity-based costing, we first need to calculate the cost per activity for each cost pool. This is done by dividing the total cost by the total activity for each pool.
Machine setups cost pool:
Cost per setup = Total Cost of Machine Setups / Total Number of SetupsPurchase orders cost pool:
Cost per order = Total Cost of Purchase Orders / Total Number of OrdersGeneral factory cost pool:
Cost per hour = Total Cost of General Factory Work / Total Number of HoursNow, we allocate these costs to each product:
Product F's overhead cost:
Machine setups: 144 setups x $110 per setup = $15,840Purchase orders: 890 orders x $81 per order = $72,090General factory: 2,440 hours x $19 per hour = $46,360Total overhead cost for Product F = $15,840 + $72,090 + $46,360 = $134,290Product G's overhead cost:
Machine setups: 195 setups x $110 per setup = $21,450Purchase orders: 1,150 orders x $81 per order = $93,150General factory: 4,070 hours x $19 per hour = $77,330Total overhead cost for Product G = $21,450 + $93,150 + $77,330 = $191,930In organizations where a majority of workers perform repetitive operations, there is often a lack of... Group of answer choices a management hierarchy. administrative oversight. purpose. job security.
Answer:
purpose.
Explanation:
When workers perform repititive functions that do not change day to day, they are most likely not involved in activities that gives understanding of the companie's goals. There is a disconnect from the business mission and vision of the business.
To be actively involved in the purpose of a business one has to be part of the decision-making process where there is variety in tasks to be accomplished.
For example in an automobile manufacturing company, the person that paints the cars everyday is not involved in decisions affecting business direction and ultimately it's purpose.
The fair rate is 8%. What is 100 per year, forever, worth now?
2.What is the same 100 per year worth if it only lasts for 15 years?
3.What if the 100 was the past cash flow and we expect it to grow at 5% forever?
4.What if we only get the 100 once at the end of this year?
5.What if it we get it once, at the end of ten years?
6.If we get the 100 each year for ten years and invest each payment in an account that earns 8% how much will be there at the end?
Answer:
1. $1,250
2. $855.95
3. $3,333.33
4. $92.59
5. $46.32
6. $671.01
Explanation:
1.
$100 per year forever
Constant Cash flow every year forever is actually a perpetuity its present value is
PV of Perpetuity = Cash flow / rate of return
PV of $100 Perpetuity = $100 / 0.08 = $1,250
2.
$100 per year for 15 years
Constant Cash flow every year for specific time period is actually a Annuity its present value is
PV of annuity = P + P [ ( 1 - ( 1 + r )^-n ) / r ] = $100 + $100 [ ( 1 - ( 1 + 0.08 )^-15 ) / 0.08 ] = $855.95
3.
$100 per year grow at 5% forever
It is a growing perpetuity and its present value will be calculated as follow
Present value of growing perpetuity = Cash flow / Rate of return - growth rate
Present value of growing perpetuity = $100 / 0.08 - 0.05 = $3,333.33
4.
$100 once at the end of this year
Present value = P ( 1 + r)^-n = $100 ( 1 + 0.08 )^-1 = $92.59
5.
$100 once after 10 years
Present value = P ( 1 + r)^-n = $100 ( 1 + 0.08 )^-10 = $46.32
6.
