Answer:
Explanation:
Value assigned to bonds =
Value of bonds without warrants/(value of bonds without warrants+value of warrants)*Issue price
Value assigned to warrants =
Value of warrants/(value of bonds without warrants+Value of warrants)
Value assigned to bonds = 115,200/(115,200+28,800) * 140,000 = 0.8*140,000 = 112,000
Value assigned to warrants = 28,800/144,000 * 140,000 = 28,000
Journal entries:
Dr Cash 140,000
Dr Discount on bonds payable (171,000-112,000) 59,000
Cr Bonds payable 171,000
Cr Paid in capital-Stock warrants 28,000
To prepare the journal entry for the bond issuance with detachable stock warrants, we allocate the issuance price of $140,000 proportionately between the bonds and the warrants based on their market values. The allocation results in $112,000 for bonds and $28,000 for warrants. The journal entry includes debit to cash and credits to bonds payable and paid-in capital – stock warrants.
To prepare the journal entry for Blue Inc., we need to allocate the issuance price of $140,000 between the bonds and the warrants. The market values provided are $115,200 for the bonds (without warrants) and $28,800 for the warrants.
The total market value is $115,200 + $28,800 = $144,000. We will allocate the issuance price based on the proportionate market values.
Step-by-Step Calculation
Determine the allocation percentages:Apply allocation to issuance price:Journal Entry
Debit: Cash $140,000
Credit: Bonds Payable $112,000
Credit: Paid-in Capital – Stock Warrants $28,000
Krentz Insulating accepted a 3-year note for $1,500 in lieu of immediate payment for insulating equipment sold to a local firm. Find the present value of the note at 4% per year compounded semiannually.
Answer:
$1,331.96
Explanation:
Present value (PV) refers to today's worth of cash flows to be received at a future date. The formula for PV is given as follows:
PV = F ÷ (1 + r)^n ......................................... (1)
PV = present value = ?
F = Future amount or note amount = $1,500
r = interest rate = 4% annually = 0.04 annually
= (0.04 ÷ 2) semiannually = 0.02 semiannually
n = number of compounding period = 3 years
= (3 × 2) semiannually = 6 semiannually
Substituting the figures above into equation (1). we have:
PV = $1,500 ÷ (1 + 0.02)^6
= $1,500 ÷ (1.02)^6
= $1,500 ÷ 1.126162419264
= $1,331.96
Therefore, the present value of the note at 4% per year compounded semiannually is $1,331.96.
A small company that specializes in powder coating expanded its building and purchased a new oven that is large enough to handle automobile frames. The building and oven cost $175,000, but new business from hot-rodders has increased annual income by $520,000. If operating expenses for gas, materials, labor, etc., amount to $470,000 per year, what rate of return will be made on the investment if only the cash flows that occur over the next 4 years are included in the calculation
Answer:
rate 0.= 5.63%
Explanation:
F0 = -175,000 (oven cost)
Then
520,000 additional revenues
-470,000 additional expenses
50,000 net cash flow
We ghave to solve for the rate of return of a 50,000 dollar annuity given it cost 170,000 during four years
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 50,000.00
time 4
PV $175,000.0000
[tex]50000 \times \frac{1-(1+r)^{-4} }{r} = PV\\[/tex]
We apply the IRR function in excel to get the IRR
=IRR({-175000,50000,50000,50000,50000})
rate 0.055637846 = 5.63%
The Kittle Company’s 30-year, $1,000 par-value bonds currently sell for $1,125.50. Assuming interest is paid annually and the bond’s coupon rate is 10%, what is the bond’s yield-to-maturity?
Answer:
Estimated YTM = 9.016%
YTM = 8.81%
Explanation:
YTM is total return that is expected from a bond if it is hold until maturity. It is a long term bond yield rate but expressed as annual rate. Formula to calculate the YTM is as follow:
Yield to maturity = [ C + ( F - P ) / n ] / [ ( F + P ) / 2 ]
C= Coupon payment = $1,000 x 10% = $100
F = Face Value = $1,000
P = price of bond = $1,125.50
n = number of years = 30 years
Yield to maturity = [ $100 + ( $1,000 - $1,125.50 ) / 30 ] / [ ( $1,000 + $1,125.50 ) / 2 ]
Yield to maturity = [ $100 + ( - 125.50 ) / 30 ] / [ $2,125.50 / 2 ]
Yield to maturity = [ $100 - 4.18 ] / $1,062.75
Yield to maturity = $95.82 / $1,062.75
Yield to maturity = 0.09016 = 9.016% (Estimated)
Actual YTM = 8.81%
Here are the data for the past 21 months for actual sales of a particular product: LAST YEAR THIS YEAR January 370 295 February 415 350 March 405 355 April 435 440 May 430 450 June 495 385 July 415 365 August 330 290 September 385 350 October 515 November 600 December 495 Develop a forecast for the fourth quarter using a three-quarter, weighted moving average. Weight the most recent quarter 0.50, the second most recent 0.25, and the third 0.25. Solve the problem using quarters, as opposed to forecasting separate months. (Round your answer to 2 decimal places.)
