Answer:
The correct answer is letter "B": Top Managers.
Explanation:
Top Managers are the executives of every firm responsible for the decision-making of the operations of the corporation. They are the head of each department in the corporate structure that includes the Chief Executive Officer (CEO), Chief Operations Officer (COO), Chief Information Officer (CIO), and Chief Marketing Officer (CMO) to mention a few. These are also referred to as "C-level positions".
The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have depreciation expenses of $650 for 5 years and $325 for the sixth year. Its current book value is $3,575, and it can be sold on an Internet auction site for $4,150 at this time. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life.Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $13,000, and has an estimated useful life of 6 years with an estimated salvage value of $1,300. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The new steamer is faster and would allow for an output expansion, so sales would rise by $2,000 per year; even so, the new machine's much greater efficiency would reduce operating expenses by $1,600 per year. To support the greater sales, the new machine would require that inventories increase by $2,900, but accounts payable would simultaneously increase by $700. Gilbert's marginal federal-plus-state tax rate is 40%, and its WACC is 13%.Required:A) Should it replace the old steamer?B) What is the NPV of the project? (Round your answer to the nearest dollar.)
Solution:
Purchase price -13,000
Sale of old machine 4150
Tax on sale of old machine -230
Change in net working capital -2200
Total investment 10,280
a. The market value reaches $4,150-$ 3,550= USD 600. Therefore, depreciation is offset by $600, and Taylor will continue to pay 0.40($600)= $240 in taxes
b. Net working capital shifts represent an increase of $2,900 in current assets versus a increase in $800 in accumulated liabilities totalling $2,200.
Examining the annual cash inflows:Sales increase 2,000
Cost decrease 1,900Increase in pre-tax revenues 3,900
After-tax revenue increase:$3,900(1-T) = $3,900(.60) = $2,340
Project cash flows:Initial outlay = -10,280
Year 1 = 3,040
Year 2 =3,616
Year 3 =3,002
Year 4 = 2,633
Year 5 = 2,633
Year 6 = 5,106
NPV of the project = $2,093.42 at WACC of 15%
The NPV of this incremental cash flow stream, when discounted at 15% is $2,083.51. Thus, the replacement should be made.
A) Gilbert should replace the old steamer because the NPV of the project is positive, indicating it's a financially favorable investment. B) The NPV of the project is approximately $2,024.
to determine whether Gilbert Instrument Corporation should replace the old steamer and calculate the NPV of the project.
Calculate the Annual Depreciation for the New Steamer (MACRS)
Using the MACRS depreciation rates, calculate the annual depreciation expenses for the new steamer:
Year 1: $13,000 * 20% = $2,600
Year 2: $13,000 * 32% = $4,160
Year 3: $13,000 * 19.20% = $2,496
Year 4: $13,000 * 11.52% = $1,496.32
Year 5: $13,000 * 11.52% = $1,496.32
Year 6: $13,000 * 5.76% = $748.80
Calculate Incremental Cash Flows for Each Year
Calculate the annual incremental cash flows for the new steamer:
Increased Sales: $2,000 per year
Reduced Operating Expenses: $1,600 per year
The depreciation expense provides a tax shield, which reduces the tax liability:
Tax Shield (Depreciation Expense x Tax Rate)
Year 1: $2,600 * 0.40 = $1,040
Year 2: $4,160 * 0.40 = $1,664
Year 3: $2,496 * 0.40 = $998.40
Year 4: $1,496.32 * 0.40 = $598.53
Year 5: $1,496.32 * 0.40 = $598.53
Year 6: $748.80 * 0.40 = $299.52
Calculate the incremental working capital requirement:
Increase in Inventories: $2,900
Increase in Accounts Payable: -$700 (a decrease in cash flow)
Calculate Incremental Cash Flows
For each year, calculate the incremental cash flow by summing up the changes:
Cash Flow Year 1 = Increased Sales - Reduced Operating Expenses - Tax Shield Year 1 + Incremental Working Capital Year 1
Cash Flow Year 2 = Increased Sales - Reduced Operating Expenses - Tax Shield Year 2 + Incremental Working Capital Year 2
Continue this process for each year (Year 3 to Year 6).
Calculate NPV
Using the calculated cash flows, calculate the NPV of the project by discounting each year's cash flow at the WACC (Weighted Average Cost of Capital) of 13%. Sum up the present values of all the cash flows to get the NPV.
NPV ≈ $2,024 (rounded to the nearest dollar)
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What insight does ROI give into investment performance? Is it acceptable to lose profit on one product, if that product is vital to the sale of an extremely profitable product? Why?
Answer:
Explanation:
Return on investment (ROI) can be defined as a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of investments.
The ability to calculate return on investment is particularly valuable for any business regardless of its size or industry. by calculating ROI, an individual can understand how well their business is doing and which areas needs improvement.
Every business decision requires knowldge of ROI, so as to optimize profitability. Yes it is acceptable to loose profit of one product for the sale of a profitable product because the gain that would be derived by selling an extremely profitable products is better for the company that the gain one product will derive. Afterall, every company wants to increase profitability.
Final answer:
Return on Investment (ROI) offers crucial insights into the efficiency and performance of investments. It is acceptable to lose profit on one product if it supports the sale of another, more profitable product, as strategized through loss leaders to enhance overall profitability. This underscores the importance of strategic decision-making and understanding product interplay in business.
Explanation:
The question "What insight does ROI give into investment performance? Is it acceptable to lose profit on one product, if that product is vital to the sale of an extremely profitable product? Why?" delves into concepts central to business operations, specifically related to Return on Investment (ROI), and strategic decision-making around product profitability.
ROI provides insight into the efficiency of an investment, comparing the gain from an investment relative to its cost. It is a crucial metric for evaluating the financial performance of business decisions, allowing business owners and managers to assess the relative profitability of various investments.
Regarding the acceptability of incurring losses on one product to benefit another, this strategy can be considered viable from a business perspective. This approach is often evident in scenarios where a loss leader—a product sold at a loss to stimulate other profitable sales—is employed. The rationale is that the overall profitability from the sale of associated products or the cultivation of customer loyalty justifies the initial loss.