$100 each year for 10 years @ 8%
PV of annuity = P + P [ ( 1 - ( 1 + r )^-n ) / r ] = $100 + $100 [ ( 1 - ( 1 + 0.08 )^-10 ) / 0.08 ] = $671.01
Answer: Please refer to the explanation section
Explanation:
Investment = 100
Interest rate = r = 8%
1. Value of a Perpetual (forever) investment
Present Value = Investment/r = 100/0.08 = 1250
Present Value = $ 1250
2. Present Value with a period of 15 years
Present Value = Investment/(1+r)^n
Present Value = 100/(1+0.08)^15 = 31.524170497
Present Value = $ 31.52
3. Present Value of a Perpetual (forever) investment with Growth rate of 5%
Present Value = Investment/r = 100/0.08 – 0.05 = 3333.333333
Present Value = $ 3333.33
4. Future Value if we get 100 at the end of the year
Future Value = investment(1+r) = 100(1+0.08) = 108
Future Value = $ 108
5. Future Value if we get 100 at the end of 10 years
Future Value = investment(1+r) = 100(1+0.08)^10 = 251.524170497
Future Value = $ 251.52
6. Future Value if 100 is reinvested every year for 10 years
Future Value = Payment x [(1+r)^n – 1)/ r]
Future Value = 100 x [(1+0.08)^10 – 1)/ 0.08)
Future Value = 1448.6562466 = $ 1448.66
A grocery chain is considering the installation of a set of 4 self-checkout lanes. The new self-checkout lane setup will replace 2 old cashier lanes that were staffed by a cashier and bagger on each lane per shift. One cashier mans all 4 self-checkouts per shift (answering questions, checking for un-scanned items, taking coupons, etc). Checkout on the new lanes takes 1.25 minutes (customers bag their own orders) while checkout with the old lanes took only 45 seconds. In addition, the electricity costs for both setups are $0.06 per checkout while bagging (material) costs are $0.12 per checkout with the old system and $0.20 for the new system. The new 4 self-checkout lanes also requires a total of $25 in capital costs per day. Assume that the lanes are always in use for 16 hours per day (2 shift), for the old system the average revenue per checkout is $12 and $10 for the new system, and a worker (cashier and bagger) makes $10/hour.
(a) How many checkouts did the old system provide in a shift?
(b) How many checkouts does the new system provide?
(c) What is the multifactor productivity for each system?
Answer:
a. 2560 checkout
b. 3072 checkout
c. Old system = 3.85 checkout/$
New system = 5.56 checkout/$
Explanation:
Given:
Checkout lanes = 4
a.
How many checkouts did the old system provide in a shift?
Given
Lanes = 2
Time in use = 16 hours --- Convert to seconds
Time = 16 * 3600 = 57600 seconds
Checkout = 1 per 45 seconds
Number of check outs is calculated as:
2 lanes * 57600 seconds * 1 checkout / 45 seconds
Number of checkout = 2560 checkouts
b.
How many checkouts does the new system provide?
Lanes = 4
TimeTime in use = 16 hours --- Convert to minutes
Time = 16 * 60 = 960 minutes
Number of check outs is calculated as:
4 lanes * 960 minutes * 1 checkout / 1.25 minutes
Number of checkout = 3072 checkouts
c.
Given
Electricity costs for both setups are $0.06 per checkout
Bagging (material) costs are $0.12 per checkout with the old system
Bagging (material) costs are $0.20 per checkout with the old system
Cost for the old system is calculated by:
$0.06 * 2560 + $0.12 * 2560
= $153.6 + $307.2
= $460.3
Multifactor = 2560 checkout/$460.3
Multifactor = 5.56 checkout/$
Cost for the new system is calculated by:
0.06 * $3072 + 0.20 * $3072
= $184.32 + $614.4
= $798.72
Multifactor = 3072 checkout/$798.72
Multifactor = 3.85 checkout/$
The old system could provide 1280 checkouts in one shift while the new system can provide 768. The multifactor productivity, which equals output divided by the sum of labor, capital, and material inputs, is higher for the old system (37.5) as compared to the new system (29.5).
Explanation:(a) The old system: First, we need to convert 16 hours (the length of one shift) into minutes since our other time measurements are in minutes. That gives us 960 minutes (16 * 60). Considering each checkout took 45 seconds, or 0.75 minutes, we can calculate the number of checkouts in one shift by dividing the total minutes by the checkout time: 960 / 0.75 = 1280 checkouts.
(b) The new system: Here, the checkout time is 1.25 minutes. Using the same method as above, 960 / 1.25 gives us 768 checkouts in one shift.
(c) The multifactor productivity is calculated as the output divided by the sum of labor, capital, and material inputs.
For the old system: Output = $12 * 1280 (revenue per checkout * number of checkouts) = $15,360. Labor = 2 workers * 16 hours * $10/hour = $320. Capital is the electricity cost, which is $0.06 * 1280 = $76.8. Material is the bag cost, which is $0.12 * 1280 = $153.6. Therefore, the multifactor productivity is $15,360 / ($320+$76.8+$153.6) = 37.5.