Answer:
Here in this question, I have used tables to show you more clearly. So please refer to the attachment 1.
Explanation:
Please refer to the attachment 1.
Weighted Moving Average = ∑Quantity*Weights/ ∑weights
Forecast for Oct: (350*0.5 + 290*0.25 + 365*0.25)/ 0.5 + 0.25 + 0.25 = 338.75 0r 339
Forecast for Nov: (339*0.5 + 350*0.25 + 290*0.25)/ 0.5 + 0.25 + 0.25 = 329.5 0r 330
Forecast for Dec: (330*0.5 + 339*0.25 + 350*0.25)/ 0.5 + 0.25 + 0.25 = 337.25 0r 337
Final answer:
To forecast the fourth quarter sales, calculate the total sales for the last three quarters, apply the given weights to each, and sum them. The forecast for the fourth quarter is 1146.25.
Explanation:
To develop a forecast for the fourth quarter using a three-quarter weighted moving average, we need to first calculate the sales figures for the last three quarters available this year:
Q2 (April + May + June): 440 + 450 + 385 = 1275Q3 (July + August + September): 365 + 290 + 350 = 1005Next, we apply the given weights (most recent quarter 0.50, second most recent 0.25, and third most recent 0.25) to these totals and sum them to get the weighted moving average.
Weighted Total = (Q3 sales imes 0.5) + (Q2 sales imes 0.25) + (Q1 sales of prior year imes 0.25)
In this case:
Weighted Total = (1005 imes 0.5) + (1275 imes 0.25) + (1300 imes 0.25) = 502.5 + 318.75 + 325 = 1146.25
Therefore, the forecast for the fourth quarter is:
1146.25
Procter & Gamble recently kept its retail price on its jumbo pack of Pampers and Luvs diapers, but reduced the number of diapers per pack from 140 to 132. The repositioning strategy P&G is using here is called
a. market modification.
b. product extension.
c. rebranding.
d. trading up.
e. downsizing
Answer:
e. downsizing
Explanation:
Downsizingbor shrinkfalation is the practice where the amount of a product in a package is reduced. The package looks similar to the old one and customers buy on assumption that they are buying the same amount as before. Although the product amount is written in the label most people do not take the time to check.
For businesses this is a great way to increase revenue from sales. Prices are kept constant while amount is reduced.
This is quite effective as most customers will react negatively to price change.
Answer: E. Downsizing
Explanation: Downsizing is defined as the process of reducing in size or number. An adjustment made to an existing product, is usually made for greater appeal or functionality or to reduce cost of production. Such adjustments may include changes to a product's shape, adding a feature or improving its performance, reducing its quantity.
However, most consumers often jump to the conclusion that the company is purely profit-driven but often than not, downsizing—reduction in the amount of the product offered to the consumer—at the same price are due to increased costs of raw materials, production and distribution, which the company must factor in to break even. And so, at times like this the firm is faced with either increasing prices of products or cutting down the quantity in their packaging such as P&G had done. As consumers are more sensitive to price changes than to decreases in product quantity, firms will often decrease product sizes as against raising product prices.
1. How does the complete equity method, used to facilitate consolidation in subsequent years, differ from the equity method used for external reporting? A. The complete equity method adjusts for upstream and downstream unconfirmed profits, while the equity method used for external reporting does not make these adjustments. B. The complete equity method deducts unconfirmed profits on downstream sales to the extent of ownership interests, while the equity method used for external reporting deducts all unconfirmed profits on downstream sales. C. The complete equity method deducts unconfirmed profits on upstream sales to the extent of ownership interests, while the equity method used for external reporting deducts all unconfirmed profits on upstream sales.
Answer:
None of the option is correct.
Explanation:
The major difference between the two methods is that under the complete equity method, an adjustment is made to the reported profit for impairment losses on the intangible assets that were not previously reported. However, under the he equity method used for external reporting, adjustment for impairment losses on the intangible assets that were not previously reported is not made.
Note that impairment loss occurs when the fair value of an intangible asset falls below its carrying amount. The amount by which the fair value is lower than the carrying amount is adjusted or written off.
Examples of intangible assets are goodwill, copyrights, brand recognition, patents, trademarks, and among others.
Which of the following accurately describe depreciable cost? i. The amount of cost a company intends to depreciate over the life of the asset? ii. The acquisition cost of the asset. iii. The fair market value of the asset iv. The acquisition cost of the asset less the salvage value.
Answer:
(i) and (iv)
Explanation:
The appreciable cost is the cost in which the assets can be depreciation over the useful life
And, the appreciable cost is come after deducting the salvage value from the acquisition cost
The formula to compute the depreciation expense using the straight-line method is shown below:
= (Original cost - salvage value) ÷ (useful life)
So it can be calculated after considering the first and four options
The Central Limit Theorem: states that the average range can be used as a proxy for the standard deviation. states that the average of assignable variations is zero. controls the steepness of an operating characteristic curve. is the theoretical foundation of the c-chart. allows managers to use the normal distribution as the basis for building some control charts.
