Answer:
PART A
A constructive receipt is a term often used in both accounting and taxation to describe the taxation of an income even when the income had not been received by the person being taxed.
IMPORTANCE OF CONSTRUCTIVE RECEIPTS
It guarantees the early payment of taxes without undue delays from the tax payer.
It ensures effective taxation by effective tracking of the tax payers.
PARTB
(B) Under the concept of constructive receipt, income is taxed when it becomes available to the tax payer. The taxpayer cannot defer the tax by refusing to accept payment.
Explanation:
Constructive reciept is of great importance and relevance in the field of cost accounting and taxation,it guarantees early payment of taxes and effective tracking of tax payers by the regulatory or taxation bodies.
Under the concept of constructive reciept, income is taxed when it becomes available to the tax payer and it can not be deferred by refusing to accept payment.
Constructive receipt is a tax law concept where income is taxed when it becomes available to the taxpayer, regardless of when it is actually received. This prevents manipulation of tax payment timing by delaying income acceptance.
Explanation:The term Constructive Receipt is defined under the tax law context. According to this concept, income is considered to be received, and subsequently liable for tax, when it becomes readily available to the taxpayer, irrespective of when it is actually received. In other words, option (B) is the accurate definition of constructive receipt. The taxpayer cannot defer tax by refusing to accept the payment or by directing it to be paid to another party.
The importance of constructive receipt lies in its role in determining the taxation period for any given income. It prevents the taxpayer from manipulating the timing of their tax payment by refusing or delaying the acceptance of their income. Constructive receipt is a critical aspect of income recognition and timing of tax liability for cash-based accounting systems.
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16-26Coronado Company’s net income for 2020 is $51,000. The only potentially dilutive securities outstanding were 1,200 options issued during 2019, each exercisable for one share at $6. None has been exercised, and 9,000 shares of common were outstanding during 2020. The average market price of Coronado’s stock during 2020 was $15.(a) Compute diluted earnings per share.
Answer:
The diluted earnings per share is $5.25
Explanation:
In this question, we are asked to compute the diluted earnings per share.
To calculate this, we employ the mathematical formula below for diluted earnings per share:
Diluted earnings per share
= (Total income - preference dividends) /( outstanding shares + diluted shares)
To be able to use this formula, we need a formula expression to get the value of the diluted shares.
Diluted shares = Options issued - value of options
Also,
Amount paid towards shares = Options issued * Exercise price per share = 1,200 * 6 = $ 7,200
Value of options = Amount paid towards shares / Current market price = $ 7,200 /$ 15= 480
Hence, diluted shares = 1,200 - 480 = 720
Thus, the diluted earnings per share =
( 51,000) / ( 9,000 +720) = $5.25 per share
Fill in the blank.
Larry manages a grocery store in a country experiencing a high rate of inflation. He is paid in cash. On payday, he immediately goes out and buys as many goods as he can for himself for the next two weeks in order to prevent the money in his wallet from losing value. What he can't spend, he converts into a more stable foreign currency for a steep fee. This is an example of the of _______? inflation.
a. menu costs
b. shoe-leather costs
c. unit-of-account costs
Answer:
Explanation:
Larry manages a grocery store in a country experiencing a high rate of inflation. He is paid in cash. On payday, he immediately goes out and buys as many goods as he can for himself for the next two weeks in order to prevent the money in his wallet from losing value. What he can't spend, he converts into a more stable foreign currency for a steep fee. This is an example of the of shoe-leather costs inflation as shoe-leather costs refer to the time and effort people take to minimize the effect of inflation on the eroding purchasing power of money. As larry made a decision for stocking goods for use for 2 weeks, it prevents him to fight against inflation as there is so much costs involved to earn such money and then fight against inflation
If a sample of items is taken and the mean of the sample is outside the control limits, the process is: in control, but not capable of producing within the established control limits. producing high quality products. likely out of control and the cause should be investigated. monitored closely to see if the next sample mean will also fall outside the control limits. within the established control limits with only natural causes of variation.
Answer: likely out of control and the cause should be investigated.
Explanation: The Mean is a term used both in Statistics, Economics, mathematics etc to describe the average of a set of numbers. The Arithmetic mean can be calculated by adding up a set of numbers and dividing the number by the frequency or the number of occurrences.
IF A MEAN IS WITHIN THE LIMITS OF A SET OF NUMBERS THE PROCESS IS SAID TO BE UNDER CONTROL WHILE IF THE MEAN IS OUTSIDE THE LIMITS OF A SET OF NUMBERS THE PROCESS IS SAID TO BE LIKELY OUT IF CONTROL AND THE ROOT CAUSE HAS TO INVESTIGATED TO ESTABLISH THE ROOT CAUSE.
1. A subsidiary has plant assets with a fair value of $70 million and book value of $60 million at the date of acquisition. The plant assets have a remaining life, as of the date of acquisition, of 20 years, straight-line. You are consolidating the accounts at the end of the third year since acquisition, and the subsidiary still owns the plant assets. The amount by which the plant assets are revalued in eliminating entry (R) is: A. $9.5 million B. $9 million C. $8.5 million D. $10 million
Answer:
B. $9 million
Explanation:
firstly we are given a book value of the plant assets which is $60 million which in calculating the depreciation we use straight line method which is using the assets book value to depreciate over the assets lifespan which is 20 years so to calculate the depreciation for 1 year = $60 million/ 20 years= $3 million which is the depreciation for one year then we multiply this amount for 3 years which will be $3 million X 3years= $9 million which needs to be adjusted and the plant assets must be revalued by in order to have the correct fair value of the plant assets.
