Solution:
Sales Price $115,000 - BV $80,000 = $35,000
Gain on Sale /8 years = $4,375
Annual Amortisation of Unrealised Gain over Expected Useful Life of the Asset
Parent's Depreciation $84,000 + Sub's Depreciation $60,000 - Annual amortisation $4,375 = $139,625
LLAP Company manufactures a specialized hoverboard. LLAP began 2017 with an inventory of 240 hoverboards. During the year, it produced 1,200 boards and sold 1,300 for $800 each. Fixed production costs were $319,000, and variable production costs were $375 per unit. Fixed advertising, marketing, and other general and administrative expenses were $150,000, and variable shipping costs were $20 per board. Assume that the cost of each unit in beginning inventory is equal to 2017 inventory cost.
Required
1. Prepare an income statement assuming LLAP uses variable costing.
2. Prepare an income statement assuming LLAP uses absorption costing. LLAP uses a denominator level of 1,100 units. Production-volume variances are written off to cost of goods sold.
3. Compute the breakeven point in units sold assuming LLAP uses the following:
a. Variable costing
b. Absorption costing (Production = 1,200 boards)
4. Provide proof of your preceding breakeven calculations.
5. Assume that $44,000 of fixed administrative costs were reclassified as fixed production costs. Would this reclassification affect the breakeven point using variable costing? What if absorption costing were used? Explain.
6. The company that supplies LLAP with its specialized impact-resistant material has announced a price increase of $20 for each board. What effect would this have on the breakeven points previously calculated in requirement 3?
Answer:
Part 1 : Income statement assuming LLAP uses variable costing
$
Sales ($800×1300) 1040000
Less Cost of Goods Sold
Opening Stock ($375 × 240) 90000
Add Cost of Goods Manufactured 450000
Less Closing Stock ($375×140) (52500) (487500)
Gross Profit 552500
Less Periodic Costs
Fixed Production Costs ( 319000)
Fixed Advertising, Marketing, Admin (150000)
Shipping Cost( $ 20 × 1300) (26000)
Net Income 57500
Part 2 : Income statement assuming LLAP uses absorption costing
$
Sales ($800×1300) 1040000
Less Cost of Goods Sold
Opening Stock ($665 × 240) 159600
Add Cost of Goods Manufactured 769000
Less Closing Stock ($665×140) (93100)
Add Under - Applied Overheads 29000 864500
Gross Profit 175500
Less Periodic Costs
Fixed Advertising, Marketing, Admin (150000)
Shipping Cost( $ 20 × 1300) (26000)
Net Loss (500)
Part 3 and Part 4 : Breakeven point in units sold assuming LLAP uses:
a. Variable costing
B.E.P (Units) = Fixed Costs/Contribution per unit
=($319000+$150000)/($800-$375-$20)
=$469000/$405
=1159
b. Absorption costing (Production = 1,200 boards)
B.E.P (Units) = Fixed Costs/Contribution per unit
=($319000+$150000)/($800-$375-$20)
=$469000/$405
=1159
Part 5 : Effect of Re-classification of $44,000 of fixed administrative costs as fixed production costs on:
a. Breakeven point using variable costing
There is no effect. The $44000 is still a fixed overhead for Break-even calculation
b.Breakeven point using Absorption costing
There is no effect. The $44000 is still a fixed overhead for Break-even calculation
Part 6 : Effect of a price increase of $20 for each board on Breakeven point in units sold assuming LLAP uses:
a. Variable costing
B.E.P (Units) = Fixed Costs/Contribution per unit
=($319000+$150000)/($800-$375-$20-20)
=$469000/$385
=1219
Therefore this increases the Break Even Point by 60 units
b. Absorption costing (Production = 1,200 boards)
B.E.P (Units) = Fixed Costs/Contribution per unit
=($319000+$150000)/($800-$375-$20-20)
=$469000/$385
=1219
Therefore this increases the Break Even Point by 60 units
Explanation:
Part 1
Variable Costing System assumes that all Fixed Manufacturing costs are periodic costs. Thus Fixed Manufacturing costs are not used for product valuation but only for Profit calculation.
Part 2
Absorption Costing System assumes that all Fixed Manufacturing costs are product costs. Thus Fixed Manufacturing costs are used for product valuation as well as for Profit calculation.
Part 3
For Break Even purposes Variable Costing and Absorption Costing will produce the same results.
Part 5
The $ 44000 fixed administrative cost reclassified as fixed production cost is still a Fixed Overhead for Break-even point Calculation purposes.
Part 6
The $20 charge further increases variable cost per unit. This lowers the contribution per unit and increases the Break Even Point.
Reclassification of administrative costs wouldn't affect variable costing's breakeven, but could lower it under absorption costing. Price increase lowers breakeven.
