Answer:
a. The risk premium on Risky Investment bond = 5.8
b. Such a change would decrease/reduce 4.2%
c. The expected default rate on the Risky Investment bond has decreased (1).
Explanation:
a. The risk premium on a risky investment is equal to the total return on a risky investment less the return on the risk free asset. The risky asset here gives an annual return of 7.1% while the risk free rate is 1.3%. So, the risk premium on the risky asset for additional risk is,
7.1 - 1.3 = 5.8%b. A reduction in the annual return on the risky asset will decrease/reduce the interest rate spread which is equal to the difference between the return of the risky and risk free asset. The new spread will be equal to,
5.5 - 1.3 = 4.2%c. The risk free rate is expected to be the same as no information is provided. Besides, a fall in annual rate of risky investment means that there is a reduction in the riskiness of such an investment and that would mean that there is a reduction in the default risk in turn leading to a reduction in compensation for default and the default rate.
The risk is made up of risk free + maturity risk + liquidity risk and default risk.
The risk premium on the Risky Investment bond is initially 5.8 percentage points. A decrease in its rate of return from 7.1% to 5.5% narrows the interest rate spread over Treasuries to 4.2 percentage points, likely due to a decrease in the expected default rate of Risky Investment Inc that is option A.
The risk premium on the Risky Investment bond is calculated by subtracting the Treasury bond's rate of return from the Risky Investment bond's rate of return. So the risk premium would be 7.1% - 1.3% = 5.8 percentage points.
When the annual rate of return on the Risky Investment bond decreases from 7.1% to 5.5%, this would narrow the interest rate spread on the Risky Investment bond over Treasuries to 5.5% - 1.3% = 4.2 percentage points.
The decrease in the annual rate of return on the Risky Investment bond could potentially be explained by option 1, which states that the expected default rate on the Risky Investment bond has decreased. This implies that the bond is seen as less risky than before, which can justify a lower rate of return required by investors.
The voters of the City of Monroe approved the issuance of tax-supported bonds in the face amount of $4,000,000 for the construction and equipping of a new City Jail. Architects were to be retained, and construction was to be completed by outside contractors. In addition to the bond proceeds, a $1,340,000 grant was expected from the state government.
Open a general journal for the City Jail Annex Construction Fund. Record the following transactions and post to the general ledger. Control accounts are not necessary.(1) On January 1, 2017, the total face amount of bonds bearing an interest rate of 8 percent was sold at a $200,000 premium. Principal amounts of $200,000 each will come due annually over a 20-year period commencing January 1, 2018. Interest payment dates are July 1 and January 1. The first interest payment will be July 1, 2017. The premium was transferred to the City Jail Debt Service Fund for the future payment of principal on the bonds.(2) The receivable from the state government was recorded.(3) Legal and engineering fees early in the project were paid in the amount of $121,000. This amount had not been encumbered.(4) Architects were engaged (like a contract, record an encumbrance) at a fee of $250,000.(5) Preliminary plans were approved, and the architects were paid $50,000 (20 percent of the fee).(6) The complete plans and specifications were received from the architects and approved. A liability in the amount of $150,000 to the architects was approved and paid.(7) Bids were received and opened in public session. After considerable discussion in City Council, the low bid from Hardhat Construction Company in the amount of $4,500,000 was accepted, and a contract was signed.(8) The contractor required partial payment of $1,350,000. Payment was approved and vouchered with the exception of a 5 percent retainage.(9) Cash in the full amount of the grant was received from the state government.(10) Furniture and equipment for the annex were ordered at a total cost of $459,500.(11) Payment was made to the contractor for the amount payable (see 8 above).(12) The contractor completed construction and requested payment of the balance due on the contract. After inspection of the work, the amount, including the past retainage, was approved for payment and then paid.(13)The furniture and equipment were received at a total actual installed cost of $459,300. Invoices were approved for payment.(14) The remainder of the architects’ fees was approved for payment.(15) The City Jail Construction Fund paid all outstanding accounts payables ($ 509,300) on December 31, 2017.(16) The remaining cash was transferred to the City Jail Debt Service Fund.
Answer:
See attached for answer because of the inability to create a table on this platform.
Opening a general journal to record transactions for the City Jail Annex Construction Fund involves several steps as detailed below:
1. On January 1, 2017:
Debit Cash $4,200,000
Credit Bonds Payable $4,000,000
Credit Premium on Bonds $200,000
Debit Premium on Bonds $200,000
Credit Transfer to Debt Service Fund $200,000
2. Recording the Receivable from the State Government:
Debit Receivable from State Government $1,340,000
Credit Revenue $1,340,000
3. Paying Legal and Engineering Fees:
Debit Expenditures $121,000
Credit Cash $121,000
4. Engaging Architects:
Debit Encumbrances $250,000
Credit Reserve for Encumbrances $250,000
5. Paying Architects' Preliminary Fees:
Debit Expenditures $50,000
Credit Cash $50,000
6. Paying Remaining Architects' Fees:
Debit Expenditures $150,000
Credit Cash $150,000
7. Signing Contract with Hardhat Construction Company:
Debit Encumbrances $4,500,000
Credit Reserve for Encumbrances $4,500,000
8. Approving Partial Payment to Contractor:
Debit Expenditures $1,282,500
Debit Retainage Payable $67,500
Credit Cash $1,282,500
Credit Accounts Payable $67,500
9. Receiving State Government Grant:
Debit Cash $1,340,000
Credit Receivable from State Government $1,340,000
10. Ordering Furniture and Equipment:
Debit Encumbrances $459,500
Credit Reserve for Encumbrances $459,500
11. Paying Contractor:
Debit Accounts Payable $67,500
Credit Cash $67,500
12. Completing Construction and Final Contractor Payment:
Debit Expenditures $3,217,500
Credit Cash $3,217,500
Debit Retainage Payable $67,500
13. Receiving and Paying for Furniture and Equipment:
Debit Expenditures $459,300
Credit Cash $459,300
14. Paying Remaining Architects' Fees:
Debit Expenditures $50,000
Credit Cash $50,000
15. Paying all Outstanding Accounts Payable:
Debit Accounts Payable $509,300
Credit Cash $509,300
16. Transferring Remaining Cash to Debt Service Fund:
Debit Transfer to Debt Service Fund $750,000
Credit Cash $750,000
These entries ensure proper tracking of the transactions in accounting records.