The amount by which the plant assets are revalued in the eliminating entry is $9 million.
Explanation:To find the amount by which the plant assets are revalued in the eliminating entry, we need to calculate the depreciation expense for the first three years of the asset's life. Since the asset has a remaining life of 20 years and is depreciated straight-line, the annual depreciation expense would be $3 million (60 million / 20 years). Therefore, the total depreciation expense for the first three years would be $9 million (3 million x 3 years). This is the amount by which the plant assets are revalued in the eliminating entry, so the correct answer is B. $9 million.
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Using the following information, complete the incomestatement, statement of retained earnings, and balance sheet for
LUV Painting for the month of March 2018. The business began operations on March 1,2018.
Accounts Receivable $1,800
Salaries Expense $1,300
Accounts Payable 1,400
Service Revenue 10,500
Cash 23,500
Office Supplies 1,900
Stock issued during March 40,000
Truck 18,680
Dividends paid during March 4,500
Utilities Expense 220
Answer:
Gross profit = $8980
Retained earning (end) = $4480
Explanation:
LUV
Income Statement
For the m/o march 1,2018
$
Service revenue = 10500
less: Operating expense
Salaries expense 1300
Utilities expense 220
= (1520)
Gross profit 8980
LUV
Balance sheet
as on march 1,2018
ASSETS: $
Current Asset:
Cash = 23500
Account receivable = 1800
Office supplies = 1900
27200(a)
Fixed Asset:
Truck = 18680(b)
Total Assets (a+b) = 45880
LIABILITIES:
Account payable = 1400 (c)
STOCKHOLDERS EQUITY:
Issued stocks = 40000
Add: income = 8980
less: Paid dividend = (4500)
44480(d)
Total Stock holders asset and liabilities (c+d) = 45880.
LUV
Statement of retained Earning
as on march 1,2018
$
Retained earning (open) = 0
Add: Net income = 8980
less: Dividend = (4500)
Retained earning (end) 4480
Intuit Labs, a division of Intuit, the accounting and payroll software developer, follows a "Design for Delight (D4D)" development philosophy, which states that products should delight customers by providing experiences that exceed expectations. Which new product development approach is Intuit using?
Options:
A. Team based new product development
B. Customer centered new product development
C. Crowdsoursing
D. Systematic new product development
E. New Market Strategy.
Answer:
B. Customer centered new product development.
Explanation: Customer centered new product development is a product development concept which is focuses more on the satisfaction of the needs of the customer. This type of product development strategy ensures that the needs of the customers, some times research or surveys or questionaires are used to first determined the needs of the target market or target customers before finally designing the product.
An electronics firm is currently manufacturing an item that has a variable cost of $0.50 per unit and a selling price of $1.00 per unit. Fixed costs are$14,000 per month. Current volume is 30,000 units per month. The firm wants to improve the product quality by adding a new piece of equipment at an additional fixed cost of $6,000 a month. Variable cost would increase to $0.60 a unit but volume should jump to 50,000 units a month due to improved productivity. Although the new product is of a higher quality, the firm intends to stay with the selling price of $1.00 per unit (for competitive purposes). (a) Should the firm buy the new equipment?(b) The firm is now considering stepping the new volume to 45,000 units a month to produce even better quality products and increase the selling price to $1.10 a unit. Under these circumstances, should the company buy the new equipment and increase the selling price?
Answer:
Part (a) Should the firm buy the new equipment
The Firm Should not Buy the New Equipment since there is No Profit ( instead $1000 Profit lost) from this decision and is in a worse off position than before.
Part (b) should the company buy the new equipment and increase the selling price?
The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.
Explanation:
Part (a) Should the firm buy the new equipment
Do Not Buy Buy New Equipment
$ $
Sales 30,000 50,000
Less Variable Cost 15,000 30,000
Contribution 15,000 20,000
Less Fixed Costs 14,000 20,000
Net Income 1,000 0
The Firm Should not Buy the New Equipment since there is No Profit ( instead $1000 Profit lost) from this decision and is in a worse off position than before.
Part (b) should the company buy the new equipment and increase the selling price?
Do Not Buy Buy New Equipment
$ $
Sales 30,000 49,500
Less Variable Cost 15,000 27,000
Contribution 15,000 22,500
Less Fixed Costs 14,000 20,000
Net Income 1,000 2,500
The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.
A cost-volume-profit analysis suggests the firm should buy the new equipment and increase the selling price to yield a higher profit despite a decrease in volume. The firm breaks even in the first scenario and makes a profit in the second scenario.
Explanation:The subject of your question revolves around cost-volume-profit analysis. This is a method used in managerial economics to understand the relationship between a firm's costs, its production volume, and its profits. This is done by considering the impact of different levels of output and costs on a company's net income.
