Answer:
$915,000
Explanation:
Because half of the depreciation expense, and the expense on bonuses has already been reported by June 30,2021 (the half of the year), only hafl of the total money spent on the two items will have to be reported for the interim income statement ended on December 31, 2021:
$591,000 / 2 = $295,500
$1,240,000 / 2 = $620,000
Now, we simply add up these two figures:
$295,500 + $620,000 = $915,000
Which of the following statements regarding the dividends and/or the dividends received deduction (DRD) is true?A. The DRD can increase the net operating loss (NOL) of a corporation.B. Corporations are allowed to deduct from a dividend received the product of the dividend and the percentage of the receiving corporation's ownership in the distributing corporation's stock.C. The DRD allows corporations to deduct the amount of dividends that they distribute.D. Dividends are taxed at preferential rates for corporations as well as for individuals.
Answer:
B. Corporations are allowed to deduct from a dividend received the product of the dividend and the percentage of the receiving corporation's ownership in the distributing corporation's stock.
Which of the following caused a recession in the years immediately following World War II? A surge in investment spending. Pent-up demand for consumer goods. Cutbacks in defense production. Technological advances.
Answer:
The answer is cutbacks in defense production
One of the main reasons of the recession which was immediate after the world war 2 was the government's inability to produce anything as most expense was carried out in the event of the war which decreased the gross domestic product making the economy to fall into recession.
Answer:
Cutbacks in defense production.
Explanation:
World War II refers to a global war that started in 1939 and ended in 1945.
The end of World War II was immediately followed by a recession known as the Recession of 1945.
The Recession of 1945 occurred as a result of the reduction in government spending especially on defense production like arms and ammunition due to demobilization and movement to peacetime from a wartime economy.
This resulted into an enormous fall in gross domestic product (GDP) and the US economy technically entered a recession.
Therefore, cutbacks in defense production caused a recession in the years immediately following World War II.
After deciding to acquire a new car, you realize you can either lease the car or purchase it with a three-year loan. The car you want costs $32,500. The dealer has a leasing arrangement where you pay $94 today and $494 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent. You believe that you will be able to sell the car for $20,500 in three years.a. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)b. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)c. What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)
Answer:
a. $15,369.28
b. $16,332.28
c. $19,347.60
Explanation:
a. What is the present value of purchasing the car?
PV of resale = SP ÷ (1 + r)^n ................................................. (1)
Where SP = Resales proceed = $20,500
r = discount rate = 6% annually = 0.06 annually = (0.06 ÷ 12) monthly = 0.005 monthly
n = number of periods = 3 years = 3 × 12 = 36 months
Substituting into equation (1), we have:
PV of resale = $20,500 ÷ (1 + 0.005)^36 = $17,130.7208354753
Net PV = Purchase price - PV of resale
= $32,500 - $17,130.7208354753
Net PV = $15,369.28
Therefore, the present value of purchasing the car $15,369.28.
b. What is the present value of leasing the car?
PV of future period payment can be calculated using the following formula:
PV of monthly payment = M × 1 - (1 + r)^-n ÷ r .......................................... (2)
Where,
M = monthly payment = $494
r = discount rate = 6% annually = 0.06 annually = (0.06 ÷ 12) monthly = 0.005 monthly
n = number of periods = 3 years = 3 × 12 = 36 months
Substituting into equation (2), we have:
PV of monthly payment = $494 × {[1 - (1 + 0.005)^-36] ÷ 0.005}
PV of monthly payment = $16,238.2820221969
PV of leasing the car = Today's payment + PV of monthly payment
= $94 + $16,238.2820221969
PV of leasing the car = $16,332.28
Therefore, PV of leasing the car is $16,332.28.
c. What break-even resale price in three years would make you indifferent between buying and leasing?
This will be calculated by equating the PV of leasing the car to the difference between the purchase price and the PV of resale as follows:
PV of leasing car = Purchase price - PV of resale
$16,332.28 = $32,500 - PV of resale
Solving for PV of resale, we have:
PV of resale = $16,167.72.
The future value (FV) of resale price in 3 years can be calculated as follows:
FV of resale = PV of resale × (1 + r)^n
FV of resale = $16,167.72 × (1 + 0.005)^36 = $19,347.60
Therefore, the break even resale price in 3 years is $19,347.60.
Jonathan is considering opening a shop for online baseball memorabilia. He has two options. He can build the web site himself and only pay for hosting. This would cost him $2,000/year. The average item for sale is $4. Average costs associated with each sale are $3. His second option is to use an existing e-commerce service. This incurs an additional monthly cost of $15/month. The site takes a cut of his sales, so he is planning on increasing his prices by $0.5/item. The remaining costs stay the same.
a. What is the annual fixed cost for the e-commerce site option?
b. What is the unit price for the e-commerce option?
C. What is the variable cost for the self-developed site option?
d. If Jonathan sells 200 items, which option does he prefer?
e. If Jonathan sells 700 items, which option does he prefer?
