Answer:
The correct answer is: profit-oriented pricing.
Explanation:
Profit-oriented pricing is set by companies after determining the production of total costs per unit of the goods offered. After that, the profit is established typically as a percentage of the costs incurred. The problem with this method of costing is that the sum of the costs and the profit margin can result in a price that is higher than the average for the product.
Even worse, competitors may take advantage of that scenario to lower their prices to drag more consumers away from the profit-oriented pricing entity.
Ayayai Corporation engaged in the following cash transactions during 2020. Sale of land and building $194,800 Purchase of treasury stock 46,900 Purchase of land 44,700 Payment of cash dividend 91,800 Purchase of equipment 58,200 Issuance of common stock 157,000 Retirement of bonds 102,900
Compute the net cash provided (used) by investing activities
Answer:
$91,900 (provided)
Explanation:
The cashflow statement shows how much cash has been used up or generated by the company's activities which are classified into 3 groups;
Operating, investing and,Financing.The sale of land and building, purchase of land and equipment are investing activities. Others are financing activities as they relate to owner's equity and long term debts.
The net cash provided (used) by investing activities
= $194,800 - $44,700 - $58,200
= $91,900
Consider the following model of a very simple economy. Household saving and investment behavior depend in part on wealth (accumulated savings and inheritance). In the late 1990's many were concerned with very large increase in stock value (a form of wealth) and it's possible effect on saving and investment.
The following consumption function incorporate wealth (W) as a determinant of consumption. We have the following information on consumption (C) and investment (I):
C=45+0.60Y+0.05W
I=100
W=800
We are ignoring the fact that saving adds to the stock of wealth.
Calculate the value of equilibrium Y,C, and savings (S). (Enter you responses as Integers. )
Answer:
Equilibrium Y = 462.5 , Equilibrium C = 362.5 , Equilibrium S = 100
Explanation:
At equilibrium : Aggregate Demand = Aggregate Supply[ AD = C + I ] = [ AS = C + S = Y ]
45 + 0.6Y + 0.05 W + 100 = Y → 45 + 0.6Y + 0.05 (800) + 100 = Y
45 + 40 + 100 + 0.6Y = Y → Y ; 185 + 0.6Y = Y
Y - 0.6Y = 185
0.4Y = 185
Y = 185 / 0.4 = 462.5
Consumption C = 45 + 0.6Y + 0.05WPutting Y value : C = 45 + 0.6 (462.5) + 0.05 (800) → C = 45 + 277.5 + 40
C = 362.5
Income Y is either consumed (C) or saved (S). So, Y = C + SHence , S = Y - C → 462.5 - 362.5 = 100
Alternatively : As C + I = C + S
Hence, I = S
Equilibrium Savings = Given Investment = 100
Final answer:
Given the consumption function C=45+0.60Y+0.05W with W=800 and I=100, the equilibrium values for this simple economy are found to be income (Y)=463, consumption (C)=364, and savings (S)=99 when rounded to integers.
Explanation:
Considering a simple economy where the consumption function incorporates wealth as a determinant of consumption, we are given a consumption function C=45+0.60Y+0.05W, with I=100 and W=800. To find the equilibrium values for income (Y), consumption (C), and savings (S), we follow these steps:
First, substitute the given wealth (W) into the consumption equation: C=45+0.60Y+0.05(800).
Since W=800, substituting this gives us C=45+0.60Y+40, simplifying to C=85+0.60Y.
For equilibrium in a simple economy without government or foreign trade, investment (I) equals savings (S), and Y=C+I. Hence, total output (Y) also equals consumption (C) plus investment (I).
Using the equilibrium condition Y=C+I, we substitute the values to get Y=85+0.60Y+100.
This simplifies to 0.40Y=185, solving for Y yields Y=462.5.
By substituting Y back into our consumption equation, C=85+0.60(462.5) = 363.5.
Finally, savings (S) is the difference between output (Y) and consumption (C): S=Y-C=462.5-363.5=99.
Therefore, the equilibrium values are Y=463, C=364, and S=99 when rounded to integers.
Under what conditions does a Cobb-Douglas production function,
q= 10L^0.71. K^0.84
Show how output changes if both inputs are doubled.
Answer:
Exhibits increasing returns to scale.
Explanation:
Given that,
Cobb-Douglas production function:
[tex]q=10(L)^{0.71}(K)^{0.84}[/tex]
If both inputs are doubled, then
[tex]q=10(2L)^{0.71}(2K)^{0.84}[/tex]
[tex]q=10(2)^{(0.71+0.84)}(L)^{0.71}(K)^{0.84}[/tex]
[tex]q=10(2)^{1.55}(L)^{0.71}(K)^{0.84}[/tex]
Therefore, this Cobb-Douglas production function exhibits the increasing returns to scale because the power of 2 is greater than 1. Under the condition of increasing returns to scale, an increase in the output of the firm is greater than the increase in the input of the firm.