The correct answer is - allows managers to use the normal distribution as the basis for building some control charts.
Explanation:
It is the theorem that allows inference from a random sample. It says that:
• The sample mean will likely be towards the population mean within a margin of error
• The margin of error is a multiple of the standard error, which is the standard deviation divided by the square root of the sample size. The multiple is determined by the degree of statistical confidence you’re looking for, and the normal deviate corresponding to that — 1.65 for 90% confidence, 1.96 for 95% confidence, etc.
A company completes 21,000 units this month and has ending goods in process inventory of 3,000 units which are estimated to be 40% complete. Direct materials cost per EUP is $5.00 and Conversion cost per EUP is $1.50.
The cost transferred to the Finished Goods Inventory is $______.
Answer:
Total cost of transferred to finished goods inventory = $ 136,500
Explanation:
To value cost of transferred finished goods, we multiply the cost per equivalent unit of production (cost per EUP) by the the number of equivalent units (EUP) for each of the cost element.
So the value of the finished inventory, is determined as follows:
Value of inventory = cost per E.U.P × number of E.U.P
Direct Material = $5.00 × 21,000 =$ 105,000
Conversion cost = $1.50 × 21,000= $31,500
Total cost of transferred to finished goods inventory =
$ 105,000 + $31,500
= $ 136,500
How would you categorize the following transactions in the balance of payments for the United States. For each scenario, besure to discuss which section it enters as a credit and debit (for any entry in the current account, be sure to discuss if it is an import or export as well as whether it is a good or service)a.A French chef is hired to cater a US diplomats event in Franceb.An American purchases 1 Million dollars’ worthof shares in a Nigerian companyc.The United States forgives a 5 Billion dollar debt owed by a foreign countryd.An Italian movie pays for the rights to sing the English version of the "Happy Birthday" song to its American copyright holderse.16 million dollars’ worthof escargot is purchased by an American restaurant from Francef.An American business man in Los Angeles purchases crabs from a dealer in Seattle
Answer:
a. The transaction enters Current account as a Debit entry and is an import and a service.
b. The Transaction enters on the financial account as a debit.
c. The Transaction enters on the financial account as a credit.
d. The transaction enters on the current account as a credit and is more of an export and is also a service.
e.The transaction enters as a current account on a debit and is an import of a good.
f..The transaction enters as a current account on a debit and is an import of a good.
Explanation:
Transaction number c, the state forgives a debt meaning it needs to cancel it, the time it was granted it went on on a debit entry now they act like they received it so it should cancel that debit by credit.
transaction d, the song is a service because it is intangible, more or less inseparable from person doing it hence copyright and paying.
The categorization of transactions into credit and debit entries based on whether they are exports or imports of goods and services. Here the example of current accounts are French chef, United States forgives a foreign debt, American restaurant and Nigerian company: is financial account and American businessman is domestic transaction.
When categorizing transactions in the balance of payments for the United States, each scenario reveals different entries in credits and debits:
A French chef is hired to cater a US diplomat's event in France: This is an import of services and is recorded as a debit in the current account.
An American purchases shares in a Nigerian company: This transaction would be recorded as a debit in the financial account as it's an outbound investment.
The United States forgives a foreign debt: Debt forgiveness is categorized under unilateral transfers in the current account, treated as a negative entry (like an import).
An Italian movie pays for rights to an American song: This is an export of services, recorded as a credit in the current account.
Escargot is purchased by an American restaurant from France: Import of goods, recorded as a debit in the current account.
An American businessman in Los Angeles purchases crabs from Seattle: This is a domestic transaction and does not appear on the balance of payments as there's no international component.
Your cellular phone contract is due for renewal and the company offers you a new free phone. Since you want to use your new phone, you decide to recycle your old phone. Your action a. Creates wealth by moving the phone from lower value use to higher value use b. Destroys wealth since you lose your phone c. Creates wealth by making you feel richer d. All of the above
Answer:
creates wealth by moving the phone from lower value use to higher value use.
Explanation:
Wealth creation is maximised when an item is of greater value to the user. When the old phone is recycled, it has a higher value to the company.
The company will refurbish the phone and sell to a new user who will maximise it's use.
So this action creates wealth by prolonging the useful life of the old phone.
If the user had discarded the phone he would have destroyed wealth because the usefulness of the phone would have been wasted.
On June 1 of the current tax year Elisha and Ezra (who are equal partners) contribute property to form the Double E Partnership. Elisha contributes cash of $200,000. Ezra contributes a building and land with an adjusted basis and fair market value of $340,000, subject to a liability of $140,000. The partnership borrows $20,000 to finance construction of a parking lot in front of the building. At the end of the first year (December 31), the accrual basis partnership owes $8,200 in trade accounts payable to various creditors. The partnership reported net income of $30,000 for the year which they share equally.
Assume that Elisha and Ezra share equally in partnership liabilities. How much is Elisha’s basis in the partnership interest on December 31? Ezra’s?
