Explanation:
The Journal entry is given below:-
1 January 2020 No Entry
31 December 2020 Compensation Expense Dr, 6,580
To, Paid-In-Capital 6,580
(Being the compensation expense stock-option plan is recorded)
Working Note:-
Compensation Expense
= $7 × 4,700 ÷ 5
= $7 × 940
= $6,580
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,170,000 and will be sold for $1,370,000 at the end of the project. If the tax rate is 30 percent, what is the aftertax salvage value of the asset?
Answer:
After tax salvage value $1,278,852.8
Explanation:
MARCS five years class:
after four years we will have depreicate:
0.2 + 0.32 + 0.192 + 0.1152 = 0,8272
(Data from the attached MACRS)
tax basis of the asset:
6,170,000 x ( 1 - 0.8272) = 1.066.176
We will be taxed for the difference between the basis and the salvage value:
1,370,000 - 1,066,176 = 303,824 taxable gain:
303,824 x 30% = 91,147.2
After tax salvage value:
salvage valeu - income tax expense
1,370,000 - 91,147.2 = 1,278,852.8
Ralph Waters owns forested land. The Department of the Interior has declared that a small fruitfly on his property is an endangered species and prevented the harvesting of trees there. Ralph: a. cannot harvest trees. b. is entitled to compensation for a taking. c. can challenge the determination in court. d. None of the above.
Answer:
c. can challenge the determination in court.
Explanation:
Ralph owns a forested land which he most likely purchased for the purpose of cutting timber. If the Department of the Interior has declared that a small fruitfly on his property is an endangered species and prevented the harvesting of trees, he can challenge this in court.
This is because the land is private property and the determination by the Department of the Interior will make the land useless to Ralph. Also the government only has the ability to enforce such directives on public property.
Packaging equipment for Xi Cling Wrap costs $60,000 and is expected to result in end-of-year net savings of $23,000 per year for 3 years. The equipment will have a market value of $10,000 after 3 years. The equipment can be leased for $21,000 per year, payable at the beginning of each year. Xi Cling’s MARR is 10 percent/year. Based on an internal rate of return analysis, determine if the packaging equipment should be purchased or leased.
Answer:
(a) Purchase the equipment
Annual worth (AW, $)
[tex]=-60,000 \mathrm{x} \mathrm{A} / \mathrm{P}(10 \%, 3)+23,000+[10,000 \mathrm{x} \mathrm{A} / \mathrm{P}(10 \%, 3) \mathrm{x} \mathrm{P} / \mathrm{F}(10 \%, 3)][/tex][tex]=-60,000 \times 0.4+23,000+[10,000 \times 0.4 \times 0.75][/tex]
= - 24,000 + 23,000 + 3,000
= 2,000
(b) Leasing
AW ($) = AW of cost of leasing + AW of annual benefits
[tex]=-21,000 \mathrm{x}(1.1) * *+23,000[/tex]
= - 23,100 + 23,000
= - 100
Since AW of savings from leasing option is negative and AW of benefits from purchase decision is positive, the equipment should be purchased.
**Since lease payments are at beginning of year, these are "annuity due" and annual lease payment is multiplied by (1 + MARR) to obtain AW.
To determine if the packaging equipment should be purchased or leased, we will calculate the Internal Rate of Return (IRR) of purchasing the equipment. If the IRR exceeds the Minimum Acceptable Rate of Return (MARR), it is more favorable to purchase the equipment. Otherwise, leasing may be the better option.
Explanation:Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of an investment equal to zero. To determine whether the packaging equipment for Xi Cling Wrap should be purchased or leased, we will calculate the IRR of purchasing the equipment and compare it to the MARR.
The initial cost of purchasing the equipment is $60,000. The net savings per year for 3 years is $23,000, and the market value of the equipment after 3 years is $10,000. We'll use these numbers to calculate the NPV of purchasing the equipment. Then, we'll calculate the NPV of leasing the equipment for 3 years at a cost of $21,000 per year.
After calculating the NPV for both purchasing and leasing, we'll compare the IRR of purchasing to the MARR of 10 percent/year to determine whether the packaging equipment should be purchased or leased.
In 2017, Concord Corporation, issued for $103 per share, 93500 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Concord's $20 par value common stock at the option of the preferred stockholder. In August 2018, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $25 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?
Answer:
The value to be credited as additional Paid in Capital from Common stock however, will be the Par Value of $5,610,000.
Explanation:
Number of Convertible Preferred Stock issued = 93,500
Conversion ratio is one preferred stock for 3 common stock = 3
At 100% conversion in August 2018,
The admissible new number of common stock added = 93,500 x 3 = 280,500
Par Value of these holdings is $20 Per Share = $5,610,000
The Market Value however is $25 Per Share = $7,012,500
The value to be credited as additional Paid in Capital from Common stock however, will be the Par Value of $5,610,000.
This is because Paid in Capital is recognized at Par and premium is only a basis of Stock issuance above Par Value, in this case the $5 extra valuation is an external Valuation which should flow in through the retained earnings of the Business in an ideal situation.
Suppose that you are attempting to value an income-producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 11.44%. If the projected first-year net operating income (NOI) for the subject property is $44,500, what is the indicated value of the subject using direct capitalization?
Answer:
Based on the calculation made, the indicated value is $3,889.86014
Explanation:
Using direct capitalization method, indicated value can be calculated using the formula below:
Value = Annual net operating income NOI/Capitalization rate
= $44500/11.44%
Value= $3,889.86014
Based on the calculation made above, the indicated value is $3,889.86014.