Mustard Corporation (a C corporation) owns 15% of the stock of Burgundy Corporation (a C corporation), which pays an annual dividend to its shareholders. Mustard is considering the purchase of additional shares of Burgundy stock. Would this stock purchase affect the amount of dividends received deduction that Mustard can claim
Answer:
Yes, it will affect it.
Explanation:
The dividends received deduction (DRD) refers to a US federal tax law that allows some corporation that are paid dividend by related entities to deduct certain percentage of the dividend received from their income tax depending on their percentage of ownership of the related entity that paid the dividend.
The three criteria or tiers that determines how much to deduct as DRD are as follows:
1. Generally, the DRD a corporation is qualified for is 70% of the dividend received.
2. A DRD equals to 80% of the dividend received can be deducted if the corporation holds more than 20% but less than 80% shareholding of the company that paid the dividend.
3. If the corporation holds more than 80% shareholding of the company that paid the dividend, a DRD of 100% of the dividend applies.
Therefore, additional stock purchase will affect the amount of dividends received deduction that Mustard can claim.
Final answer:
Purchasing additional shares of Burgundy Corporation could affect Mustard Corporation's dividends received deduction (DRD). The impact depends on whether the additional shares purchased increase Mustard's ownership stake to reach certain thresholds, which would allow a higher percentage of the dividends to be deducted from taxable income.
Explanation:
The purchase of additional shares of Burgundy Corporation stock by Mustard Corporation would affect the dividends received deduction (DRD) that Mustard can claim for tax purposes. The DRD allows a corporation that receives a dividend from another corporation in which it has an ownership stake to deduct a portion of that dividend from its taxable income. Notably, the amount of deduction depends on the percentage of ownership. Owning more shares typically entitles the shareholder to a larger deduction. Under U.S. tax law, corporations that own less than 20% of another corporation can deduct 50% of dividends received, those owning between 20% to 80% can deduct 65%, and those owning more than 80% can deduct 100%. If Mustard Corporation purchases additional shares and its ownership stake in Burgundy Corporation increases to meet one of these thresholds, the DRD percentage that Mustard Corporation can claim may increase, leading to a potentially more favorable tax treatment of the received dividends.
What makes buying a foreclosed property risky? Select two. The title fee is set later and can’t be negotiated They’re usually sold "as is" Usually, you can’t inspect the home in advance You must use an adjustable-rate loan for purchase
They’re usually sold "as is" and Usually, you can’t inspect the home in advance makes buying a foreclosed property risky.
Purchasing a foreclosed property is dangerous for the following two reasons:
They're usually sold "as is"
Frequently, foreclosed homes are offered for sale as-is, with no alterations done by the bank or the prior owner.
This implies that you may be buying a house with hidden problems or damage that would cost a lot of money to rectify. You can incur unforeseen fees after buying the home if you are unable to negotiate repairs or renovations before the purchase.
Usually, you can't inspect the home in advance:
Many often, prospective purchasers of foreclosed homes are not given the chance to perform a comprehensive examination before finalizing the purchase.
Due to the lack of an assessment, there may be repulsive after-purchase shocks, such as finding basic troubles, plumbing or electrical issues, or other covered-up imperfections that were not seen amid the initial seeing. You'll not have comprehensive information on the genuine state of the property you're buying without an intensive examination.
Hence, buying a foreclosed property risky cause Usually, you can't inspect the home in advance and They're usually sold "as is".
Learn more about property risk, here:
https://brainly.com/question/15319840
#SPJ12
The correct options are B and C. Buying a foreclosed property is risky because they are usually sold 'as is' and prospective buyers often cannot inspect them in advance.
The correct answers are:
They’re usually sold “as is”Usually, you can’t inspect the home in advanceForeclosed properties are often sold “as is”, meaning the buyer takes responsibility for any existing issues without expecting repairs or improvements from the seller. Furthermore, prospective buyers often cannot inspect the home in advance, which increases the risk of unforeseen problems that may require costly repairs after the purchase.
Complete question
What makes buying a foreclosed property risky? Select two.
A. The title fee is set later and can’t be negotiated
B. They’re usually sold “as is”
C. Usually, you can’t inspect the home in advance
D. You must use an adjustable-rate loan for purchase
A manufacturer of brand A jeans has daily production costs of Upper C equals 0.3 x squared minus 120 x plus 12 comma 585, where C is the total cost (in dollars) and x is the number of jeans produced. How many jeans should be produced each day in order to minimize costs? What is the minimum daily cost?
Answer:
a. 200 jeans should be produced each day in order to minimize costs.
b. The minimum daily cost is $108,585
Explanation:
a. How many jeans should be produced each day in order to minimize costs?