In order to determine whether the firm should buy the new equipment, we need to conduct a cost-volume-profit analysis. If the firm goes ahead with its plan for improved quality, the total cost (including fixed and variable costs) will be $20,000 + ($0.60 x 50,000) = $50,000. Given their plan to stay at the $1.00 selling price, the total revenue will be $1.00 x 50,000 = $50,000. As you can see, the total cost equals the revenue, meaning there is neither a profit nor loss, effectively breaking even in this scenario.
In the other scenario, where the firm increases the selling price to $1.10 and volume drops to 45,000 units, the revenue would now be $1.10 x 45,000 = $49,500. The total cost will be $20,000 + ($0.60 x 45,000) = $47,000. This means the firm would make a profit as the revenue is higher than the total cost. Therefore, under these changed circumstances, it would be advisable for the company to buy the new equipment and increase the selling price.
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Given the following changes what is the net effect on cash? (1) Accounts Receivables increases by $150; Inventory decreases by $95; Accounts Payable increases by $225; Common dividend payment of $55.
Answer:
Net Cash Increase of $115
Explanation:
Receivable Increases by $150 means a cash outflow in receivable by $150 because Increase in Receivable indicates that there are more sale on credit is made than cash received from the customers. So, the outflow in the receivable section is more than the inflow.
Inventory Decreases by $95 means the inventory sold during the period is more than purchases / manufactured. It result in cash inflow as cash is not being held in the form of inventory.
Accounts Payable increases by $225 means that company is making less payment to its suppliers, so that its balance has been increase. Company made more purchases than payment made to suppliers. Net cash Inflow is observed from this.
Common dividend payment of $55 means a direct cash outflow because actual cash has been paid during the year.
Net Effect on Cash = Cash inflows - Cash outflows
Net Effect on Cash = ( Inventory decrease + Accounts Payable increase ) - ( Accounts Receivables increase + Common dividend payment )
Net Effect on Cash = ( $95 + $225 ) - ( $150 + 55 )
Net Effect on Cash = $320 - $205
Net Effect on Cash = $115
Net Cash Increase of $115
Which of the following is an example of the free-rider problem? a. Both Zoe and Zach receive low-cost dental care at the local dental school, so neither of them pays the full cost of the care. b. Alfred receives a free lunch from the local "Meals on Wheels" program because of his low monthly income. Yet his next door neighbor, Alice, is not eligible for the free lunch. c. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking. d. Sam purchases a burger at a fast food restaurant and gets a second burger free because the restaurant is having a buy one, get one free sale.
Answer:
c. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking
Explanation:
Free rider is a form of market inefficiency that occurs when people benefit from a good or service but do not pay or underpay for the product.
Betty is receiving free protection from Bruce's dog.
I hope my answer helps you
Answer:
Which of the following is an example of the free-rider problem? Option C is the most suitable answer - Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking.
Explanation:
In a situation whereby one party benefits without having to pay for the transaction themselves, and rather the other party pays for it, there would be an occurrence of the free-riding problem.
In the scenario described in the question, the neighbor is receiving benefits from burglars without having to pay for the security or dog.
Therefore, option C is the most suitable answer.
The Palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at exist75 a night. Operating costs are as follows: Salaries exist5, 400 per month Utilities exist1, 100 per month Depreciation exist1, 100 per month Maintenance exist5, 150 per month Maid service exist15 per room Other costs exist30 per room Determine the inn's break-even point in number of rented rooms per month. Break-even point _________ rooms Determine the inn's break-even point in dollars. Break-even point exist __________
Answer:
425 rooms
$31,875
Explanation:
In this question, we are asked to calculate the the break even point per room and the break even point in dollars.
We use a mathematical approach to solve this question.
Firstly, we calculate the total fixed cost. Mathematically, the total fixed cost = Salaries + Utilities + Depreciation + Maintenance
In the question, we have identified the following;
Salaries = $5,400 per month
Utilities = $1,100 per month
Depreciation = $1,100 per month
Maintenance = $5,150 per month
Thus, total fixed cost = $5,400 + $1,100 + $1,100 + $5,150 = $12,750
Next, we proceed to calculate the contribution per unit.
Mathematically, contribution per unit = Sales - Variable cost
From the question, we can identify sales as = $75 per room
Variable cost = cost of maid service + other service = $15 + $30 = $45
Thus, contribution per unit = $75-$45 = $30
The break even point is thus calculated as Fixed cost/ contribution per room = $12,750/$30 = 425 rooms
Now, we need to calculate the value of this in dollars. In the question, we can see that rent per room is $75. The break even amount is thus = $75 * 425 = $31,875
Thus, the Breakeven point amount in dollars is $31,875
The Marigold Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Marigold has decided to locate a new factory in the Panama City area. Marigold will either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to the following three very similar buildings that will meet their needs.
Building A: Purchase for a cash price of $600,000, useful life 25 years.
Building B: Lease for 25 years with annual lease payments of $69,000 being made at the beginning of the year.
Building C: Purchase for $650,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,000. Rental payments will be received at the end of each year.
The Black Knights Inc. has no aversion to being a landlord Instructions In which building would you recommend that The Black Knights Inc. locate, assuming a 12% cost of funds?
Answer:
The solution the given problem is done below.