A causal-explanatory study is one that _______. Multiple Choice attempts to reveal why or how one variable produces changes in another provides repeated measures over an extended period of time discovers answers to the questions of who, what, when, where, or how much attempts to capture a population's characteristics by making inferences from a sample's characteristics and testing resulting hypotheses emphasizes a full contextual analysis of a few events or conditions and their interrelations
Answer:
The correct answer is letter "A": attempts to reveal why or how one variable produces changes in another.
Explanation:
Causal-explanatory research is conducted to identify cause-effect relationships between variables. This study focuses on analyzing events or specific problems to determine relationships with their effects.
In business, for instance, causal-explanatory research is useful to determine the influence of direct investment over a foreign country, the impact of re-branding in consumer's loyalty, or the impact of changing the current method of manufacturing in employees.
Final answer:
A causal-explanatory study aims to determine how one variable produces changes in another, establishing a cause-and-effect relationship through controlled experiments and causal mechanisms.
Explanation:
A causal-explanatory study is one that attempts to reveal why or how one variable produces changes in another. This kind of study is integral in establishing a cause-and-effect relationship between variables, allowing researchers to draw more definitive conclusions about causal relationships. In order to achieve this, an experimental research design must be utilized. Experiments are designed to test hypotheses in a controlled setting, with the goal to explain how certain factors or events produce outcomes. These experiments manipulate one variable (the independent variable) to observe changes in another (the dependent variable), establishing a causal link.
Experimental studies introduce a suspected causal factor to subjects and observe if the effect occurs, thereby ruling out other explanations for the correlation. This method is contrasted with correlational studies which can only establish a relationship between variables but cannot confirm causation. In causal case studies that employ causal mechanisms, the context is meticulously reviewed to understand how a hypothesized cause, in a given context, contributes to a particular outcome, strengthening the causal inference.
Y = F(K, L) = K1/2L1/2. Suppose that both countries start off with a capital stock per worker of 2. What are the levels of income per worker and consumption per worker? Round your answers to two decimal places.
Answer:
Income per worker = 1.41 ; If rate of savings is 20% or 0.20 - Savings = 0.28
Explanation:
Y is output or income per worker, is given as a function of factors - Capital & Labour.
Y = F (K,L) = K^1/2.L^1/2
Given : 'Capital per worker' = 2
So, labour = 1 & capital = 2
Income [Y] per worker = (2)^1/2 . (1)^1/2
I.4 x 1
= 1.41
Savings [S] is a function of Income [Y]
S = f (Y)
S = s.f(Y) ; where s represents ratio / proportion of income saved.
Example : If 's' savings rate is 20% i.e 0.20
S = (0.20) (1.41)
= 0.28
g The company took out a loan from the bank (this transaction was already recorded). It was a 90-day, 9% note for $7,200 taken out on December 1, 2014. Record the accrued interest expense for the month of December.
Answer:
1. Dr Interest expense 54
Cr Accrued interest 54
( To record interest expense )
Explanation:
Interest expense = 7200 * 9% = $648 * 1 /12 = $54 for the m/o dec
Place in order the events that start with the right institution being put in place and end with growth.
a. More investment in production facilities occurs.
b. Future prices of physical capital and raw goods become more predictable, as does the cost of borrowing money.
c. More production takes place.
d. A new government adopts tighter inflation controls.
Answer:
d. A new government adopts tighter inflation controls.
b. Future prices of physical capital and raw goods become more predictable, as does the cost of borrowing money.
a. More investment in production facilities occurs.
c. More production takes place.
Explanation:
The process flow for implementing the right policy to resultant growth is shown above.
First the government adopts tighter inflation controls, institutionalising the policy that will bring growth.
As a result of the policy prices become more predictable.
Confidence of investors grow as they can forecast future profits. More investment in production occurs.
Finally more production takes place. Growth is achieved.
A firm practicing direct price discrimination will charge a higher price to a. Consumers known to have an inelastic demand b. All consumers c. Consumers known to have a unitary elastic demand d. Consumers known to have an elastic demand
Answer:
c) Consumers with an inelastic demand
Explanation:
When the price increase, the demand for the product will decrease. The increase in price makes the customer look for a product substitute with cheaper price. Substitutes will keep the demand elastic since it can change easily.
But some customer has an inelastic demand, which means that their demand does not easily change when the price is increased. This type of customer can't substitute and have no choice but to keep buying even at a higher price.
Direct price discrimination occurs when a firm charges different prices to different groups of customers based on their price elasticity of demand. Consumers with an inelastic demand are charged a higher price as they are less likely to switch to substitute goods if the price increases. Examples of direct price discrimination include senior citizen or student discounts and variable utility rates.
Explanation:Direct price discrimination occurs when a firm charges different prices to different groups of customers based on their price elasticity of demand. In this case, a firm practicing direct price discrimination will charge a higher price to consumers known to have an inelastic demand.
This is because consumers with an inelastic demand are less likely to switch to a substitute good if the price increases and are more likely to pay the higher price, allowing the firm to increase its profits.
Examples of direct price discrimination include senior citizen or student discounts, different rates for weekdays and weekends, and variable utility rates.
Nonconstant Growth. Tattletale News Corp. has been growing at a rate of 20% per year, and you expect this growth rate in earnings and dividends to continue for another 3 years.
a. If the last dividend paid was $2, what will the next dividend be?
b. If the discount rate is 15% and the steady growth rate after 3 years is 4%, what should the stock price be today?