1. Income Statement using Variable Costing:
Sales Revenue:
Sales = 1,300 * $800 = $1,040,000
Variable Costs:
Variable Production Costs = 1,200 * $375 = $450,000
Variable Shipping Costs = 1,300 * $20 = $26,000
Total Variable Costs = $450,000 + $26,000 = $476,000
Contribution Margin = Sales Revenue - Total Variable Costs
Contribution Margin = $1,040,000 - $476,000 = $564,000
Fixed Costs:
Fixed Production Costs = $319,000
Fixed Advertising, Marketing, and Other G&A Expenses = $150,000
Total Fixed Costs = $319,000 + $150,000 = $469,000
Operating Income = Contribution Margin - Total Fixed Costs
Operating Income = $564,000 - $469,000 = $95,000
2. Income Statement using Absorption Costing:
Sales Revenue = $1,040,000
Cost of Goods Sold:
Beginning Inventory = 240 * $375 = $90,000
Cost of Goods Manufactured = 1,200 * $375 = $450,000
Total Cost of Goods Available for Sale = $90,000 + $450,000 = $540,000
Cost of Goods Sold = (1,300 - 240) * $375 = $451,500
Gross Profit = Sales Revenue - Cost of Goods Sold
Gross Profit = $1,040,000 - $451,500 = $588,500
Operating Expenses:
Fixed Production Costs = $319,000
Fixed Advertising, Marketing, and Other G&A Expenses = $150,000
Total Operating Expenses = $319,000 + $150,000 = $469,000
Operating Income = Gross Profit - Total Operating Expenses
Operating Income = $588,500 - $469,000 = $119,500
3. Breakeven Point in Units Sold:
a. Variable Costing:
Breakeven Point = Fixed Costs / Contribution Margin per Unit
Breakeven Point = ($319,000 + $150,000) / ($800 - $375 - $20)
Breakeven Point = $469,000 / $405 = 1,157.41 units (rounded to nearest whole number)
b. Absorption Costing (Production = 1,200 boards):
Breakeven Point = Fixed Costs / Contribution Margin per Unit
Breakeven Point = ($319,000 + $150,000) / ($800 - $375)
Breakeven Point = $469,000 / $425 = 1,103.53 units (rounded to nearest whole number)
4.Proof of Breakeven Calculations:Breakeven point represents the level of sales at which total revenue equals total costs, resulting in zero profit. It can be calculated using either variable or absorption costing methods.
5.Reclassification of Fixed Administrative Costs:Reclassifying $44,000 of fixed administrative costs as fixed production costs would not affect the breakeven point under variable costing since fixed administrative costs are not considered in determining the contribution margin. However, under absorption costing, this reclassification would reduce the amount of fixed costs allocated to each unit produced, potentially lowering the breakeven point.
6. Effect of Price Increase on Breakeven Points: A $20 increase in the price of each board would increase the contribution margin per unit, leading to a lower breakeven point in units sold for both variable and absorption costing. This is because higher selling prices increase revenue without affecting variable costs, thereby improving the contribution margin and reducing the number of units needed to cover fixed costs and break even.
A differentiation strategy is based on creating a product that customers perceive as being: a. cheaper, but inferior to the available products. b. the least costly product in the industry. c. superior to other available products. d. the same as other available products. e. the most costly product in the industry.
Answer:
c. superior to other available products.
Explanation:
When using the differentiation strategy, a business aims to distinguish itself from the competition by offering a product or service that is perceived as unique or better when compared to what is currently available on the market. Therefore, the alternative that best fits this description is alternative c. superior to other available products.
The BEST approach to network representation of a large and hugely complex project is to: Use AOA. Represent all activities and relationships. Use AON. Simplify network logic and reduce it to the most meaningful relationships.
Answer:
Simplify network logic and reduce it to the most meaningful relationships
Explanation:
The above refers to a Logic Network which describes the sequencial activities in a project over a period of time. Here we are able to see which activity logically precedes/comes before or follows the other. The network logic can be used to identify the targets/achievements or the milestones reached in a project. It aids understanding of project workflow, timescale and relationships/dependencies.
Naomi Fisher, a sales manager at Pure, a water purifier company, had a new member, Leah Marshall, join her team. Though during Leah's interview, Naomi felt she would be a productive sales executive, her performance has often been below the mark. Consistently in the past three months, Leah has been unable to reach her targets and is falling substantially behind on her annual targets. Naomi assumes that Leah is not determined and motivated enough to do what it takes. Which of the following, if true, weakens Naomi's assumption? Research showed that the company's largest competitor had a lower turnover than they did. Leah has good interpersonal skills and gets along well with her customers. Leah has often arrived late for team meetings conducted in the morning. Naomi recently received feedback from other team members that Leah is often uncooperative. Leah has been assigned a sales territory where consumers are from low income groups.
Answer:
The Declaration of Independence was the first formal statement by a nation's ... a draft of what would become the Declaration of Independence.
Explanation:
Leah being assigned a sales territory with low income consumers weakens the assumption that her poor performance is due to a lack of determination or motivation.
Among the given options, the one which if true, could weaken Naomi's assumption about Leah not being determined or motivated enough is that Leah has been assigned a sales territory where consumers are from low income groups. This suggests that Leah's low performance may be due to external market conditions rather than her personal lack of determination or motivation. If Leah is working in an area where people have less disposable income to spend on water purifiers, it might be a significant factor in her inability to reach her sales targets.
I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is .5, when in fact the beta is really 1, how much more will I offer for the firm than it is truly worth
Answer:
Assuming that the risk free rate is 5%, you will pay $4, 849 more
Explanation:
The beta of a company or firm is a measure of the volatility, or systematic risk of a security, as it compares to the market. The beta of a frim or company is a measure of how the company’s equity market value changes with the changes in the overall market. It shows the sensitivity of the company’s equity to changes in the market. Systematic risk is the risk that cannot be diversified. This type od risk is due to changes in the market, and because of this, it cannot be avoided. This risk is caused by factors that are external to the firm.
Assume that the $1, 000 is a perpetuity. The risk- free rate is 5%
If beta is 5, the cash flow is discounted at 55%
PV (beta = 5) = $1, 000 / .55 = $1, 818
If, however, beta is equal to 1, the investment will yield at 15%, and the price paid for the firm should be:
PV = $1, 000 / .15 = $6, 667
The difference $4, 849 [ $6, 667 - $1, 818], is the amount you will pay if you erroneously assumed that the beta is 5 rather 1.
If the cash flow lasts only one year:
PV (beta = 5) = $1, 000 / (1 + .55) = $645
PV (beta = 1) = $1, 000 / (1 + .15) = $869
With a difference of $224.
Incorrectly assuming the value of beta has substantial effects on the calculations of cash flows.