Explanation:
Building A: Purchase for a cash price of $600,000, useful life 25 years.
—PV = $600,000.
Building B: Lease for 25 years with annual lease payments of $69,000 being made at the beginning of the year.
Rent X (PV of annuity due of 25 periods at 12%)
PV =$69,000 X 8.78432
PV=$606,118.08
Building C: Purchase for $650,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,000. Rental payments will be received at the end of each year.
PV of Building C—
Rent X (PV of ordinary annuity of 25 periods at 12%)
=$7,000 X 7.84314
PV=$54,901.98
Cashpurchasepriceof…………….$650,000.00
PV of rental income,……………..(54,901.98)
Net present value…………………..$595,098.02
In which building would you recommend that The Black Knights Inc. locate, assuming a 12% cost of funds?
Lease Building C since the present value of its net cost is the smallest.
Great Cruiseline offers nightly dinner cruises off the coast of Miami, San Francisco, and Seattle. Dinner cruise tickets sell for $ 80 per passenger. Excel Cruiseline's variable cost of providing the dinner is $ 40 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $ 240, 000 per month. The company's relevant range extends to 18,000 monthly passengers. The breakeven sales are 9000 tickets sold. Use this information to compute the following:
a. Compute the operating leverage factor when Great Cruiseline sells 12000 dinner cruises.
b. If volume increases by 8%, by what percentage will operating income increase?
c. If volume decreases by 5%, by what percentage will operating income decrease?
Answer:see attached file
Explanation:
In 2020, Wimer Corporation, a service business, no longer qualifies as a small business. Thus, it must change from the cash to the accrual method starting with its 2020 tax year.. At the beginning of 2020, Wimer had accounts receivable of $575,000. Also, Wimer had accounts payable of $345,000. Determine the adjustment to income due to the change in accounting method and the amount that is allocated to 2020.
Explanation:
Data given in the question
Beginning account receivable = $575,000
Account payable balance = $345,000
Since the account receivable is arise from credit sales where the account payable is arisen from credit purchase
Plus, the income is also increased by considering the account receivable balance while on the other hand, the income can be decreased if account payable is considered
So the net effect is
= $575,000 - $345,000
= $230,000
Since the net income comes in positive so the net income is increased
Cruises, Inc., operates two divisions: (1) a management division that owns and manages cruise ships in the Florida Keys and (2) a repair division that operates a dry dock in Marble Sand Florida. The repair division works on company ships, as well as other large-hull ships.The repair division has an estimated variable cost of $28.50 per labor-hour. The repair division has a backlog of work for outside ships. They charge $48.00 per hour for labor, which is standard for this type of work. The management division complained that it could hire its own repair workers for $30.00 per hour, including leasing an adequate work area.
Required:
If the repair division had idle capacity, what is the minimum transfer price that the repair division should obtain?
Answer:
The minimum transfer price shoud be $28.50.
Explanation:
The transfer price is determined by two factors:
(1) The idle capacity of the business;
(2) The price in the market.
In this case, the repair division has idle capacity. This means that the transfer price could be equal to, but not lower than, the variable cost of production.
The estimated variable cost is $28.50 per labor-hour. However, this cost must be compared with the market price first, which is $30 per labor-hour. Hence, hiring labor from outside at $30 per labor-hour shall be relatively expensive and not a good option to exercise.
Since, the variable cost is lower, Cruises, Inc. should provide labor at $28.50 per labor-hour. Because there is idle capacity, this is also the minimum transfer price that should be charged.
Since the Repair Division of Cruise, Inc. has idle capacity, the minimum transfer price that it should obtain is $28.50 per labor-hour.
Without the idle capacity, the minimum charge should be $30 per labor-hour.
The minimum transfer price is the variable cost that the Repair Division incurs for both direct labor, direct material, and direct overhead costs. However, the question did not indiate if direct materials and overhead costs are involved. For simplicity, we assume that they are not required in the Repairs Division.
Thus, the minimum charge that the Repair Division should obtain is $28.50.
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Sheffield Corp. just began business and made the following four inventory purchases in June: June 1 290 units $2030 June 10 340 units 2516 June 15 200 units 1540 June 28 290 units 2291 $8377 A physical count of merchandise inventory on June 30 reveals that there are 350 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory (rounded to whole dollar) for June is $2753. $2450. $2765. $2474.
Answer:
The amount allocated to ending inventory for June is $2,753
Explanation:
The FIFO is a method used to account value for inventory. Under the method, the first item of inventory purchased is the first one sold.
A physical count of merchandise inventory on June 30 reveals that there are 350 units on hand.