Answer:
a) $2.4b) $30.29
Explanation:
a. If the last dividend paid was $2, what will the next dividend be?
Next dividend = last dividend + growthNext dividend = last dividend × (1 + growth rate)
Next dividend = $2 × (1 + 20%) = $2 × (1 + 0.20) =
Next dividend = $2 × (1.20) = $2.4
b. If the discount rate is 15% and the steady growth rate after 3 years is 4%, what should the stock price be today?
You have to calculate the price in two parts: 1) present value of the dividends for 3 years, and 2) present value of the dividends after 3 years.
i) Present value of the dividends for 3 years
Year Dividend PV
1 $2.40 [tex]\dfrac{\$2.40}{(1+0.15)^1}=\$ 2.09[/tex]
2 [tex]\$2.40\times (1+0.20)=\$2.88[/tex] [tex]\dfrac{\$2.88}{(1+0.15)^2}=\$ 2.18[/tex]
3 [tex]\$2.88\times (1+0.20)=\$3.46[/tex] [tex]\dfrac{\$3.46}{(1+0.15)^3}=\$ 2.27[/tex]
The present value of those three dividends is:
$2.09 + $2.18 + $2.27 = $6.54ii) Present value of the dividends since year 4.
Equation to discount a perpetuity with constant rate g less than the discount rate.
[tex]PV=\dfrac{\text{Dividend one year from now}}{r-g}[/tex]
Substitute with:
Dividend the year four = $3.46 × (1.04)r = 0.15g = 0.04[tex]PV=\dfrac{\$3.46\times (1.04)}{0.15-0.04}=\$ 36.13[/tex]
Since that is the value at the end of year 3, you need to discount it to the present day:
[tex]PV_0=\dfrac{\$36.13}{(1+0.15)^3}=\$23.75[/tex]
iii) Add the present values of the two streams of dividends:
Price = $6.54 + $23.75 = $30.29 ← answerBased on the Gordon Growth Model, the next dividend from Tattletale News Corp. would be $2.4 and the current stock price should be approximately $23.93.
Explanation:The concept involved in this question is the Gordon Growth Model which forms a pivotal part of corporate finance and valuation. In this case, we are using this model to calculate the dividends and the price of the Tattletale News Corp. stock.
a. The next dividend can be found by increasing the last dividend by the given growth rate. Hence, the growth of dividends is 20%, and the last dividend paid was $2. Thus, the next dividend can be calculated as:
Next Dividend = Last Dividend × (1 + growth rate) = $2 × (1 + 20/100) = $2.4
b. The price of the stock today is found by using the Gordon Growth Model after the next three years and then discounting it to the present value at the 15% discount rate. The Gordon Growth Model calculation is: Terminal Value = D/(k-g), where D is the dividend at the end of three years, k is the required rate of return or discount rate, and g is the steady growth rate.
First, we find D, which is the dividend paid at the end of 3 years (which would be grown at 20% per year):
D = [tex]\[2 \times (1 + \frac{20}{100})^3\][/tex]= $3.48
Then, we find the Terminal Value using the Gordon Growth Model:
Terminal Value = D/(k-g) = $3.48/(15%-4%) = $34.36
Finally, we discount this Terminal Value back to its present value:
Present Value = [tex]\[\frac{\$34.36}{(1 + \frac{15}{100})^3} = \$23.93\][/tex]
The stock price today should be around $23.93.
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Data concerning Follick Corporation's single product appear below:
Selling price per unit....................... $ 220.00
Variable expense per unit............... $74.80
Fixed expense per month............... $141,240
The break-even in monthly dollar sales is closest to:
a. 3,111
b. 6,892
c. 4,040
d. 13,525
Answer:
$214,000
Explanation:
The computation of the break even point in dollars is shown below:
= (Fixed cost ) ÷ (Profit volume ratio)
where,
Fixed cost = $141,240
And the profit volume ratio would be
= (Contribution margin) ÷ (Sales) × 100
= ($145.20) ÷ ($220) × 100
= 66%
where Contribution margin equal to
= Selling price per unit - variable expense per unit
= $220 - $74.80
= $145.20
So, the break even in dollars is
= $141,240 ÷ 66%
= $214,000
This is the answer and the options that are given in the question are wrong
Listed below are several terms and phrases associated with inventory measurement. Pair each item from the list below with the item of the following list that is most appropriately associated with it.
1. Perpetual inventory system
2. Periodic inventory system
3. F.o.b. shipping point
4. Gross method
5. Net method
6.Cost index
7. F.o.b. destination
8. FIFO
9. LIFO
a. Legal title passes when goods are delivered to common carrier.
b. Goods are transferred to another company but title remains with transferor.
c. Purchase discounts not taken are included in inventory cost.
d. If LIFO is used for taxes, it must be used for financial reporting.
e. Assumes items sold are those acquired first.
f. Assumes items sold are those acquired last.
g. Purchase discounts not taken are considered interest expense.
h. Used to convert ending inventory at year-end cost to base year cost.
i. Continuously records changes in inventory.