Given C = 0.3x^2 - 120x + 120,585 ........................... (1)
Cost is minimized when MC = C' = 0
To obtain MC, equation (1) is differentiate with respect to x as follows:
dC/dx = MC = C' = 0.6x - 120 = 0 ............................... (2)
From equation (2), we can now solve for x follows:
0.6x - 120 = 0
0.6x = 120
x = 120 ÷ 0.6
x = 200
Therefore, 200 jeans should be produced each day in order to minimize costs.
b. What is the minimum daily cost?
Substitute 200 for x in equation (1) to have:
C = 0.3(200^2) - 120(200) + 120,585
= 12,000 - 24,000 + 120,585
C = $108,585
Therefore, the minimum daily cost is $108,585.
a. 200 jeans should be produced each day in order to minimize costs.
b. The minimum daily cost is $108,585
Arundel Company uses percentage of sales to estimate uncollectibles. At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance of $78,000 and had a total of $805,000 in credit sales. Arundel assumes that 2.0% of sales will eventually be uncollectible. before adjustment, the Allowance for Uncollectible Accounts had a credit balance of 4,000. What dollar amount should be credited to Allowance for Uncollectible Accounts at year end?
Answer: The dollar amount that should be credited to Allowance for Uncollectible Accounts at year end is $12,100.
Explanation: As provided in the question, Arundel Company already had a credit balance of $4,000 in allowance for uncollectible accounts, before adjustment. Remember, the allowance account is usually in credit balance and mapped to the accounts receivable account to show the net balance of the receivables that is recoverable, and to show the true and fair position of that amount.
The 2% of credit sales (2% of $805,000) is $16,100 - this should serve as additional provision for bad debts expense at year end and the following journals should have been recorded: Debit Bad debt expense $16,100; Credit Allowance for uncollectible accounts $16,100. But there is $4,000 balance in the allowance account, which serves as the opening balance. The amount deemed irrecoverable during the year is $16,1000, which should represent the additional provision but since there is an exisiting balance in the allowance account, the differential would be recorded as additional provision ($16,100 - $4,000).
The president of a company gave two talks, one on Monday and one on Tuesday. A total of 405 employees attended the Monday talk, 275 attended the Tuesday talk and 55 went to both. How many employees attended at least one of the talks
Answer:
625 employees
Explanation:
Given that,
Let the Monday talk be A and the Tuesday talk be B,
Employees attend Monday talk: I A I = 405
Employees attend Tuesday talk: I B I = 275
Employees attend both talks: I A ∩ B I = 55
Employees attended at least one of the talks: I A ∪ B I
= I A I + I B I - I A ∩ B I
= 405 + 275 - 55
= 625
A company had calculated net income to be $77,850 based on the unadjusted trial balance. The following adjusting entries were then made for: Salaries and wages owed but not yet paid of $820 Interest earned but not received from investments of $780 Prepaid insurance premiums amounting to $580 have expired Unearned revenue in the amount of $780 has now been earned.
Answer:
Adjusted net income will be $78,010
Explanation:
According to the Accrual concept all the accrued expenses should be recognized and deducted from the unadjusted net income and all the earned revenues should be recognized and added to unadjusted net Income.
Salaries and wages owed but not yet paid of $820 is an expense which is accrued but not been paid it should be recorded and deducted from the unadjusted net income as earlier expenses were understated.
Interest earned but not received from investments of $780 is the revenue recognized but not been received until now. Accrual Concept requires that when revenue is realized it should be recognized into the accounting records. So it should be added to the net income.
Prepaid insurance premiums amounting to $580 have expired is actually an accrued expense which previously recorded as prepaid expense. It should be deducted from the net income as it is a expense which need to be recognized.
Unearned revenue in the amount of $780 has now been earned. Now it should be added to the net income because it is a revenue item that should be recognized as it is recorded as unearned revenue earlier.
Net income to be $77,850 based on the unadjusted trial balance.
Adjusted Net Income = $77,850 - $820 + $780 - 580 + 780 = $78,010
Final answer:
Adjusted net income is calculated by considering the effects of adjusting entries for unpaid salaries and wages, interest earned, expired insurance premiums, and now-earned unearned revenue on the net income previously based on the unadjusted trial balance. The adjusted net income is $78,010 after accounting for these changes.
Explanation:
The question involves making adjusting entries to a company's financial records to reflect events that have occurred but are not yet recorded in the accounts. This process is a key part of the accounting cycle, ensuring that the financial statements reflect the true financial position of the company at the end of the accounting period. Adjusting entries for salaries and wages, interest, prepaid insurance, and unearned revenue will affect both the company's balance sheet and income statement.