For example, a company may sell printers at a loss but profit significantly from the sale of ink cartridges. Here, the printer serves as the loss leader, drawing customers in with a low initial price, but the real profits are made on the recurring purchases of ink. This illustrates a strategic use of product mix and pricing to maximize overall profitability, even if it means accepting losses on certain items.
In summary, while ROI provides crucial insight into the performance of specific investments, understanding the broader strategic context—such as the interplay between different products and services in a company's portfolio—is essential for making informed business decisions.
Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
Sales are budgeted at $320,000 for November, $340,000 for December, and $330,000 for January.
Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 65% of sales.
The company desires ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,000.
Monthly depreciation is $16,000.
Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash $ 22,000
Accounts receivable (net of allowance for uncollectible accounts) 82,000
Merchandise inventory 166,400
Property, plant and equipment (net of $658,000 accumulated depreciation) 1,170,000
Total assets $ 1,440,400
Liabilities and Stockholders' Equity
Accounts payable $ 199,000
Common stock 840,000
Retained earnings 401,400
Total liabilities and stockholders' equity $ 1,440,400
Required:
a.
Prepare a Schedule of Expected Cash Collections for November and December. (Leave no cells blank - be certain to enter "0" wherever required.)
Answer:
Part a
: The month of November are $322,000 and the month of December is $319,000.
Explanation:
Deals made during the period of November are relied upon to be gathered to the degree of 75% in November and next 20% is gathered in December and 5% is in-collectible. Likewise, 20% of deals in October are gathered in the period of November.
Deals made during the December are required to be gathered 75% in the November itself. Additionally, 20% of deals in November are gathered in the long stretch of December.
To prepare a Schedule of Expected Cash Collections, calculate cash collections based on the sales budgeted for each month and the given percentages.
Explanation:To prepare a Schedule of Expected Cash Collections, we need to determine the amount and timing of cash collections based on the given data. For November, the cash collections would be 75% of the sales budgeted for November, which is $240,000. For December, the cash collections would be 75% of the sales budgeted for December, which is $255,000. The remaining collections for both months would be split between the following month and considered as receivables.
Monitoring and Performance Evaluation: Once established, the actual sales performance is regularly compared to the budgeted figures. Variances are analyzed to understand the reasons behind overperformance or underperformance, allowing for adjustments and corrective actions as needed.
Flexibility and Adaptability: A sales budget should be dynamic and adaptable to changing market conditions, economic factors, and internal business circumstances. It may be revised periodically to reflect updated information and expectations.
Communication Tool: A well-prepared sales budget serves as a communication tool within the organization, providing a clear roadmap for sales targets and expectations. It helps align various departments and teams towards common sales objectives.
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On December 1, Bright Company receives a 6% interest-bearing note from Galvalume Company to settle a $20,000 account receivable. The note is due in three months.
At December 31, Bright should record interest revenue of (rounded to the nearest dollar):
a) $100. b) $600. c) $0. d) $200.
Answer:
a) $100
Explanation:
The adjusting entries are prepared at the end of the period and in this case, we assume that the adjusting entries are prepared on 31 December.
To calculate the interest revenue on the note, we need to understand that the rate that is 6% is the annual interest rate. Thus, the interest revenue for the year will be,
Interest = 20000 * 0.06 = $1200However, the note is only for 3 months starting from December and by the end of December, only one month's interest revenue is earned, then the interest revenue at 31 December will be,
Interest revenue = 1200 / 12 = $100The entry will be,
31 Dec Interest Receivable $100 Dr
Interest Revenue $100 Cr
The Sonny Bono Copyright Extension Act: a. does not apply to individual copyright ownership. b. does not apply to corporate copyright ownership. c. does not provide protection for movies. d. extended the time for the federal copyright protection to 70 years beyond the life of the creator/author. e. none of the above
Answer:
The correct answer is letter "D": extended the time for the federal copyright protection to 70 years beyond the life of the creator/author.
Explanation:
The Sonny Bono Copyright Extension Act mostly known as the Copyright Term Extension Act (CTEA) is a regulation passed in 1998 to extend the length of copyrights. It is an amendment to the Copyright Act of 1976 where copyrights granted exclusiveness over inventions for 50 years after the decease of the author if individual or 75 years for corporate creations.
With the CTEA copyrights are granted to be used by individual creators only for until 70 years after their decease or 120 years for corporate authorship.
Ponzi Corporation has bonds on the market with 14.5 years to maturity, a YTM of 6.1 percent, and a current price of $1,038. The bonds make semiannual payments. What must the coupon rate be on these bonds?
Answer:
Coupon rate is 6.5%
Explanation:
Bond price is the sum of present value of coupon payment and face value of the bond. If the price is available the coupon payment can be calculated by following formula
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
$1,038 = C x [ ( 1 - ( 1 + 6.1%/2 )^-14.5x2 ) / 6.1%/2 ] + [ $1,000 / ( 1 + 6.1%/2 )^14.5x2 ]
$1,038 = C x [ ( 1 - ( 1 + 0.0305 )^-29 ) / 0.0305 ] + [ $1,000 / ( 1 + 0.0305 )^29 ]
$1,038 = C x [ ( 1 - ( 1.0305 )^-29 ) / 0.0305 ] + [ $1,000 / ( 1..0305 )^29 ]
$1,038 = C x [ ( 1 - ( 1.0305 )^-29 ) / 0..0305 ] + [ $1,000 / ( 1.0305 )^29 ]
$1,038 = C x 19.068 + $418.42
$1,038 - $418.42 = C x 19.068
$619.58 = C x 19.068
C = $619.58 / 19.068
C = $32.49
Coupon rate = 32.49 / $1,000 = 3.25% semiannual
Coupon rate = 3.25% per semiannual x 2 = 6.5% per year
Final answer:
To calculate the coupon rate, use the present value formula for a bond. Divide the YTM by 2 to get the semi-annual interest rate. Calculate the present value factor and the bond price. Finally, calculate the coupon rate using the formula (Coupon Payment / Bond Price) * 2.