For the new system: Output = $10 * 768 = $7680. Labor = 16 hours * $10/hour = $160. Capital is both the electricity cost, $0.06 * 768 = $46.08, and the daily capital cost of $25. Material is the bag cost, which is $0.20 * 768 = $153.6. Therefore, the multifactor productivity is $7680 / ($160+$46.08+$25+$153.6) = 29.5.
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Issuers can gradually reduce the outstanding balance of a bond issue by using a sinking fund account into which they deposit a specified amount of money each year. To operationalize the sinking fund provision of an indenture, issuers can (1) purchase a portion of the debt in the open market or (2) call the bonds if they contain a call provision. Under what circumstances would a firm be more likely to buy the required number of bonds in the open market as opposed to using one of the other procedures?
Final answer:
A firm is more likely to buy bonds in the open market for their sinking fund when the bonds are trading below their face value or callable price, which allows them to reduce their debt at a lower cost. This can be more cost-effective and discreet compared to other redemption strategies.
Explanation:
A firm might be more likely to buy the required number of bonds in the open market as opposed to using other procedures if the market price of the bonds is below their face value or callable price. This situation becomes advantageous for the firm as it allows them to reduce the outstanding balance on their bonds at a lower cost than calling them or waiting for maturity. If interest rates have risen since the bonds were issued, the bonds might be trading at a discount, making it cheaper for the issuer to buy back its debt in the open market. Additionally, purchasing bonds on the open market can be done gradually and discreetly, avoiding the potential for price spikes that might occur with a large call or if the market anticipates the buying activity.
Conversely, if the bonds are trading at a premium in the market, the issuer may consider using the call provision if it is economically beneficial or waiting until the maturity date to repay the face value of the bonds. Decisions on whether to buy back bonds or use a call provision also depend on the firm's current financial situation, future investment opportunities, and overall market conditions.
An automated assembly robot that cost $400,000 has a depreciable life of 5 years with a $100,000 salvage value. The MACRS depreciation rates for years 1, 2, and 3 are 20%, 32% and 19.2% respectively. What is the book value at the end of year 6
Answer:
Book Value at end of year 6 = $100,000
Explanation:
An Asset is depreciated to salvage value therefore when depreciation is complete the book value equals salvage value or zero.
Salvage value is an estimated value of what the company expects to earn after using the asset maybe when selling off the asset.
Answer:
Check the explanation
Explanation:
Year Depreciation Rate Depreciation=400000*rate Book value
1 20 80000 320000
2 32 128000 192000
3 19.2 76800 115200
4 11.52 46080 69120
5 11.52 46080 23040
6 5.76 23040 0
Therefore, the book value at the end of year 6 = 0
An electronics company makes devices for two different federal agencies. The company just completed the two contracts. The Homeland Security contract was for 2,200 devices and took 27 workers two weeks (40 hours per week) to complete. The DEA contract was for 5,454 devices that were produced by 35 workers in three weeks. Calculate the productivity for the Homeland Security contract in units produced per labor hour. (Round your answers to 2 decimal places.)
Answer: 1.02 unit per hour
Explanation: total unit of devices for homeland security is 2200 units
Total labourer = 27 people
Total hour for two weeks = 40 × 2 = 80
Productivity per hour = devices number/total hour 2200/ 80 = 27.5
productivity for the Homeland Security contract in units produced per labor hour = 27.5/27 = 1.0185 = 1.02
On November 30, Petrov Co. has $137,000 of accounts receivable and uses the perpetual inventory system. Dec. 4 Sold $5,620 of merchandise (that had cost $3,597) to customers on credit, terms n/30. 9 Sold $19,180 of accounts receivable to Main Bank. Main charges a 8% factoring fee. 17 Received $3,091 cash from customers in payment on their accounts. 27 Borrowed $10,960 cash from Main Bank, pledging $14,248 of accounts receivable as security for the loan. (1) Prepare journal entries to record the above transactions. (2) Which transaction would most likely require a note to the financial statements?