To calculate the adjusted net income, we need to consider the effect of these adjustments on the originally calculated net income:
Interest earned (revenue increases, increasing net income): $780
Expired insurance premiums (expense increases, reducing net income): $580
$77,030 + $780 (increase in accounts receivable - interest)
$77,230 + $780 (decrease in deferred revenue)
Adjusted net income: $78,010
Assume that the spot rate of the singaproe dollar is $.664. The ADR of a Singapore firm is convertibe into 3 shares of stock. The price of an ADRis $20. What is the share price of the firm in Singapore dollars
Answer: 10
Explanation:
1 ADR = $20
1 ADR = 3 Shares
Hence,
3 Shares =$20
1 share =$20/3
1 Singapore dollar =$0. 664
1$= 1/0.664 =1.506
20$ =20 x 1.506 /3
=10.10
The share price of the firm in Singapore dollars is $10.
The calculation is as follows:
1 ADR = $20
1 ADR = 3 Shares
So,
3 Shares =$20
1 share =$20 ÷÷3
1 Singapore dollar =$0. 664
Now
1$= 1 ÷ 0.664 =1.506
And,
20$ =[tex]20 \times 1.506 \div 3[/tex]
=10.10
Learn more: https://brainly.com/question/17429689?referrer=searchResults
Exercise 189 Hu, Marcos, and Letterman share income on a 6:3:1 basis. They have capital balances of $80,000, $60,000, and $45,000, respectively, when Buffett is admitted to the partnership. Prepare the journal entry to record the admission of Buffett into the partnership if Buffett purchases one-half of Hu’s equity for $45,000; one-half of Marcos’s equity for $22,000; and one-third of Letterman’s equity for $18,000. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Answer:
Debit Hu, 40,000, Marcos, 30,000 and Letterman 15,000 and credit Buffet, 85,000
Explanation:
The question is to journalize the entry of admitting Buffet into the partnership
First, we know that Buffet bought 1/2 of Hu, 1/2 of Marcos and 1/3 of Letterman.
Has such Buffet bought the following number of shares
Hu = 1/2 x $80,000 = $40,000
Marcos = 1/2 of $60,000 = $30,000
Letterman = 1/3 of $45,000 = $15,000
Buffet= 85,000
Jounal Entry
Description Debit($) Credit($)
Hu, Capital 40,000
Marco, Capital 30,000
Letterman, Capital 15,000
Buffet, Capital $85,000
Being the admission of Buffet in to partnership.
Which of the following policies are consistent with the goal of increasing productivity and growth in developing countries? Check all that apply. Providing tax breaks and patents for firms that pursue research and development in health and sciences Imposing restrictions on foreign ownership of domestic capital Protecting property rights and enforcing contracts Increasing taxes on income from savings
Answer:
1)Protecting property rights and enforce contracts.
2)Providing tax breaks and patents for firms that pursue research and development in health and sciences.
Explanation:
These two alternatives are the most applicable in relation to policies that are most consistent with the goal of increasing productivity and growth in developing countries. The first alternative is related to the protection of property rights and compliance with contracts, which guarantees stability and political confidence to the country, which is important to attract new investors and consequently to leverage the growth and development of a country.
The other alternative concerns tax incentives and patents for companies seeking research and development in health and science. What is a way to encourage the growth of this sector, which in addition to generating savings and productivity for the country, also brings innovations and relevant discoveries in health and science, which helps the growth and development of the country.
While living in her home country of Tanzania, Sophia Kiwanuka signed an employment contract with Anne Margareth Bakilana, a Tanzanian living in Washington, D.C. Kiwanuka traveled to the United States to work as a babysitter and maid in Bakilana’s house. When Kiwanuka arrived, Bakilana confiscated her passport, held her in isolation, and forced her to work long hours under threat of having her deported. Kiwanuka worked seven days a week without breaks and was subjected to regular verbal and psychological abuse by Bakilana. Kiwanuka filed a complaint against Bakilana for intentional infliction of emotional distress, among other claims. Bakilana argued that Kiwanuka’s complaint should be dismissed because the allegations were insufficient to show outrageous intentional conduct that resulted in severe emotional distress. If you were the judge, in whose favor would you rule? Why? [Kiwanuka v. Bakilana, 844 F.Supp.2d 107 Miller, Roger LeRoy. Business Law: Text & Cases - The First Course - Summarized Case Edition (p. 123). Cengage Learning. Kindle Edition.
In this example, Kiwanuka is suing for intentional infliction of emotional distress. This can be defined as extreme and outrageous conduct which results in severe emotional distress to another person. This act must be severely extreme, to an extent that is not normally tolerated by society. In such cases, threatening conduct coupled with repeated annoyances can be enough to offer support to a claim of intentional infliction of emotional distress.
If I were the judge, I would rule in favor of Kiwanuka, as I the fact that Bakilana held Kiwanuka in isolation and confiscated her passport is evidence of extreme emotional distress.
Boston Cycles started October with 12 bicycles that cost $42 each. On October 16, Boston bought 40 bicycles at $68 each. On October 31, when the average cost per unit was $62.00, Boston sold 34 bicycles for $100 each. Boston's cost of goods sold under the FIFO, LIFO and weighted-average methods is summarized as follows: FIFO LIFO Weighted-average bicy Cost of Goods Sold $2,000 $ 2,312 $ 2,108 Which inventory costing method produced the lowest cost of goods sold?