Answer:
The annual fixed cost of e-commerce option is $2180 as shown above
The unit price for the unit price for the e-commerce option is $4.5($4 original price plus the extra $0.50 as a result of cut taken by the site owner)
The variable cost for the self-developed site is $3
If sells 200 items he would prefer self-developed option with a lower amount of loss $1800
If sell 700 items he would prefer e-commerce option with amount of $1130 as losses
Explanation:
Options Self-Built site E-commerce
Fixed cost $2000 $2180 ($2000+15*12)
Variable cost $3 $3
Revenue $4 $4.5 ($4+$0.5)
The profit under each option when 200 items are sold are :
Self-developed option:
revenue=$4*200=$800
total cost =$2000+($3*200)
total cost =$2600
Profit/(loss) =$800-$2600
loss=-$1800
e-commerce
revenue=$4.5*200=$900
total cost=$2180+($3*200)
total cost =$2780
profit/(loss)=$900-$2780
loss=-$1880
when 700 items were sold:
self-developed option;
revenue=$4*700=$2800
total cost=$2000+($3*700)
total cost=$4100
profit/(loss)=$2880-$4100
loss=-$1220
e-commerce option
revenue =$4.5*700
revenue=$3150
total cost=$2180+(700*$3)
total cost=$4280
loss=$3150-$4280
loss=-$1130
The annual fixed cost for the e-commerce site option is $180. The unit price for the e-commerce option would be $4.5. If Jonathan sells 200 items, the self-developed site option would be preferred, while if he sells 700 items, the e-commerce option would be preferred.
Explanation:a. The annual fixed cost for the e-commerce site option is $180 (15*12 months).
b. The unit price for the e-commerce option would be $4.5 ($4 + $0.5).
c. The variable cost for the self-developed site option is $3 per item sold.
d. If Jonathan sells 200 items, the self-developed site option would be preferred as the cost would be $600 for the e-commerce site and $600 for the self-developed site.
e. If Jonathan sells 700 items, the e-commerce option would be preferred as the cost would be $1,260 for the e-commerce site and $2,100 for the self-developed site.
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If Zenyatta Inc. has the following anticipated dividends: in year 1 of $4.00, in year 2 of $3.50, after that dividends are expected to grow at a 1.4% rate. What is a fair price if the required return is 5%
Answer:
The fair price per share today is $96.40
Explanation:
The fair price per share can be calculated using the DDM approach whereby the expected future dividends are discounted back to calculate the fair value of the share today.
The fair price per share will be,
P0 or V = 4 / (1+0.05) + 3.5 / (1+0.05)² + [(3.5 * (1+0.014)) / 0.05 - 0.014] / (1+0.05)²
Fair price per share = $96.40
Answer:
$96.403(Approx)
Explanation:
Using The dividend discount model (DDM) which is a method or technique that is used in the valuation of a company's stock price based on the premise that the company’s stock is worth of all of its potential dividend payments, discounted back to their current value.
Value after year 2=(D2*Growth rate)/(Required return-Growth rate)
=(3.5*1.014)/(0.05-0.014)
=98.583
Hence fair price=Future dividend and valu x Present value of discounting factor(rate%,time period)
=4/1.05+3.5/1.05^2+98.583/1.05^2
=$96.403(Approx)
You have the following price for a stock for several recent years. Assume that the stock pays no dividends Beginning of year price # shares bought Year 2005 $50 2006 $55 2007 S51 2008 54 or sold 100 bought 50 bought 75 sold 75 sold
a. What is the holding period return for each year?
b. What is the geometric average return for the period?
c. What is the dollar weighted return for the time period?
Answer:
a. 2005 2006 2007 2008
Holding period return 10% -7.27% 5.88% -100
b. Geometric average return = -100
c. Dollar weighted return= -2.70%
Explanation:
Holding period return = [tex]\frac{income+(end period value - original value)}{original value}[/tex]
=[tex]\frac{o + ( 55 - 50)}{50}[/tex] * 100
= 10%
geometric average return = (( 1+r)*(1+r2)*(1+r3)*(1+r4))^1/4 - 1
dollar weighted return = (initial investment + additions) / (initial investment -withdrawals)
= ( 5000+ 2750)/(5000-3825-4050)
= 7750/-2875
=
Changes in weather patterns are increasing administrative costs for insurance companies. These added costs often exceed the amount of the premiums coming in and claim payments going out. To address this problem, insurance companies typically
A. increase dividend payments to shareholders.
B. deny weather related claims for property damage.
C. increase their investment income.
D. build up the amount of their reserves.
Answer:
D. build up the amount of their reserves.
Explanation:
With the changes in the weather patterns increasing the administrative costs of insurance companies and the added costs often exceeding the amount of premium coming in and claims the payment going out, Insurance companies have developed typically, a way of building up the amount of their reserves as a way of addressing this problem.
Insurance companies are required to have a reserve funds to pay out customers claims, and often insurance companies lists the details about their reserves in order to impress customers and give them a feeling of being more secure than than rivals. It is this reserve that insurance companies develops a way of building the amount inside so as to combat the problem of often changes in weather policies that increase their administrative costs to exceed the premium amount that comes in and claims the payment going out.
Answer: The correct answer is D). build up the amount of their reserves.
Explanation: An insurance is a protection from financial loss. It is a hedge against eventualities.
Changes in weather pattern can occur and cost incurred. Having an increased investment income may not necessarily tackle it.
The best way is to build up the amount of RESERVES which is also called retained earnings or ploughed back profit. It forms part of shareholder's equity and can be used in case of eventualities such as changes in weather pattern.
Nazim wants to include bonds in his investment portfolio, but he wants the option to sell the bond to the issuer at a specified price on a certain date before the maturity of the bond. Which of the following bond redemption features should he pick?
O Putable bond
O Convertible bond
Answer:
Putable Bond
Explanation:
This is an embedded put option that enables the bondholder to demand for the payment of the principal sum from the issuer. It is effectively an option given to bond holders to put the bond back to the issuer once during the lifetime of the bond or on multiple dates.