A television costs $100, but a new excise tax law imposes a $5 tax on the sale of the set. If Takeshi wants to buy a television, what would have to be his minimum willingness to pay?
a. between $100 and $105
b. $105
c. more than $105
d. $100
Answer:
The correct answer is option (A).
Explanation:
According to the scenario, the given data are as follows:
Television cost = $100
Tax imposed = $5
So, we can calculate the minimum willingness to pay to buy television can be concluded by taking following observation:
As the minimum amount of the television without taxes is $100 So, the minimum amount we will take is $100.While after new excise tax law the maximum amount that should be payable to buy television is ($100 + $5 = $105) $105. So, the maximum amount we will take is $105.Hence, the amount that should be pay to buy the television should be between $100 and $105.
The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 44,000 m2 and the installed liner cost was $8 per m2. In order to recover the investment, the owner charges to unload at the rates of $14 per pickup, $25 per dump truck, and $70 per compactor truck load. The fill area is adequate for 8 years. If the annual traffic is estimated to be 2500 pickup loads, 650 dump-truck loads, and 1200 compactor-truck loads, what rate of return will the landfill owner make on the investment
Answer:
The rate of return in investment = 61.6% per year
Explanation:
The return on an investment is defined as the interest gained on an investment. Ideally, the return amount is supposed to be more than the amount invested, but if the reverse occurs, the rate of return is described as negative return. The Rate of Return on investment is the proportion of the investment amount which is the return on the originally invested amount. It is calculated in percentage as; (profit ÷ invested amount) × 100.
First, we will calculate the profit made on investment.
total landfill area = 44,000 m²
cost per m² = $8
Therefore total cost incurred (investment) = 44,000 × 8 = $352,000
Income
Pickups;
$14 per pickup load. Therefore, 2500 pickup loads
= 2500 × 14 = $35,000
dump-truck;
$25 per dump-truck load. Therefore, 650 dump-truck loads
= 650 × 25 = $16,250
Compactor-trucks;
$70 per compactor-truck load. Therefore, 1200 compactor truck loads
= 1200 × 70 = $84,000
Therefore, Total income = 35,000 + 16,250 + 84,000 = $135,250
Gain/Return on investment = Total investment - total expenditure
= 352,000 - 135,250 = $216,750
Rate of return on investment (%) = (profit ÷ invested amount) × 100.
= (216,750 ÷ 352,000) × 100 = 0.6157 × 100 = 61.6% (to one decimal place)
The landfill owner's rate of return on the liner investment is calculated by subtracting the initial cost from the total income over 8 years and then dividing by the initial cost. The total calculated rate of return is 207.39% over 8 years, which equates to an annual rate of return of approximately 25.92%.
Explanation:To calculate the rate of return the landfill owner will make on the investment for the Camino Real Landfill liner, we need to consider the costs and revenues over the 8-year span the fill area is expected to be adequate. The initial cost of the liner is the area multiplied by the cost per square meter, which is 44,000 m2 times $8/m2. Each year, the landfill receives an income based on the number of loads from pickups, dump trucks, and compactor trucks. Over 8 years, the total income can be calculated and compared to the initial investment to determine the rate of return.
Step-by-Step Calculation:
The calculation of annual income would be: (2500 × $14) + (650 × $25) + (1200 × $70) = $35,000 + $16,250 + $84,000 = $135,250.
To find the total income over 8 years: $135,250 × 8 = $1,082,000.
The rate of return can then be calculated as: ($1,082,000 - $352,000) / $352,000 × 100 = 207.39% total rate of return over 8 years or an average annual rate of return of approximately 25.92%.
Canine Gourmet Super Breath dog treats are sold in boxes labeled with a net weight of 12 ounces (340 grams) per box. Each box contains 8 individual 1.5-ounce packets. To reduce the chances of shorting the customer, product design specifications call for the packet-filling process average to be set at 43.5 grams so that the average net weight per box of 8 packets will be 348 grams. Tolerances are set for the box to weigh 348plus or minus13 grams. The standard deviation for the packet-filling process is 1.03 grams. The target process capability ratio is 1.67. One day, the packet-filling process average weight drifts down to 42.5 grams. Is the packaging process capable? Is an adjustment needed?
To determine if the packaging process is capable, the process capability ratio (PCR) and process capability index (Cpk) need to be calculated using the standard deviation and the tolerance range. If the packet-filling average weight drifts below the design specification, the process may produce underweight boxes, which requires calibration adjustment to maintain product quality within acceptable limits.
Explanation:The packaging process capability is assessed by determining if the process can consistently produce products within specification limits. The target process capability ratio (PCR) is 1.67, which implies the process should be able to produce products within specification limits with a narrow spread of variation. With a tolerance of "+/- 13 grams" and a standard deviation of 1.03 grams, the process capability index (Cpk) can be calculated to assess if the process is currently capable.
When the packet-filling process average weight drifts down to 42.5 grams, which is lower than the design specification of 43.5 grams per packet, the actual average weight per box of 8 packets would be 340 grams, potentially leading to a situation where boxes are under the net weight. This indicates that the equipment may be out of calibration and could fail to meet the specifications, suggesting an adjustment is needed to bring the process back into capability.
Two merchant companies have entered into a contract for the sale of goods but have had no prior dealings that would establish a course of conduct between them. The UCC will allow gap fillers to apply to their contract regarding missing terms in each of the following situations except when
Answer:
they have failed to specify the price of the goods to be delivered.
Explanation:
If there is a buyer and seller conflict where paperwork between the two them do not agree, the the UCC makes provision for gap fillers. Gap fillers supplements agreement that has failed between the parties and includes that delivery of goods is within a reasonable time.
However UCC gap cannot be used to account for situations where the price of the goods has not been specified. The price can only be agreed between the parties involved.