Answer:
FIFO method of inventory valuation produced the lowest of goods sold at $2000
Explanation:
The implication of FIFO producing the lowest costs of good sold is that profit under FIFO method will be much higher since a lower costs of good sold is deducted from sales revenue to arrive at gross profit for the period
In addition, higher gross profit is also a pointer to higher net income and higher tax expense overall.
In order to manage tax exposure effectively,the LIFO method of valuation would be the best option as it has the highest costs of good sold,hence lower profit figure and lower tax liability
On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3.
What strategy should the investor follow?
Answer:
The strategy the investor should follow is to short the September Mini S&P 500 futures contract by 26
Explanation:
Parameters:
Portfolio value= P = 50,000 * 30 = $1,500,000
Beta of stock β = 1.3
Index price = 1,500
Multiplier = $50
Futures Value A = 1,500*50 = $75,000
The formula to calculate number of contract N;
N= β ∗ P/A
N= 1.3*1,500,000/75,000
N= 26
The strategy the investor should follow is to short the September Mini S&P 500 futures contract by 26
To hedge their portfolio, the investor should enter into a short position of approximately 26 September Mini S&P 500 futures contracts. This allows the investor to mitigate risk associated with market movements.
Explanation:In this scenario, the investor is looking to hedge their portfolio using the September Mini S&P 500 futures contract. Given that their portfolio has a beta of 1.3, it suggests that the portfolio is more volatile than the market. The use of futures can help to reduce this risk.
The investor needs to calculate the number of futures contracts to enter into, which can be calculated using the formula:Hedging Ratio = Beta x (Value of the Portfolio / Future Price). In this case, the Value of the Portfolio is $1,500,000 (50,000 shares x $30/share). While, the Future Price is $75,000 (1,500 index value x $50). Plugging these into the formula, the investor would need approximately 26 futures contracts to hedge their portfolio.
So, the investor should short 26, September Mini S&P 500 futures contracts.
Learn more about Financial Hedging here:https://brainly.com/question/32064230
#SPJ3
In the year, 2005 Janice Quinn sells a five-year-old car to Used Car, Inc. for $3,000. In the same year, Used Car, Inc. resells the car to Ima Goner for $3,500. What is the contribution of this transaction to GDP in the year 2005
Answer:
$500
Explanation:
The computation is shown below:
Data provided in the question
Sale value of five year old car to used car = $3,000
Now in the same year, the resales value to Ima Goner = $3,500
So, the contribution made in the GDP for the year 2005 is
= Resales value to Ima Goner - Sale value of five year old car to used car
= $3,500 - $3,000
= $500
According to the dynamic AD-AS model, what is the most common cause of inflation? A. AD increases by more than LRAS. B. Total spending increases faster than total production. C. The U.S. Mint prints too much currency. D. All of the above. E. A and B only.
Answer: Option E
Explanation:
Inflation is an economic term that refers to a situation of continuous increase in the price level of goods and services. Inflation can either be as a result of a rise in demand or due to a rise in the production cost.
When the available resources in the economy are used in the production process, such economy will have little supply of products in the long run.
When there is an increase in aggregate demand as a result of other factors apart from the price of the product, there will be a rightward shift of the aggregate demand curve on the LRAS.
The rightward shift in aggregate demand curve will result into an increase in price but the quantity supplied does not increase which leads to inflation.
Answer:
A and B only.
That is
A. AD increases by more than LRAS.
B. Total spending increases faster than total production.
Explanation:
Inflation can be defined as loss of value of goods and services. The price of a basket of goods and services increases over time, meaning the purchasing power of money reduces.
In the AD-AS model inflation occurs of total spending occurs faster than total production. Goods and services become scarce, there is too much money chasing scare product, prices will go up resulting in reduction of purchasing power of money (inflation).
When AD increases more than the LRAS (long run aggregate supply) it results in shortage of goods and increase in price of goods.
On July 1, 2019, Major Co. pays $15,120 to Mesa Insurance Co. for a 4- year insurance contract. Both companies have fiscal years ending December 31 Journalize and post the entry on July 1 and the adjusting entry on December 31 for Mesa Insurance Co. Mesa uses the accounts Unearned Service Revenue and Service Revenue. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to O decimal places,e.g. 5,275.) Date Account Titles and Explanation Debit Credit Unearned Service Revenue Service Revenue
Answer:
Debit Cash account $15,120
Credit Unearned Service Revenue $15,120
Being entries to record cash collected for service to be rendered.
Debit Unearned Service revenue $1,890
Credit Service Revenue $1,890
Being entries to recognize revenue earned as at 31 December
Explanation:
When an amount is collected in advance for a service yet to be rendered, the company recognizes and asset in form of cash and a liability in form of Unearned Service Revenue.