The ending inventory of finished goods has a total cost of $11,600 and consists of 600 units. If the overhead applied to these goods is $3,850, and the overhead rate is 70% of direct labor, how much direct materials cost was incurred in producing these units?
Answer:
the Direct Labor Costs are $5500
And Direct Materials are 2,250
Explanation:
Finished Goods has a total cost of $11,600
If the overhead applied to these goods is $3,850
Then the Direct Labor Costs are $5500
And Direct Materials are 2,250
Using the cross product rule
$3850 : 70
x : 100
x= $3850*100/70= $ 5500 are Direct LAbor Costs
Direct Materials= Finished Goods - overhead applied -Direct Labor Costs
Direct Materials =$11,600- $3,850- $5500
And Direct Materials are = $2,250
A thirty-year annuity X has annual payments of $1,000 at the beginning of each year for twelve years, then annual payments of $2,000 at the beginning of each year for eighteen years. A perpetuity Y has payments of $Q at the end of each year for twenty years, then payments of $3Q at the end of each year thereafter. The present values of X and Y are equal when calculated using an annual effective discount rate of 10%. Find Q.
Answer:
The value of Q is $1069.89
Explanation:
Please find attached
According to the dynamic version of the equation of exchange (as presented in the PowerPoint slides for Chapter 12), what will the rate of inflation be if real output grows 3% a year while the money supply grows 9% a year, assuming velocity is constant?
Answer:
6%
Explanation:
Based on the equation of exchange, the inflation rate can be determined by taking the difference between the rate of wage growth and the rate of labor productivity. Therefore, in the question above, the inflation rate is 9% - 3% = 6%. This shows that a fast increase in the wage growth rate with a slow increase in the productivity rate will lead to inflation.
Final reports represent the end product of a thorough investigation and analysis. They provide an ordered format for presenting information to decision makers and are divided into segments to make information comprehensible and accessible. Formal reports usually consist of three divisions.
a. Which element of formal proposals is similar to that of informal proposals?
Answer:
Elements of formal proposals similar to that of informal proposals
Introduction Background, Problem, Purpose Proposal, Plan, Schedule Staffing Budget AuthorizationDetermine the utilization and the efficiency for each of these situations: a. A loan processing operation that processes an average of 7 loans per day. The operation has a design capacity of 10 loans per day and an effective capacity of 8 loans per day. b. A furnace repair team that services an average of four furnaces a day if the design capacity is six furnaces a day and the effective capacity is five furnaces a day. c. Would you say that systems that have higher efficiency ratios than other systems will always have higher utilization ratios than those other systems? Explain.
Answer:
Explanation:
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A financial institution has entered into an interest rate swap with company X. Under the terms of the swap, it receives 10% per annum and pays six-month LIBOR on a principal of $10 million for five years. Payments are made every six months. Suppose that company X defaults on the sixth payment date (end of year 3) when the interest rate (with semiannual compounding) is 8% per annum for all maturities. What is the loss to the financial institution
Answer:
The loss of the financial institution is $413,000
Explanation:
Let's say that after 3 years the financial institution will receive:
0.5 * 10% of $10million
= 0.5 * 0.1 * 10000000
= $500,000
Then, they will pay 0.5 * 9% of $10M
= 0.5 * 0.09 * 10000000
= $450,000
Therefore, their immediate loss would be $500000 - $450000
= $50000.
Let's assume that forward rates are realized to value the rest of the swap.
The forward rates = 8% per annum.
Therefore, the remaining cash flows are assumed that floating payment is
0.5*0.08*10000000 =
$400,000
Received net payment would be:
500,000-400,000= $100,000. The total cost of default is therefore the cost of foregoing the following cash flows:
Year 3=$50,000
Year 3.5=$100,000
Year 4 = $100,000
Year 4.5= $100,000
Year 5 = $100,000
Discounting these cash flows to year 3 at 4% per six months, the cost of default would be $413,000
Problem 13-02A a-c Whispering Winds Corporation had the following stockholders’ equity accounts on January 1, 2020: Common Stock ($4 par) $400,000, Paid-in Capital in Excess of Par—Common Stock $185,000, and Retained Earnings $110,000. In 2020, the company had the following treasury stock transactions. Mar. 1 Purchased 6,500 shares at $8 per share. June 1 Sold 1,500 shares at $13 per share. Sept. 1 Sold 2,000 shares at $11 per share. Dec. 1 Sold 1,500 shares at $6 per share. Whispering Winds Corporation uses the cost method of accounting for treasury stock. In 2020, the company reported net income of $34,000.
Answer:
The journal entries, open accounts and stockholders equity section for the following information are given below.
Explanation:
Date Account Titles and Explanation Debit Credit
Mar. 1 Treasury Stock 52000
Cash 52000
June 1 Cash 19500
Treasury Stock 12000
Paid-in Capital from Treasury Stock 7500
Sept. 1 Cash 22000
Treasury Stock 16000
Paid-in Capital from Treasury Stock 6000
Dec. 1 Cash 9000
Paid-in Capital from Treasury Stock 3000
Treasury Stock 12000
Dec. 31 Income Summary 34000
Retained Earnings 34000
Paid-in Capital from Treasury Stock
Dec. 1 3000 June 1 7500
Sept. 1 6000
Bal. 10500
Treasury Stock
Mar. 1 52000 June 1 12000
Sept. 1 16000
Dec. 1 12000
Bal. 12000
Retained Earnings
Bal. 110000
Dec. 31 34000
Bal. 144000
WHISPERING WINDS CORPORATION
Balance Sheet (Partial)
December 31, 2020
Stockholders' Equity
Paid-in Capital
Capital Stock
Common Stock 400000
Additional Paid-in Capital
Paid-in Capital in Excess of Par-Common Stock 185000
Paid-in Capital from Treasury Stock 10500
Total Additional Paid-in Capital 195500
Total Paid-in Capital 595500
Retained Earnings 144000
Total Paid-in Capital and Retained Earnings 739500
Less
Treasury Stock (12000)
Total Stockholders' Equity $ 727500
To evaluate the worth of a Babble, Inc. share, one would consider the present and future dividends, discounted to their present value. An investor would analyze the potential returns from immediate profits and the anticipated dividends over the next two years.