Explanation:
To calculate the coupon rate, we need to use the present value formula for a bond. In this case, the coupon rate is the semi-annual interest payment divided by the bond price. The formula is given by:
Coupon Rate = (Coupon Payment / Bond Price) * 2
Given that the bond has a YTM of 6.1 percent, we can use the present value formula to find the bond price. Once we have the bond price, we can calculate the coupon rate using the formula above. Here's a step-by-step calculation:
Divide the YTM by 2 to get the semi-annual interest rate: 6.1% / 2 = 3.05% Convert the annual interest rate to a decimal: 3.05% / 100 = 0.0305Calculate the number of semi-annual periods: 14.5 years * 2 = 29 semi-annual periodsCalculate the present value factor: (1 - (1 + r)^(-n)) / r = (1 - (1 + 0.0305)^(-29)) / 0.0305 = 18.83Calculate the bond price: Bond Price = Coupon Payment * Present Value Factor + Face Value * Present Value FactorSubstitute the given values: $1,038 = Coupon Payment * 18.83 + $1,000 * 18.83Solve for Coupon Payment: Coupon Payment = ($1,038 - $1,000 * 18.83) / 18.83 = $3.05Calculate the coupon rate: Coupon Rate = ($3.05 / $1,038) * 2 = 0.0059 or 0.59%
Real-Time Data Analysis Exercise The following table contains some investment data from FRED* for the fourth quarter of 2017. Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. Title Value Gross Private Domestic Investment Private Nonresidential Fixed Investment Private Residential Fixed Investment $3,285.601 billion $2,511.182billion $767.091 billion The difference between gross private domestic investment and fixed private investment represents inventory investment For the the fourth quarter of 2017 this amount was $billion. (Enter your response rounded to one decimal place and be sure to use a minus sign if the magnitude is negative.) IS Enter your answer in the answer box and then click Check Answer.
Answer:
Inventory investment = Gross private domestic - Fixed private investment
= $3,285.601 billion - ($2,511.182+767.091)billion
= $3,285.601-$3,278.273
= $7.3 billion
Explanation:
The difference between gross private domestic investment and fixed private investment represents inventory investment, which can be calculated by subtracting the fixed private investment from the gross private domestic investment.
Explanation:The difference between gross private domestic investment and fixed private investment represents inventory investment. To find the inventory investment for the fourth quarter of 2017, subtract the fixed private investment from the gross private domestic investment. In this case, the inventory investment amount would be $774.419 billion ($3,285.601 billion - $2,511.182 billion).
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Eccles Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Wages and salaries $ 331,000 Depreciation 275,000 Utilities 227,000 Total $ 833,000 Distribution of resource consumption: Activity Cost Pools Assembly Setting Up Other Total Wages and salaries 50% 25% 25% 100% Depreciation 40% 10% 50% 100% Utilities 25% 55% 20% 100% How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool
Answer:
The cost in total allocated to the first stage in the assembly activity pool is $3,32,250
Explanation:
The cost in total allocated to the first stage in the assembly activity pool is given below:
Jenny Enterprises has just entered a lease agreement for a new manufacturing facility. Under the terms of the agreement, the company agreed to pay rent of $12,000 per month for the next 9 years with the first payment due today. If the APR is 6.36 percent compounded monthly, what is the value of the payments today?
Final answer:
The present value of Jenny Enterprises' lease payments can be found using the present value of an annuity due formula. By inserting the monthly payment amount, the monthly interest rate calculated from the APR, and the total number of payments, we can compute how much those future lease payments are worth today.
Explanation:
To calculate the present value of the lease payments for Jenny Enterprises, we need to discount the series of future rental payments at the given interest rate. Since the payments are made at the beginning of each period, we will use the formula for the present value of an annuity due. The annual percentage rate (APR) of 6.36% compounded monthly translates into a monthly interest rate, which can be calculated by dividing the APR by 12. The formula for the present value of an annuity due is [tex]P = PMT [(1 - (1 + r)^{-n}) / r] * (1 + r)[/tex], where P is the present value, PMT is the monthly payment amount, r is the monthly interest rate, and n is the total number of payments. Substituting the given values, we get [tex]P = $12,000 [ (1 - (1 + 0.00636)^{-108}) / 0.00636] * (1 + 0.00636)[/tex].
Below are some data from the land of milk and honey.
Year Price of Milk Quantity of Milk Price of Honey Quantity of Honey
2016 $1 100 quarts $2 50 quarts
2017 1 200 2 100
2018 2 200 4 100
a. Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2016 as the base year.
b. Compute the percentage change in nominal GDP, real GDP, and the GDP deflator in 2017 and 2018.
Answer:
The solution to the given problem is done below.
Explanation:
a. Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2016 as the base year.
Nominal GDP is simply equal to the sum of the current year price * current year quantity of all the goods.
2016: ($1 per qt. of milk X 100 qts. milk) + ($2 per qt. of honey X 50 qts. honey) = $200
2017: ($1 per qt. of milk X 200 qts. milk) + ($2 per qt. of honey X 100 qts. honey) = $400
2018: ($2 per qt. of milk X 200 qts. milk) + ($4 per qt. of honey X 100 qts. honey) = $800
Calculating real GDP (base year 2016):
Real GDP is equal to the sum of the base year price * current year quantity of all the goods.
Calculating real GDP (base year 2016):
2016: ($1 per qt. of milk X 100 qts. milk) + ($2 per qt. of honey X 50 qts. honey) = $200
2017: ($1 per qt. of milk X 200 qts. milk) + ($2 per qt. of honey X 100 qts. honey) = $400
2018: ($1 per qt. of milk X 200 qts. milk) + ($2 per qt. of honey X 100 qts. honey) = $400
b. Compute the percentage change in nominal GDP, real GDP, and the GDP deflator in 2017 and 2018.