Solution:
The relationship is called the deal to run the company by adding money, by distributing the business risk, etc. We share profit and loss from their relationship and the net profit is the partner's profits.
Calculating the basis of partners
Elisa's basis in partnership :
Particulars Amount $
Cash contribution 200,000
Add:
Share of the liability on the contributed land 70,000
Share of the construction debt 10,000
Share of the accounts payable debt 4,100
Share of partnerships taxable income 15,000
Hence, Elisha's basis in the partnership on December 30. $299,100
Ezra's basis in partnership
Particular Amount $
Land and building 340,000
Less: Debt assumed by the partnership 140,000
Add:
Share of liability on contributed land 70,000
Share of construction debt 10,000
Share of accounts payable debt 4,100
Share of partnerships taxable income 15,000
Ezra's basis in partnership on December 30. $299,100
Hollaway Corp. has the following data for the current fiscal year: Actual Budget Sales Units Product X 20,000 90,000 Product Y 140,000 110,000 Total 160,000 200,000 Contribution Margin Product X $ 9.00 $ 8.00 Product Y $ 6.00 $ 5.00 The contribution margin sales volume variance is: Multiple Choice $200,000 favorable. $260,000 unfavorable. $340,000 unfavorable. $410,000 unfavorable. $580,000 unfavorable.
Final answer:
The contribution margin sales volume variance for Hollaway Corp. is an unfavorable $40,000, combining the variances from both Product X and Product Y.
Explanation:
The contribution margin sales volume variance is calculated by taking the difference between the actual sales units and the budgeted sales units, multiplied by the contribution margin per unit.
For Product X, the variance is (20,000 - 90,000) × ($9 - $8) = -70,000 × $1 = -$70,000, which is an unfavorable variance since actual sales were less than budgeted.
For Product Y, the variance is (140,000 - 110,000) × ($6 - $5) = 30,000 × $1 = $30,000, which is a favorable variance.
Combined, the total contribution margin sales volume variance is -$70,000 + $30,000 = -$40,000, an unfavorable variance.
For many years you have been using your local, small-town bank. One day you hear that the bank is about to be purchased by Bank of America. From your vantage point as a retail bank customer, what are the costs and benefits of such a merger?
Answer:
If I was banking with my local town bank and it happens that Bank of Africa purchases it, there are cost and benefits associated with the merge. First, Bank of America is global, meaning that I will be able to access the Services such as ATM services at different points. Second, due to its area of coverage, the services are cheaper compared to the ones I got when it was in my local town. However, due to the monopoly of the bank, they might increase the charges making them more expensive than when the services in the local village. Additionally, it will be a challenge for average customers, such as farmers, to access big banks unless faithful people accompany them.
Explanation:
There are costs and advantages to the merger when my local town and the Bank of Africa acquire it. Bank of America is a multinational business, so one may get its capabilities, such as ATM services, from a variety of locations.
Who is the customer?"A customer can be defined as a person who buys a product or takes the services. For the product or the service, they pay the amount. A customer is one who demands the product which is supplied by the supplier."
Second, comparable to the service received when it covered his hometown, they are less expensive to its covering region. But, because of the bank's monopolies, they may raise the prices, resulting in a higher cost than using the products in the next hamlet.
It will also be difficult for regular clients, like farmers, to enter big banks unless dependable people go with them.
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Name some factors causing environmental complexity for an organization of your choice. How might this environmental complexity lead to organizational complexity? Explain.
Factors causing environmental complexity and in turn leading to organizational complexity:
There are several factors that cause the complexity in a business entity or an organization. Some of them are as follows,
Evolving technologies - With the vast development in the technologies, the organizations are forced to come up with various business strategies to cope up with the pressures and streamline its operations.
Stiff Competition for Market Opportunities - Every organization thrives for market opportunities by their productivity, quality or brand image, etc.,
To counteract the influence of the enviroment, organizations dive into the four axioms of the traditional organizational science. Those are generally as follows,
An organizational pyramid should have a minimum quantity of possible level or rank in the market. The actual control range should be within the limits of the control range. The organization's efficiency depends on exchanging the vital information effectively through the structural links. Forming subsets of smaller elements should be done in such a way that the destruction of steady information links between the elements is minimum.Environmental complexity for an organization can stem from varied external factors like regulatory environments, cultural differences, economic fluctuations, technological advancements, or competitive pressures. These complexities can lead to internal organizational complexity as the organization has to adapt and evolve its structures and processes to navigate the external environment. The cycle of adaptation usually results in increased internal organizational complexity.
Explanation:Organizations often face environmental complexity that comes from diverse external factors. For example, a multinational corporation such as Microsoft may face complexities stemming from varied regulatory environments, cultural differences, economic fluctuations, technological advancements, or competitive pressures.
This environmental complexity may lead to organizational complexity. For instance, variations in regulatory environments across different regions might necessitate the creation of local compliance teams within Microsoft. Cultural differences might mean that the company has to adapt its business practices or product offerings in different global markets. Economic fluctuations might lead to changes in the company's financial strategies. The rapid pace of technological advancement may necessitate the constant creation of new divisions or teams to keep up. Lastly, competition will necessitate strategic changes and possibly the creation of new business lines.