Explanation:Buying and selling stocks is a fundamental activity in the finance world, directly impacting an investor's net profit and the overall valuation of companies involved. Let's dissolve the case for Babble, Inc. into its financial anatomy. To ascertain what an investor would be willing to pay for a share of the company, we would need to examine the expected dividends paid out over the timespan prior to the company's disbandment. Given the profit projections totaling $60 million over two years and a total share count of 200, it can be calculated by adding the present value of expected dividends. For example, a share's value today might include the present value of $15 million / 200 shares plus the present value of future dividends, discounted back into today's dollars.
Small percentage changes in an amount from a company's financial statement may still represent large dollar amounts; therefore, analysts should examine changes in both absolute dollar amounts and percentages.
Answer: You are trying to find out if the statement is true or false? It is FALSE.
Explanation: Analysts should be concerned with the material movements in the company's financial statements. Although as stated in the question, small changes could amount to material movement but that applies in situations where there is a huge outflow but at the same time, there is similar inflow, so the net effect is negligible on a particular financial statements line item. This instance is not relevant to financial analysts but only the concern of internal control and or internal audit.
Financial analysts are interested in what the key drivers of the financial statements are. These drivers in most cases are an avenue to explain what has transpired in the financials between the current period and the preceding one by way of writing a commentary and providing a succinct and holistic explanation of the financial statements.
It would be time consuming and too operational if analysts are concerned with every percentage movement in the financial statements.
Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 8.6%, what is the value of the bond
Answer:
Value of the bond = $767.70
Explanation:
The value of the bond is the present value of the future cash receipts expected from the bond. The value is equal to present values of interest payment and the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond for Potter Industries can be worked out as follows:
Step 1
Calculate the PV of Interest payment
Present value of the interest payment
PV = Interest payment × (1- (1+r)^(-n))/r
Interest payment = 6% × $1,000 = $60
PV = 60 × (1 - (1.0.086)^(-10)/0.086)
= 60 × 5.4912
= 329.47
Step 2
PV of redemption Value
PV of RV = RV × (1+r)^(-n)
= 1000 × (1.086)^(-10)
= 438.229
Step 3
Calculate Value of the bond
=329.47 + 438.229
=767.7066285
Value of the bond = $767.70
Answer:
$830.16
Explanation:
Tenor: 10 years
Coupon rate: 6% annually -> coupon received annual (PMT) = $1,000 * 6% = $60
Face value (FV): $1,000
Yield To Date (YTD): 8.6% annually
Bond’s price = present value of bond + present value of total coupon received semiannual
Present value of bond = FV/(1+ YTD) ^tenor = 1000/(1+8.6%)^10 = $438.23
Present value of total coupon received semiannual = 60/(1+8.6%)^10 +60/(1+8.6%)^9+….+ 60/(1+8.6%)^1 = $391.93
(we can use excel to calculate the PV of coupon received = PV(rate,tenor,-PMT) = PV(8.6%,10,-60) = 391.93)
⇒ Bond’s price = $438.23+ $391.93 = $830.16
For each of the following statements, indicate whether it is true, false, or uncertain and EXPLAIN WHY. a. In the long-run the typical monopolistically competitive firm earns no economic profit and that indicates that the firm is economically (productively) efficient. b. Monopolists have complete pricing freedom as they seek to maximize profits. c. In the short-run, if price drops below the average total cost, the perfectly competitive firm must shut down immediately.
Answer:
a.
FALSE
The argument above is in part inaccurate. In the long run, the monopoly dominant firms gain no economic profit at the profit generating production as their LRAC= LRAR at.
The firm is not effective economically (productively) though.
A monopolistically dominant firm is not successful effective because it does not achieve the average cost curve at the minimum level. The difference between supply and supply of the equilibrium at the minimum average cost is called overcapacity.
b.
FALSE
The monopolist has the power to make the price to maximize the profit. The monopolist, however, always has to respect demand rule of law. Its AR-curve is a sloping downward curve.
It indicates that if the monopolist decides to increase production, he will have to lower the price. It shows that to increase income, the monopolist can set its price but can not set any price.
c.
FALSE
The shut down point for reasonably competitive firms is Price= AVC.
When the price falls below the average cost of the product, otherwise the business must shut off.
Otherwise, the business must continue to manufacture until the price falls below the average cost of the product. It will still deliver, even if the average income or price is below the average output.
Luke Anderson is earning $48,000 a year in a city located in the Midwest. He is interviewing for a position in a city with a cost of living 12 percent higher than where he currently lives. What is the minimum salary Luke would need at his new job to maintain the same standard of living?
The minimum requirement of salary = $53760
Explanation:
Cost of living in city is 12 percent higher than where Luke Anderson lives. So, Luke Anderson will require 12 percent higher salary than existing salary in order to maintain the existing standard of living
The calculations are as follows.
Current salary of Luke Anderson = $48000
12 percent increase = 48000 multiply with 12 percent = 5760
Thus, the required minimum salary = 48000+ 5760 = 53760
So, Luke Anderson will require minimum salary of $53760
To maintain the same standard of living in a city with a cost of living 12% higher than his current city, Luke Anderson would need a minimum salary of $53,760.a year.