Percentage change in nominal GDP in 2017 = [($400 –$200)/$200] X 100% = 100%.
Percentage change in nominal GDP in 2018 = [($800 –$400)/$400] X 100% = 100%.
Percentage change in real GDP in 2017 = [($400 –$200)/$200] X 100% = 100%.
Percentage change in real GDP in 2018 = [($400 –$400)/$400] X 100% = 0%.
The GDP deflator is equal to (Nominal GDP / Real GDP)*100
Percentage change in the GDP deflator in 2017 = [(100 –100)/100] X 100% = 0%.
Percentage change in the GDP deflator in 2018 = [(200 –100)/100] X 100% = 100%.
Prices did not change from 2016 to 2017. Thus, the percentage change in the GDP deflator is zero. Likewise, output levels did not change from 2017 to 2018. This means that the percentage change in real GDP is zero.
To compute nominal GDP, real GDP, and the GDP deflator, we use the prices and quantities of goods and services. We compare the values to a base year to calculate the percentage change in each measure.
Explanation:To compute nominal GDP, we multiply the price of each good or service by the quantity produced and sum across all goods and services. To compute real GDP, we use constant prices from a base year to remove the effects of inflation. The GDP deflator is a measure of the overall price level in an economy. We can calculate it by dividing nominal GDP by real GDP and multiplying by 100.
In 2017, the nominal GDP increased by 20% compared to 2016, the real GDP increased by 9.09%, and the GDP deflator increased by 10%. In 2018, the nominal GDP increased by 41.67%, the real GDP increased by 9.09%, and the GDP deflator increased by 32.14%.
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Using the graph, complete the table that follows by indicating whether each statement is true or false. Statement True False a. Curve MM is more elastic between points A and C than curve NN is between points A and D.b. Between points A and B, curve LL is unit elastic. c. Between points A and D, curve NN is inelastic.
Answer:
a. Curve MM is more elastic between points A and C than curve NN is between points A and D: TRUE
b. Between points A and B, curve LL is unit elastic: FALSE
c. Between points A and D, curve NN is inelastic: TRUE
Explanation:
Elasticity is the responsiveness of quantity demanded or quantity supplied to a change in the price. There are five categories of elasticities:
1. Perfectly elastic: Quantity changes even without a change in price. Curve is a horizontal line.
2. Elastic: Change in price is smaller than a change in quantity. Curve has a smoother slope.
3. Unit elastic: Change in price causes a proportionate change in quantity. Curve is a rectangular hyperbola.
4. Inelastic: Change in price causes a smaller change in quantity. Curve is a steep slope.
5. Perfectly inelastic: Change in price causes no change in quantity. Curve is a vertical line.
To interpret statements about price elasticity of demand, consider that elastic demand corresponds to a more horizontal demand curve, unit elastic demand suggests a straight line with a negative slope through the origin, and inelastic demand corresponds to a steeper curve. Without the graph, we cannot definitively label statements a, b, and c as true or false.
Explanation:Without the graph, it's not possible to definitively determine the truth of these statements. However, I can provide some clarification about the concepts in question:
Price Elasticity of Demand is a measure of the responsiveness of quantity demanded to a change in price. Elastic demand means that quantity demanded is highly responsive to changes in price. This would likely correspond with a more horizontal, or less steep, demand curve. Thus, if curve MM is more horizontal than curve NN between points A and C and A and D respectively, statement a would be true.
Unit elastic demand means that the percentage change in quantity demanded is equal to the percentage change in price. In this case, the total revenue remains constant. If curve LL is a straight line with a negative slope through the origin from A to B, it may indicate unit elasticity. However, without the graph, it's not possible to be sure.
Lastly, inelastic demand means that quantity demanded is relatively unresponsive to price changes. If the curve NN is steeper between points A and D, it indicates inelastic demand, thus making statement c true.
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ZipCar has learned that Urban Boomers, baby boomers that have spent most of their time living in the suburbs but then later move into the city, drive less frequently, making them more ______ to ZipCar’s offerings than their counterparts in the suburbs.
Answer:
Susceptible
Explanation:
Urban Boomers tend to drive their car less when moving to the city, searching for new and innovative ways of transportation. The service ZipCar offers, such as car sharing, address this consumption behavior in the way urban boomers still drive but don´t want to own a car with all the maintenance, financial and emotional, that it comes with.
Final answer:
Urban Boomers are more likely to use ZipCar due to their location in the city and infrequent driving, aligning with the trend of gentrification and urban living preferences that have evolved since the rise of suburbanization.
Explanation:
Urban Boomers, a subsegment of the baby boomer generation who have relocated from the suburbs to the city, are more likely to embrace ZipCar's offerings due to their less frequent driving habits. This demographic shift coincides with the fact that city inhabitants typically have greater access to amenities within walking distances and are less reliant on personal vehicles compared to their suburban counterparts. Furthermore, the gentrification of urban areas has made city living more desirable for various age groups, increasing the demand for flexible transportation options like car-sharing services.
Historically, the advent of the automobile led to suburban sprawl, as Americans could live further away from urban cores and commute to work. Over time, the proliferation of suburbs created a decentralized city landscape with residential and commercial hubs scattered across metropolitan areas. However, recent trends show a reversal with younger generations and even former suburbanites moving back to the city, opting for the convenience of urban living, which makes them prime candidates for services like ZipCar.
Despite broad regulatory reforms after the Enron scandal over a decade ago, corporate boards still are not providing the oversight necessary to prevent ethical lapses, according to an article in the Harvard Business Review. Which of the following are likely areas of concern for corporations? Check all that apply.A) Corporations place too much emphasis on pleasing shareholders and not enough on meeting the needs of other stakeholders such as customers, employees, and members of the public.B) Executive bonuses are based on a number of qualitative and quantitative measures rather than just on stock price.C) Corporations focus on meeting short-term earnings goals rather than on creating long-term value.D) Executives’ pay exceeds their value to the organization, as indicated by historical measures.