In each of the following sentences, select the appropriate answer option as debitor credit
1. Revenue accounts normally have _________ balances. These accounts increase on the __________ side and decrease on the ________side.
2. Liability accounts normally have ________ balances. These accounts increase on the _______ side and decrease on the _______ side.
3. Expense accounts normally have________ balances. These accounts increase on the________ side and decrease on the _________side.
4. Asset accounts normally have_________ balances. These accounts increase on the ______________ side and decrease on the ___________ side.
5. The owner capital account normally has a ___________ balance. This account increases on the ___________ side and decreases on the __________ side.
Revenue accounts have credit balances, liability accounts have credit balances, expense accounts have debit balances, asset accounts have debit balances, and the owner capital account has a credit balance.
Explanation:1. Revenue accounts normally have credit balances. These accounts increase on the credit side and decrease on the debit side.
2. Liability accounts normally have credit balances. These accounts increase on the credit side and decrease on the debit side.
3. Expense accounts normally have debit balances. These accounts increase on the debit side and decrease on the credit side.
4. Asset accounts normally have debit balances. These accounts increase on the debit side and decrease on the credit side.
5. The owner's capital account normally has a credit balance. This account increases on the credit side and decreases on the debit side.
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When par value capital stock is issued, capital stock is credited with the par value of the shares issued, regardless of whether the issuance price is equal to par, more than par, or less than par.a. Trueb. False
Answer:
False
Explanation:The Par value of a stock is has a different value when compared with its market value. Well established companies usually have have a higher market value when compared to its par value. The par value of a stock can be represented in three different ways
1) When the par value of a stock is equal with the market value.
2) When the par value of a stock is lower than the market value.
3) When the par value of a stock is Higher than the market value.
WHEN THE PAR VALUE OF A CAPITAL STOCK IS EQUAL TO THE CAPITAL STOCK IS ISSUED WITH THE PAR VALUE ONLY WHEN THE PAR VALUE IS EQUAL TO THE MARKET VALUE.
You want to buy a house that costs $305,000. You will make a down payment equal to 10 percent of the price of the house and finance the remainder with a loan that has an interest rate of 5.57 percent compounded monthly. If the loan is for 20 years, what are your monthly mortgage payments
Answer:
$1,899.12
Explanation:
We use the PMT formula that is shown in the attachment below:
Provided that
Present value = $305,000 - $30,500 = $274,500
Future value = $0
Rate of interest = 5.57% ÷ 12 = 0.46416666%
NPER = 12 months × 20 = 240 months
The formula is shown below:
= PMT(Rate;NPER;-PV;FV;type)
The present value come in negative
So, after solving this, the monthly payment is $1,899.12
If you have an income of $18 to spend, and if commodity 1 costs $3 per unit and commodity 2
costs $9 per unit, then the equation for your budget line can be written as (Below, x 1 and x 2
are respectively the quantities of commodities 1 and 2.)
a. x1/3 + x2/9 = 18. b. (x1 + x2)/12 = 18. c. x1 + 3x2 = 6.
d. 4x1 + 10x2 = 19. e. 12(x1 + x2) = 18.
Answer:
c. x1 + 3x2 = 6
Explanation:
Budget Line is the combination of goods that consumer can buy with given prices & Income (spending all).
Equation: p1.x1 + p2.x2 = m
where p1 & p2 are respective prices ; q1 & q2 are respective quantities ; m is the money income.
Putting p1 = 3 , p2 = 9 as given :
3x1 + 9x2 = 18
Dividing the equation by common factor = 3, we get :
x1 + 3x2 = 6
Suppose Kyoko is an avid reader and buys only mystery novels. Kyoko deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $15.00.
Initially, the purchasing power of Kyoko's $3,000 deposit is___________mystery novels.
For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Kyoko's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates.
Hint: Round your answers in the first row down to the nearest mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Kyoko will not buy seven-tenths of a mystery novel.
Annual Inflation Rate
0% 10% 13%
Number of Novels Kyoko Can Purchase after One Year
Real Interest Rate
When the rate of inflation is equal to the interest rate on Kyoko's deposit, the purchasing power of her deposit ______ over the course of the year.
Question is incomplete, Complete question is as follows :
Suppose Kyoko is an avid reader and buys only mystery novels. Kyoko deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $15.00.
Initially, the purchasing power of Kyoko's $3,000 deposit is___________mystery novels.
For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Kyoko's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates.
Hint: Round your answers in the first row down to the nearest mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Kyoko will not buy seven-tenths of a mystery novel.
When the rate of inflation is equal to the interest rate on Kyoko's deposit, the purchasing power of her deposit ______ over the course of the year.
Answer:
1) Purchasing power = 3000/15 = 200 novels
2) 0% Annual inflation rate:
Novel price = $ 15
Number of novels bought = 3300/15 = 220 novels
Real rate of interest = Nominal interest rate - Inflation = 10% - 0 = 10%
10% Annual inflation rate:
Novel price =10% of 15 + $ 15 = 1.5 +15 = 16.5
Number of novels bought = 3300/16.5 = 200 novels
Real interest rate = Nominal interest rate - Inflation = 10% - 10% = 0%
13% Annual inflation rate:
Novel price = 13% of 15 + $15= 1.95 + 15= 16.95
Number of novels bought = 3300/16.95 = 194.69 = 195 novels
Real rate of interest = Nominal interest rate - Inflation = 10% - 13% = - 3%
3) remains same over the course of year
Kyoko's initial purchasing power is 200 mystery novels. With different inflation rates, her purchasing power decreases to 181 novels (10% inflation) and 177 novels (13% inflation). The real interest rate is 10%, 0%, and -3% for inflation rates of 0%, 10%, and 13% respectively.