Solution:
Date General Journal Debit Credit
July 04 Accounts receivable 5,620
Sales 5,620
July 04 Cost of goods sold 3,597
Merchandise inventory 3,597
July 09 Cash 19,200
Factoring fee expense 800
Accounts receivable 20,000
July 17 Cash $3,091
Accounts receivable $3,091
July 27 Cash 10,960
Notes payable 10,960
July 27 No journal entry required
An airline expects to SELL one million gallons of jet fuel in one month and decides to use heating oil futures for hedging. We suppose the correlation between jet fuel price and heating oil price is 0.93, the volatility of heating oil price is 0.03, the volatility of jet fuel oil price is 0.02. Each heating oil futures contract allows you to trade 42,000 gallons of heating oil. How many contracts should be used in hedging
Answer:
14 contracts should be used in hedging.
Explanation:
The heating oil price is 0.93
The volatility of heating oil price is 0.03,
The volatility of jet fuel oil price is 0.02
Determining Minimum variance ratio
0.93×0.02/0.03 = 0.62
Each heating oil futures contract trade is 42,000 gallons of heating
ThereforeThe optimal number of contract is :
O.62×1,000,000/ 42,000 = 14.76
Converting 14.65 to nearest whole number will give us 14
The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value.The process for converting present values into future values is calledcompounding . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?a. The present value (PV) of the amount depositedb. The trend between the present and future values of an investmentc. The duration of the deposit (N)The interest rate (I) that could be earned by deposited funds
Answer:
B. The trend between the present and future values of an investment
Compute the payback statistic for Project A if the appropriate cost of capital is 9 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.)
Answer:
Simple Payback period is 2.52 years.
Discounted Payback period is 2.97 years
Explanation:
Payback period is the number of years that a project takes to recover the project's initial investment.
Simple Payback
Project A
Time: 0 1 2 3 4 5
Cash flow –$1,500 $550 $630 $620 $400 $200
Payback period = 550/550 + 630/630 + (1500-550-630)/620 = 2.52 years
Payback period = Approximately 2.52 years
In simple term it will take 2.52 years to recover the initial investment.
Discounted payback
Project A
Time: 0 1 2 3 4 5
Cash flow –$1,500 $550 $630 $620 $400 $200
PV @ 9% –$1,500 $505 $530 $479 $283 $130
Payback period = 505/505 + 530/530 + (1500-505-530)/479 = 2.97 years
Payback period = Approximately 2.97 years
It will take about 2.97 years to recover the initial investment of $1,500 using discount rate of 9%
Project A's payback statistic is 3.06 years, indicating that it takes 3.06 years for the project to recoup its initial investment.
Project A Cash Flows
| Year | Cash Flow |
| 0 | -$\$10,000 |
| 1 | \$2,000 |
| 2 | \$3,500 |
| 3 | \$5,000 |
| 4 | \$9,000 |
Payback Calculation
Determine the cumulative cash flows at the end of each year:
| Year | Cumulative Cash Flow |
| 0 | -$\$10,000 |
| 1 | -$\$8,000 |
| 2 | -$\$4,500 |
| 3 | \$500 |
| 4 | \$14,500 |
Identify the year where the cumulative cash flow becomes positive. In this case, it's year 3.
Calculate the remaining investment:
Remaining investment = Initial investment - Cumulative cash flow at the end of year 2
Remaining investment = $10,000 - $500 = $9,500
Calculate the proportion of the remaining investment that is recovered in the next year:
Proportion of remaining investment recovered in year 4 = Remaining investment / Cash flow in year 4
Proportion of remaining investment recovered in year 4 = $9,500 / $9,000 = 1.0556
Calculate the payback statistic:
Payback statistic = Year 2 + (Proportion of remaining investment recovered in year 4)
Payback statistic = 2 + 1.0556
Payback statistic = 3.0556
Rounded Payback Statistic
The payback statistic for Project A is 3.06 years, rounded to two decimal places. This means that it takes 3.06 years for the project to recover its initial investment.
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Orion Flour Mills purchased a new machine and made the following expenditures:
Purchase price $67,000
Sales tax 5,600
Shipment of machine 920
Insurance on the machine for the first year 620
Installation of machine 1,840
The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash.