Corporate governance still faces challenges in ensuring companies act ethically and in the long-term interest of not just shareholders but all stakeholders. The focus on short-term earnings, excessive executive pay, and inadequate attention to broader stakeholder needs are key areas of concern.
Explanation:Despite regulatory reforms post-Enron, the Harvard Business Review article indicates that corporate boards are still not sufficiently overseeing to prevent ethical lapses. Here are areas of concern for corporations:
Corporations place too much emphasis on pleasing shareholders and not enough on meeting the needs of other stakeholders such as customers, employees, and members of the public.Corporations focus on meeting short-term earnings goals rather than on creating long-term value.Executives’ pay exceeds their value to the organization, as indicated by historical measures.These areas highlight the ongoing challenges in corporate governance, despite the establishments like the board of directors, auditing firms, and outside investors designed to provide oversight.
Concerns A, C, and D are likely areas of concern for corporations regarding ethical lapses and corporate governance, as they touch upon issues related to stakeholder prioritization, short-term focus, and executive compensation practices. Option B, on the other hand, promotes a more balanced approach to executive bonuses, which is considered a positive practice.
The concerns highlighted in the Harvard Business Review article touch upon various aspects of corporate governance and ethics. Let's analyze each option to understand the likely areas of concern for corporations:
A) Corporations place too much emphasis on pleasing shareholders and not enough on meeting the needs of other stakeholders such as customers, employees, and members of the public: This is a valid concern. If corporations excessively prioritize shareholder interests over those of other stakeholders, it can lead to ethical lapses, such as neglecting employee welfare, customer satisfaction, or broader societal impact.
B) Executive bonuses are based on a number of qualitative and quantitative measures rather than just on stock price: This is a positive practice. Relying solely on stock price for executive bonuses can encourage short-term decision-making to boost stock value, potentially at the expense of long-term sustainability and ethical considerations. A more balanced approach, incorporating various measures, promotes a holistic view of performance.
C) Corporations focus on meeting short-term earnings goals rather than on creating long-term value: This is a significant concern. Short-term focus can lead to unethical practices, such as financial manipulation, to meet immediate goals at the expense of sustainable long-term value creation.
D) Executives’ pay exceeds their value to the organization, as indicated by historical measures: This is another potential concern. Overcompensation without corresponding value creation raises ethical issues. Executives should be fairly compensated based on their contribution to the organization, and excessive pay without commensurate performance can be seen as unjust.
Transworld Import Company and USA Export, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This organization is ______.
A) a business trustB) a joint stock company.C) a joint venture.D) a syndicate.
Answer:
A joint stock company
Explanation:
A joint stock company is a business organisation that is owned jointly by all its shareholders. All the shareholders have a specific amount of stock in the company, which is represented by their amount of shares.
Advantages of joint stock company include:
1) Large amount of capital
2) Limited Liability
3) Stability of Existence
4) High Public Confidence
5) Increased tax Benefits
6) It greatly Promotes Savings and Investment
Answer: B- joint stock company
Explanation: A joint-stock company is
a business existence in which shares of the business organization’s merchandise kept on the premises of a warehouse and available for distribution or sale can be purchased or sold by an individual or corporation that lawfully owns one or more mutual funds, limited partner, and real estate investment trusts of stock in a public or private corporations. In this case, a shareholder’s liability is limited to the amount of the share equity that is unpaid, hence he or she has a personal liability.
The trial balance of Woods Company includes the following balance sheet accounts. Identify the accounts that might require adjustment. For each account that requires adjustment, indicate (1) the type of adjusting entry and (2) the related account in the adjusting entry.
(a) Accounts Receivable
(b) Prepaid Insurance
(c) Equipment
(d) Accumulated Depreciation Equipment
(e) Notes Payable
(f) Interest Payable
(g) Unearned Service Revenue
Adjustment entries are the form of journal entries being recorded during the closure of books or at the end of the financial year. They are recorded to adjust the due amounts of the expenses or incomes that are not of the current financial period.
For each of the accounts the adjusting entry and the related account in the adjusting entry are shown in the table attached below:
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(a) Accounts Receivable: Accrued Revenues - Service Revenue
(b) Prepaid Insurance: Insurance Expense - Prepaid Expenses
(c) Equipment: No adjustment required
(d) Accumulated Depreciation Equipment: Depreciation Expense - Equipment
(e) Notes Payable: No adjustment required
(f) Interest Payable: Accrued Expenses - Interest Expense
(g) Unearned Service Revenue: Unearned Revenues - Service Revenue
(a) Accounts Receivable
1. Type of adjusting entry: Accrued Revenues
2. Related account in the adjusting entry: Service Revenue
(b) Prepaid Insurance
1. Type of adjusting entry: Insurance Expense
2. Related account in the adjusting entry: Prepaid Expenses
(c) Equipment
1. Type of adjusting entry: Not Required (unless there are impairments or disposals)
2. Related account in the adjusting entry: Not Required
(d) Accumulated Depreciation Equipment
1. Type of adjusting entry: Depreciation Expense
2. Related account in the adjusting entry: Equipment
(e) Notes Payable
1. Type of adjusting entry: Not Required (unless there are changes in interest or principal)
2. Related account in the adjusting entry: Not Required
(f) Interest Payable
1. Type of adjusting entry: Accrued Expenses
2. Related account in the adjusting entry: Interest Expense
(g) Unearned Service Revenue
1. Type of adjusting entry: Unearned Revenues
2. Related account in the adjusting entry: Service Revenue
Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting and which characteristics are more closely associated with managerial accounting.
1. General-purpose reports
2. Reports are used internally
3. Prepared in accordance with generally accepted accounting principles
4. Special purpose reports
5. Limited to historical cost data
6. Reporting standard is relevance to the decision to be made
7. Financial statements
8. Reports generally pertain to the business as a whole
9. Reports generally pertain to subunits
10. Reports issued quarterly or annually
Answer:
Characteristics more closely related to Financial Accounting:
A - 1
B - 3
C - 5
D - 6
E - 7
F - 8
G - 10
Characteristics more closely related to management accounting:
A - 2
B - 4
C - 9
Explanation:
Characteristics more closely related to Financial Accounting:
A - general purpose reports: financial accounting takes a general and broad overview look on the company's affairs. This cannot be said of management accounting.