To better navigate in an environment filled with complexity, organizations like Microsoft must constantly adapt and evolve their organizational structures and processes. This cycle of adaptation in response to external environmental complexity often leads to increasing internal organizational complexity.
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The price of compact fluorescent light bulbs fell because of improvements in production technology. As a result, the demand for incandescent light bulbs decreased. This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further.
Evaluate this statement.
a. The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease.
b. The statement is false because compact fluorescent light bulbs producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits
c. The statement is false because the demand for incandescent light bulbs would increase as the price of compact fluor. light bulbs fell.
d. The statement is false. a decrease in the price of compact fluor. light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease.
Final answer:
The statement incorrectly suggests that a decrease in the price of incandescent light bulbs would further decrease their demand; however, according to basic economic principles, a decrease in price should increase demand. Instead, the decrease in demand for incandescent bulbs is due to improved CFL technology and cost-effectiveness.
Explanation:
The price of compact fluorescent light bulbs (CFLs) fell because of improvements in production technology, which led to a decrease in demand for incandescent light bulbs. The statement, however, contains a misunderstanding regarding the effect of price changes on demand. According to basic economic principles, if the price of incandescent light bulbs falls, it does not lead to a further decrease in demand for them but rather the opposite. A decrease in price typically leads to an increase in demand, assuming other factors remain constant. Therefore, the correct evaluation of the statement is: a. The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease.
1. What kinds of resources can likely be shared across different brands between an apparel maker and a footwear maker? What kinds of resources are unlikely to be shared?
Explanation:
Apperel maker and footwear maker are industries that use as common resources such as packaging, distribution, marketing and selling operations.
On the other hand, the resources that are unlikely to be shared, we can mention different types of machinery for confection, raw material and specialized professionals.
Answer:
An apparel maker and footwear maker can use packaging, distribution, marketing and selling operations together. They can use common resources for these operations. But, apparel makers and footwear makers cannot use common manufacturing operations.
Clothing and footwear industry, also called apparel and allied industries, garment industries, or soft-goods industries, factories, and mills producing outerwear, underwear, headwear, footwear, belts, purses, luggage, gloves, scarfs, ties, and household soft goods such as drapes, linens, and slipcovers. The same raw materials and equipment are used to fashion these different end products.
Explanation:
A bridge design firm is performing an economic analysis of two mutually exclusive designs for a highway overpass. The steel girder option has an initial cost of $2.04 million, and the concrete option has an initial cost of $2.52 million. Every 25 years, the steel bridge must be painted at a cost of $790,000, and all other maintenance costs are the same for both options. The steel bridge is expected to last 50 years, and concrete bridge is expected to last 75 years. Both are assumed to be identically replaced indefinitely. Based on the shortest acceptable analysis period for each option, determine the equivalent uniform annual cost (EUAC) for the best option using an interest rate of 7%. Express your answer in $ to the nearest $1,000.
Answer:
Please find attached solution
Explanation:
Summarized operations for Splish Brothers Inc. for the month of July are as follows. Revenues recognized: for cash $30,000; on account $71,480. Expenses incurred: for cash $26,120; on account $41,220. Indicate for Splish Brothers Inc. (a) the total revenues, (b) the total expenses, (c) net income for the month of July.
Answer:
a. Total Revenues are $ 101,480
b. Total expenses are $ 67,340
Net income for July is $ 34,140
Explanation:
Total Revenues is Cash revenue + Revenues on credit
$ 30,000 ( cash)+ $ 71,480 ( on credit) = $ 101,480
Total expenses is Cash expenses + Expenses on account
$ 26,120 (cash)+ $ 41,220 (on account) = $ 67,340
Net income = Total revenues - Total expenses
Net Income = $ 101,480 - $ 67,340 = $ 34,140
Final answer:
Splish Brothers Inc. recorded a total revenue of $101,480 and total expenses of $67,340 in July, resulting in a net income of $34,140 for the month.
Explanation:
To calculate the total revenues, total expenses, and net income for Splish Brothers Inc. for the month of July, we need to add together both the cash and account figures for each category.
Total Revenues
Total revenues are calculated by adding the revenues recognized for cash and on account. In this case it is:
$30,000 (cash) + $71,480 (account) = $101,480
Total Expenses
Similarly, total expenses are the sum of expenses incurred for cash and on account:
$26,120 (cash) + $41,220 (account) = $67,340
Net Income
Net income for July is determined by subtracting the total expenses from the total revenues:
$101,480 (total revenues) - $67,340 (total expenses) = $34,140
A vintner is deciding when to release a vintage of sauvignon blanc. If it is bottled and released now, the wine will be worth $ 2.6 million. If it is barrel aged for a further year, it will be worth 25% more, though there will be additional costs of $ 975 comma 000 incurred at the end of the year. If the interest rate is 7%, what is the present value of the difference in the benefit the vintner will realize if he releases the wine after barrel aging it for one year or if he releases the wine now?