The following list that is most appropriately associated with it:
1. Perpetual inventory system: Continuously records changes in inventory. Option i.
2. Periodic inventory system: Assumes items sold are those acquired last. Option d.
3. F.o.b. shipping point: Legal title passes when goods are delivered to a common carrier. Option a.
4. Gross method: Purchase discounts not taken are included in inventory cost. Option c.
5. Net method: Purchase discounts not taken are considered interest expense. Option g.
6. Cost index: Used to convert ending inventory at year-end cost to base year cost. Option h.
7. F.o.b. destination: Goods are transferred to another company but title remains with transferor. Option b.
8. FIFO: Assumes items sold are those acquired first. Option e.
9. LIFO: f. Assumes items sold are those acquired last. Option f.
Here are the pairs of terms and phrases associated with inventory measurement:
- A perpetual inventory system keeps a real-time, up-to-date record of inventory levels, making it ideal for tracking inventory on an ongoing basis.
- The periodic inventory system determines the cost of goods sold and the ending inventory by assuming that the items sold are the ones acquired most recently during the period.
- F.o.b. shipping point means that the buyer assumes ownership and responsibility for the goods as soon as they are shipped by the seller, typically when they are delivered to a common carrier.
- The gross method includes any purchase discounts not taken in the cost of inventory, assuming that the discounts will eventually be taken.
- The net method treats any purchase discounts not taken as interest expense rather than including them in the inventory cost.
- A cost index is used to adjust ending inventory from the current year's cost to the base year's cost for financial reporting purposes.
- F.o.b. destination means that the seller retains ownership of the goods until they reach the buyer's specified destination.
- FIFO (First-In-First-Out) assumes that the items sold are those acquired earliest in the inventory, leaving the most recently acquired items in the inventory.
- LIFO (Last-In-First-Out) assumes that the items sold are those acquired most recently, leaving the earliest acquired items in the inventory.
These pairings help clarify the relationships between the terms and their associated inventory measurement methods and principles.
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On April 5, 2019, Kinsey places in service a new passenger automobile that cost $60,000. The car is used 100% for business in each tax year. Kinsey uses the MACRS 200% declining-balance method of cost recovery (the auto is a 5-year asset).
assume Kinsey elects any available additional first-year depreciation. the max depreciation allowed for 2019 and 2020 are?
Answer:
60,000
Explanation:
The section 179 for depreciaiton considers a requirement that the assets should be used more than 50% for business purposes during the tax year. Also ther eis a cap at $1,000,000 to depreciate
and 2,000,000 for purchases
Kinsey meet the percentage of business use and she doesn't exceeds the caps therefore it can depreciate the entire 60,000 of the car in the first year.
Even if Cajun opens company-owned restaurants in a foreign country, it may have to buy local food products to supplement the menu; in fact, it may have to buy chicken from local producers for the standard menu. In doing so, the company would be engaged in _____.
Answer: The company would be engaged in Outsourcing.
Explanation:
Outsourcing is the practice whereby a company hires a party outside the company to perform services that could have been performed by the company's employees. Outsourcing is usually undertaken by companies to reduce cost such as labor costs, technology costs.
Outsourcing is also used by firms to focus on the main aspects of the business and give the less critical operations of the business to outside organizations. Outsourcing can include different functions ranging from purchases to recruitment to customer services. Buying chickens from local producers means the company is engaging in outsourcing.
Even if Cajun opens company-owned restaurants in a foreign country, it may have to buy local food products to supplement the menu; in fact, it may have to buy chicken from local producers for the standard menu. In doing so, the company would be engaged in import substitution. The correct term to fill in the blank is import substitution.
When a company like Cajun opens company-owned restaurants in a foreign country, it may need to purchase local food products to supplement its menu. This could include buying chicken from local producers for the standard menu. This practice is known as import substitution. Import substitution is an economic policy and strategy that advocates replacing foreign imports with domestic production. It is often implemented in an attempt to diversify the economy, reduce dependence on foreign trade, and improve the balance of trade.
In the context of Cajun's operations, by sourcing chicken locally instead of importing it from its home country, the company is substituting a local product for an imported one. This can have several benefits:
1. Cost Reduction: Local sourcing can reduce transportation costs and tariffs associated with imports.
2. Supply Chain Stability: Relying on local suppliers can make the supply chain more resilient to international disruptions.
3. Cultural Adaptation: Using local ingredients can make the menu more appealing to local tastes and cultural preferences.
4. Economic Contribution: Purchasing from local producers contributes to the local economy and can improve community relations.
5. Environmental Impact: Reducing the need for long-distance transportation can lower the company's carbon footprint.
By engaging in import substitution, Cajun is adapting its business model to the local context, which can be a key factor in the success of international operations. It also aligns with the broader economic goals of the host country by fostering local industry growth and reducing reliance on foreign goods.
Assume the company is considering a reduction in the selling price by $10 per unit and an increase in advertising budget by $5,000. This will increase sales volume by 50%.
What is the net operating income after the changes?
a. $5,000
b. $60,000
c. $25,000
d. $35,000
Answer:
Net Operating income after change is $25,000
Explanation:
Increase in price will increase the sales value, it will increase the contribution margin as well. Increase in advertisement expense will be added to fixed cost. which will decrease the net profit by $5000. Net effect will be $5000 of profit.
Increase in Price = $110 + $10 = $120
Fixed Cost = $30,000 + $5,000 = $35,000
Sales $120,000 1000 units @ $120 100 %
Variable expenses $60,000 1000 units @ $60 50 %
Contribution margin $60,000 1000 units @ $60 50 %
Fixed expenses $35,000
Net operating income $25,000
* Data for the question was missing following data has been used from the similar question
Selling price $110,000 1000 units @ $110 100 %
Variable expenses $60,000 1000 units @ $60 55 %
Contribution margin $50,000 1000 units @ $50 45 %
Fixed expenses $30,000
Net operating income $ 20,000
Wiley Consulting purchased $7,800 worth of supplies and paid cash immediately. Which of the following general journal entrie will Wiley Consulting make to record this transaction? Assume the company's policy is to Initially record prepaid and unearned Items In balance sheet accounts. Multiple Choice Accounts
Accounts Payable 7,800
Supplies 7, 800
Answer: Debit Supplies and Credit Cash
Explanation: From the above question, Wiley paid cash for the supplies and in accounting you debit the receiver and credit the giver.