B - Preparation in accordance with relevant Generally Accepted Accounting Principles is one of the fundamentals of financial accounting. Unlike management accounting.
C - financial accounting uses historical bases in valuation of its cost items. Unlike the management accounting.
D - Reporting standards is crucial to the presentation of financial statement and eventual decision making. This cannot be said of management accounting.
E - Financial statement is simply the medium through financial accountant communicate their findings. This is not the same as management accountant.
F - Reports generally centers on the business in financial accounting than management accounting.
G - Financial statement are issued quarterly - interim, or annually - year end. This is unlike management accounting that is most time discretional.
Characteristics more closely related to management accounting than financial accounting:
A - reports are used internally. Management reports are specific to a particular line of company's business. The reports are thus to be used by management.
B - Management reports are more specifically focused. This further buttresses point A above.
C - management reports in its specifically focused drive generally focused on sub units. This cannot be said of financial reports.
Financial accounting is associated with general-purpose reports, GAAP, historical cost data, financial statements, and company-wide reporting at regular intervals. Managerial accounting is linked to internal use, special-purpose, and decision-relevant reports that focus on specific subunits of the business.
Explanation:The characteristics that distinguish financial accounting from managerial accounting can be related to specific aspects such as the purpose of reports, principles followed, scope, timing, and their usage. Here is the association of each characteristic:
General-purpose reports: Financial accountingReports are used internally: Managerial accountingPrepared in accordance with generally accepted accounting principles (GAAP): Financial accountingSpecial-purpose reports: Managerial accountingHistorical cost data: Financial accountingReporting standard is relevance to the decision to be made: Managerial accountingFinancial statements: Financial accountingReports generally pertain to the business as a whole: Financial accountingReports generally pertain to subunits: Managerial accountingReports issued quarterly or annually: Financial accountingFinancial accounting is oriented towards external stakeholders, follows strict guidelines such as GAAP, and is more concerned with historical data and general-purpose reporting. Managerial accounting focuses on internal decision-making, provides detailed reports for specific purposes, and emphasizes relevance and timeliness.
The following accounts are taken from Equilibrium Riding, Inc., a company that specializes in occupational therapy and horseback riding lessons, as of December 31.
Account Name Debits Credits
Cash 69,600
Accounts Receivable 5,200
Prepaid Insurance 5,000
Equipment 78,750
Land 26,550
Accounts Payable 32,600
Unearned Revenue 2,100
Notes payable (long-term) 66,000
Common stock 5,000
Retained Earnings 51,815
Dividends 0
Service Revenue 33,500
Wages Expense 4,800
Repairs and Maintenance-
Expense 830
Office Expenses 285
Totals 191,015 191,015
(a) Using the unadjusted trial balance provided, create an Income Statement for Equilibrium Riding, Inc., for the year ended December 31.
(b) Using the unadjusted trial balance provided, create a Statement of Retained Earnings for Equilibrium Riding, Inc., for the year ended December 31.
(c) Using the unadjusted trial balance provided, create a classified Balance Sheet for Equilibrium Riding, Inc., for the year ended December 31.
Answer:
Part a) Net Income for the year $27,585
Part b) Balance of Retained Earnings for the year $79,400
Part c) Total Assets as the December 31 $185,100
Explanation:
Part a)
Equilibrium Riding Inc.
Income Statement for the year ended as of 31 December
Service Revenue $33,500
Less Expenses
Wages Expense $4,800
Repairs and Maintenance Expense $830
Office Expenses $285
Net Revenue $27,585
Part b)
Equilibrium Riding Inc.
Statement of changes in Equity for the year ended as of 31 December
Retained Earnings at the beginning of the period $51,815
Add: Net income for the year $27,585
Less Dividends $0
Retained earnings at the end of the period $79,400
Part c)
Equilibrium Riding Inc.
Balance Sheet as at 31 December
Assets
Non-Current Assets
Equipment $78,750
Land $26,550
Current Assets
Accounts Receivable $5,200
Cash $69,600
Prepaid Insurance $5,000
Total Assets $185,100
Equity and Liabilities
Owners Equity
Common Stock $5,000
Retained Earnings $79,400
Non Current Liabilities
Notes Payable (long-term) $66,000
Current Liabilities
Accounts Payable $32,600
Unearned Revenue $2,100
Total Equity and Liabilities $185,100
Answer:
Please find the answer below
Explanation:
1. Equilibrium, Inc
Income statement for the year ended December 31
($)
Service revenue 33, 500
Other income 0
Gross Income 33, 500
Expenses:
Wages expense 4, 800
Repairs and maintenance 830
Office expenses 285
Total Expenses (5, 915)
Net Income 27, 585
2. Equilibrium, Inc
Statement of retained earnings
for the year ended December 31
($)
Retained earnings, 1 Jan 51, 815
Dividends (0)
Net profit 27, 915
Retained earnings , Dec 31 79, 400
3. Equilibrium, Inc
Balance sheet
for the year ended December 31
($)
Non-Current assets
Equipment 78, 750
Land 26, 550
Total Non-current assets 105, 300
Current Assets
Cash 69, 600
Accounts Receivable 5, 200
Prepaid insurance 5, 000
Total non-current assets 79, 800
TOTAL ASSETS 185, 100
Equity
Common stock 5, 000
Retained earnings 79, 400
Total equity 84, 400
Liabilities
Notes payable (long-term) 66, 000
Unearned revenue 2, 100
Accounts payable 32, 600
Total liabilities 100, 700
TOTAL EQUITY AND LIABILITIES 185, 100
Sole Occhiali Group, an Italian company that sells sunglasses, reported Net Sales of $181,000 and Cost of Goods Sold of $59,500. Candy Electronics Corp. reported Net Sales of $39,000 and Cost of Goods Sold of $28,600.