Answer:
a. PV of one year future net benefit is $2,126,168.22
b. The PV of now is $2,600,000
c. The difference between the two PVs is $473,831.78.
d. It is better to release the vintage of sauvignon blanc now.
Explanation:
a. What is the present value of the difference in the benefit the vintner will realize if he releases the wine after barrel aging it for one year?
Benefit in one year = $2,600,000 + ($2,600,000 × 25%) = $3,250,000
Cost in one year = $975,000
Net Benefit in one year = Benefit in one year - Cost in one year
Net Benefit in one year = $3,250,000 - $975,000 = $2,275,000
Present value (PV) = $2,275,000 ÷ (1.07^1) = $2,126,168.22
b. What is the present value if he releases the wine now
The present value is $2,600,000
c. Difference between the two PVs
Difference = PV of b - PV of a = $2,600,000 - $2,126,168.22 = $473,831.78.
d. Decision
Since the PV of releasing the vintage of sauvignon blanc is $473,831.78 higher than the PV of releasing it in a year, it is better to release it now.
"The forward rate of the Swiss franc is $.50. The spot rate of the Swiss franc is $.48. The following interest rates exist: You need to purchase SF200,000 in 360 days. If you use a money market hedge, the amount of dollars you need in 360 days is:"
Answer:
$96,914
Explanation:
360‑day borrowing rate in Swiss as given is 5%
rate = 100 + 5 = 105%
Total = 200,000/105% = SF190,476
The spot rate of the Swiss franc is $.48
Therefore SF190,476 = SF190,476 × $.48 = $91,428
360‑day deposit rate in US as given 6%
Total Invest = 6 % of $91,428 + $91,428
= $5485.68 + $91,428 = $96,914
Eastman Kodak reported that the cost of its PPE on December 31, 2010 was $6,805 million. On January 1, 2010, it had been $7,327 million. Also, the balance of accumulated depreciation on December 31, 2010 was $5,254 million. On January 1, 2010, it had been $5,516 million. Depreciation expense for the fiscal year 2010 was $420 million. During 2010, the company bought new equipment with acquisition cost of $254 million worth. The company also sold PPE and reported a $14 million gain on selling PPE.
Questions:
How much did Kodak sell its PPE for (sale price)?
Answer:
Kodak sold its PPE for $108 million
Explanation:
The question here has missing sales figure for a PPE item for which the gain on sale is $14 million (given) .Sale price of PPE item are obtained from a PPE Disposal account.We need to first find the other missing figures of 1. Cost of the Sold PPE and 2. The Accumulated Depreciation of the Sold PPE item. After that we complete our PPE disposal account to find the missing figure of the Sale Price of PPE.
1. Cost of Sold PPE
Open a PPE at Cost Account: Opening Balance $ 7327 million (Debit), Addition of PPE $ 254 million (Debit),Closing Balance $6805 million(Credit).The Balancing figure of this account $ 776 million (credit) {7327+254-6805} is the cost of the PPE item sold.
2. Accumulated Depreciation of the Sold PPE Item
Open a PPE Accumulated Depreciation Account : Opening Balance $ 5516 million (Credit), Depreciation Expense $ 420 million (Credit), Closing Balance $ 5254 million (Debit). The Balancing figure of this account $682 million (Debit) is the Accumulated Depreciation of the PPE item disposed or sold.
3. Disposal Account and Calculation of the Sale Price (Balancing figure)
Open a PPE Disposal Account : Cost of PPE $ 776 million (Debit), Gain on Sale of PPE $ 14 million (Debit), Accumulated Depreciation of the PPE Sold $ 682 million (Credit). The Balancing figure of this account $ 108 million (Credit) {776+14-108} is the Sale Price of PPE item.
Thus Sale price of the PPE is $ 108 million.
The question is about calculating the sale price of Eastman Kodak's PPE during 2010 by using changes in PPE cost and accumulated depreciation, new equipment acquisition cost, and gain on sale. The sale price of Eastman Kodak's PPE was $20 million.
Explanation:The question asks to calculate how much Eastman Kodak sold its property, plant, and equipment (PPE) for during the fiscal year 2010. To find the sale price of the PPE, we need to consider the cost and accumulated depreciation of PPE at the beginning and end of the year, along with the depreciation expense, the acquisition cost of new equipment, and the gain on the sale of PPE.
First, calculate the change in accumulated depreciation and PPE cost:
Change in accumulated depreciation: $5,516 million (beginning) - $5,254 million (ending) = $262 million (depreciation reversed due to sale)Change in PPE cost: $7,327 million (beginning) - $6,805 million (ending) - $254 million (new acquisitions) = $268 million (cost of PPE sold)Now, we can find the book value of sold PPE by subtracting the depreciation reversed from the cost of sold PPE:
Book value of sold PPE: $268 million - $262 million = $6 millionFinally, add the gain on sale to find the sale price:
Sale price of PPE: $6 million (book value) + $14 million (gain) = $20 millionInformation related to Harwick Co. is presented below.1. On April 5, purchased merchandise from Botham Company for $32,400, terms 3/10, net/30, FOB shipping point.2. On April 6, paid freight costs of $860 on merchandise purchased from Botham.3. On April 7, purchased equipment on account for $40,000.4. On April 8, returned damaged merchandise to Botham Company and was granted a $6,800 credit for returned merchandise.5. On April 15, paid the amount due to Botham Company in full.A) Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system.B) Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15. Prepare the journal entry to record this payment.