In the question above, the supplies account is receiving value while the cash is giving value. Then the right journal entry is to Debit supplies and credit cash.
The correct journal entry for Wiley Consulting's purchase of $7,800 in supplies with immediate cash payment is a debit to Supplies and a credit to Cash.
When Wiley Consulting purchased $7,800 worth of supplies with cash, the correct journal entry to record this transaction, assuming the company uses a balance sheet approach for prepaid items, would be a debit to Supplies and a credit to Cash. This adheres to the double-entry accounting principle where every transaction affects at least two accounts. Since the purchase was for supplies and the payment was made immediately in cash rather than on credit, there is no need to use Accounts Payable in this transaction.
The owner’s equity isa. added to assets and the two are equal to liabilities b. added to liabilities and the two are equal to assets c. subtracted from liabilities and the net amount is equal to assets d. subtracted from owner’s equity and the net amount is equal to net income
Answer:
The correct answer is letter "B": added to liabilities and the two are equal to assets.
Explanation:
Owner’s equity mostly known as the shareholders' equity is a measure of a company's net worth. Shareholder's equity is calculated using the following formula:
Shareholders' Equity = Total Assets - Total Liabilities
Thus:
Shareholders' Equity + Total Liabilities = Total Assets
Shareholders' equity comes from two pots of money: the first port has money that was initially invested in the company, and any subsequent investments. The second pots contain retained earnings that are the gains the company holds on to and do not pay out as dividends to its shareholders.
Owner's equity is added to liabilities and the total is equal to assets according to the basic accounting equation: Assets = Liabilities + Owner's Equity. This means, the total value of a company's assets must always be equal to the sum of its liabilities and equity.
Explanation:The correct option is that owner's equity is added to liabilities and the two are equal to assets. This reflects the basic accounting equation, which is Assets = Liabilities + Owner's Equity. This equation is the core of double-entry bookkeeping method which means, at all times, the total value of a company's assets must equal the sum of its liabilities and equity. For example, if a business has $100,000 in assets such as cash, equipment etc, and it's financed by $60,000 liabilities (like loans) and $40,000 equity (owner's contribution), the equation holds, as liabilities + Equity ($60,000 + $40,000) equals assets ($100,000).
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What type of residential survey, also called a drive-by survey, is designed to show the location of the house and other large structures on the property?
Answer:
It is called a "House Location" Survey, which is also sometimes called a "drive-by" survey, and its goal is to show the location of the house and other large structures on the property, as well as the orientation of those structures in relation to each other.
Activity-Based Costing: Factory Overhead Costs The total factory overhead for Bardot Marine Company is budgeted for the year at $600,000, divided into four activities: fabrication, $204,000; assembly, $105,000; setup, $156,000; and inspection, $135,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The activity-base usage quantities for each product by each activity are as follows: Fabrication Assembly Setup Inspection Speedboat 2,000 dlh 1,000 dlh 300 setups 1,100 inspections Bass boat 1,000 2,000 100 400 3,000 dlh 3,000 dlh 400 setups 1,500 inspections Each product is budgeted for 250 units of production for the year.
Answer:
The question is not incomplete as it is missing the requirement below:
A) The activity rates for each activity and
B) The activity-based factory overhead per unit for each product.
Fabrication activity rate=$68 /dlh
Assembly activity rate =$35 /dlh
Setup activity rate =$390/setup
inspection activity rate=$90/inspection
Speed boat activity based factory overhead=$387000
Bass boat activity based factory overhead=$213000
Explanation:
Fabrication activity rate=$204,000/(2000+1000)=$68 /dlh
Assembly activity rate =$105000/(1000+2000)=$35 /dlh
Setup activity rate =$156000/(300+100)=$390/setup
inspection activity rate=$135000/(1100+400)=$90/inspection
Speed boat total overhead is computed thus:
fabrication $68*2000 136000
Assembly $35*1000 35000
setup $390*300 117000
inspection $90*1100 99000
Total 387000
bass boat total overhead is computed thus:
fabrication $68*1000 68000
Assembly $35*2000 70000
setup $390*100 39000
inspection $90*400 36000
Total 213000
The question requires allocating factory overhead costs to speedboats and bass boats using Activity-Based Costing. We calculate overhead cost per unit for each activity by dividing the activity's cost by its total usage and then by the number of units produced. The provided manufacturing data is utilized in this allocation process.
The question involves Activity-Based Costing (ABC), a system used to determine the cost of products or services more accurately. ABC assigns factory overhead costs to products based on their usage of activities, rather than using a traditional single overhead rate. For Bardot Marine Company, the total factory overhead is divided into four activities (fabrication, assembly, setup, and inspection) with respective costs.
To calculate the overhead cost per unit for each type of boat (speedboat and bass boat), we'll allocate each activity's cost based on the direct labor hours (dlh) and the number of setups and inspections required for each boat. After allocating the overhead costs, we could then determine the overhead cost per unit by dividing the total overhead costs by the number of units budgeted to be produced.