Gap fillers is effective when time of payment is not settled, place of delivery is not provided, and when quality or grade of goods is not stated.
Gap fillers in the UCC supply missing terms in a contract to ensure fairness, but they cannot be used when they would result in illegality, such as in the enforcement of a minimum price contract that restricts competition among dealers.
Explanation:The question pertains to the use of gap fillers under the Uniform Commercial Code (UCC) when a contract for the sale of goods has been created without specific terms being defined. Gap fillers are provisions within the UCC that supply missing terms in a contract, allowing for a fair and efficient transaction between parties who have not established a prior course of dealing.
However, the UCC will not allow gap fillers to apply when doing so would violate a legal requirement or a fundamental principle of law. A clear example of this would be the illegality of a minimum price contract, which would restrict competition among dealers. Such a requirement is not just a missing term that can be gap-filled because it goes against public policy by hindering market competition.
Therefore, the application of gap fillers is limited by the legal framework within which commercial transactions occur. They are designed to facilitate trade by making assumptions about missing terms that are reasonable and lawful but cannot contravene explicit legal prohibitions.
Shire Computers predetermined overhead rate is based on direct labor cost. Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the year. During March, Shire began and completed Job 13-56. What is the predetermined overhead rate for the year
Answer:
Estimated manufacturing overhead rate= $1.3 per direct labor dollar
Explanation:
Giving the following information:
Management estimates the company will incur $747,500 of overhead costs and $575,000 of direct labor cost for the year.
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 747,500/575,000= $1.3 per direct labor dollar
Final answer:
The predetermined overhead rate for Shire Computers is 130% of the direct labor cost, calculated by dividing the estimated overhead costs by the estimated direct labor costs for the year.
Explanation:
The predetermined overhead rate for Shire Computers is calculated based on the estimated overhead costs and direct labor costs for the year. To find this rate, you divide the estimated overhead costs by the estimated direct labor costs, then multiply by 100 to get a percentage.
The formula is as follows: Predetermined Overhead Rate = (Estimated Overhead Costs / Estimated Direct Labor Costs) × 100. Using the provided numbers, the calculation would be ($747,500 / $575,000) × 100, which gives us a predetermined overhead rate of approximately 130% of the direct labor cost.
An auto insurance company is implementing a new bonus system. In each month, if a policyholder does not have an accident, they will receive a cash-back bonus of 5 from the company. Among the 1000 policyholder of the auto insurance company, 400 are classified as low-risk drivers and 600 are classified as high-risk drivers. In each month, the probability of zero accidents for high-risk drivers is 0.80 and the probability of zero accidents for low-risk drivers is 0.90. Calculate the expected bonus payment from the company to the 1000 policyholders in one year.
Answer:
50,400
Explanation:
Using application of total expectation, E;
N= Number of policy holders who have zero accidents in one month
P= Probability
N|Low = 400
N|High=600
P|Low=0.9
P|High=0.8
Therefore E = (N|Low*P|Low)+(N|High*P|High)
E=(400*0.9)+(600*0.8)
E=360+480
E=840
Then Total bonus for the year B
B= E*12*5
B=840*12*5
B=50,400
The expected bonus payment from the company to the 1000 policyholders in one year is 50,400
What is insurance policy?Insurance policy is a legal contract that binds both policyholder and the insurance company towards each other. The policy contains the details of the conditions or circumstances under which either the insured individual or policy nominee receives insurance benefits from the insurer.
Using application of total expectation, E;
N = Number of policy holders who have zero accidents in one month
P = Probability
N|Low
= 400
N|High
= 600
P|Low
= 0.9
P|High
= 0.8
Therefore E
= (N|Low*P|Low) + (N|High*P|High)
= (400 * 0.9) + (600 * 0.8)
= 360 + 480
= 840
Then Total bonus for the year B
= E * 12 * 5
= 840 * 12 * 5
= 50,400
Hence, the expected bonus payment from the company to the 1000 policyholders in one year is 50,400
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Presented below are selected account balances for Homer Winslow Co as of December 31, 2014.
Instructions: Prepare closing entries for Homer Winslow Co on December 31,2014. (Omit explanations)
Inventory 12/31/14 $60,000 Cost of Goods Sold $225,700
Common Stock 75,000 Selling Expenses 16,000
Retained Earnings 45,000 Administrative
Expenses 38,000
Dividends 18,000 Income Tax
Expense 30,000
Sales Returns
and Allowances 12,000
Sales Discounts 15,000
Sales Revenue 410,000
Answer:
Sales Revenue 410,000 debit
Income Summary 410,000 credit
--to close revenues accounts--
Income Summary 95,000 debit
Administrative Expenses 38,000 credit
Income Tax Expense 30,000 credit
Sales Returns and Allowances 12,000 credit
Sales Discounts 15,000 credit
--to close expenses and other--
Income Summary 18,000 debit
Dividends 18,000 credit
--to close dividends--
Income summary 297,000 debit
Retained Earnings 297,000 credit
--to close the income summary against RE--
Explanation:
We have to close against income summary he temporary accounts:
To close this accounts we need to post them in their opposite side of the normal balance. Revenues will be debited while expenses credited.
At last, we solve for the income summary balance and close it against retained earnings
410,000 - 95,000 - 18,000 = 297,000
Shares of common stock of the Samson Co. offer an expected total return of 16.2 percent. The dividend is increasing at a constant 5.6 percent per year. The dividend yield must be:_________
Options:
A. 5.60%.
B. 10.60%.
C. 16.20%.
D. 21.80%.
E. 2.89%.
Answer:D. 21.80%
Explanation:The Dividend yield is the total amount earned by dividing the amount of dividend per share by the stock price per share for a given Company,it generally represented in percentage. The Shares of common stock of the Samson Co. that offers an expected total return of 16.2 percent, and a dividend increase of 5.6% per year will be expected to give a total yield(Which is the total amount earned from this investment during the period under review)
Total yield will be 16.2%+5.6%=21.8%.