When the service for which cash was collected is performed, revenue is said to have been earned. Entries required then are debit Unearned Service Revenue Credit Service revenue.
For Mesa, on 1 July , entries required are
Debit Cash account $15,120
Credit Unearned Service Revenue $15,120
Being entries to record cash collected for service to be rendered.
As at 31 December, revenue earned
= 1/2 × $15120/4
= $1890
Entries required
Debit Unearned Service revenue $1,890
Credit Service Revenue $1,890
Being entries to recognize revenue earned as at 31 December
The journal entries and adjusting entries should be shown below.
Journal entries:Cash account $15,120
Unearned Service Revenue $15,120
(Being entries to record cash collected for service to be rendered)
Unearned Service revenue $1,890 ( 1/2 × $15120/4)
Service Revenue $1,890
( to recognize revenue earned as at 31 December)
These journal entries should be recorded.
learn more about journal entries here: https://brainly.com/question/24741269
In 2016, Chaya Corporation, an accrual basis, calendar year taxpayer, provided services to clients andearned $25,000. The clients signed notes receivable to Chaya that have a fair market value of$22,000 at year-end. In addition, Chaya sold a 36-month service contract on June 1, 2016, and received payment in full of $12,000.
How much income does Chaya report from these transactions in 2016?
Answer:
$27,333.33
Explanation:
The computation of the amount of income reported is shown below:
= Provided services to the customer + Payment received × number of months ÷ given number of months
= $25,000 + $12,000 × 7 months ÷ 36 months
= $25,000 + $2,333.33
= $27,333.33
The seven months is calculated from the June 1 to December 31. We assume the books are closed on December 31
Chaya Corporation reports a total income of $27,333.33 for 2016, which includes $25,000 from services provided and $2,333.33 from the service contract sold on June 1, 2016.
For Chaya Corporation, which is an accrual basis, calendar year taxpayer, the income reported for 2016 from the transactions mentioned can be determined as follows:
1. Services Provided: Chaya earned $25,000 from providing services. Under the accrual basis of accounting, income is recognized when services are performed, regardless of when cash is received. Thus, Chaya reports the full amount of $25,000 as income.
2. Fair Market Value of Notes Receivable: Chaya received notes receivable with a fair market value of $22,000 for the services. However, for accrual accounting, the income is recorded based on the amount earned, not the lower fair market value of the note receivable. Therefore, the $22,000 is not considered.
3. Service Contract: Chaya sold a 36-month service contract on June 1, 2016, and received $12,000. For accrual purposes, income must be allocated over the period the service is provided. For 2016, Chaya should report ($12,000 / 36 months) * 7 months = $2,333.33 as income earned from the service contract in 2016.
$25,000 from services provided$2,333.33 from the service contractTotal income reported for 2016: $25,000 + $2,333.33 = $27,333.33
Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding.
The present value of the lease payments for the delivery truck is closest to $____.
Answer:
The present value of the lease payments for the delivery truck is closest to $207,050.
Explanation:
First we need to calculate the monthly discount rate for the lease arrangement.
EAR = (1 + APR / k) [tex]^{k}[/tex]- 1
= (1 + 0.06 / 4)[tex]^{4}[/tex] - 1 = 0.06136 or 6.14%
Monthly rate = (1 + EAR)([tex]\frac{1}{12}[/tex]) - 1
= (1.06136)[tex]^{\frac{1}{12}}[/tex] - 1 = 0.004975 = 0.4975%
Now we can apply the PVA formula in excel or calculate the PV of the lease or by a calculator:
I = 0.4975
N = 60 (5 years × 12 months/yr)
FV = 0
PMT = $4000
PV = 207,051.61.
On September 30, Silver Corporation, a calendar year taxpayer, sold a parcel of land (basis of $400,000) for a $1 million note. The note is payable in five installments, with the first payment due next year. Because Silver did not elect out of the installment method, none of the $600,000 gain is taxed this year. Silver Corporation had a $300,000 deficit in accumulated E&P at the beginning of the year. Before considering the effect of the land sale, Silver had a deficit in current E&P of $50,000. Sam, the sole shareholder of Silver, has a basis of $200,000 in his stock. If silver distributes $900,000 to Sam on December 31,
how much income must he report for tax purposes?
Answer: Sam must report $700,000($900,000 - $200,000) for tax purposes.
Explanation:
Because Sam is the sole shareholder of Silver, and has a basis of $200,000 in his stock. Once Silber distributes $900,00to Sam on December 31
In a net lease, the tenant is responsible for paying a clearly defined portion of the property's operating expenses. Based on your understanding of the standard definitions of "netness" in commercial leases, the tenant is responsible for which of the following in a net-net lease?
A) both property taxes and insurance
B) no operating expenses
C) all operating expenses
D) only property taxes
Answer:
A
Explanation:
net-net refers to 2 of the operating expenses in Commerical property. Triple Net refers to all of the taxes, maintenance and insurance or TMI
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 114,000 kilometers during a year, the average operating cost is 12.7 cents per kilometer. If a truck is driven only 76,000 kilometers during a year, the average operating cost increases to 14.8 cents per kilometer.