Explanation:To calculate the minimum salary Luke Anderson would need to maintain the same standard of living in the new city, we need to consider the new city's higher cost of living. Given that it is 12% higher, this percentage needs to be added to Luke's current salary. The equation is as follows:
Current salary x (1 + Percentage increase / 100)
Substituting in the values provided gives:
$48,000 x (1 + 12/100)
This calculation gives a total of $53,760. This means that Luke would need a minimum salary of $53,760 to maintain his current standard of living in the new city, considering the higher cost of living.
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Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 44,000 units and sold 36,000 units at a price of $140 per unit. Manufacturing costs Direct materials per unit $ 60 Direct labor per unit $ 22 Variable overhead per unit $ 8 Fixed overhead for the year $ 528,000 Selling and administrative costs Variable selling and administrative cost per unit $ 11 Fixed selling and administrative cost per year $ 105,000 Exercise 06-9 Part 1a 1a. Assume the company uses absorption costing. Determine its product cost per unit.
Answer:
$102
Explanation:
Given that,
Direct materials per unit = $60
Direct labor per unit = $22
Variable overhead per unit = $8
Fixed overhead for the year = $528,000
Units produced = 44,000
Fixed overhead = Fixed overhead for the year ÷ Number of units produced
= $528,000 ÷ 44,000
= $12 per unit
Total product cost per unit under absorption costing:
= Direct material per unit + Direct labor per unit + Variable overhead + Fixed overhead
= $60 + $22 + $8 + $12
= $102
In order to purchase a new freezer in 4 years, the Steakhouse Restaurant has decided to deposit $1,700 in an account that earns 2% per year compounded monthly for 4 years. How much money will be in the account in 4 years
Answer:
$ 1844
Explanation:
A = P (1 + r / n) ^ nt ; where
A = Final Amount , P = Principal base, r = Interest rate , t = no. of time periods (usually years) , n = compounding in a time period (annually)
Given : P = 1700 , r = 2% , t = 4 , n = 12
A = 1700 [ 1 + 0.02 / 12 ] ^ (12 x 4)
1700 [ 1 + 0.0017 ] ^ (12 x 4)
1700 [ 1.0017 ] ^ 48
1700 [1.0849]
= 1844
Gambrinus is a large company that owns and operates the breweries that produce Moosehead Lager, Bridgeport Ale, Pete's Wicked Ale, Corona beer, Trumer Pilsner, and Shiner Bock. Each brewery is run as an independent division and each produces a malt liquor that appeals to a different market. This is an example of departmentalization by:
Answer:
The answer is departmentalization by product.
Explanation:
Departmentalization refers to the divisions of different work areas. Each one specializes in a specific job, most companies use departmentalization and train their employees, making them specialists in their role.
The main objective of departmentalization is to specialize in activities and facilitate processes while maintaining control in the organization. The departmentalization is usually divided by product, function, process, project, clients, and territory.
For example, in the case of departmentalization by-products, it is used by large companies to divide the area where the product is developed and those in charge of product delivery, thus obtaining better control, organization, and production.
I hope this information can help you.
Departmentalization by product in business organizations is exemplified by Gambrinus owning breweries producing various types of beer that cater to different market segments.
Departmentalization is a strategy in which a company organizes its structure by grouping jobs based on similarities. In the case of Gambrinus owning several breweries producing different types of beer targeting diverse markets, this represents departmentalization by product. Each brewery operates independently, focusing on producing a specific type of beer for a distinct market segment.
A 1-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding.
(a) What are the forward price and the initial value of the forward contract?
(b) Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
Answer:
(a) What are the forward price and the initial value of the forward contract?
Fo= 40ε[tex]^{0.1*1}[/tex] = 44.21
The initial value of the forward contract is zero.
(b) Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
The delivery price K in the contract is $44.21. The value of the contract, f, after six months is given by:
f= 45-44.21ε[tex]^{-0.1*0.5}[/tex]
= $2.95
The forward price is:
45ε[tex]^{0.1*0.5}[/tex] = $47.31
Below are a set of heights (in inches) and GPA scores for a sample of 6 students. Height, GPA 60, 4.0 55, 3.2 62, 3.7 55, 3.9 49, 2.4 61, 2.7 Find the equation of the regression line to predict GPA from height by hand
Answer:
[tex]S_{xx}=\sum_{i=1}^n x^2_i -\frac{(\sum_{i=1}^n x_i)^2}{n}=19616-\frac{342^2}{6}=122[/tex]
[tex]S_{xy}=\sum_{i=1}^n x_i y_i -\frac{(\sum_{i=1}^n x_i)(\sum_{i=1}^n y_i)}{n}=1142.2-\frac{342*19.9}{6}=7.9[/tex]
And the slope would be:
[tex]m=\frac{7.9}{122}=0.0648[/tex]
Nowe we can find the means for x and y like this:
[tex]\bar x= \frac{\sum x_i}{n}=\frac{342}{6}=57[/tex]
[tex]\bar y= \frac{\sum y_i}{n}=\frac{19.9}{6}=3.317[/tex]
And we can find the intercept using this:
[tex]b=\bar y -m \bar x=3.317-(0.0648*57)=-0.377[/tex]
So the line would be given by:
[tex]y=0.0648 x -0.377[/tex]
Explanation:
The data given is:
x: 60, 55, 62, 55,49, 61
y: 4.0, 3.2, 3.7, 3.9, 2.4, 2.7
For this case we need to calculate the slope with the following formula:
[tex]m=\frac{S_{xy}}{S_{xx}}[/tex]
Where:
[tex]S_{xy}=\sum_{i=1}^n x_i y_i -\frac{(\sum_{i=1}^n x_i)(\sum_{i=1}^n y_i)}{n}[/tex]
[tex]S_{xx}=\sum_{i=1}^n x^2_i -\frac{(\sum_{i=1}^n x_i)^2}{n}[/tex]
So we can find the sums like this:
[tex]\sum_{i=1}^n x_i = 342[/tex]
[tex]\sum_{i=1}^n y_i =19.9[/tex]
[tex]\sum_{i=1}^n x^2_i =19616[/tex]
[tex]\sum_{i=1}^n y^2_i =68.19[/tex]
[tex]\sum_{i=1}^n x_i y_i =1142.2[/tex]
With these we can find the sums:
[tex]S_{xx}=\sum_{i=1}^n x^2_i -\frac{(\sum_{i=1}^n x_i)^2}{n}=19616-\frac{342^2}{6}=122[/tex]
[tex]S_{xy}=\sum_{i=1}^n x_i y_i -\frac{(\sum_{i=1}^n x_i)(\sum_{i=1}^n y_i)}{n}=1142.2-\frac{342*19.9}{6}=7.9[/tex]
And the slope would be:
[tex]m=\frac{7.9}{122}=0.0648[/tex]
Nowe we can find the means for x and y like this:
[tex]\bar x= \frac{\sum x_i}{n}=\frac{342}{6}=57[/tex]
[tex]\bar y= \frac{\sum y_i}{n}=\frac{19.9}{6}=3.317[/tex]
And we can find the intercept using this:
[tex]b=\bar y -m \bar x=3.317-(0.0648*57)=-0.377[/tex]
So the line would be given by:
[tex]y=0.0648 x -0.377[/tex]
Tracy Company, a manufacturer of air conditioners, sold 270 units to Thomas Company on November 17, 2021. The units have a list price of $400 each, but Thomas was given a 25% trade discount. The terms of the sale were 3/10, n/30. Thomas uses a perpetual inventory system.