Whereas most men's suit brands focus on their craftsmanship and use of high-quality materials, Bluebird Suits distinguishes itself by emphasizing the durability of its products and deriding other suit makers as "delicate." Which positioning method is Bluebird using?
Whereas most men's suit brands focus on their craftsmanship and use of high-quality materials, Bluebird Suits distinguishes itself by emphasizing the durability of its products and deriding other suit makers as "delicate.". Bluebird is using positioning method of Competition.
Explanation:
Competition arises when two or more brands have a common objective. Bluebird and other brands are selling men's suits so they compete with each other.
Bluebird is trying to position its product in the market through competition. Bluebird is selling Men's suit. It trying to present its Suits different from other brands by focusing on the durability factor and telling that other brands are delicate. This will make customers believe that Suits of Bluebird will last long as compared to other brands. So, in this way, it can compete easily.
Bluebird Suits is using Competitive Positioning. By emphasizing the durability of their products, they create a unique image in the customer's mind compared to other brands. This differentiates them from other suit brands that focus on delicacy and craftsmanship.
Explanation:Bluebird Suits is using a method called Competitive Positioning. This is where a company positions its products or services uniquely in the minds of customers, compared to its competitors. In this case, Bluebird Suits is emphasizing their suit's durability over the delicate craftsmanship of its competitors. They are trying to create a unique space for their brand by suggesting that their suits are tough, long-lasting and reliable, compared to other brands which are presented as 'delicate'.
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Applications or uses of a new technology or product that are so compelling that they persuade customers to adopt the new format or technology in droves, thereby eliminating demand for competing formats, are known as:
a. killer applications.
b. technological paradigm shifts.
c. razor and blade strategies.
d. first-movers.
Answer:
The correct answer is letter "A": killer applications.
Explanation:
In consumer technology, killer applications is a term used to refer to those applications that cover needs so efficiently to cause their success and to wipe out of the market those applications replaced. Thus, while killer applications represent success for some entities it also represents the failure of others. However, a characteristic of killer application is their short product life cycles.
LOL Music Store uses the perpetual inventory system to account for its merchandise. On November 17, it purchased $1,000 of merchandise with terms of 2/5,n60. If payment is made on November 21, demonstrate the required journal entry to record the payment by selecting all of the correct actions below. (Check all that apply).
Credit Purchase Discounts $20
Credit Cash $980
Debit Accounts Payable $1,000
Credit Cash $1,000
Debit Merchandise Inventory $20
Credit Merchandise Inventory $20
Credit Accounts Payable $1,000
Final answer:
The correct journal entry to record the payment on November 21, using the perpetual inventory system, is to debit Accounts Payable, credit Purchase Discounts, and credit Cash.
Explanation:
The correct journal entry to record the payment on November 21, using the perpetual inventory system, is as follows:
Debit Accounts Payable $1,000Credit Purchase Discounts $20Credit Cash $980The first entry, debit to Accounts Payable and credit to Purchase Discounts, reflects the reduction in the liability of the company due to the prompt payment discount.
The second entry, credit to Cash, reflects the actual payment made by the company.
Being "on time" in business situations generally means being about ________________. about thirty minutes late. about five minutes early. at the time of the appointment. at the time of appointment or within 15 minutes after.
Being "on time" in business situations generally means being about "five minutes early".
Option: B
Explanation:
Either in business or in any government sector being on time is one of the key to grab best opportunity. Here in business being on time means atleast 5 minute early on the spot, if someone became late than with apology it is acceptable only upto 5-10 minutes immediately after a start. While the one who is late more than 15 minute they need to inform coordinators or head through phone call or text and with reason. Reaching too early also may become boring and non-interest sometimes, especially when meeting starts.
In a business context, being 'on time' usually refers to arriving about five minutes before a scheduled appointment. This is a demonstration of respect and professionalism. It is almost always considered inappropriate to arrive late.
Explanation:In most professional business situations, being 'on time' typically signifies arriving approximately five minutes early to a scheduled appointment. It gives you enough time to settle in, prepare, and present yourself as a responsible individual. Arriving late tends to communicate disregard for others' time, and should be avoided unless an unavoidable circumstances arise. Keep in mind, though, expectations may vary in different cultures and contexts, but timeliness in general is key to maintaining professionalism in business settings
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A stock had a 12 % return last year, a year when the overall stock market declined. Does this mean that the stock has negative beta and thus very little risk if held in a portfolio?
Answer:
Yes it has a negative beta but this does not translate to very little risk
Explanation:
A negative beta correlation means an investment moves in the opposite direction from the stock market.
A negative beta coefficient does not necessarily mean absence of risk. Instead, negative beta means your investment offers a hedge against serious market downturns.
The economic entity assumption states that economic events must be reported to the IASB. of different entities can be combined if all the entities are corporations. of every entity can be separately identified and accounted for. of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
Answer:
The correct answer is that the every entity could be separately accounted as well as identified for.
Explanation:
The accounting guideline or the principle, which allows the accountant who keep the transactions of the sole proprietor of the business separate from the personal transactions of the owner, though the sole proprietorship is not legally separate from the owner.
So, the assumption of the economic entity, states or define that the every entity could be separately accounted as well as identified for or in short, it is that entity to kept separate from the owner activities.
The Economic Entity Assumption in accounting suggests that the financial activities of a business can be identified separately from the personal financial activities of its owners. This principle applies to all types of businesses, including sole proprietorships. It allows for better clarity and accuracy in the financial reporting of businesses.