Following the FIFO, 350 units on hand include:
290 units were purchased on June 28: $2,291
60 units were purchased on June 15: $1,540/200 x 60 = $462
The amount allocated to ending inventory = $2,291 + $462 = $2,753
Derst Inc. sells a particular textbook for $22. Variable expenses are $13 per book. At the current volume of 51,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:a. $352,000
b. $1,276,000
c. $1,628,000
d. $924,000
Answer:
None of the choice is correct; The correct answer is $459,000
Explanation:
The company is just breaking even at current volume of 51,000 books sold per year, then its revenue = total cost
↔ unit sold * selling price = fixed cost + unit sold * variable cost
↔ 51,000 * $22 = fixed cost + 51,000 * $13
↔ Fixed cost = $1,122,000 - $663,000
↔ Fixed cost = $459,000
UIC estimates that the in-state student demand for undergraduate education is Q subscript i n minus s t a t e end subscript equals 10 comma 000 space minus space 2 P , and out-of-state student demand is Q subscript o u t minus o f minus s t a t e end subscript equals 30 comma 000 space minus space P . The total market demand facing UIC will be a:
A. Straight line with a slope of -1.5
B. Straight line with a slope of -1.0
C. Kinked line with the kink at Q=5,000
D. Kinked line with the kink at P=5,000
Answer:
C. Kinked line with the kink at Q=5,000
Explanation:
After plotting graph between P and Q there is kink at Q=5000 and P=25,000
Production used 2.5 labor hours per finished unit, and the company actually paid $21 per hour, totaling $52.50 per unit of finished product. What amount is the company’s direct labor rate variance for March?
Answer:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual hours
Explanation:
Giving the following information:
The production used 2.5 labor hours per finished unit, and the company paid $21 per hour, totaling $52.50 per unit of finished product.
We weren't provided with enough information to solve the problem. We need estimated production hours and rates. But, I can leave the formula to solve it.
To calculate direct labor rate variance, we need to use the following formula:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Hours
Zero-base budgeting: a. means the Congress has ""sunseted"" an agency. b. means that an agency does not automatically receive its previous year’s base budget. c. is unconstitutional. d. none of the above
Answer: b. means that an agency does not automatically receive its previous year’s base budget.
Explanation: By definition, zero-based budgeting (ZBB) implies commencing a budget from a zero base and justifying each segment of the budget rather than merely adding to historical budgets or actual.
Conventionally, budgets are queried when they show variations from previous years but in ZBB, there is a positive attempt to eliminate inefficiencies and slack from current expenditures.
The concept of ZBB was developed by Peter Pyhor in 1969 and identified the following structured systematic approach to budgeting:
* organisations are divided into sections known as decision unit or expense control units
* decision units are clearly defined
* for each unit, a decision package is defined for the minimum level of spending and this sets the tone for the cost, purpose, and performance measurement and consequences
* similar decision package is defined for incremental allocations to activities
* decision package is specified for alternative methods of performing those activities
* decision packages are ranked
Example of ZBB is: if an organization notices a percentage increase on an expenditure line, the organization can compare all available and suitable alternatives before taking that increase as bona fide, the organization can also consider using its outsourced or internal employees to achieve same purpose. Proper scrutiny is required in ZBB unlike the traditional budgeting process.
There are other types of budgets like rolling and flexible budgeting.
Brief Exercise 8-06 The cash register tape for Bluestem Industries reported sales of $6,871.50. Record the journal entry that would be necessary for each of the following situations. (a) Cash to be accounted for exceeds cash on hand by $50.75. (b) Cash on hand exceeds cash to be accounted for by $28.32. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 52.75.)
The question deals with recording journal entries for cash transactions in a business. It presents two scenarios: one where there's less cash on hand than expected, and one where there's more. For each, a unique journal entry is required, taking into account an 'over and short' account to record discrepancies.
Explanation:The subject of this question relates to accounting and how to record journal entries related to cash transactions in a business environment. In particular, Bluestem Industries has reported sales of $6,871.50, and there are two different situations for which journal entries are required.
In the first scenario (a), the cash to be accounted for exceeds the cash on hand by $50.75. In other words, Bluestem Industries has less cash on hand than it should have. The journal entry would be: Debit Sales Revenue $6,921.25 (this is the cash to be accounted for, or $6,871.50 plus the $50.75 difference), Credit Cash $6,871.50, Credit Over and Short $49.75 (which is the account used to record discrepancies in the cash account). In the second scenario (b), the cash on hand exceeds the cash to be accounted for by $28.32. Now, Bluestem has more cash on hand than it should. The journal entry would be: Debit Sales Revenue $6,871.50, Debit Over and Short $28.32, Credit Cash $6,899.82 (or $6,871.50 plus the $28.32 excess). Learn more about Accounting for Cash Transactions here:
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below is the equity section of the balance sheet of bottle inc. as of december 31, 2014: common stock, $12 par value $2,280,000 paid-in capital in excess of par 1,330,000 the company only has one class of common stock and no preferred stock. what was the price of the common stock when it was first issued?
Answer:
The price of the common stock when it was first issued was $19 per share
Explanation:
Price at which the stock is issued is consists of Par value and add-in-capital in excess value. It is recorded in different accounts and reported as separately on the balance sheet.
Common Stock at par value of $12 = $2,280,000
Number of outstanding shares = 2,280,000 / 12 = 190,000 shares
Paid-in-Capital in Excess = $1,330,000 / 190,000 = $7 per share
As we know
Price of share = Par value + Paid in capital in excess
Price of share = $12 + $7 = $19 per share
13-1. Liquidated Damages. Carnack contracts to sell his house and lot to Willard for $100,000. The terms of the contract call for Willard to make a deposit of 10 percent of the purchase price as a down payment. The terms further stipulate that if the buyer breaches the contract, Carnack will retain the deposit as liquidated damages. Willard makes the deposit, but because her expected financing of the $90,000 balance falls through, she breaches the contract. Two weeks later, Carnack sells the house and lot to Balkova for $105,000. Willard demands her $10,000 back, but Carnack refuses, claiming that Willard’s breach and the contract terms entitle him to keep the deposit. Discuss who is correct.