Let's break it down for the fabrication activity for speedboats as an example:
Total fabrication overhead cost: $204,000Total dlh for fabrication (speedboats and bass boats): 3,000 dlhSpeedboat fabrication usage: 2,000 dlhOverhead cost per dlh for fabrication: $204,000 / 3,000 dlh = $68 per dlhOverhead cost allocated to speedboat fabrication: $68 per dlh \\* 2,000 dlh = $136,000Number of speedboats produced: 250 unitsFabrication overhead cost per speedboat unit: $136,000 / 250 units = $544 per unitThis process would be repeated for each activity for both products to determine the total overhead cost per unit for each boat type.
Mrs. Peterson’s triplets all want to attend the local private academy, where they are required to wear uniforms. Mrs. Peterson knows that the only way she can afford these uniforms is to shop early, put the uniforms on layaway, and pay a little every week. The total uniform cost for the three girls is $1817.75. If she put down a deposit of $600.00 and she could afford $105.00 per week, how long would it take her to pay off the uniforms? (Round to nearest whole number.)
Answer:
12 weeks
Explanation:
Data:
Let the total amount be: = $ 1 817. 75
Deposit paid = $ 600
Amount remaining after deposit = [tex]1 817.75 - 600[/tex]
= $ 1 217.75
Amount per week = $ 105.00
Therefore, the time taken to pay $ 1 217.75 = [tex]\frac{1 217.75}{105.00}[/tex]
= 11.59
= 12 weeks
Unearned revenues refer to a(n)_____________.
a. Asset that will be used over time.
b. Expense incurred because a customer has paid in advance.
c. Liability that is settled in the future when a company delivers its products or services.
d. Increase in revenues as a result of delivering products or services to a customer.
e. Decrease in an asset.
Answer:
The answer is C.
Explanation:
Unearned revenue is a liability because the amount for the transaction has already been collected while the goods or services have not been delivered. Example of unearned revenue is magazine subscription fee for a year and the money for the subscription has been collected at the beginning of the year.
Revenue is only recognized as the service is being rendered, maybe monthly or quarterly while the unearned revenue (liability) in the balance sheet decreases by the same amount
Answer: c. Liability that is settled in the future when a company delivers its products or services.
Explanation: Firstly, liability an obligation, debt or responsibility owed to someone. They are a company's legal financial debts or obligations that are incurred during the course of business operations. Unearned revenues, a type of current liability (short term liability), defines a firm's liability to deliver goods and/or services at a future date after being paid in advance. The unearned revenue amount will be deducted in the future with an offsetting entry once the product or service is delivered.
Knowledge Check 01 Complete each sentence by selecting the correct term using the drop-down list. Abbey Company completed the annual count of its inventory. During the count, certain items were identified as requiring special attention. Decide how each item would be handled for Abbey Company's inventory.
Answer:
The items are:
Goods in transit to Customers warehouse
Goods loaded in Trucks but not shipped as at stock Count
Explanation:
Annual stock count is meant to help determine our closing stock position as well as complete our revenue recognition processes in line with the IFRS.
Where Goods are in transit to Customers warehouse; we would consider if the risk and reward have been passed to the Customer or not based on the contract agreed to
A. if the Risk and reward have been passed from the point the stock was loaded based on Contract with customer then the stock should not be added to the stock physically counted in the warehouse; if otherwise, we should add the stock to that counted in the warehouse and deduct it from Sales as Goods in transit.
B.Because these goods are loaded but haven't been shipped, Abbey company still holds the full risks and rewards of these stock. thus, we have to add back the Quantity on truck to that in the warehouse.
The following income statement and additional year-end information is provided. SONAD COMPANY Income Statement For Year Ended December 31 Sales $ 1,858,000 Cost of goods sold 910,420 Gross profit 947,580 Operating expenses Salaries expense $ 254,546 Depreciation expense 44,592 Rent expense 50,166 Amortization expenses—Patents 5,574 Utilities expense 20,438 375,316 572,264 Gain on sale of equipment 7,432 Net income $ 579,696 Accounts receivable $ 18,800 increase Accounts payable $ 10,900 decrease Inventory 20,200 increase Salaries payable 3,550 decrease
Answer:
Statement of Cash Flows (partial)
Cash flows from operating activities
Net income 579,696
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Depreciation expense 44,592
Amortization expense—Patents 5,574
Gain on sale of equipment -7,432
Changes in current operating assets and liabilities
Increase in accounts receivable -47,700
Increase in inventory -15,650
Decrease in accounts payable -13,550
Decrease in salaries payable -3,500
Net cash provided by operating activities 5,42,030
The accounting profit of Sonad Company can be calculated by subtracting explicit costs from total revenue. Net operating income is also computed, by subtracting operating expenses from gross profit. Both these values are found to be equivalent when the gain on sale is considered in net income.
Explanation:The question pertains to the income statement of the Sonad Company. Based on the data, we can calculate both the accounting profit and net operating income. Accounting profit is determined by subtracting explicit costs from total revenue. In this case, the total revenue is the Sales ($1,858,000) and the explicit costs are the Cost of Goods Sold ($910,420) and Operating Expenses ($375,316). Hence, the Accounting Profit is $1,858,000 - ($910,420 + $375,316) = $572,264.
The net operating income is computed by subtracting all operating expenses from gross profit. Therefore, the net operating income = Gross profit - Operating expenses = $947,580 - $375,316 = $572,264. The Net income provided ($579,696) includes the gain from the sale of equipment ($7,432). So,the operating income and net income figures align when the gain on sale is considered.