Explanation:Initial PurchaseSince each mystery novel costs $15.00, Kyoko can initially purchase $3000 / $15.00 = 200 mystery novels.
With an annual inflation rate of 0%, the price of a mystery novel remains the same at $15.00. Therefore, Kyoko's purchasing power remains at 200 mystery novels.
With an annual inflation rate of 10%, the new price of a mystery novel after one year is $15.00 * (1 + 10%) = $15.00 * 1.10 = $16.50. Kyoko's purchasing power after one year is $3000 / $16.50 = 181 mystery novels.
With an annual inflation rate of 13%, the new price of a mystery novel after one year is $15.00 * (1 + 13%) = $15.00 * 1.13 = $16.95. Kyoko's purchasing power after one year is $3000 / $16.95 = 177 mystery novels.
The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. So, at an inflation rate of 0%, the real interest rate is 10% - 0% = 10%. At an inflation rate of 10%, the real interest rate is 10% - 10% = 0%. And at an inflation rate of 13%, the real interest rate is 10% - 13% = -3%.
When the inflation rate is equal to the interest rate, the purchasing power of Kyoko's deposit remains the same over the course of the year.
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A new machine costs $200,000 and has a useful life of 5 years, with a salvage value of $30,000. It will cost $5,000 to dismantle and remove the machine at the end of its useful life. Use straight line depreciation to determine book value of asset at end of year 3.
Answer:
The book value at the end of year 3 is $100,000
Explanation:
Yearly Depreciation =(cost+cost of dismantling-salvage value)/useful life
cost is $200,000
cost of dismantling is $5000
salvage value is $30000
useful life is 5 years
Yearly depreciation=(200000+5000-30000)/5
Yearly depreciation=$35000
Depreciation for three years=$35000*3
=$105000
Book value at the end of year 3=total cost of machine-three years' depreciation
Book value at end of year 3=$200000+$5000-$105000
Book value at the end of year 3=$100,000
A company is evaluating a new 4-year project.
The equipment necessary for the project will cost $3,800,000 and can be sold for $745,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's tax rate is 34 percent.
What is the aftertax salvage value of the equipment?
Answer:
$ 714.957,6
Explanation:
We should solve for the book value afer four years:
3,800,000 x (0.2 + 0.32 + 19.2 + 11.52) =
3,800,000 x 0,8272 = 3.143.360
book value: 3,800,000 - 3,143,360 = 656.640
Now, we compare it against our expected sales value
745,000 - 656,640 = 88,360
This gain will be taxes at 34%
88,360 x 34% = 30.042,4
Now, the after tax salvage value will be :
745,000 - 30,042.4 = 714.957,6
A biotech company has an effective income tax rate of 40%. Recaptured depreciation is also taxed at the rate of 40%. The company must choose one of the following mutually exclusive cryogenic freezers for its tissue samples. The after-tax MARR is 12% per year. Which freezer should be selected based on after-tax present worth?
Answer:
Freezer 2 is the better option because it has higher present worth.
Explanation:
Final answer:
This engineering question deals with the selection of a cryogenic freezer by analyzing after-tax present worth, demonstrating the significance of tax rates, recaptured depreciation, and after-tax MARR in such decisions. It encompasses evaluating investment returns at different costs, the impact of tax credits, and considerations for maximum investment based on borrowing costs.
Explanation:
The question relates to the decision of selecting a cryogenic freezer for a biotech company, considering after-tax present worth (ATPW), which involves applying principles of engineering economics. It underscores the importance of understanding the effective income tax rate, recaptured depreciation, and after-tax minimum acceptable rate of return (MARR) in evaluating investment options. The hypothetical scenarios provided include calculating rates of return on investments at different costs, the impact of an investment tax credit, and determining the maximum investment based on borrowing costs. This forms a basis for applying tax effects and financing costs to investment decisions in engineering economic analysis.
Key Concepts
Effective income tax rate and its influence on net taxable income.
The role of recaptured depreciation in investment decisions.
Calculating after-tax present worth for comparing investment options.
The effect of investment tax credits on the attractiveness of an investment.
Linking borrowing costs to the maximum payable for an investment without the benefit of tax credits.
Loring Company incurred the following costs last year:
Costs Amounts
Direct materials $210,000
Factory rent 20,000
Direct labor 123,000
Factory utilities 6,400
Supervision in the factory 54,000
Indirect labor in the factory 34,000
Depreciation on factory equipment 6,000
Sales commissions 26,000
Sales salaries 66,000
Advertising 3 4,000
Depreciation on the headquarters building 9,600
Salary of the corporate receptionist 35,000
Other administrative costs 186,000
Salary of the factory receptionist 24,000
Required:
1. Classify each of the costs using the table provided. Be sure to total the amounts in each column.
2. What was the total product cost for last year?
3. What was the total period cost for last year?
4. If 30,000 units were produced last year, what would be the unit product cost?
Answer:
1. please refer to item 1 in explanation table below
2. $477, 400
3. $256, 600
4. $15.91
Explanation:
Loring Company
(1) Classification of costs:
Direct Materials Direct Labor Overhead Selling Expense Admin Expense
Direct materials $210, 000
Factory rent $20, 000
Direct labor $123, 000
Factory utilities $6, 400
Supervision in factory $54, 000
Indirect labor $34, 000
Depreciation of factory equipment $6, 000
Sales commission $26, 000
Sales salaries $66, 000
Advertising $34, 000
Depreciation on headquarter building $9, 600
Salary of corporate receptionist $35, 000
Other administrative costs $186, 000
Salary of factory receptionist $24, 000
(2) Total Product cost is the total cost incurred in the production process. It is a sum of all direct labor costs, direct material costs and factory overhead costs. Factory overhead costs include factory rent, factory utilities, salaries of factory supervisor, indirect labor, indirect materials and depreciation of all equipment and plants used in the factory. These are basically all costs that re directly, and indirectly involved in the production process.