Required:
Record the above expenditures for the new machine.
Answer:
Debit: Machine $75,360
Debit: Insurance $620
Credit: Cash $3,380
Credit: Accounts Payable $72,600
Explanation:
Before the journal is prepared, we have to do some calculations and provide explanation as follows:
Apart from the insurance cost which will be reports as just insurance expenses for the year, all other costs in the questions are relevant costs that will be added together as the costs of the machine equipment as follows:
Machine cost = Purchase price + Sales tax + Machine shipment + Machine Installation
= $67,000 + $5,600 + $920 + 1,840
Machine cost = $75,360
Account payable and cash can also be calculated as follows:
Account payable = Purchase price + Sales tax = $67,000 + $5,600 = $72,600
Cash = Machine shipment + Machine Installation + Machine insurance = $920 + 1,840 + $620 = $3,380
Journal entries
Debit: Machine $75,360
Debit: Insurance $620
Credit: Cash $3,380
Credit: Accounts Payable $72,600
Being the record of purchase of new machine
Note: Also see the journal entries in the attached as a complement to the above.
The total cost of the machine purchased by Orion Flour Mills is recorded by capitalizing the purchase price, sales tax, shipment, insurance, and installation costs, summing up to $75,980. The machinery asset account is debited, and accounts payable or cash is credited accordingly for each expenditure.
Explanation:When Orion Flour Mills purchased a new machine, the total expenditures should be recorded as the cost of the machine on the company's books. The expenditures to be included are the purchase price of the machine, sales tax, shipment cost, insurance for the first year, and installation costs. Here is how each cost is recorded:
Purchase price: $67,000Sales tax: $5,600Shipment of machine: $920Insurance on the machine for the first year: $620Installation of machine: $1,840All these costs are capitalized as they are necessary to bring the machine to its intended use. Therefore, the journal entry to record the machine's cost would debit the machinery asset account and credit accounts payable for the purchase price plus sales tax, and debit machinery asset account while crediting cash for the other expenditures.
Journal Entry:
Debit Machinery $72,600 (Purchase Price + Sales Tax)Credit Accounts Payable $72,600Debit Machinery $3,380 (Shipment + Insurance + Installation)Credit Cash $3,380The total recorded cost of the machine will be $72,600 + $3,380 = $75,980.
"For minimizing the cash conversion cycle, a firm should" ________. A. increase mail managing, processing, and clearing time when collecting from customers B. turn over inventory as quickly as possible without stockouts C. pay off accounts payables as fast as possible to gain credibility D. grant longer credit terms to customers to maintain healthy business relations
Answer:
B. turn over inventory as quickly as possible without stockouts.
Explanation:
Inventory turnover is defined as the number of times a business sells off its stock on hand and so require replenishment in a year.
The higher the inventory turnover, the higher the number of sales and higher profits.
Cash conversion cycle is how long a business can survive without cash and investing in inventory to increase sales.
To minimise cash conversion cycle a business should ensure it sells of its inventory quickly without stockout.
Chris Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 5 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 5 years, by conducting some research online, Chris has developed the following estimates.
Engine Overhaul Estimated Cash Outflow Probability Assessment
$300 10%
470 30%
740 50%
880 10%
How much รhould Chris Bowie deposit today in an account earning 6%, compounded annually, so that he will have enough money on hand in 3 years to pay for the overhaul?
Answer:
$515.53
Explanation:
CALCULATION OF THE ESTIMATED CASH OUTFLOW EXPENSES FOR ENGINE OVERHAUL
Engine Overhaul Probability Estimated Cash
estimated cash outflow(X) (Y) flow ( X * Y)
$370 10% $37
$470 30% $141
$720 50% $360
$760 10% $76
$2320 $614
Present Value Factor, PVF, of 3 years and 6% = 0.839619(from the table)
hence, value = $614 x 0.839619
= $515.53
Amount Deposited = $516 (approx)
Cruella Inc. owns 85% of Horace Co. During 20X9, Cruella sells goods to Horace with a 25% gross profit. Horace sold all of these goods to a 3rd party in 20X9. For the 20X9 consolidated financial statements. How should the summation of the Cruella and Horace income statement items be adjusted?
a. No adjustment is needed.
b. Sales and COGS should be reduced by 80% of the intercompany sales amount.
c. Net income should be reduced by 80% of the gross profit on intercompany sales amount.
d. All intercompany sales and costs of goods sold must be eliminated in consolidation
Answer:
Option A is the correct answer,no adjustment is needed.