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Problem 12-04A a-b At April 30, partners’ capital balances in Ivanhoe Company are G. Donley $48,000, C. Lamar $48,000, and J. Pinkston $15,000. The income sharing ratios are 5 : 4 : 1, respectively. On May 1, the PDLT Company is formed by admitting J. Terrell to the firm as a partner.
Answer:
Question is incomplete Complete question is given below
Explanation:
Problem 12-04A a-b At April 30, partners’ capital balances in Ivanhoe Company are G. Donley $48,000, C. Lamar $48,000, and J. Pinkston $15,000. The income sharing ratios are 5 : 4 : 1, respectively. On May 1, the PDLT Company is formed by admitting J. Terrell to the firm as a partner.
a. Journalize the admission of Terrell under each of the following independent assumptions.
(1) Terrell purchases 50% of Pinkston's ownership interest by paying Pinkston $15,400 in cash.
(2) Terrell purchases 33 1/3% of Lamar's ownership interest by paying Lamar $15,600 in cash.
(3) Terrell invests $60,200 for a 30% ownership interest, and bonuses are given to the old partners.
(4) Terrell invests $41,400 for a 30% ownership interest, which includes a bonus to the new partner.
b. Lamar's capital balance is $38,200 after admitting Terrell to the partnership by investment. If Lamar's ownership interest is 20 % of total partnership capital, what were (1) Terrell's cash investment and (2) the bonus to the new partner?
Solution
a. Journal Entries:
No. Account Titles Debit Credit
1 Pinkson, Capital 7,500
Terrell, Capital 7,500
2 Lamar, Capital 16,000
Terrell, Capital 16,000
3 Cash 60,200
Terrell, Capital 51,360
Donley, Capital 4,420
Lamar, Capital 3,536
Pinkston, Capital 884
4 Cash 41,400
Donley, Capital 2,160
Lamar, Capital 1,728
Pinkston, Capital 432
Terrell, Capital 45,720
Computation:
a.(1) Capital of Terrell = $15000 x 0.50 =$ 7500
a.(2) Capital of Terrell = $48,000 x 1/3 = $16,000
a.(3) Capital of Terrell = $171,200 x 0.30 = $51,360
Old Partners bonus = $60,200 - $51,360 = $8,440
Capital of Donley = $8,440 x 5/10 = $4420
Capital of Lamar = $8,840 x 4/10 = $3,536
Capital of Pinkston = $8,840 x 1/10 = $884
a.(4) Terrel Capital = $152,400 x 0.30 = $45,720
New Partner Bonus = $45,720 - $41,400 = $4,320
Donley Capital = $4,320 x 5/10 = $2,160
Lamar Capital = $4,320 x 4/10 = $1,728
Pinkston Capital = $4,320 x 1/10 = $432
b.(1) Total Capital after Admission = $38,200 / 0.20 = $191,000
Total Capital before Admission = $48000 + $48000 + $15000 = $110,000
Cash Investment by Terrell = $191,000 - $111,000 = $80,000
b.(2) Decrease in Lamar's Capital = $48,000 - $38,200 = $9,800
Bonus to New Partner = $9,800 / 0.40 = $24,500
For a present sum of $640,000, determine the annual worth (in then-current dollars) in years 1 through 4 if the market interest rate is 13% per year and the inflation rate is 5% per year.
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The present sum of $640,000.
The market interest rate is 13% per year and the inflation rate is 5% per year.
First, we need to calculate the real interest rate.
Real interest rate= interest rate - inflation rate
Real interest rate= 13 - 5= 8%= 0.08
Now, using the following formula we can calculate the future value on each year:
FV= PV*(1+i)^n
FV1= 640,000*1.08= 691,200
FV2= 691,200*1.08= 746,496
FV3= 746,496*1.08= 806,215.68
FV4= 806,215.68*1.08= 870,712.93
Kristina just won the lottery, and she must choose among three award options. She can elect to receive a lump sum today of $62 million, to receive 10 end-of-year payments of $9.5 million, or to receive 30 end-of-year payments of $5.6 million.
(a) If she thinks she can earn 7% annually, which should she choose?
(b) If she expects to earn 8% annually, which is the best choice?
(c) If she expects to earn 9% annually, which option would you recommend?
(d) Explain how interest rates influence her choice.
Answer:
a. Best deal is 30 end-of-year payments of $5.6 million
b. Best deal is 10 end-of-year payments of $9.5 million
c. Best deal is lump sum today of $62 million
Explanation:
Please see attachment for workings.
d. As the interest rate increases, the duration of value shortens. That is as the interest rate increases, the best choose based on their payment duration reduces
To choose the best option, we calculate the present value of each award option using the formula PV = CF / (1+r)^n. At 7% annually, Kristina should choose the lump sum option of $62 million. At 8% and 9% annually, the lump sum option is still the best choice. Interest rates influence the present value, with higher rates making lump sum payments more attractive.