Required:
1.Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places and Fixed cost answer to nearest whole dollar amount.)
2. Express the variable and fixed costs in the form Y = a + bX. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.)
3. If a truck were driven 95,000 kilometers during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations.)
Explanation:
The computation of the fixed cost and the variable cost per hour by using high low method is shown below:
Variable cost per hour = (High Operating cost - low operating cost) ÷ (High driven in kilometers - Low driven in kilometers)
where,
High operating cost = 114,000 km × 12.7%
= $14,478
Low operating cost = 76,000 km × 14.8%
= $11,248
So,
= ($14,478 - $11,248) ÷ (114,000 km - 76,000 km)
= $3,230 ÷ 38,000 km
= $0.085 per km
Now the fixed cost equal to
= High operating cost - (High driven in kilometers × Variable cost per km)
= $14,478 - (114,000 km × $0.085)
= $14,478 - $9,690
= $4,7882
2. The equation is as follows
Y = a + bx
So,
Total cost = $4,788 + 0.085X
3.
Y = a + bx
= $4,788 + 0.085 × 95,000
= $4,788 + $8,075
= $12,863
1. Variable Cost per Kilometer is $0.085 and Fixed Cost is $4,788 2. Cost Formula is [tex]\( Y = 4,788 + 0.085X \)[/tex]. 3.Total Cost for 95,000 Kilometers is $12,863.
To solve this problem, we'll use the high-low method to estimate the variable and fixed cost elements of the annual cost of truck operation.
Step 1: Determine Variable and Fixed Costs
Given Data:
High activity level: 114,000 kilometers, cost: 12.7 cents/km
Low activity level: 76,000 kilometers, cost: 14.8 cents/km
Total Costs at High and Low Activity Levels:
High activity total cost: [tex]\(114,000 \times 0.127 = 14,478\)[/tex] dollars
Low activity total cost: [tex]\(76,000 \times 0.148 = 11,248\)[/tex] dollars
Variable Cost per Kilometer:
[tex]\[ \text{Variable Cost per Kilometer} = \frac{\text{Cost at High Activity} - \text{Cost at Low Activity}}{\text{High Activity Kilometers} - \text{Low Activity Kilometers}} \][/tex]
[tex]\[ \text{Variable Cost per Kilometer} = \frac{14,478 - 11,248}{114,000 - 76,000} \][/tex]
[tex]\[ \text{Variable Cost per Kilometer} = \frac{3,230}{38,000} \][/tex]
[tex]\[ \text{Variable Cost per Kilometer} = 0.085 \text{ dollars} \][/tex]
Fixed Costs:
Using the variable cost per kilometer, we can calculate the fixed cost using the total cost equation for either the high or low point.
Let's use the high point:
[tex]\[ \text{Total Cost} = \text{Fixed Cost} + (\text{Variable Cost per Kilometer} \times \text{Kilometers Driven}) \][/tex]
[tex]\[ 14,478 = \text{Fixed Cost} + (0.085 \times 114,000) \][/tex]
[tex]\[ 14,478 = \text{Fixed Cost} + 9,690 \][/tex]
[tex]\[ \text{Fixed Cost} = 14,478 - 9,690 \][/tex]
[tex]\[ \text{Fixed Cost} = 4,788 \text{ dollars} \][/tex]
Step 2: Express the Costs in the Form [tex]\(Y = a + bX\)[/tex]
Where:
\(Y\) = Total Cost
\(a\) = Fixed Cost = $4,788
\(b\) = Variable Cost per Kilometer = $0.085
\(X\) = Number of Kilometers Driven
[tex]\[ Y = 4,788 + 0.085X \][/tex]
Step 3: Predict the Total Cost for 95,000 Kilometers
Using the cost formula:
[tex]\[ Y = 4,788 + 0.085 \times 95,000 \][/tex]
[tex]\[ Y = 4,788 + 8,075 \][/tex]
[tex]\[ Y = 12,863 \text{ dollars} \][/tex]
Using your knowledge of SMART goals, select the best goal. I will start saving money toward a new house next week. I will save $40,000 by January 3, 2014, to use as a down payment on a home. I will buy a new house soon so my family will have a place to live. I will pay off my credit cards so I can start saving money for a house. g
Answer: I will save $40,000 by January 3, 2014, to use as a down payment on a home.
Explanation: SMART goals are:
Specific: they are well defined. Here, the goal is to save money towards the down payment of a house. It is clearly defined.
Measurable: it can be quantified with a number. The options, I will start saving money towards a new house does not state exactly how much. It can not be measured so it is impossible to say whether you have achieved the goal or not.