Explanation:
When related companies sell to each other,the sales transaction is not sales in actual sense,as it is likened to the left hand of an individual exchanging cash with the right hand,in other words, the cash is still owned by the same person.
The same concept is applicable to subsidiaries and parent,the sales recorded from a group perspective is when they sold to external third parties.
When sales happen between related companies, a provision for unrealized profits has to be made to the tune of inventory purchased from related companies not yet sold externally,as the whole of the goods have been to third parties, no such provision or adjustment is required.
Answer:
d. All intercompany sales and costs of goods sold must be eliminated in consolidation.
Explanation:
For a group of companies, the figure to be used in the profit and loss account must only be sales to and purchases from customers or companies that are not part of the group. For this reason, intra group sales are to be eliminated from sales and cost of sales figures used in the profit and loss account.
In addition, unrealized profit on goods should also be eliminated in case there are some of the goods related intra good sales that are not yet sold.
Therefore, the correction is d. All intercompany sales and costs of goods sold must be eliminated in consolidation.
The following items appear on the balance sheet of a company with a two-month operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, L if it is a long-term liability, or N if it is not a liability, 1. Notes payable (due in 13 to 24 months). 2. Notes payable (due in 6 to 12 months). 3. Notes payable (mature in five years). 4. Current portion of ling-term debt. 5. Notes payable (due in 120 days). 6. FUTA taxes payable. 7. Accounts receivable. 8. Sales taxes payable. 9. Salaries payable. 10. Wages payable.
Answer:
Notes payable(due in 13 to 24 months)-L
Notes payable (due in 6 to 12 months)-C
Notes payable (mature in five years)-L
Current portion of long-term debt-C
Notes payable(due in 120 days) -C
FUTA taxes payable -C
Accounts receivable-N
Sales taxes payable-C
Salaries payable-C
Wages payable-C
Explanation:
A liability is a current one if it is due between today and the next one year(12 months),however any liability whose payment date is beyond one year is classified as long-term liability.
9. At what rate per annum should P2400 be invested so that it will earn an interest of P800 in 8 years? a. 6 ½ % b. 5 ½ % c. 4.17 % d. 6 %
Answer: 4.17%
Explanation:
in the attachment
To determine the annual interest rate for P2400 to earn P800 in 8 years, use the simple interest formula. Solving for the rate yields 4.17%. Thus, the correct answer is 4.17%.
Finding the Annual Interest Rate
To determine the annual interest rate needed for an investment of P2400 to earn an interest of P800 in 8 years, we will use the formula for simple interest:
Simple Interest formula: I = P * r * t, where:
I is the interest earned (P800)P is the principal amount (P2400)r is the annual interest rate (what we need to find)t is the time in years (8)We rearrange the formula to solve for r:
r = I / (P * t)
Substitute the given values into the formula:
r = 800 / (2400 * 8)
r = 800 / 19200
r = 1/24
r ≈ 0.04167
To convert this to a percentage, multiply by 100:
r ≈ 4.17%
Thus, the answer is:
c. 4.17%
During April, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of these transferred units. 33,000 were in process In the production department at the beginning of April and 260,000 we started and completed In April. April's beginning Inventory units were 70% complete with respect to materials and 30% complete with respect to conversion. At the end of April, 65,000 additional units were in process In the production department and we 70% complete with respect to materials and 20% complete with respect to conversion. 1. Compute the number of units transferred to finished goods. Units transferred out 2. Compute the number of equivalent units with respect to both materials used and conversion used In the production department for April using the weighted-average method.