Answer:
A) Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system.
April 5, purchased merchandise terms 3/10, net/30, FOB shipping point
Dr Merchandise inventory 32,400
Cr Accounts payable 32,4000
April 6, paid freight costs (in perpetual inventory, freight ans insurance costs increase COGS so they are included in merchandise inventory)
Dr Merchandise inventory 860
Cr Cash 860
April 7, purchased equipment on account
Dr Equipment 40,000
Cr Accounts payable 40,000
April 8, returned damaged merchandise
Dr Accounts payable 6,800
Cr Merchandise inventory 6,800
April 15, paid Botham's invoice within discount term
Dr Accounts payable 25,600
Cr Cash 24,832
Cr Purchase discounts 768
B) Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15. Prepare the journal entry to record this payment.
May 4, paid Botham's invoice
Dr Accounts payable 25,600
Cr Cash 25,600
To record the transactions on the books of Harwick Co., the journal entries needed are provided. They include the purchase of merchandise, payment of freight costs, purchase of equipment, return of damaged merchandise, and payment to Botham Company. The entries should be made on the given dates with appropriate amounts.
Explanation:To record the transactions on the books of Harwick Co., the following journal entries should be made
April 5: Merchandise Inventory $32,400 and Accounts Payable $32,400April 6: Freight Out $860 and Cash $860April 7: Equipment $40,000 and Accounts Payable $40,000April 8: Accounts Payable $6,800 and Merchandise Inventory $6,800April 15/May 4: Accounts Payable $25,608, Purchase Discount $792, and Cash $32,400https://brainly.com/question/32366159
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Carla Company’s ledger shows the following balances on December 31, 2020. 7% Preferred Stock—$10 par value, outstanding 21,700 shares $ 217,000 Common Stock—$100 par value, outstanding 32,700 shares 3,270,000 Retained Earnings 630,000Assuming that the directors decide to declare total dividends in the amount of $366,000, determine how much each class of stock should receive under each of the conditions stated below. One year‘s dividends are in arrears on the preferred stock.(a) The preferred stock is cumulative and fully participating.
Answer:
preferred dividends = $30380
Common stock = $ 335620
Explanation:
Dividends 366000
preferred 7% * 217000= $15190 *2 years = $30 380
common stock = $335620
The total dividend declared is 366000 and preferred is 15190 per year but it is cumulative so we add the year that was in arrears so to get total dividend for preferred stock then we deduct the preferred from total dividend declared to get common stock's dividend.
Suppose that Best National Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Fill in (dollars):
Best National
Reserves (Dollars) (Dollars)?
Required Reserves (Dollars)?
Excess Reserves (Dollars)?
Answer:
Reserve = $70,000
Required reserves = $20,000
Excess reserves = $50,000
Explanation:
Given that
Demand deposits = $200,000
Outstanding loans = $130,000
Reserve requirement = 10%
Reserve = Demand deposits - Outstanding loans
= $200,000 - $130,000
=$70,000
Required reserves = Reserve requirement × Demand deposits
= 10% × $200,000
= $20,000
Excess reserves = Reserve - Required reserves
= $70,000 - $20,000
=$50,000
Final answer:
Best National Bank, with a 10% reserve requirement, has required reserves of $20,000, actual reserves of $70,000, and excess reserves of $50,000. This is based on $200,000 in demand deposits and $130,000 in outstanding loans.
Explanation:
The subject of this question is Business, specifically the topic of banking and the Federal Reserve's reserve requirements. This is a college-level question due to the involvement of financial regulations and monetary policy concepts.
Let's calculate the required reserves for Best National Bank:
Total demand deposits = $200,000Reserve requirement = 10%Required reserves = 10% of total demand depositsRequired reserves = 0.10 × $200,000Required reserves = $20,000Now, let's determine the bank's actual reserves and excess reserves:
Best National's current loans = $130,000Reserves = Total demand deposits - Outstanding loansReserves = $200,000 - $130,000Reserves = $70,000Excess reserves = Actual reserves - Required reservesExcess reserves = $70,000 - $20,000Excess reserves = $50,000Therefore, Best National Bank has:
Reserves (Dollars) = $70,000Required Reserves (Dollars) = $20,000Excess Reserves (Dollars) = $50,000The comparative balance sheets for Lowery Company show these changes in noncash current asset accounts: accounts receivable decrease $80,000, prepaid expenses increase $28,000, and inventories increase $40,000.