Explanation:The Economic Entity Assumption is a key principle in accounting that states that the activities of a business or other entity can be kept separate and distinct from the personal financial activities of its owners or other businesses. In other words, the financial transactions of a business are to be recorded separately from the personal transactions of the owner(s). This principle applies even in the case of a sole proprietorship, where the business may not be a separate legal entity from the owner.
So, in response to your question, the economic events of a sole proprietorship can absolutely be distinguished from the personal economic events of its owners. They are treated as separate entities for accounting purposes, irrespective of the legal structure of the business.
This assumption allows for more clarity and accuracy in financial reporting, as well as making the lives of business owners, accountants, and other stakeholders easier. It simplifies the process of analyzing the financial health and performance of a business by excluding irrelevant personal financial information.
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The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value.
The process for converting present values into future values is called_______ .This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?
a. The interest rate (I) that could be earned by deposited funds
b. The duration of the deposit (N)
c. The trend between the present and future values of an investment
d. The present value (PV) of the amount deposited
Answer:
Compounding; Option C
Explanation:
Time value of money recognizes the fact that today's $100 receipts are better than $100 receipts one year hence. The concept points towards inflation due to which money gradually loses its worth and value.
Future value refers to present value of an amount deposited today at r% rate of compounded interest for n periods.
It is expressed as:
[tex]FV = PV (1\ +\ R)^{n}[/tex]
The above process of converting present value into future value is referred to as compounding.
The variables required for above computation of future value being,
Present Value of the amount deposited denoted as PV
The interest rate (I) that would be earned on deposited funds i.e r
The time period of deposit i.e n
You work for an auto manufacturer designing brake systems, but you do not have a dedicat- ed team. Instead, you move from project to project, joining a new team and project when your current project is concluded.
A, Innovative communication technologies
B. Nonterritorial offices
C. Self-directed work groups and virtual teams
Answer:
C: Self-directed work groups and virtual teams.
Explanation:
SDWT (Self-directed work groups and virtual teams) are the groups in offices who possess different skills, and even aren't working on the same project which that they don't have same purpose as you have but still they are in your team.
Since, there is not any dedicated team for my project, I am just moving into other teams for every new project I am going int o self-directed work groups and virtual teams.
Assume that a 6 percent $500,000 bond with semiannual interest payments and a remaining life of 10 years could be purchased today, when market interest rates are 4.5 percent. How much would you have to pay to buy the bond?
Answer:
I will pay $559,864 for this bond
Explanation:
Coupon payment = $500,000 x 6% = $30,000 annually = $15,000 semiannually
Number of periods = 10 years x 2 = 20 period
Interest Rate = 4.5% = 2.25% semiannually
Price of bond is the present value of future cash flows, to calculate Price of the bond use following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond =$15,000 x [ ( 1 - ( 1 + 2.25% )^-20 ) / 2.25% ] + [ $1,000 / ( 1 + 2.25% )^20 ]
Price of the Bond = $15,000 x [ ( 1 - ( 1.0225 )^-20 ) / 0.0225 ] + [ $500,000 / ( 1.0225 )^20 ]
Price of the Bond = $239,455.68 + $320,408.24 = $559,863.92
Price of the Bond = $559,864
Answer:
$530579.03
Explanation:
Bond Value Formula
BV = C×1-(1+r/m)^-nm/r/m + FV/(1+r/m)^nm
So we need to first calculate the semi annual coupon payment
given by C = C×FV/2
=0.06×$500000/2
=$15000
Then substitute into the formula for bond value
BV = 15000 × 1 -(1+0.045/2)^-10×2 /0.045/2+ 500000/(1+0.045/2)^10×2
=$532579.03
Bekah is an adviser for the company Vicoltech, which deals heavily in investments. Bekah also advises several other clients in her state, but no clients outside of her state. Before the Dodd-Frank Act was passed, Bekah was exempt from registration and reporting requirements with the SEC. When the Dodd-Frank Act was passed:
a) Indeterminable with current informationb) Bekah was required to register with the SEC, but not required to report information to the SEC.c) Bekah was still exempt from the SEC’s reporting requirements.d) Bekah was required to begin reporting information to the SEC.
Answer:
a) Indeterminable with current information
Explanation:
Beranek Corp has $720,000 of assets, and it uses no debt--it is financed only with common equity. The new CFO wants to employ enough debt to raise the debt/assets ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio
Answer:
Beranek Corp. should borrow $288,000 to achieve the target debt ratio.
Explanation:
40% of debt-to-asset ratio means that 40% of the assets should be Financed with debt and the remaining with equity. We have $720,000 worth of assets, simply multiply it with 40% and you will get the amount the needs to be borrowed.
If you have any queries about double entries of all this scenario, do leave a comment, I'll be pleased to help you.
Thank you!
Management fraud (e. g., fraudulent financial reporting) is a relatively rare event. However, when it does occur, the frauds (e. g., Enron and WorldCom) can have a significant effect on shareholders, employees, and other parties. AU 240, Consideration of Fraud in a Financial Statement Audit, provides the relevant guidance for auditors.
Required:
a. What is the auditor's responsibility for detecting fraud?
b. Describe the three conditions that are generally present when fraud occurs?
c. What are the objectives of the " brainstorming" meeting that is held among the engagement team members?
d. What is the required documentation for identified risk factors?
A. ANSWER:
The Auditors major responsibility for detecting fraud is to flag it and report it.
EXPLANATION:
He or she may:
Report it to the audit committee or
to the highest level of management (if they are not involved in the fraud), or
to the shareholders if the fraud was and or is being committed by those in senior management
It is also the Auditors responsibility to:
Detect any error leading to a material misstatement. A material misstatement is information in the financial statements that is sufficiently incorrect that it may impact the economic decisions of someone relying on those statements
If the error is immaterial, it should be reported to those charged with governance.