1. Prepare the journal entries to record the (a) purchase by Thomas on November 17 and (b) payment on November 26, 2021. Thomas uses the gross method of accounting for purchase discounts.
2. Prepare the journal entry for the payment, assuming instead that it was made on December 15, 2021.
1. Record the purchase of air conditioners.
Answer:
See explanation section
Explanation:
Requirement 1
November 17, 2021 Merchandise Inventory Debit $81,000 (Note - 1)
Accounts payable - Tracy Company Credit $81,000
Calculation - $270 units × $400 = $108,000
$108,000 × (100 - 25)% = $81,000
To record the purchase of office equipment on account with a trade discount and a credit terms of 3/10, n/30. As the company uses perpetual inventory system, merchandise inventory is debit.
November 26, 2021 Accounts payable - Tracy Company Debit $81,000
Cash Credit $78,570
Merchandise Inventory Credit $2,430
As Thomas gave the payment within 10 days, Tracy Company provided a 3% discount according to the terms.
Calculation - $81,000 - ($81,000 × 3)% = $81,000 - 2,430 = $78,570
Requirement 2
If Thomas paid on December 15, 2021, Tracy company would not give any discount. However, Thomas paid within 30 days.
Therefore, the journal entry to record the payment is as follows:
December 15, 2021 Accounts payable - Tracy Company Debit $81,000
Cash Credit $81,000
This time he did not receive the discount as he failed to pay within 10 days to get discount.
If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Peacock ______ from ______ rooms per night to ______ rooms per night. Therefore, the income elasticity of demand is _____, meaning that hotel rooms at the Peacock are _____.
The quantity of rooms demanded at the Peacock Hotel in response to increases in household income relates to the concept of income elasticity of demand. As income rises, the elasticity measure tells us whether the good (hotel rooms) is a necessity or a luxury. With an elasticity value greater than 1, hotel rooms would be considered a luxury.
Explanation:To answer this question, we'd need factual data on how the demand for rooms at the Peacock Hotel has changed. However, we can discuss the concept of income elasticity of demand. The income elasticity of demand measures how much the quantity demanded of a good responds to a change in consumers' income.
For example, if income increases by 10% and simultaneously, demand for hotel rooms increases by 15% (from 100 rooms to 115 per night), we'd calculate the income elasticity of demand as follows: (change in quantity demanded / initial quantity demanded) / (change in income / initial income), resulting in (15/100) / (10/100), or 1.5. An elasticity greater than 1 implies that the good is a luxury good, meaning consumers will buy more of it as their income rises.
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Complete the following sentence about margins and alignment with the best choices. Business letters and memos usually have margins of_________ and are usually___________ on the left. Typeface, font, and size influence how your message is read.
Business letters and memos usually have margins of approximately one inch and are usually aligned flush or justified on the left. Typeface, font, and size influence how your message is read.
Flush refers to a specific alignment style commonly used in business letters and memos. When a document is aligned flush on the left, it means that the left edge of the text forms a straight line, creating a clean and professional appearance.
This alignment choice helps maintain consistency and readability by ensuring a uniform left margin throughout the document.
By aligning text flush on the left, it facilitates easy scanning and comprehension for the reader. This alignment style is a standard convention in business communication, contributing to the overall professional presentation and visual appeal of the document.
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Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $38,000 and then sells this inventory on account on March 17 for $58,000. Record transactions for the purchase and sale of inventory. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
Debit Inventory $38,000
Credit Accounts Payable $38,000
Being entries to record inventory purchased on account.
Debit Cost of goods sold $38,000
Credit Inventory $38,000
Being entries to account for cost of items sold.
Debit Accounts receivable $58,000
Credit Revenue account $58,000
Being entries to recognize the sale of inventories.
Explanation:
When inventory is purchased on account, it means that cash was yet to be paid for the purchase and as such a liability should be recorded.
The entries required for the purchase of inventory would therefore be
Debit Inventory $38,000
Credit Accounts Payable $38,000
Being entries to record inventory purchased on account.
When the items are sold on account, it means cash was not collected at the point of sale. This creates another asset called accounts receivable. Entries required on sale
Debit Cost of goods sold $38,000
Credit Inventory $38,000
Being entries to account for cost of items sold
Then
Debit Accounts receivable $58,000
Credit Revenue account $58,000
Being entries to recognize the sale of inventories.
From the following particulars of Purple New Co., prepare the bank reconciliation statement as on May 31, 2016.
a. The bank statement balance is $4,000.
b. The cash account balance is $3,950.
c. Outstanding checks amounted to $960.
d. Deposits in transit are $900.
e. The bank service charge is $75.
f. Interest added to the checking account by the bank is $150.
g. A check drawn for $65 was incorrectly charged by the bank as $150.