Calculate the Gross Profit Percentage for both companies.
Answer:
The gross profits of Sole Occhiali Group and Candy Electronics Corp. are 67.13% and 26.66% respectively.Explanation:
In Business Studies and Accounting,Gross Profit percentage is calculated by subtracting the cost of goods sold from the net sales revenue and then dividing the result by net sales revenue and finally multiplying the entire expression with hundred.Here,the net sales revenue of Sole Occhiali Group is given as $181,000 and the costs of goods sold is $59,500 and for Candy Electronics Corp. they are $39,000 and $28,600 respectively.
Hence,gross profit percentage for Sole Occhiali Group=[tex](\frac{181,000-59,500}{181,000})\times 100[/tex]=[tex](\frac{121,500}{181,000})\times 100[/tex]=[tex](0.6713\times 100)[/tex]=67.13% approximately
Now,gross profit for Candy Electronics Corp.=[tex](\frac{39,000-28,600}{39,000})\times 100[/tex]=[tex](\frac{10,400}{39,000})\times 100[/tex]=[tex](0.2666\times 100)[/tex]=26.66% approximately
Required information Accounts receivable are amounts due from customers for credit sales. A subsidiary ledger lists amounts owed by each customer. Credit sales arise from at least two sources: (1) sales on credit and (2) store credit card sales. Sales on credit refers to a company's granting credit directly to customers. Store credit card sales involve customers' use of store credit cards. Messing Company has their own credit card and makes a credit sale on February 1 to one of its customers for $5,000. Prepare the February 1 journal entry for Messing Company by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns
Answer:
Messing company Journal entries for Store Credit Card usage for a Customer
Explanation:
The Journal entries required includes
a. Recognition of the Bank credit advanced via usage of Credit Card (Liability)
b. Recognition of the Customer Account funded by this Credit line (Accounts receivable)
c. Recognition of the Sales created by this credit utilization
Kindly refer to attachment for detailed Journal entries
A credit sale of $5,000 made by Messing Company would create a journal entry where the Accounts Receivable is debited by $5,000 and Sales Revenue is credited by $5,000. These entries reflect the recognition of earned revenue and anticipations of future cash collection.
Explanation:When Messing Company makes a credit sale, two accounts are impacted: Accounts Receivable and Sales Revenue. Accounts Receivable is an asset account and is therefore increased with a debit entry. On the other hand, Sales Revenue, being an income account, increases with a credit entry. The journal entry for this $5,000 credit sale would be as follows:
Debit: Accounts Receivable - $5,000Credit: Sales Revenue - $5,000
This indicates that the company has earned revenue of $5,000 (even though the cash has not been received yet) by extending credit to a customer. The corresponding increase in Accounts Receivable reflects the company's expectation to collect this cash in the future.
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Suppose that you own 1,000 shares of Nocash Corp. and the company is about to pay a 25% stock dividend. The stock currently sells at $100 per share. (LO17-1) a. What will be the number of shares that you hold after the stock dividend is paid? b. What will be the total value of your equity position after the stock dividend is paid? c. What will be the number of shares that you hold if the firm splits five-for-four instead of paying the stock dividend?
Answer:
a. 1250 shares
b. $125000
c. 1250 shares
Explanation:
A stock dividend refers to dividend payment by an entity in the form of stocks and not in cash, thereby increases the number of shares held.
Dividend Declared = 25% of $100 = $ 25 per share
Total dividend declared = $25 × 1000 shares = $25,000
Number of shares held after the stock dividend is declared = 1000 shares + [tex]\frac{25000}{100}[/tex] = 1250 shares
(b) Total value of equity position = $1250 shares × 100 = $125,000
(c) Number of shares held after stock split = 1000 shares × [tex]\frac{5}{4}[/tex] = 1250 shares
After the stock dividend, you will hold a total of 1,250 shares and the total value of your equity position will be $125,000. If the firm splits five-for-four, you will hold 1,250 shares.
Explanation:a. After the stock dividend is paid, the number of shares you will hold will increase by 25%. Since you initially own 1,000 shares, your new holdings will be 1,000 x 1.25 = 1,250 shares.
b. The total value of your equity position after the stock dividend is paid can be calculated by multiplying the new number of shares (1,250) by the stock price ($100 per share). Therefore, the total value will be 1,250 x $100 = $125,000.
c. If the firm splits five-for-four instead of paying the stock dividend, this means that for every four shares you own, you will receive five additional shares. Since you initially own 1,000 shares, and the split is five-for-four, you will receive 1,000 / 4 x 5 = 1,250 shares after the split.
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For three months, an attorney has represented a local manufacturing company in a contract dispute with the company's landlord. Last week, an employee of the manufacturing company asked the attorney to represent the employee in an action against the manufacturing company for failing to comply with wage and hour laws. The contract dispute and the wage and hour matter have no common issues of law or fact, and the attorney reasonably believes that he can competently represent the clients in the respective matters. Without discussing it with the manufacturing company, the attorney accepts and begins representation of the employee in the wage and hour matter.
Is the attorney subject to discipline?
(A) No, because the attorney reasonably believes that he can represent both the company and the employee competently in the respective matters.
(B) No, because there are no common issues of law or fact in the respective lawsuits.
(C) Yes, because the attorney did not terminate the representation of the company before agreeing to represent the employee.
(D) Yes, because the attorney’s representation of the employee is directly adverse to the manufacturing company.
Answer:
D
Explanation:
Although the attorney reasonably believes that he can represent both the company and the employee competently in the respective matters, it is against the ethics because there is conflict of interest and it should be noted that the legal issue involves claim by one client against another who both requires the service of the attorney in the same litigation.
Representation of one of the client will no doubt be affected by the attorney's loyalty or personal and responsibility to the other client. Therefore the answer is Yes, because the attorney's representation of the employee is directly adverse to the manufacturing company
Footsteps Co. has a bond outstanding with a coupon rate of 5.7 percent and annual payments. The bond currently sells for $927.87, matures in 13 years, and has a par value of $1,000. What is the YTM of the bond?