Here there is no responsibility to detect them.
At the Planning Stage consider in advance, the risk of material misstatement due to fraud and error
B. ANSWER
The three conditions generally present when fraud occurs are:
Opportunity
Incentive
Rationalization
EXPLANATION
1. Opportunity:
Opportunity refers to circumstances that allow fraud to occur. In the fraud triangle, it is the only component that a company exercises complete control over. Examples of conditions that provide opportunities for committing fraud include but are not limited to: Weak internal controls, lack of integrity at management level, inadequate accounting policies.
2. Incentive:
This is alternatively called pressure, or motive. It refers to an employee’s mindset towards committing fraud. Examples of things that provide incentives for committing fraud include:
Bonuses based on a financial metricCommon financial metrics used to assess the performance of an employee are revenues and net income. Bonuses that are based on a financial metric creates pressure for employees to meet targets which, in turn, may cause them to commit fraud to achieve the objective.
Investor and analyst expectationsThe need to meet or exceed investor and analyst expectations can create pressure to commit fraud.
Personal needsPersonal needs may include wanting to earn more money, the need to pay personal bills, a gambling addiction, etc.
3. Rationalization
Rationalization refers to an individual’s justification for committing fraud. Examples of common rationalizations that fraud committers use include:
“They treated me wrong”An individual may be spiteful towards their manager or employer and believe that committing fraud is a way of getting payback.
“Upper management is doing it as well”Lack of integrity at the top may cause an individual to follow in the footsteps of those higher in the corporate hierarchy.
“There is no other solution”An individual may believe that they might lose everything (for example, losing a job) unless he or she commits fraud.
C. ANSWER
The objectives of the "Fraud Brainstorming" meeting that is held among the engagement team members are to:
Share insights about the entity and its environment and the entity's business risksProvide an opportunity for the team members to discuss how and where the entity might be susceptible to fraudEmphasize the importance of maintaining professional skepticism throughout the audit regarding the potential for material misstatement due to fraudEXPLANATION
Auditors are required to hold discussions ( "brainstorming sessions) with the audit team about the entity's financial statements' susceptibility to material misstatements In planning the audit, the engagement partner or manager should communicate with members of the audit team regarding the potential for misstatement due to fraud . The brainstorming session can be held separately, or concurrently with the discussion required as part of understanding the entity and its environmentD. ANSWER
The required documents for identified risk factors are:
A record of the discussion among the engagement team where required and the significant decisions reached;A record holding the key elements of the understanding obtained regarding each of the aspects of the entity and its environment specified and of each of the internal control components the sources of information from which the understanding was obtained; and the risk assessment procedures performed;the identified and assessed risks of material misstatement at the financial statement level and at the assertion level ; andthe risks identified, and related controls about which the auditor has obtained an understanding
Auditors are responsible for detecting material misstatement due to fraud in financial statements. Three conditions present during fraud are pressure, opportunity, and rationalization, known as the fraud triangle. The brainstorming meeting aims to discuss possible risk areas and plan accordingly, and auditors should document their findings and responses thoroughly.
Explanation:In the context of an audit, the auditor's responsibility for detecting fraud involves planning and performing the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.
Three conditions generally present when fraud occurs are known as the fraud triangle, which includes pressure or incentive, opportunity, and rationalization. Pressure or incentive could be financial or personal needs, opportunity might arise due to weak internal controls, and rationalization is the mindset that excuses the fraudulent behavior.
The brainstorming meeting among the engagement team members aims to discuss how and where the entity's financial statements might be susceptible to material misstatement due to fraud, and to design procedures accordingly.
The required documentation for identified risk factors includes a written record of the identification and assessment of the risks of material misstatement, the auditor’s response to those risks, and the basis for the conclusions about the risks related to each of these.
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McDonald's major distribution partner, The Martin-Brower Company, needs at least $1 million to build a new warehouse in Medicine Hat two years from today. To date, it has invested $500,000. If it continues to invest $50,000 at the end of every quarter into a fund earning 6% quarterly, will it have enough money to build the warehouse two years from now?Show calculations to support your answer
Answer:
No it wont have enough money to build a warehouse in two years.
Explanation:
Firstly we are given that the warehouse is $1 million so the company needs to save this amount of money in two years time.
We know that the company has invested $500000 to date therefore we need to calculate if this $50000 per quarter investment will cover the the other portion for $500000 to meet the warehouse cost of $1 million so we will use the future value annuity formula to calculate this which is :
Fv = C[((1+i)^n -1)/i]
where Fv will be the future value after two years of the $50000 investment
C is the periodic payment of $50000
i is the interest rate per period which is 6% per quarter
n is the number of periods the payment is done here it is 4 x 2years= 8 periods / investments of $50000 that will be done.
thereafter we substitute on the above formula:
Fv = 50000[((1+6%)^8 - 1)/6%]
Fv = $494873.40
then we combine this amount to $500000 to see if it reaches $1 million
$494873.40+ $500000 = $994873.40 which is close to the warehouse cost of $1 million but it does not reach it so the company wont have enough money to purchase the warehouse.
Using the future value of an annuity formula, The Martin-Brower Company's scheduled investments and initial amount will grow to approximately $1,444,343.66 in two years, which is enough to build the warehouse, as the required amount is $1 million.