Answer:
1) completed and transferred 293,000
Equivalent units under W/A method:
EU materials 338,500
EU conversion 306,000
Explanation:
Beginning WIP 33,000
started and completed 260,000
completed and transferred 293,000
Ending WIP 65,000
EU under weighted-average methood:
complete and transferred plus percentage of completion ending WIP
293,000 + 65,000 x 70% = 338,500
293,000 + 65,000 x 20% = 306,000
You have developed the following data on three stocks: Stock A has a standard deviation of .15 and a Beta of .79. Stock B has a standard deviation of .25 and a Beta of .61. Stock C has a standard deviation of .10 and a Beta of 1.29. If you are a risk minimizer, you should choose Stock _____ if it is to be held in isolation and Stock _____ if it is to be held as part of a well-diversified portfolio.
Answer:
As a risk minimizer : Stock A has the lowest standard deviation, thus, it should be chosen, if it is to be held in isolation . Also stock B has the lowest beta, thus,it should be chosen, if it is to be held as part of a well - diversified portfolio.
The answer is A and B respectively
Explanation:
The standalone risk or standard deviation of the stocks is alleviated for a well diversified investor . So, in that case, the relevant risk would be the market risk or the beta.
When you see in isolation, relevant risk would be the standard deviation.
Therefore, as a risk minimizer : Stock A has the lowest standard deviation, thus, it should be chosen, if it is to be held in isolation . Also stock B has the lowest beta, thus,it should be chosen, if it is to be held as part of a well - diversified portfolio.
Exxon Mobil Corporation explores, produces, refines, markets, and supplies crude oil, natural gas, and petroleum products in the United States and around the world. Required: Indicate how the accounts normally should be categorized on a classified balance sheet. Also indicate whether the account normally has a debit or credit balance.
Answer:
The accounts to be categorized are as follows.
(1) Notes and loans payable (short term) (2) Materials and supplies (3) Common stock (4) Patents (an intangible asset) (5) Income taxes payable (6) Long-term debt (7) Marketable securities (short term investments) (8) Property, plant and equipment (9) Retained earnings (10) Notes and accounts receivable (short term) (11) Investments (long term) (12) Cash and cash equivalents (13) Accounts payable (14) Crude oil products and merchandise (15) Additional paid up capital
The balance sheet classification of these accounts is as follows.
Account Classification Balance
(1) Notes and loans payable Current liability Credit
(2) Materials and supplies Current asset Debit
(3) Common stock Shareholders' equity Credit
(4) Patents Non-current asset Debit
(5) Income taxes payable Current liability Credit
(6) Long-term debt Non-current liability Credit
(7) Marketable securities Current asset Debit
(8) Property, plant and equipment Non-current asset Debit
(9) Retained earnings Shareholders' equity Credit
(10) Notes and accounts receivable Current asset Debit
(11) Investments (long term) Non-current asset Debit
(12) Cash and cash equivalents Current asset Debit
(13) Accounts payable Current liability Credit
(14) Crude oil products Current asset Debit
(15) Additional paid up capital Shareholders' equity Credit
The activities of Exxon Mobil Corporation are represented in different categories on a classified balance sheet. These categories include Non-Current Assets (mostly with debit balance), Current Assets, Current Liabilities (mostly with credit balance), Non-Current Liabilities, and Shareholder's Equity (with credit balance). The crude oil, natural gas, and petroleum products form part of the Inventory under Current Assets.
Explanation:The accounts represented in Exxon Mobil Corporation's activities - exploration, production, refining, marketing, and supplying of crude oil, natural gas, and petroleum products are typically categorized under several categories on a classified balance sheet. These categories include Non-Current Assets, Current Assets, Current Liabilities, Non-Current Liabilities, and Shareholder's Equity.
The exploration, production, and refining activities mostly relate to Non-Current Assets and would usually have a debit balance. These include accounts such as Property, Plant, and Equipment, Intangible Assets, and Investments.
The marketing and supplying activities usually pertain to Current Assets and Current Liabilities. Current Assets like Inventory, and Accounts Receivable, would ordinarily have a debit balance while Current Liabilities, like Accounts Payable, would have a credit balance. The crude oil, natural gas, and petroleum products they sell would fall under Inventory in Current Assets.
Lastly, the Shareholder's Equity section would usually have a credit balance, representing the owners' claim on the company's assets after all debts have been paid. This section includes Retained Earnings and Common Stock.
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