Prepare a bank reconciliation for Purple New Co. for May 31, 2016. Purple New Co. Bank Reconciliation May 31, 2016
Answer:
Explanation:
Bank reconciliation statement:
Cash account balance $3950
Less: Deposit in transit ($900)
Less: Bank service charges ($75)
Add: Interest added to the checking account by the bank $150
Add: Checks outstanding $960
Less: Check drawn incorrectly charged by the bank ($85) [150-65]
Adjusted balance $4,000
Final answer:
To reconcile Purple New Co.'s bank statement, several adjustments were made including deposits in transit, outstanding checks, bank interest, service charges, and an error correction for a mischarged check. The adjusted bank balance came to $4,100, and after reconciling items, the corrected cash account should match this balance.
Explanation:
Purple New Co. Bank Reconciliation Statement
As of May 31, 2016, Purple New Co. needs to reconcile its bank statement with its cash account records. Let's go through the items one by one to prepare the bank reconciliation statement.
Start with the bank statement balance: $4,000.Add deposits in transit: $900. These are amounts the company has received and recorded, but the bank has not yet processed.Subtract outstanding checks: $960. These are checks Purple New Co. has issued, but the recipients have not yet cashed.Add interest credited by the bank: $150. This is interest earned on the bank balance.Subtract bank service charge: $75.Correct for the error in check charging: the check was for $65 but was charged as $150. Add back the difference: $85 ($150 - $65).Adjusting the bank statement balance with these items gives us the adjusted bank balance. Now, let's prepare the bank reconciliation statement:
Bank statement balance: $4,000Add: Deposits in transit: $900Less: Outstanding checks: $960Add: Interest added by bank: $150Less: Bank service charge: $75Add: Error in check charging correction: $85Adjusted bank balance: $4,000 + $900 - $960 + $150 - $75 + $85 = $4,100.
The cash account balance shows $3,950. To reconcile with the adjusted bank balance, we have to align the two balances:
Cash account balance: $3,950Add: Deposits in transit: $900Less: Outstanding checks: $960Adjusted cash account balance: $3,890The difference of $210 ($4,100 - $3,890) represents the reconciled items such as interest and bank service charges. The corrected cash account after accounting for all reconciling items should match the adjusted bank balance of $4,100.
Information necessary to prepare the year-end adjusting entries appears below.
Depreciation on the office equipment for the year is $12,000.
Employee salaries and wages are paid twice a month, on the 22nd for salaries and wages earned from the 1st through the 15th, and on the 7th of the following month for salaries and wages earned from the 16th through the end of the month. Salaries and wages earned from December 16 through December 31, 2018, were $1,700.
On October 1, 2018, Pastina borrowed $72,300 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
On March 1, 2018, the company lent a supplier $30,300 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019.
On April 1, 2018, the company paid an insurance company $6,400 for a two-year fire insurance policy. The entire $6,400 was debited to insurance expense.
$1,010 of supplies remained on hand at December 31, 2018.
A customer paid Pastina $1,980 in December for 1,650 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.
On December 1, 2018, $2,800 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $1,400 per month.
For requirement 4, Assume that no common stock was issued during the year and that $3,600 in cash dividends were paid to shareholders during the year.
4. Prepare the income statement, statement of shareholders' equity and classified balance sheet for the year ended December 31, 2018
Answer:
Although the Question seems incomplete, i have made out the Income statement, Balance sheet and Shareholders'equity statement from the information provided to ease you into completing it as soon as the full details of questions is provided
Explanation:
Income Statement
For the Year Ended 31 December 2018
Sales Not Provided
Income
Accrued interest on loan (8% x 10/12 x 30,300) $1939.2
Total Income $1,939.2
Expense
Depreciation $12,000
Employee Salaries & Wages ($1,700 x 2 x 12) $40,800
Interest on loan Accruals (12% x 3/12 x $72300) $2,169
Insurance (recognizable in 2018 is half of $6,400) $3,200
Total expenses $58,169
Net Loss -$56,229.8
Dividend Paid -$3,600
Net transfer to retained earnings -$59,829.80
Balance Sheet
As at December 31, 2018
Current Account
Supplier loan (Accounts receivable) A $30,300
Fire insurance policy prepayment $3,200
Stock in hand $1,010
Prepaid rent $1,400
Total Current Assets $35,910
Current Liability
Customer Advance Payment $1,980
Total Current Liability $1,980
Long term liability
12% interest backed 10yr Bank loan $72,300
Total Long term liability $72,300
Total Net Assets -$38,370
Shareholders Fund (Statement of Shareholders'equity)
Retained Earnings transferred from Income statement -$59,829.80
Apple Inc."". Create a company report that includes financial highlights. What can you say about Apple’s financial performance? Compare Apple with key competitors. Submit a one page summary in class and attach the report. (This is a separate assignment than the BB discussion case)
Answer:
A company report is a report that gives detailed information about what a company has done and how successful it has been.
When this report is generated to capture annual performance it is referred to annual report.
An example of Apples Quarterly report is given below
Explanation:
Apple Reports Record First Quarter Results
iPhone, Wearables and Services Drive All-Time Record Revenue and Earnings
On January 28, 2020 Apple announced financial results for its fiscal 2020 first quarter ended December 28, 2019. The Company posted quarterly revenue of $91.8 billion, an increase of 9 percent from the year-ago quarter and an all-time record, and quarterly earnings per diluted share of $4.99, up 19 percent, also an all-time record. International sales accounted for 61 percent of the quarter’s revenue.
Apple recorded its highest quarterly revenue ever, fuelled by strong demand for her iPhone 11 and iPhone 11 Pro models, and all-time records for Services and Wearables.
Tim Cook, Apple’s CEO stated that during the holiday quarter their active installed base of devices grew in each of their geographic segments and has now reached over 1.5 billion. This according to him is a powerful testament to the satisfaction, engagement and loyalty of their customers — and a great driver of their growth across the board.