Total Product cost = $210, 000 + $20, 000 + $123, 000 + $6, 400 + $54, 000 + $34, 000 + $34, 000 + $6, 000 + $24, 000 = $477, 400
(3) Total Period cost is any cost that cannot be capitalized into inventory, prepaid expenses or fixed assets. This cost is the cost that is incurred not as a result of production. They are incurred independently of the production process.
Total period costs = $26, 000 + $66, 000 + $34, 000 + $9, 600 + $35, 000 + $186, 000
= $356, 600
(4) Unit cost = $477, 400 / 30, 000 = $15.91
Final answer:
The total product cost of Loring Company is $477,400, the total period cost is $356,600, and the unit product cost for last year is $15.91 per unit, assuming 30,000 units were produced.
Explanation:
To classify each of the Loring Company's costs and calculate the total product cost, period cost, and unit product cost, we can separate the costs into categories of product and period costs. Product costs include all the costs that are necessary to manufacture a product, whereas period costs are non-manufacturing costs that are expensed within the period they are incurred.
Classified Costs:
Product Costs: Direct materials, Direct labor, Factory rent, Factory utilities, Supervision in the factory, Indirect labor in the factory, Depreciation on factory equipment, Salary of the factory receptionistPeriod Costs: Sales commissions, Sales salaries, Advertising, Depreciation on the headquarters building, Salary of the corporate receptionist, Other administrative costsTotal Product Cost:
The total product cost equals the sum of all product costs:
$210,000 (Direct materials) + $123,000 (Direct labor) + $20,000 (Factory rent) + $6,400 (Factory utilities) + $54,000 (Supervision in the factory) + $34,000 (Indirect labor in the factory) + $6,000 (Depreciation on factory equipment) + $24,000 (Salary of the factory receptionist) = $477,400Total Period Cost:
The total period cost equals the sum of all period costs:
$26,000 (Sales commissions) + $66,000 (Sales salaries) + $34,000 (Advertising) + $9,600 (Depreciation on headquarters building) + $35,000 (Salary of the corporate receptionist) + $186,000 (Other administrative costs) = $356,600Unit Product Cost:
If 30,000 units were produced last year, the unit product cost would be calculated by dividing the total product cost by the number of units:
$477,400 / 30,000 units = $15.91 per unit.the temporary difference is $60 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2018 is $220 million and the tax rate is 40%. Required: 1. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not that the deferred tax asset will be realized. 2. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not that one-fourth of the deferred tax asset will ultimately be realized.
Answer:
Answers are available in the attached images
Explanation:
This question is incomplete. I will type the complete question below and add image attachments of the solution as tabulated journal entries are required.
At the end of 2017, Payne industries had a deferred tax asset account with a balance of $26 million attributable to a temporary book tax difference of $65 million in a liability for estimated expenses. At the end of 2018, the temporary difference is $60 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2018 is $220 million and the tax rate is 40%. Required:
1. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not that the deferred tax asset will be realized.
2. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not that one-fourth of the deferred tax asset will ultimately be realized.
Daisy Bath Products, Inc. (DBP) makes a variety of ceramic sinks and tubs. DBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $200 each and have variable costs of $70. The tubs sell for $700 and have variable costs of $320. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The specialized molding equipment has 5,000 hours of capacity per year. A sink uses an average of 5 hours of specialized molding equipment time; a tub uses an average of 6 hours of specialized molding equipment time.What is the contribution margin per hour of specialized molding equipment time for sinks
Answer:
Contribution margin per hour = $26
Explanation:
Given:
Selling price of sink = $200 per unit
Variable cost of sink = $70 per unit
Selling price of tube = $700 per unit
Variable cost of tube = $320 per unit
Required time for specialized molding sink = 5 hours
Required time for specialized molding tube = 6 hours
Computation of contribution margin of sink:
Contribution margin = Selling price - Variable cost
Contribution margin = $200 - $70
Contribution margin = $130
Computation of contribution margin per hour of specialized molding sink:
Contribution margin per hour = Contribution margin / Required time for specialized molding sink
Contribution margin per hour = $130 / 5
Contribution margin per hour = $26
The beginning balance in the Lopez, Capital account of a company was $ 13 comma 000. The revenues and expenses were $ 220 comma 000 and $ 150 comma 000, respectively. During the year, Lopez took withdrawals of $ 5 comma 000. There were no new capital contributions during the year. The ending balance in Lopez, Capital was $ 83 comma 000.
a. True.
b. False.
Answer:
a. True
Explanation:
The capital account of a soul proprietor is similar to the equity account of a company. It shows how much the business owes the owner.
This includes the amount invested and net income over the years posted as part of the retained earnings.
Net income is the difference between the total revenue and total expenses.