Answer:
6.54%
Explanation:
YTM which is Year to Maturity, is the yield of a bond if it is held till maturity.
[tex]\frac{Annual interest + Par value - Market value/Number of years}{Par value + market value/2\\}[/tex]
Formula for YTM
Annual interest = 1000*0.57=57
Par value $1000
Market value $927.87
YTM= [tex]\frac{57+ (1000-927.87)/13}{1000+927.87/2}[/tex]
YTM= 6.54%
The average elasticity for steeper demand curves are _____ elastic than flatter curves because percentage changes in ____ tend to be smaller and percentage changes in _____ tend to be larger.
Answer:
Explanation:
The average elasticity for steeper demand curves are less elastic than flatter curves because percentage changes in price tend to be smaller and percentage changes in quantity tend to be larger.
Advantage, Inc., a tennis equipment manufacturer, has variable costs of $ 0.80 per unit of product. In August, the volume of production was 27 comma 000 units, and units sold were 21 comma 400. The total production costs incurred were $ 30 comma 800. What are the fixed costs per month?
Answer:
Total fixed cost= $9,200
Explanation:
Giving the following information:
variable costs= $0.80 per unit.
production= 27,000 units
The total production costs incurred were $30,800.
First, we need to calculate the total variable cost at the production level of 27,000 units.
Total variable cost= 0.8*27,000= $21,600
Total cost= total fixed cost + total variable cost
30,800= total fixed cost + 21,600
Total fixed cost= 30,800 - 21,600
Total fixed cost= $9,200
General Inertia Corporation made a distribution of $50,000 to Henry Tiara in partial liquidation of the company on December 31, 20X3. Henry owns 500 shares (50%) of General Inertia. The distribution was in exchange for 250 shares of Henry's stock in the company. After the partial liquidation, Henry continued to own 50% of the remaining stock in General Inertia. At the time of the distribution, the shares had a fair market value of $200 per share. Henry's income tax basis in the shares was $100 per share. General Inertia had total E&P of $800,000 at the time of the distribution. What are the tax consequences to Henry because of the transaction? A. Henry has dividend income of $50,000 and a tax basis in his remaining shares of $100 per share. B. Henry has capital gain of $25,000 and a tax basis in his remaining shares of $100 per share. C. Henry has dividend income of $50,000 and a tax basis in his remaining shares of $200 per share. D. Henry has capital gain of $25,000 and a tax basis in his remaining shares of $200 per share.
Answer: B
Explanation:
Henry has capital gain of $25,000 and a tax basis in his remaining shares of $100 per share
g suppose that bigbucks company pays a dividend this year of $7 per share. You expect the dividend to grow by 2% per year, so you discount bigbucks dividend at 4%. What is the most youwould be willing to pay for a share of stock in bigbucks
Answer:
$357
Explanation:
The price that g would pay for the stock of the bigbucks shall be determined through the following mentioned formula:
Price of stock of big bucks=[D(1+g)/(r-g)]
In the given question
D=dividend paid by the Big bucks this year=$7
g=growth rate in dividend=2%
r=discount rate=4%
Price of stock of big bucks=[7(1+2%)/(4%-2%)]
=$357
Martinez Manufacturing incurred $ 4 comma 000 for indirect labor in Department III. The journal entry to record indirect labor utilized, but not paid is ________. Process costing is used. A. debit Accounts Payable, $ 4 comma 000; credit Manufacturing Overhead, $ 4 comma 000 B. debit Wages Payable, $ 4 comma 000; credit Manufacturing Overhead, $ 4 comma 000 C. debit Manufacturing Overhead, $ 4 comma 000; credit Accounts Payable, $ 4 comma 000 D. debit Manufacturing Overhead, $ 4 comma 000; credit Wages Payable, $ 4 comma 000
Answer: B. debit Wages Payable, $ 4 comma 000; credit Manufacturing Overhead, $ 4 comma 000
Explanation:
Kirkland Theater sells season tickets for six events at a price of $189. For the 2016 season, 1,200 season tickets were sold.
Required:
a-1. Use the horizontal model to show the effect of the sale of the season tickets. (Use amounts with + for increases and amounts with – for decreases.) FIll in yellow boxes
Assets Balance Sheet Liabilities Stockholders Equity Net Income
b-1. Use the horizontal model to show the effect of presenting an event. (Use amounts with + for increases and amounts with – for decreases.) Fill in yellow boxes
Answer:
Explanation:
Theater sells season tickets for six events at a price of $189. For the 2016 season, 1,200 season tickets that were sold.This is illustrated in the attached diagram.
When no-par stock is issued, the entire proceeds are credited to Capital Stock and this amount is viewed as legal capital not subject to withdrawal. True or False True False
Answer:
True
Explanation:
If there is no-par stock is issued, the entire proceeds are credited to Capital Stock. Also, the amount we get in for this capital amount can not be legally withdrawn for any purposes. It also reduces any responsibility faced from payable by the issuance of no face value. The journal entry will be as follows:
Cash Debit
Common stock Credit
The statement is true. When no-par stock is issued, the entirety of proceeds is credited to Capital Stock, which then becomes viewed as legal capital not subject to withdrawal. Always verify with local laws.
Explanation:The statement is true. When no-par stock is issued, the entire proceeds do indeed become credited to Capital Stock. This consequently becomes the legal capital, which is not subject to withdrawal. In essence, legal capital serves as a company's equity cushion and is calculated as the total number of shares issued multiplied by the par value per share. However, different rules may exist depending on jurisdiction, and this should always be checked with local laws and regulations.
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Your father's employer was just acquired, and he was given a severance payment of $365,000, which he invested at a 7.5% annual rate. He now plans to retire, and he wants to withdraw $35,000 at the end of each year, starting at the end of this year.
a. How many years will it take to exhaust his funds, i.e., run the account down to zero?
Answer: 21.07
Explanation:
investment an aural rate= 7.5%
severance payment = $365,000
PMT= $35,000
Answer = 21.07