“Our very strong business performance drove an all-time net income record of $22.2 billion and generated operating cash flow of $30.5 billion,” said Luca Maestri, Apple’s CFO. “We also returned nearly $25 billion to shareholders during the quarter, including $20 billion in share repurchases and $3.5 billion in dividends and equivalents, as we maintain our target of reaching a net cash neutral position over time.”
Apple is providing the following guidance for its fiscal 2020 second quarter:
revenue between $63.0 billion and $67.0 billiongross margin between 38.0 percent and 39.0 percentoperating expenses between $9.6 billion and $9.7 billionother income/(expense) of $250 milliontax rate of approximately 16.5 percentApple’s board of directors has declared a cash dividend of $0.77 per share of the Company’s common stock. The dividend is payable on February 13, 2020 to shareholders of record as of the close of business on February 10, 2020.
Apple periodically provides information for investors on its corporate website, apple.com, and its investors relations website, investor.apple.com. This includes press releases and other information about financial performance, reports filed or furnished with the SEC, information on corporate governance and details related to its annual meeting of shareholders.
Apple versus Competition
Apples top competition in order of strength are:
MicrosoftDellSamsungLenovo and HPFor the purposes of this writ, we would look at Microsoft and Dell.
1. Microsoft
The CEO of Microsoft is Satya Nadella.
Microsoft develops, manufactures, licenses, supports and sells computer software, consumer electronics, personal computers and laptops.
Microsoft generates $932.3K in revenue per employee Microsoft's IPO generated $61M. Microsoft has 42 companies in its portfolio, and its first investment was made in 1999.
Based on data from Microsoft's latest SEC filings, its Annual Revenue is
$134.2B. In terms of revenue. Apple ranks higher than Microsoft with a total of $267.7B.
2. Dell
The Chaiman and CEO of Dell Corporations is Micheal S. Dell.
Dell is a computer technology company that develops, sells, repairs and supports computers and related products.
Dell has a revenue of $90.8B, and 150,125 employees.Estimated Annual Revenue.
On December 31, 2020, Buffalo Company signed a $1,278,400 note to Carla Bank. The market interest rate at that time was 10%. The stated interest rate on the note was 8%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Buffalo’s financial situation worsened. On December 31, 2022, Carla Bank determined that it was probable that the company would pay back only $767,040 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,278,400 loan.
Determine the amount of cash Buffalo received from the loan on December 31, 2020. (Round present value factors to 5 decimal places, e.g. 0.52513 and final answer to 0 decimal places, e.g. 5,275.)
The amount of cash Buffalo Company received from the loan on December 31, 2020, is $1,153,607.62.
Explanation:To determine the amount of cash Buffalo Company received from the loan on December 31, 2020, we need to calculate the present value of the future cash flows. The note pays interest of $1,278,400 x 8% = $102,272 per year for 5 years, and the principal of $1,278,400 at maturity. The market interest rate at the time was 10%, so we need to discount the future cash flows using this rate.
Using the present value formula, the cash flow for the first 4 years would be:
$102,272 / (1 + 10%)^1 + $102,272 / (1 + 10%)^2 + $102,272 / (1 + 10%)^3 + $102,272 / (1 + 10%)^4 = $98,429.43.
The cash flow at maturity would be the principal of $1,278,400 / (1 + 10%)^5 = $767,391.90.
Adding up all the discounted cash flows, the amount of cash Buffalo Company received from the loan on December 31, 2020, is $98,429.43 x 4 + $767,391.90 = $1,153,607.62.
A car rental agency rents 210 cars per day at a rate of 30 dollars per day. For each 1 dollar increase in the daily rate, 5 fewer cars are rented. At what rate should the cars be rented to produce the maximum income, and what is the maximum income
To produce the maximum income, the cars should be rented at a rate of $30 per day. The maximum income produced by the rentals will be $6300.
Explanation:
The problem is essentially asking for the maximum of the revenue function. Since revenue (R) can be modeled with the equation R = x*y, where x represents the cost per day(hours of work, for example) and y represents the number of cars rented, we can substitute the given values. However, since the number of cars rented decreases by 5 for every dollar increase in rent, we can write y = 210 - 5(x - 30), where x > 30. Substituting y back into the revenue equation, we have R = x * (210 - 5(x - 30)).
Maximizing this quadratic function can be done by finding its vertex. The x-coordinate of the vertex (h) of a parabola given by the formula R = a(x - h)^2 + k, is h = -b/2a. Therefore, the price per day to maximize the income from rentals should be h = -b/2a = -(-5)/2*(-5) = 30 dollars and maximum income k = R(30) = 30*(210 - 5*(30 - 30)) = 6300 dollars.
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The car rental agency should charge $36 per day to maximize income. The maximum daily income the agency can make is $6480.
Explanation:This is a problem of maximizing revenue, which can be approached using the concept of quadratic functions in mathematics. The daily rental income can be represented by the function R(x) = (210 - 5x)(30 + x) = 6300 - 60x + 5x², where x is the number of dollar increases in the daily rental rate.
To find the maximum revenue, we first need to find the vertex of the parabolic function. The x-coordinate of the vertex is given by -b/2a. For this equation, b = -60 and a = 5, so the x-coordinate is -(-60) / 2×5 = 6. This means that the rental agency should increase the daily rate by $6 to achieve maximum income.
Substitute x = 6 into R(x) to find the maximum income: R(6) = 6300 - 60×6 + 5×6² = $6480. So, the maximum income is $6480.
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Following is relevant information for Snowdon Sandwich Shop, a small business that serves sandwiches: Total fixed cost per month $ 1,120.00 Variable cost per sandwich .75 Sales price per sandwich 5.50 During the month of June, Snowdon sold 480 sandwiches. Complete the contribution margin income statement for the month of June. (Round your final answers to the nearest whole dollar.)