Explanation:
In this case, the clause of a contract stipulates that, in the event of a potential breaches or infringements of the contract, a certain percentage of the dollar is to be payed. However, liquid is specified, deposited, or fixed. Liquidated judgments are therefore distinguished from fines. A fine shall be incurred in case of a default or breach of a contract which shall penalize the infringement by the party. The fine shall be paid. Provisions for liquidated losses usually often apply. However the clause covering the amount will not be applied, and recapture will not be limited to actual penalties, where, however, the courts think that includes a fine.
When a legal rule needs to be settled on liquidated damages or fines, the courts will address these two issues. The first question is: was it clear that in case of an violation it would be impossible to measure damages before the deal has been concluded?
Second, I would like to ask:
Was the figure a fair and not unreasonable calculation of damages? The deal will still be restitution in this case. The bond that recovers goods, properties or funds previously transferred to each other. If the goods or properties may be recovered, they have to be recovered. Now if the property or product is taken, it is appropriate to render restitution in an quantity of equal dollars. Restitution may be appropriate, though, when a contract is terminated.
In this contract dispute, the issue is whether Carnack can retain Willard's deposit as liquidated damages. The enforceability of liquidated damages clauses depends on the reasonableness of the amount and whether it represents a good faith estimate of the actual damages. In this case, the deposit amount of $10,000 may be considered reasonable based on the subsequent sale price of the property.
Explanation:In this case, the issue is whether the provision in the contract that allows Carnack to retain the deposit as liquidated damages is enforceable. Liquidated damages are predetermined amounts of money agreed upon in a contract that serves as compensation for a party's breach of the contract. The general rule is that liquidated damages are enforceable if the amount is reasonable and represents a good faith estimate of the actual damages that would be incurred.
In this case, the deposit of $10,000 represents 10% of the purchase price, which is a common practice in real estate transactions. Moreover, Carnack was able to sell the house and lot to Balkova for $105,000, which is $5,000 more than the original purchase price. Therefore, it can be argued that the amount of the deposit is a reasonable estimate of the damages suffered by Carnack as a result of Willard's breach.
Based on these factors, it is likely that Carnack is correct in claiming the deposit as liquidated damages. However, it is important to note that the enforceability of liquidated damages clauses can vary depending on the jurisdiction. Therefore, it would be advisable for Carnack to consult with a local attorney to confirm the validity of the provision in this specific case.
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Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its dividend is expected to grow at a constant rate of 6.50% per year. If Walter’s stock currently trades for $28.00 per share, what is the expected rate of return?
The expected rate of return for Walter Utilities stock, which trades at $28.00 and is expected to pay a $2.05 dividend growing at 6.50% annually, is calculated using the dividend discount model to be 13.82%.
The question asks how to calculate the expected rate of return on a stock from Walter Utilities, which pays an annual dividend and expects a constant growth in this dividend. Since the stock currently trades for $28.00, and the company will pay a $2.05 dividend at the end of the year that grows at a rate of 6.50% annually, we can use the dividend discount model (DDM) to calculate the required rate of return.
The formula for the expected rate of return using DDM is:
Expected Rate of Return = (Dividend Payment / Current Stock Price) + Dividend Growth Rate
Using the provided figures:
Expected Rate of Return = ($2.05 / $28.00) + 6.50%
Expected Rate of Return = 7.32% + 6.50%
Expected Rate of Return = 13.82%
This is the expected rate of return for Walter Utilities stock.
The expected rate of return for Walter Utilities is calculated using the Gordon Growth Model and is found to be 13.82%, considering the given dividend, growth rate, and stock price.
To calculate the expected rate of return for Walter Utilities, we can use the Gordon Growth Model (also known as the Dividend Discount Model). This model assumes that dividends will grow at a constant rate indefinitely. The formula for the model is:
P = D / (r - g)
Where P is the current stock price, D is the dividend per share one year from now, r is the required rate of return (which we are solving for), and g is the growth rate of dividends.
Rearranging the formula to solve for r:
r = (D / P) + g
Using the numbers given, the expected dividend (D) is $2.05, the growth rate (g) is 6.50%, and the current stock price (P) is $28.00.
Therefore, the expected rate of return (r) would be:
r = ($2.05 / $28.00) + 0.0650
After calculating, we find that:
r= 0.0732 + 0.0650
r = 0.1382 or 13.82%
This implies that an investor would expect a 13.82% return on their investment in Walter Utilities, considering the expected dividend and growth rate.
a. Suppose that businesses buy a total of $110 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $64 billion in wages, $12 billion in rent, and $22 billion in interest, how much are households paid for providing entrepreneurial ability?
Answer:
Enterprenural ability= $12 billion
Explanation:
Enterprenural ability can be defined as the human resource that gives the ability to combine other resources available to a business to create a product, make non routine decisions, innovate, and bear risks.