Net income = $220,000 - $150,000
= $70,000
Net balance in capital account = $13,000 + $70,000
= $83,000
What software is essential for any company doing business on the Web to constantly monitor the activity on a company's network server and sound an alert if it detects someone breaking into the company's computer system?
Answer:
The correct answer is: Intrusion detection software.
Explanation:
Intrusion Detection Software or IDS are vital for companies moreover for entities with web-based operations. IDS are specially programmed to detect different types of attacks in the attempt of breaking into the firm's security system and data. There are four (4) types of IDS: Network intrusion detection system (NIDS), Host-based intrusion detection system (HIDS), Perimeter Intrusion Detection System (PIDS), and VM based Intrusion Detection System (VMIDS).
Parent Corporation sells land (a capital asset) to Subsidiary Corporation in an intercompany transaction, realizing a $25,000 gain. Subsidiary uses the land for five years in its trade or business before selling the land to a nonmember of the group in a cash sale in which a $50,000 gain is realized. Which statement is correct?a. A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation. A $50,000 Sec. 1231 gain is included in consolidated taxable income when Subsidiary sells the land.b. A $25,000 capital gain and a $50,000 Sec. 1231 gain are included in consolidated taxable income when Subsidiary sells the land.c. A $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income in the year Subsidiary sells the land (assuming no recapture of previously deducted Sec. 1231 losses must occur).d. None of the above are correct.
The correct statement is that a $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income when the Subsidiary sells the land, assuming there is no recapture of previously deducted Sec. 1231 losses.
When the Parent Corporation sells land to the Subsidiary Corporation, realizing a $25,000 gain, this gain is typically deferred for tax purposes in a consolidated return because it is an intercompany transaction. Therefore, answer a, which suggests a $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary, is incorrect since this gain is not immediately recognized.
When the Subsidiary Corporation later sells the land to a nonmember, the entire gain realized, including the previously deferred gain from the intercompany sale plus any additional gain recognized by the Subsidiary, is recognized. Therefore, the correct statement is c, which states that a $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income in the year Subsidiary sells the land, assuming no recapture of previously deducted Sec. 1231 losses must occur. This includes the deferred gain and the additional gain on the final sale.
The Andrews company currently has the following balances in their equity accounts: Common Stock $17,081 Retained earnings $98,561 Suppose next year the Andrews company generates $46,300 in Net Profit, and declares and pays $16,000 in Dividends. What will Andrews ending balance in Retained Earnings be next year?
Answer:
Andrews ending balance in Retained Earnings next year will be $128,861
Explanation:
Retained Earnings is a Reserve formed from the Company`s Profits retained back in the business and forms part of Shareholders Equity
Calculation of Ending Retained Earnings is: Opening Retained Earnings Balance + Net Profit for the Year - Dividends Declared during the year.
Andrews Company Ending Retained Earnings for Next Year will be:
Opening Retained Earnings Balance $98,561
Add Net Profit for the Year $46,300
Less Dividends ($16,000)
Ending Retained Earnings $128,861
Here are selected data for Creek Corporation: Cost of materials purchases on account $ 68 comma 500 Cost of materials requisitioned (includes $ 4 comma 500 of indirect) $ 51 comma 100 Direct labor costs incurred $ 77 comma 000 Manufacturing overhead costs incurred, including indirect materials $ 98 comma 300 Cost of goods manufactured $ 223 comma 300 Cost of goods sold $ 151 comma 300 Beginning raw materials inventory $ 14 comma 500 Beginning work in process inventory $ 30 comma 400 Beginning finished goods inventory $ 33 comma 200 Predetermined manufacturing overhead rate (as % of direct labor cost) 120% What is the balance in work in process inventory at the end of the year? A. $ 51 comma 700
Answer:
Thus, Work in process inventory (Ending) = $23,840
Explanation:
Below is the Schedule of Cost of Goods Manufactured:
Cost of materials requisitioned = 51,200
Manufacturing overhead applied = 92,640
Direct materials used = 46,700
Indirect materials = 4,500
Direct labor = 77,200
Total manufacturing cost = 216,540
Work in process inventory, beginning = 30,300
Work in process inventory, ending = 23,840
Cost of goods manufactured = 223,000
Applied Manufacturing overhead = Direct labor cost x 120%
= 77,200 x 120%
Applied Manufacturing overhead= $92,640
Cost of manufactured goods = Total manufacturing cost + Work in process inventory (beginning) - Work in process inventory (Ending)
223,000 = 216,540+30,300 - Work in process inventory (Ending)
Work in process inventory (Ending) = (216,540 +30,300) - 223,000
= 246,840 - 223,000
= 23,840
Thus, Work in process inventory (Ending) = $23,840
Answer:
23100
Explanation:
To get to this answer we must use process costing and we will begin by explaining what it is first.
A process costing system is used in industries where masses of similar products or services are produced. Products are produced in the same manner and consume the same amount of direct cost overheads.it is therefore unnecessary to assign costs to individual units of outputs for that period.
The term work-in-progress (WIP) is a production and supply-chain management term describing partially finished goods awaiting completion. WIP refers to the raw materials, labour, and overhead costs incurred for products that are at various stages of the production process
Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. The manufacturing cost is classified into three categories: direct materials cost, direct labour cost and manufacturing overhead.
Direct materials are raw materials that are made into finished products. These are not materials that are used in the production process. Direct materials are goods that physically become the finished product at the end of the manufacturing process.
Direct labour cost is a part of wage-bill or payroll that can be specifically and consistently assigned to or associated with the manufacture of a product, a work order, or provision of a service.