To determine the best option for Kristina, we need to calculate the present value of each award option and choose the one with the highest present value. The formula to calculate the present value is: PV = CF / (1+r)n where PV is the present value, CF is the cash flow, r is the interest rate, and n is the number of periods.
a) 7% annuallyLump sum option: PV = $62 million / (1+0.07)0 = $62 million10 end-of-year payments option: PV = $9.5 million / (1+0.07)1 + $9.5 million / (1+0.07)2 + ... + $9.5 million / (1+0.07)10 = $59.71 million30 end-of-year payments option: PV = $5.6 million / (1+0.07)1 + $5.6 million / (1+0.07)2 + ... + $5.6 million / (1+0.07)30 = $84.77 millionTherefore, Kristina should choose the lump sum option as it has the highest present value of $62 million.
b) 8% annuallyLump sum option: PV = $62 million / (1+0.08)0 = $62 million10 end-of-year payments option: PV = $9.5 million / (1+0.08)1 + $9.5 million / (1+0.08)2 + ... + $9.5 million / (1+0.08)10 = $56.74 million30 end-of-year payments option: PV = $5.6 million / (1+0.08)1 + $5.6 million / (1+0.08)2 + ... + $5.6 million / (1+0.08)30 = $76.75 millionThe lump sum option is still the best choice with a present value of $62 million.
c) 9% annuallyLump sum option: PV = $62 million / (1+0.09)0 = $62 million10 end-of-year payments option: PV = $9.5 million / (1+0.09)1 + $9.5 million / (1+0.09)2 + ... + $9.5 million / (1+0.09)10 = $53.48 million30 end-of-year payments option: PV = $5.6 million / (1+0.09)1 + $5.6 million / (1+0.09)2 + ... + $5.6 million / (1+0.09)30 = $71.34 millionBased on an interest rate of 9% annually, Kristina should choose the lump sum option with a present value of $62 million.
d) Influence of interest ratesInterest rates have a significant impact on the present value of future cash flows. Higher interest rates result in lower present values. When interest rates increase, the present value of an annuity decreases, making lump sum payments more attractive. On the other hand, when interest rates decrease, the present value of an annuity increases, and the annuity option becomes more appealing. In this case, as the interest rate increases, the present value of the lump sum payment remains constant, but the present value of the annuity decreases, which makes the lump sum option more favorable.
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Accountants and Economists differ in their calculations of profits in that; a. economists consider sunk costs b. accountants consider implicit costs only c. accountants consider explicit costs only d. all of the above
Answer:
The correct answer is letter "C": accountants consider explicit costs only.
Explanation:
Explicit costs are those necessary for the operations of the company such as wages, rent or raw materials. Implicit costs are the opportunity costs companies as a result of giving up factors such as purchases or qualified employee hires.
The accounting profit of a company is calculated by subtracting the explicit costs from the firm's total revenue. The economic profit is computed by subtracting the result of adding the explicit and implicit costs from the company's total revenue.
Accountants and economists differ in their calculations of profits. Economists consider sunk costs, while accountants consider explicit and implicit costs.
Explanation:Accountants and economists differ in their calculations of profits. Economists consider sunk costs, which are costs that have already been incurred and cannot be recovered. Accountants, on the other hand, consider both explicit costs (actual out-of-pocket expenses) and implicit costs (opportunity costs or the value of the next best alternative forgone).
For example, let's say a business invested $10,000 in a project that turned out to be unsuccessful. Economists would consider the $10,000 as a sunk cost and exclude it from their calculation of profits. Accountants, however, would consider it as an explicit cost and include it in their calculation of profits.
Therefore, the correct answer to the question is d. all of the above. Accountants consider both explicit and implicit costs, while economists consider sunk costs.
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Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The number of unemployed persons is _____. a. 15 b. 10 c. 90 d. 40 e. 30
Answer:
The number of unemployed persons is 15 if we assume the person who are looking for work are NOT “unemployed”
The number of unemployed persons is 25 if we understand “looking for work” is “unemployed currently”
Explanation:
If we assume the person who are looking for work are NOT “unemployed” then:
Total 100 people = 60 of whom hold jobs + and 15 of whom are retired + 10 of whom are looking for work + unemployed persons
⇒ unemployed persons = 100 – 60 - 15 – 10 = 15
However, it’s better to understand “looking for work” is “unemployed currently”, then
Total 100 people = 60 of whom hold jobs + and 15 of whom are retired + unemployed persons (including whom looking for work)
⇒ unemployed persons = 100 – 60 - 15 = 25
Answer:
10
Explanation:
The total number of people that make up the economy is 100
60 people are employed
10 people are unemployed
15 people are retired and out of the labor force
Therefore the number of unemployed persons is 10
Peter owns an auto dealership. Peter hires Cara as a receptionist, Ben as a salesperson, Stacy as a mechanic, and the "Clean as a Whistle Co." to come in at night and clean the premises. Which situation is LEAST likely to result in liability for Peter?
a. Cara, with authority, buys office supplies from Office Stuff.
b. Ben sells a car at a$ 1 ,000 markdown, after Peter told him not discount more than$ 500.
c. Stacy forgets to put the oil plug back into Daria's car after an oil change, damaging the engine when the oil runs out.
d. Emeralda from " Clean as a Whilte Co." runs over patty Pedestrain in the dealership's parking lot.
Answer:
d. Emeralda from " Clean as a Whilte Co." runs over patty Pedestrain in the dealership's parking lot.
Explanation:
Liability is the degree to which a person is responsible for injury that happens to another party in a lawsuit. Peter owns an auto dealership. Peter hires Cara as a receptionist, Ben as a salesperson, Stacy as a mechanic, and "Clean as a Whistle Co." as cleaners.
Peter will be least liable if Emralda from "Clean as a Whistle Co." runs over Patty I'm the dealership's parking lot.
This is because Peter hired the company as a seperate entity from the cleaning company employees. The conduct of employees from the cleaning company is responsibility of "Clean as a Whistle Co."