Explanation:
Snowdon Sandwich Shop
Contribution margin income statement
For the month of June
The contribution margin income statement is presented below:
Sales (480 × 5.50) $2,640
Less: Variable cost (480 × $0.75) ($360)
Contribution margin $2,280
Less: Fixed cost ($1,120)
Net income $1,160
In June, the Snowdon Sandwich Shop had a total variable cost of $360, a contribution margin of $2,040, and a net income of $920.
Explanation:To form the contribution margin income statement, we need first to calculate the total variable cost, then the contribution margin, and finally the net income. With the given details, let's commence:
Total Variable Cost = Variable cost per sandwich * Number of sandwiches sold = .75 * 480 = $360Contribution Margin = Sales - Total Variable Cost = (480 * 5.50) - 360 = $2,400 - 360 = $2,040Net Income = Contribution Margin - Total Fixed Cost = $2,040 - $1,120 = $920So, for Snowdon Sandwich Shop, the net income for the month of June is $920.
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Slapshot Company makes ice hockey sticks. Last week, direct materials (wood, paint, Kevlar, and resin) costing $28,000 were put into production. Direct labor of $28,000 (10 workers x 100 hours x $28 per hour) was incurred. Manufacturing overhead equaled $55,000. By the end of the week, the company had manufactured 5,600 hockey sticks.1.Calculate the total prime cost for last week.$2. Calculate the per-unit prime cost. Round your answer to the nearest cent.$ per unit3. Calculate the total conversion cost for last week.$4. Calculate the per-unit conversion cost. Round your answer to the nearest cent.$ per unit
Answer:
Part 1. Calculate the total prime cost for last week
Direct materials 28,000
Add Direct labor 28,000
Prime Cost 56,000
Part 2. Calculate the per-unit prime cost
per-unit prime cost=$56,000/5,600
=$10.00
Part 3. Calculate the total conversion cost for last week
Direct labor 28,000
Add Manufacturing Overheads 55,000
Total conversion cost 83,000
Part 4. Calculate the per-unit conversion cost.
per-unit conversion cost=$83,000/5,600
=$14.82
Explanation:
Part 1. Calculate the total prime cost for last week
Prime Cost = Direct Materials + Direct Labor
Part 2. Calculate the per-unit prime cost
Per Unit Prime Cost = total prime cost/number of units manufactured
Part 3. Calculate the total conversion cost for last week
Conversion Cost = Direct Labor + Manufacturing Overheads
Part 4. Calculate the per-unit conversion cost.
Per-unit conversion cost =Total Conversion Cost / number of units manufactured
The total prime cost last week was $56,000, and the per-unit prime cost was $10. The total conversion cost was $83,000, and the per-unit conversion cost was $14.82.
Explanation:The prime cost is calculated by adding the costs of the direct materials and direct labor. Therefore, the total prime cost for Slapshot Company last week was $28,000 (direct materials) + $28,000 (direct labor) = $56,000.
The per-unit prime cost is calculated by dividing the total prime cost by the number of units produced. Therefore, it is $56,000 ÷ 5,600 hockey sticks = $10 per unit (rounded to the nearest cent).
The conversion cost is calculated by adding the cost of direct labor and manufacturing overhead. Therefore, the total conversion cost last week was $28,000 (direct labor) + $55,000 (overhead) = $83,000.
The per-unit conversion cost is calculated by dividing the total conversion cost by the number of units produced. Therefore, it is $83,000 ÷ 5,600 hockey sticks = <-strong>$14.82 per unit (rounded to the nearest cent).
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Which of the following is a characteristic of the Consolidation phase of e-commerce? predominance of pure online strategies brand extension and strengthening becomes more important than creating new brands shift to a technology-driven approach emphasis on revenue growth versus profits
Answer: Extension and strengthening becomes more important than creating new brands
Explanation: E-commerce (electronic commerce) is a term used in the trade and commerce to describe the trading or commercial activities driven by electronic systems such as internet, social media etc,this type of commerce or trade is technologically driven. It is made up of the following stages
Stage 1 : involves the initial starting and it is characterized by a fast growth.
Stage 2: PLATEAUING GROWTH OR CONSOLIDATION OF GROWTH IS CHARACTERIZED BY THE LEVELING UP OR STABILISATION OF GROWTH AFTER THE INITIAL FAST GROWTH EXPERIENCED IN THE FIRST STAGE. In this stage, Extension and strengthening becomes more important than creating new brands.
Stage 3: Renewed growth characterized by the implemention of changes both platforms or systems, characteristics, resources and procedures etc.
The consolidation phase of e-commerce is characterized by a predominance of pure online strategies, brand extension and strengthening, a shift to a technology-driven approach, and an emphasis on revenue growth over profits.
Explanation:The consolidation phase of e-commerce is typically characterized by several key features. One critical characteristic is the predominance of pure online strategies. This is a time when fully-digital strategies take precedence over others. Another significant characteristic of this phase is the importance of brand extension and strengthening over the creation of new brands. Rather than creating new brands, companies focus on strengthening and expanding the brands they already have. A third characteristic is the shift to a technology-driven approach. This implies that more emphasis is placed on the use of technology for achieving business objectives. The last characteristic is an emphasis on the revenue growth versus profits which may not be as important in this phase.
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What are the benefits of the corporation in comparison with the partnership and proprietorship structures? How is equity treated and reported differently in this structure?
Corporations offer limited liability, perpetual life, and simpler capital raise compared to partnerships and proprietorships. In corporations, equity is reported as share capital, retained earnings, and additional paid-in capital.
Explanation:In comparison with partnership and proprietorship structures, the corporation offers several benefits. Corporations are characterized by limited liability, which insulates owners from personal liability for business debts. They also have perpetual life and can continue operations regardless of changes in ownership. Furthermore, raising capital is often easier for corporations as they can sell shares of stock.
Compared to proprietorships and partnerships, equity is reported differently in corporations. In a corporation, equity is reported as share capital (stock), retained earnings (profit kept within the company after dividends are paid), and additional paid-in capital (amount paid by investors over and above the par value of shares). This contrasts with proprietorships and partnerships where equity primarily represents the owner(s) capital or investment.
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