23,100
Explanation:
Beginning WIP---------------------------------------30,400
Add: Total manufacturing costs
Direct materials used
(51,100 - 4,500) ----------------------46,600
Direct labour----------------------------77,000
Overhead (120% x 77,000) --------92,400-----216,000
Total cost in work in process--------------------246,400
Less; Ending WIP--------------------------------------? -----
Cost of goods manufactured--------------------223,300
Ending WIP = 246,400 - 223,300 = 23,100
A study finds that the noise from airplanes is harmful; hence, the government imposes a $25 tax on the sale of every airplane. This amount accurately accounts for the external cost of the noise pollution. Before the corrective tax, airplane tickets regularly sold for $190. After the tax is in place, the market price for airplane tickets rises to $195. Because of the tax, the number of airplane tickets sold will decrease . The socially optimal price of airplane tickets is $ . The private market price is $ . A firm selling airplane tickets receives $ after it pays the tax.
Answer:
Negative externality is the point at which the onlooker bears the expense of any action. To disguise this externality, government forces charge equivalent to the outside expense.
In negative externality showcase delivers more amount than socially ideal amount. At the point when government forces charge, it decreases the market amount and brings it equivalent to ideal amount.
As of tax, the number of tickets selling is reduce. Socially the optimal price for ticket is $205. The private market price is $190. After tax, the firm will get $205 - $25 = $180The firm will choose to abate the first 30 pounds of particulates it emits because the abatement costs are less than the pollution tax. If Congress imposes a carbon emissions tax, there's a conflict between the benefits to the townspeople and the costs to the factories, making it difficult to achieve the optimal outcome due to misaligned incentives.
Explanation:When a government imposes a corrective tax on goods or services that cause external costs, such as pollution, firms are presented with a choice. They can either continue their activities as before and pay the tax, which is intended to internalize the external cost, or they can take measures to reduce the externality and pay for the cost of abatement.
In the scenario where a firm faces a pollution tax of $1,000 for every 10 pounds of particulates emitted, the firm must compare the cost of abatement with the cost of paying the tax. Given that the first 10 pounds of abatement costs $300, the second 10 pounds costs $500, and the third 10 pounds costs $900, which are all less than the $1,000 tax, the firm will choose to abate the first 30 pounds of particulates. For the fourth 10 pounds, which would cost $1,500 to abate, the firm will choose to pay the tax, as it is cheaper than the cost of abatement.
Taking into account the benefits to the community and the costs to the factories, if Congress proposes a tax on carbon emissions, the townspeople might collectively benefit by a dollar amount equivalent to $300 each. However, the factories will see reduced profits by $1 million each, prompting a consideration of how much each side might be willing to spend to either support or oppose the tax. This scenario illustrates the challenges in reaching a societally optimal outcome, as the interests of different stakeholders must be balanced, and frequently, individual incentives can misalign with the societal good.
Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan's law firm prepares monthly financial statements, when should it recognize revenue from this engagement? The law firm should recognize the revenue in________
Zupan's law firm should recognize the revenue in April, as that is when the services were performed and, thus, the revenue was earned. This is in accordance with the accrual basis of accounting where revenue is recognized when it is earned, not when payment is received.
Explanation:The subject of this question pertains to revenue recognition, a fundamental concept in accounting. In accordance with the accrual basis of accounting, revenues are recognized when they are earned, regardless of when the payment is received. In this scenario, Susan Zupan's firm should recognize the revenue from the legal engagement in April because that is the month the work was completed and the services were rendered.
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Option b) April is the correct choice.
This question relates to the recognition of revenue in accordance with Generally Accepted Accounting Principles (GAAP). According to GAAP, revenue should be recognized when it is earned and realizable. In the case of Susan Zupan, who performed the legal work in April, the revenue should be recognized in April when the service was provided.
Option a) March – This is when the engagement was accepted, but no services were rendered.Option b) April – This is when the legal work was performed, making the revenue earned and realizable.Option c) May – This is when payment was received, but GAAP requires revenue recognition when earned, not when cash is received.Option d) June – This option is irrelevant as it does not pertain to when services were provided or payment was received.Therefore, the correct answer is April, aligning with the principle that revenue is recognized when services are performed.
Complete Question
Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan's law firm prepares monthly financial statements, when should it recognize revenue from this engagement?
a) March
b) April
c) May
d) June
On December 31, 2016, Marin Inc. borrowed $4,500,000 at 12% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: March 1, $540,000; June 1, $900,000; July 1, $2,250,000; December 1, $2,250,000. The building was completed in February 2018. Additional information is provided as follows.
1. Other debt outstanding
10-year, 13% bond, December 31, 2010, interest payable annually $6,000,000
6-year, 10% note, dated December 31, 2014, interest payable annually $2,400,000
2. March 1, 2017, expenditure included land costs of $225,000
3. Interest revenue earned in 2017
$73,500
Determine the amount of interest to be capitalized in 2017 in relation to the construction of the building.