Compute net cash provided by operating activities using the indirect method, assuming that net income is $186,000. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Answer:
$198,000
Explanation:
The computation of the net cash provided by operating activities by using the indirect method is presented below:
Cash flow from operating activities
Net income $186,000
Add: Decrease in account receivable $80,000
Less: Increase in prepaid expense -$28,000
Less: Increase in inventories -$40,000
Net cash provided by operating activities $198,000
Burnett Corp. pays a constant $8.45 dividend on its stock. The company will maintain this dividend for the next 15 years and will then cease paying dividends forever. If the required return on this stock is 13 percent, what is the current share price?
Answer:
56.47% is the current share price
Explanation:
To solve this question, we use the mathematical approach.
First, we calculate the current share price =
$8.45*Present value of annuity factor(11.2%,13)
But before we can get the value for the current share price, we need the value for the present value of annuity factor.
Present value of annuity factor = Annuity[1-(1+interest rate)^-time period]/rate =
8.45[1-(1.112)^-13]/0.112=
= $8.45*6.682519757 = 56.47%
The ratio of cash to monthly cash expenses can be used to _____. a.assess how long a company with negative cash flows from investing activities can continue to operate b.assess how long a company with negative cash flows from operations can continue to operate c.assess how long a company with positive cash flows from financing activities can continue to operate d.assess how long a company with positive cash flows from investing activities can continue to operate
Final answer:
The ratio of cash to monthly cash expenses helps determine a company's operational sustainability in the face of negative cash flows from operations. It indicates how long the company can run using its cash reserves without additional funding.
Explanation:
The ratio of cash to monthly cash expenses is a financial metric used to assess how long a company with negative cash flows from operations can continue to operate. This is akin to understanding how long one can survive on their savings. If a company is operating at a loss in its core activities, indicated by negative cash flows from operations, it is important to know how much cash reserve it has to cover monthly expenses before additional funding is needed.
Likewise, the concept of cash flow is significant for a business's sustainability and growth. Reinvesting profits back into the business is essential for generating more products, sales, and thereby increasing cash flow in subsequent periods. This reinvestment loop can lead to growth, but only as long as it exceeds the depreciation of assets.
A company identified the following partial list of activities, costs, and activity drivers expected for the next year: Activity Expected Costs Cost Driver Extrusion costs $ 83,600 Number batches made Handling costs $ 8,800 Number of orders filled Packaging costs $ 40,500 Number of units made Product A Product B Production volume 750,000 units 600,000 units Batches made 200 batches 750 batches Orders filled 75 200 Calculate activity rates for each of the three activities using activity-based costing (ABC).
Answer:
Extrusion= $88 per batch
Handling= $32 per order
Packaging= $0.03 per unit
Explanation:
Giving the following information:
Activity Expected Costs Cost Driver:
Extrusion costs $ 83,600 Number batches made
Handling costs $ 8,800 Number of orders filled
Packaging costs $ 40,500 Number of units made
Product A Product B:
Production volume: 750,000 units - 600,000 units
Batches made: 200 batches - 750 batches
Orders filled: 75 - 200
To calculate the activity rate, we need to use the following formula:
Estimated activity rate= total estimated activity costs for the period/ total amount of allocation base
Extrusion= 83,600/ (200 + 750)= $88 per batch
Handling= 8,800/(75 + 200)= $32 per order
Packaging= 40,500/ (1,350,000)= $0.03 per unit
Activity rates for extrusion, handling, and packaging are calculated by dividing expected costs by the respective cost driver totals, resulting in rates of $88 per batch, $32 per order, and $0.03 per unit.
Explanation:To calculate the activity rates for each of the three activities using activity-based costing (ABC), we divide the expected costs by the total number of each cost driver (Number batches made, Number of orders filled, and Number of units made).
Extrusion costs: The activity rate is calculated by dividing $83,600 by the total number of batches made (200 batches + 750 batches = 950 batches). This gives us an activity rate of $88 per batch.Handling costs: The activity rate is found by dividing $8,800 by the total number of orders filled (75 orders + 200 orders = 275 orders), resulting in a rate of $32 per order.Packaging costs: The activity rate is determined by dividing $40,500 by the total number of units made (750,000 units + 600,000 units = 1,350,000 units), giving us a rate of $0.03 per unit.A factory pays its employees on Wednesdays, and on Thursdays, employee productivity seems to be a little slow. The productivity gradually increases over the week and reaches its peak on Wednesday.
This is an example of which of the following types of schedules?
A. Variable interval
B. Variable ratio
C. Fixed interval
D. Fixed ratio
Answer:
C. Fixed Interval
Explanation:
"Fixed Interval" is a type of Reinforcement Schedule. The "reward" in the situation above is the salary given to the employees during Wednesdays. As noticed, their productivity increases over the week, with the peak on Wednesday.
The "peak" of productivity is the exhibited behavior during pay day. They try to work hard in order to receive a salary. They become more inspired to work during the salary day. It is followed by less productivity on Thursdays because they have already been rewarded.
Such reinforcement schedule is called the "fixed interval." This also means that their productivity will not increase if they will not be paid.
So, this explains the answer.