The main traits of an enterpreneur are research, focus, cash management, communication, and learning.
In the given instance a company buys four resources (labour, land, capital, and enterprenural ability) for $110 billion from households.
Enterprenural ability= Total spent- wages - rent- interest
Enterprenural ability= 110 billion- 64 billion- 12 billion- 22 billion
Enterprenural ability= $12 billion
Households are paid $12 billion for providing entrepreneurial ability. This is calculated by subtracting the total funds received in wages, rent, and interest from the total resources purchased by businesses.
Explanation:To find out how much households are paid for providing entrepreneurial ability, we need to subtract the wages, rent, and interest that households receive from the total amount businesses pay for the four resources. So, to calculate this:
Sum up the amounts households receive for wages, rent, and interest: $64 billion + $12 billion + $22 billion = $98 billion.Subtract this sum from the total amount businesses pay for the four resources: $110 billion - $98 billion = $12 billion.Therefore, households are paid $12 billion for providing entrepreneurial ability.
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Red Sun Rising Corp. has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,100,000 for 20 years with the first payment due today. If the interest rate is 3.25 percent, what is the value of this liability today?
Answer:
The value of Liability is $15,993,281
Explanation:
Red Sun Rising Corp. is making annuity Payment of $1,100,000 for a period of 20 years. The value of this liability can be calculated by taking net present value of all future cashflows.
Present value of Annuity = P [ 1 - ( ( 1 + r )^-n ) / r ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1 + 3.25% )^-20 ) / 3.25% ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1 + 0.0325 )^-20 ) / 0.0325 ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1.0325 )^-20 ) / 0.0325 ]
Present value of Annuity = $15,993,280.76
The value of the liability today for Red Sun Rising Corp.'s lease is $17,181,350.71.
Explanation:To determine the value of the liability, we need to calculate the present value of the lease payments. The present value of an annuity formula can be used for this calculation. The formula is:
PV = PMT x (1 - (1 + r)^-n) / r
Where PV is the present value, PMT is the annual payment, r is the interest rate, and n is the number of periods.
Substituting the values into the formula, we get:
PV = $1,100,000 x (1 - (1 + 0.0325)^-20) / 0.0325
Calculating this gives us the value of the liability today as $17,181,350.71.
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The profit and loss statement of Kitsch Ltd., an S corporation, shows $100,000 book income. Kitsch is owned equally by four shareholders. From supplemental data, you obtain the following information about items that are included in book income.
Selling expenses ($21,200)
Tax-exempt interest income 3,000
Dividends received 9,000
§1231 gain 7,000
Depreciation recapture income 11,000
Net income from passive real estate rentals 5,000
Long-term capital loss (6,000)
Salary paid to owners (each) (12,000)
Cost of goods sold (91,000)
a. The entity's nonseparately stated income is $82,000.
b. The portion of nonseparately stated income or loss for James Billings, one of the Kitsch shareholders, is $20,500.
c. What is James Billings’ share of tax-exempt interest income, if any?
$
Is the income taxable to him this year?
not taxable
Answer:
$82000$20500$750Not taxableExplanation:
with the information provided
A) how the entity's non separately stated income is $82000
to calculate the non separately stated income
(Total long term stated income) - (total short term stated income)
long term stated income
book value = $100000
long term capital loss/gain = $6000
book value + long term capital loss = $106000 ( total long term stated income )
short term stated income
tax exempt = $3000
dividends = $9000
1231 gain = $7000
net passive income = $5000
total short term stated income = 3000 + 9000 + 7000 + 5000 = $24000
hence non separately stated income = $106000 - $24000 = $82000
B) To show how one of he kitsch shareholder is bearing $205000 income or loss
Number of shareholder = 4
non separately stated income = $82000
non separately stated income / number of shareholder = 82000 / 4 =$20500
C)
Tax exempt income = $3000
number of share holders = 4
hence Billings' share of tax exempt interest income = tax exempt income / number of share holders
= $3000 / 4 = $750
Billings income is not taxable this year because his taxable income this year is $20500
Answer
82000
$20500
$750
Not taxable
In the current year, Tanager Corporation (a calendar year C corporation) had operating income of $480,000 and operating expenses of $390,000. In addition, Tanager had a long-term capital gain of $55,000 and a short-term capital loss of $40,000.
(a) Compute Tanager’s taxable income and tax for the year.
(b) Assume the same facts except that Tanager's long-term capital gain was
$15,000. Compute Tanager’s taxable income and tax for the year.
Final answer:
Tanager Corporation's taxable income in scenario (a) is $105,000 with a tax of $22,050. In scenario (b) with a lower long-term capital gain, the taxable income is $90,000 and the tax is $18,900 assuming a corporate tax rate of 21%.
Explanation:
To compute Tanager Corporation’s taxable income for the year, we first determine their net operating income by subtracting operating expenses ($390,000) from operating income ($480,000), which gives us $90,000. Next, we consider the capital gains and losses. Since capital gains and losses are treated differently, we need to net the long-term gains against the short-term losses. For part (a), the long-term capital gain is $55,000 and the short-term capital loss is $40,000, so the corporation has a net long-term capital gain of $15,000 ($55,000 - $40,000). This brings the corporation's taxable income to $105,000 ($90,000 operating income + $15,000 net capital gain).