The amount of interest _________
Answer:
$274,500
Explanation:
*March 1 : Amount spent = 540,000; Period = 10
Weighted average accumulated expenditure = (10/12)*540000= 450,000
*June 1: Amount spent = 900,000; Period = 7
Weighted average accumulated expenditure = (7/12)*900000= 525,000
*July 1: Amount spent = 2,250,000; Period = 6
Weighted average accumulated expenditure = (6/12)*2250000= 1,125,000
*December 1: Amount spent = 2,250,000; Period = 1
Weighted average accumulated expenditure = (1/12)*2250000= 187,000
Therefore total Weighted average accumulated expenditure = 2,287,500
Interest on weighted average = 12% * 2,287,500 = 274,500 = Avoidable interest
Calculation of Actual interest on the instruments;
Bond: 13%*6,000,000= 780,000
Note: 10%*2,400,000= 240,000
Loan: 12%*4,500,000= 540,000
Actual interest = 1,560,000
According to GAAP; The least amount between Actual Interest and Avoidable interest can be capitalized.
Following the figures above, amount of interest to be capitalized in 2017 in relation to the construction of the building is $274,500
4. Select an industry and consider how the industry life cycle has affected business strategy for the firms in that industry over time. Detail your answer based on each stage: introduction, growth, shakeout, maturity, and decline.
Answer:
Lets talk about the rice industry and discuss it in the light of the stages of of a business;
Introduction: The industry will start small and enter the competition among other rice mills in the area.
Growth: The company starts to make rapid sales and cash inflow increases.
Shakeout: The sales slow down slowly as the company is covering the distance towards maturity.
Maturity: The company has reached a stage where the cash inflow is stagnant along with the sales. No further growth is happening in the rice mill.
Decline: The company is over run with factors such as market competition and economy. Failure to keep the expenses afloat will eventually decline.
Final answer:
The industry life cycle impacts business strategy, with firms adapting to the introduction, growth, shakeout, maturity, and decline stages to maintain a competitive advantage and ensure longevity.
Explanation:
The impact of the industry life cycle on business strategy can be significant and varies across different stages, such as introduction, growth, shakeout, maturity, and decline. In the introduction phase, a business must focus on establishing a competitive advantage and may invest heavily in marketing to create product awareness. During the growth phase, businesses typically work on scaling up, improving efficiency, and possibly expanding their market reach.
A shakeout occurs when market saturation leads to increased competition, and firms that cannot compete effectively may exit the industry. In the maturity stage, firms emphasize process optimization and cost control to maintain profitability amidst stiffer competition. Lastly, during the decline phase, companies may decide to diversify, innovate, or exit the market depending on the market structure and production conditions.
Understanding these stages helps firms anticipate change and make informed decisions to ensure sustainability and growth, which is critical for delivering a satisfactory return to investors and for maintaining relevancy in a competitive market.
Dave Docket, the installation manager at Kleen Waterproofing, receives a high number of customer complaints that several crewmembers either come late to the job or they do not show up at all, without any communication with the customers. The job completion dates keep getting delayed, and customer dissatisfaction rate keeps increasing. Dave hires several new employees who are motivated, able to perform their jobs, and have adequate resources. However, they are not sure what tasks are included in their job. Dave wonders how he can understand what is going on with his crew behavior and what he can do to improve the situation.Dave organizes a training program for his employees to teach them how to operate the machines used for working. Which of the following attributes is Dave targeting with this training? Is he solving the problem?
A. Motivation
B. Ability
C. Role-perception
D. Situational Factors
Answer: b) Ability
Explanation: Ability is the possession of skill to do a task. It involves being able to complete a given task.
Dave's new hires are motivated and ready to do the job, however they are not sure what tasks are included in their job. In this instance, organising a training that targets 'ability' will solve a part of the problem.
However, Dave needs to do more to target the actual problems which are the job description and role play. Teaching the staff how to do a job without given them job schedules may not be so effective in the long run.
Dave is targeting the attribute of role-perception with the training program, but it may not directly solve all the problems. Option C is correct
Explanation:Dave is targeting the attribute of (C) role-perception with the training program. Role-perception refers to an individual's understanding of their job tasks and responsibilities. By training his employees on how to operate the machines used for work, Dave is providing them with clarity on what tasks are included in their job.
This training program can help improve the situation by increasing the employees' understanding of their role and reducing the likelihood of confusion or uncertainty. However, it may not directly address other issues such as crewmembers coming late or not showing up without communication, as these may be influenced by other factors such as motivation or situational factors.
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A 6-year bond, 8% semiannual coupon bond sells at par ($1,000). Another bond of equal risk, maturity, and par value pays an 8% annual coupon. What is the price of the annual coupon bond?
Answer:
Explanation:
The bond has 8% coupon paid semiannually, and those bonds sell at their par value. Since the bond sales at par value, Market rate (Yield) = Coupon rate =8%Second bond:
Coupon rate = 8%Par value = $1,000Semiannual coupon amount = 1000 x 8%/2 = $40Time to maturity = 6 years = 12 semiannual periodsSemiannual Yield = 8%/2 = 4%To get price of this bond we will use PV function of excel:
= PV (rate, nper, pmt, fv, type)
= PV (4%, 12, -40, -1000, 0)
= $1053.32
Price of this bond = $1,053.3The price of the annual coupon bond is $992.64.
EAR = (1 + YTM/m)^m - 1
EAR = (1+0.08/2)^2 - 1
EAR = 8.16%
Given Information
C/Y = 1
P/Y = 1
N = 6
I/Y = 8.16%
PMT = -$80 (8%*1000)
FV = -1000
Now, we will employ the use of PV function of Financial calculator to allow us derive the
Price of bond = CPT PV (C/Y, P/Y, N, I/Y, -PMT, -FV)
Price of bond = CPT PV (1, 1, 6, 8.16%, -80, 1000)
Price of bond = $992.64.
Therefore, the price of the annual coupon bond is $992.64.
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