Explanation:The student has asked whether The Martin-Brower Company will have enough money to build a warehouse in two years with a starting investment of $500,000, and additional $50,000 quarterly investments at a 6% quarterly interest rate. To determine if the company will reach its $1 million goal, we can apply the future value of an annuity formula:
FV = P × [((1 + r)^n - 1) / r] + PV × (1 + r)^n
Where:
FV is the future value of the annuityP is the payment per periodr is the interest rate per periodn is the number of periodsPV is the present value (initial investment)Given values:
P = $50,000r = 0.06 (quarterly)n = 2 years × 4 quarters/year = 8 quartersPV = $500,000Plugging these values into the formula, we get:
FV = $50,000 × [((1 + 0.06)^8 - 1) / 0.06] + $500,000 × (1 + 0.06)^8
Performing the calculation:
FV = $50,000 × (0.586874322) + $500,000 × (1.6) = $644,343.66 + $800,000 = $1,444,343.66
With the calculated future value, The Martin-Brower Company will exceed the required $1 million and have enough to build the warehouse.
An optimizing consumer currently spends money on many goods. The last ticket to a baseball game she bought cost $15 and gave her 10 utils of satisfaction. If this same consumer spends $10 on a movie ticket and is still optimizing utility, how many utils will she receive from the purchase
Answer:
Number of utils that will be received from the purchase is 6.667 utils.
Explanation:
At Optimum:
Pa / Pb = MUa / MUb
Where;
Pa = Price of the baseball game = 15
Pb = Price of the movie ticket = 10
Now,
15/10 = 10/MUb
1.5 = 10/MUb
MUb = 6.667 utils
Thus, the number of utils that will be received from the purchase is 6.667 utils.
Tablet Tailors sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Tablet Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $500. The standalone selling price of the tablet is $250 (the cost to Tablet Tailors is $175). Tablet Tailors sells the Internet access service independently for an upfront payment of S300. On January 2, 2017, Tablet Tailors signed 100 contracts, receiving a total of $50,000 in cash. 2. Tablet Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $600. Tablet Tailors provides the 3-year tablet service plan as a separate product with a standalone selling price of $150. Tablet Tailors signed 200 contracts for Tablet Bundle B on July 1, 2017, receiving a total of $120,000 in cash. Instructions (a) Prepare any journal entries to record the revenue arrangement for Tablet Bundle A on January 2, 2017, and December 31, 2017 (b) Prepare any journal entries to record the revenue arrangement for Tablet Bundle B on July 1,2017, and December 31, 2017 (c) Repeat the requirements for part (a), assuming that Tablet Tailors has no reliable data with which to estimate the stand- alone selling price for the Internet service.
Answer:
Please find solutions in the attached images
Explanation:
I have attached images of my journal entry solutions to this question as required.
In the Wall Street Journal (last March) it was reported that the unemployment rate decreased from 4.1% to 3.9% from January 2019 to February 2019 in the United States. This unambiguously shows that the U.S. economy must have expanded and the labor market remained robust.
a. True
b. False
Answer:
The statement in the question given is false
Explanation:
Job finding by individuals without jobs is not the only way in which the rate of unemployment can be reduced; it can also get reduced , reason being that due to discouragement and some other factors, the jobless are no longer looking for employment, thus they are withdrawing from the labor force altogether.
If the situation described above is true, then a diminishing unemployment rate is necessarily a sign of economic expansion, although could indicate a structural weakness of the job market.
Thus, the statement in the question given is false.
Handy Home sells windows and doors in the ratio of 8:2 (windows:doors). The selling price of each window is $200 and of each door is $500. The variable cost of a window is $125 and of a door is $350. Fixed costs are $900,000.
(1) Determine the selling price per composite unit.
(2) Determine the variable costs per composite unit.
(3) Determine the break-even point in composite units.
(4) Determine the number of units of each product that will be sold at the break-even point.
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The proportion of windowws= 0.8
The proportion of doors= 0.2
The selling price of each window is $200 and each door is $500. The variable cost of a window is $125 and of a door is $350. Fixed costs are $900,000.
1) To determine the composite price, we need to multiply the selling price of each product for the proportion of sales. Then sum them.
weighted average selling price= (selling price* weighted sales participation)
weighted average selling price= (0.8*200) + (0.2*500)= $260
2) We need to the same with the variable cost:
weighted average variable cost= (variable cost* weighted sales participation)
weighted average variable cost= (0.8*125) + (0.2*350)= $170
3) Break-even point (units)= Total fixed costs / (weighted average selling price - weighted average variable expense)
Break-even point (units)= 900,000/ (260 - 170)
Break-even point (units)= 10,000 units
4) To determine the number of units of each product, we need to multiply the break-even point in units for the proportion of sales:
Windows= 10,000*0.8= 8,000
Doors= 10,000*0.2= 2,000
The selling price per composite unit is $260, and the variable cost per composite unit is $170. The break-even point for Handy Home is 10,000 composite units. At this point, 8,000 windows and 2,000 doors will be sold.
Determining the selling price per composite unit, variable costs per composite unit, break-even point in composite units, and the number of units of each product that will be sold at the break-even point for Handy Home.
1. Selling Price per Composite Unit
Handy Home sells windows and doors in the ratio of 8:2. The selling price for each window is $200 and for each door is $500.
Total Revenue from Windows: 8 * 200 = $1600Total Revenue from Doors: 2 * 500 = $1000Total Revenue for Composite Unit: $1600 + $1000 = $2600Selling Price per Composite Unit: $2600 / 10 = $2602. Variable Costs per Composite Unit
The variable cost for each window is $125 and for each door is $350.
Total Variable Cost from Windows: 8 * 125 = $1000Total Variable Cost from Doors: 2 * 350 = $700Total Variable Cost for Composite Unit: $1000 + $700 = $1700Variable Cost per Composite Unit: $1700 / 10 = $1703. Break-Even Point in Composite Units
Fixed Costs: $900,000
Contribution Margin per Composite Unit: 260 - 170 = $90Break-Even Point in Composite Units: 900,000 / 90 = 10,000 units4. Number of Units of Each Product Sold at the Break-Even Point
Windows: 10,000 * 8/10 = 8,000 unitsDoors: 10,000 * 2/10 = 2,000 units