Assuming a corporate tax rate of 21% (the current U.S. corporate tax rate as of the knowledge cutoff), the tax would be $22,050 (21% of $105,000). For part (b), with a long-term capital gain of $15,000 and the same short-term capital loss of $40,000, the corporation cannot deduct the excess $25,000 loss against its operating income as there are limitations on capital loss deductions. Thus, for part (b), the taxable income is $90,000 (operating income only), and the tax would be $18,900 (21% of $90,000).
How would a decrease in the price of the feed grains used to feed cattle affect the market for beef? a. The demand for beef would decrease, decreasing beef prices. b. The supply of beef would decrease, increasing beef prices. c. The demand for beef would increase, increasing beef prices. d. The supply of beef would increase, decreasing beef prices.
Answer: The supply of beef would increase, decreasing beef prices.
Explanation: if there is a decrease in the price of the feed grains used to feed cattle, it would leads to an increase in the supply of beef in the market and consequently decrease the price of beef in the market. It would result to an increase in the supply of beef because the cattle rearers would have enough feeds for the cattle which will make them grow faster.
A decrease in the cost of feed grains would likely increase the supply of beef, which could lead to a decrease in the price of beef. This is because lower production costs would allow farmers to raise more cattle for beef, thus increasing supply.
Explanation:If the price of feed grains that are used to feed cattle falls, it reduces the cost of producing beef. Consequently, this may lead to an increase in the supply of beef as cattle farmers may find it more profitable to raise more cattle for beef production. This, in turn, could potentially lead to a decrease in beef prices because when supply increases relative to demand, prices typically fall. Therefore, the correct option is d. The supply of beef would increase, decreasing beef prices.
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A local finance company quotes an interest rate of 18.1 percent on one-year loans. So, if you borrow $39,000, the interest for the year will be $7,059. Because you must repay a total of $46,059 in one year, the finance company requires you to pay $46,059/12, or $3,838.25 per month over the next 12 months.
a.What rate would legally have to be quoted? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
APR________ %
b.What is the effective annual rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
EAR______%
Final answer:
To determine the APR and EAR for the finance company's loan, specific financial formulas must be utilized that incorporate the effects of compounding, which are not provided by the simple interest quote.
Explanation:
The local finance company quoting an interest rate of 18.1% on a $39,000 loan results in an annual interest amount of $7,059. Given that the total repayment amount is $46,059 to be paid over 12 months, the monthly payment would be $3,838.25. However, the Annual Percentage Rate (APR) and Effective Annual Rate (EAR) are not immediately evident from these numbers, as they would incorporate the effect of compounding on the interest rate.
To find the APR, which is the nominal interest rate without compounding, we can use the formula provided by financial regulations, which typically involves dividing the total amount of interest paid by the loan amount and then multiplying by 100 to get a percentage. It is important to note that while the APR provides a way to compare different loans, it does not account for the effects of compounding.
To calculate the EAR, which includes the effects of compounding, we use a different formula that takes into account the frequency of compounding within the year. In cases where monthly payments are involved, this would be compounded monthly. The EAR formula reflects the actual yearly rate that borrowers would pay if they account for compounding within the year.
The legally quoted APR for the loan is 18.12%,
and the effective annual rate (EAR) is 19.76%. These rates account for the monthly interest and compounding effects over the year.
Calculating the Required Interest Rates
To determine the legally required quoted interest rate (APR) and the effective annual rate (EAR) for a loan, you can follow these steps:
a. Annual Percentage Rate (APR):
The APR is the nominal interest rate considering the costs associated with the loan. Here, we calculate the monthly interest rate first:
The total interest [tex]APR = 0.09843 * 12 * 100 = 118.12%.[/tex]the year is $7,059.
The principal is $39,000.
The monthly payment is $3,838.25.
The monthly interest rate can be calculated using the formula: R = (payment/principal) - 1.
So, R = $3,838.25 / ($39,000 / 12) - 1 = 0.09843.
Convert the monthly rate to an annual rate: APR = 0.09843 * 12 * 100 = 118.12%.
APR = 18.12%
b. Effective Annual Rate (EAR):
The effective annual rate considers the compounding effect:
The EAR is calculated using the formula:[tex](1 + monthly interest rate)^12 - 1.[/tex]
With the monthly rate R = 0.09843, we get:
[tex](1 + 0.09843)^12 - 1 = 0.19759.[/tex]
EAR = 19.76%
Therefore, the legally quoted APR is 18.12%, and the effective annual rate (EAR) is 19.76%.
Sean works for Cash'n'Carry, a payday loan company. He has been asked to develop an ethical mission statement to reassure customer concerns regarding predatory lending practices. a. Nonterritorial offices b. Flattened management hierarchies c. Emphasis on ethics
Answer:
c. Emphasis on ethics
Explanation:
Sean has been tasked with developing a ethical mission statement with a view of reassuring customers on predatory lending practices.
This is a renewed emphasis on the ethics of the company and by so doing it will reassure the company is aware of the ethical practice in this regard and that they are pledging to act ethically.
Ethics is defined as the process of systemising and recommending concepts of right and wrong. It is also called moral philosophy.