Achievable: It should be doable. We don't have enough information here to know if saving $40,000 by January 3 2014 is doable. For instance if the person setting this goal earns $80,000 per year and is setting this goal in 2012 or January 2013, it may be achievable. It is not if he makes $20,000 per year.
Relevant: the goal should be one that motivates you because it is important to you.
Time bound: There should be a time by which you want to achieve the goal.
The chosen option is the best goal of the because it meets more of the SMART goals criteria than the others: It is Specific, Measurable and Time-bound.
The best SMART goal for saving for a house down payment is 'I will save $40,000 by January 3, 2014,' since it fulfills all the criteria of being Specific, Measurable, Attainable, Realistic, and Time-oriented. The other options lack one or more of these critical components.
When applying the principles of SMART goals, the best goal selection would be 'I will save $40,000 by January 3, 2014, to use as a down payment on a home.'
This goal is Specific (saving $40,000), Measurable (has a clear monetary value), Attainable/Achievable (assuming the person has a plan and financial capacity to save that amount), Realistic/Relevant (since typical house down payments are between 3% and 5% of the purchase price, it matches real-world expectations), and Time-oriented/time-bound (with a clear deadline of January 3, 2014).
Conversely, the other options presented lack specificity, measurability, and timeliness, essential components of SMART goals.
For instance, saying 'I will buy a new house soon so my family will have a place to live' is not time-specific or measurable.
Similarly, 'I will start saving money toward a new house next week' is neither specific about the amount to save nor provides a target date to achieve it.
And, 'I will pay off my credit cards so I can start saving money for a house' is a precursor to setting a SMART goal but is not the goal itself for purchasing the home.
It does not state how the payment of credit card debt will transition into savings for a house nor does it offer a time-frame or specific amount to save for the house down payment.
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 14 percent, and the company just paid a dividend of $3.40, what is the current share price?
Answer;
$ 70.07
Explanation:
The price of the stock when the dividends level off at a constant growth rate, we then find the PV of the future stock price, including the PV of all dividends during the super normal growth period. The stock start it constant growth in Year 4, so that we can be able to find the price of the stock in Year 3, which is the year before the constant dividend growth begins as:
P3= D3(1 + g) / (R− g) = D0(1 + g1)3(1 + g2) / (R− g)
P3= $3.40(1.24)3(1.06) / (.14 − .06)
P3= $85.89
Therefore the price of the stock today is the PV of the first three dividends, we then add it with the PV of the Year 3 stock price.
Hence the price of the stock today will be:
P0= $3.40(1.24) / 1.14 + $3.40(1.24)2/ 1.142+ $3.40(1.24)3/ 1.143+ $85.89 / 1.143
P0= $70.07
The current shape price is $70.07
For direct price discrimination to work a. The firm need not be able to identify the members of the low-value group b. The firm be able to charge the low-value customers a lower price than the higher-value customers c. The firm need not worry about any arbitrage since all its customers are charged the same price d. It needs to be too complicated for the customers to understand
Answer:
The correct answer is letter "B": The firm be able to charge the low-value customers a lower price than the higher-value customers.
Explanation:
Price discrimination is the practice by which producers charge different prices to different consumers based on factors such as age, income or location to mention a few. This differentiation in prices is always justified by producers with one of those factors otherwise the approach would be considered illegal.
Direct price discrimination is carried out when the firm charges lower prices to an unfavored sector of the market keeping the regular price in sectors where income is higher.
Dumphy and Funke are rival tattoo artists in the small town of Feline. There are no other tattoo artists in town. It costs $30 to produce a Tweety Bird tattoo. Assume for simplicity that fixed costs are zero and that Dumphy and Funke perform identical work. For a while, there was too much demand for Funke and Dumphy to handle and they both charged $200 for a tatoo. But recently, demand has dropped significantly and there isn't enough work for both to fill their days at any price. However, there is some demand at all prices.a. What will be the equilabrium price that Dumphy and Funke will charge?b. What are the profits for Dumphy and Funke at the equilibrium price?c. What type of competition would Funke and Dumphy likely engage in after the decrease in demand?
Answer:
Part a: What will be the equilabrium price that Dumphy and Funke will charge?
Answer: Price charged = $30
Part b: What are the profits for Dumphy and Funke at the equilibrium price?
Answer: Profit on equilibrium price = $0
Part c: What type of competition would Funke and Dumphy likely engage in after the decrease in demand?
Answer: Price competition
Explanation:
Part a: What will be the equilabrium price that Dumphy and Funke will charge?
Answer:
Price charged by each of the artists will be equal to their marginal cost.
Thus, equilibrium P = MC = $30.
Part b: What are the profits for Dumphy and Funke at the equilibrium price?
Answer:
Equilibrium profits will be 0 at the equilibrium because price charged is equal to MC, leading to no profits.
Part c: What type of competition would Funke and Dumphy likely engage in after the decrease in demand?
Answer:
Price competition - as changes in price will lead to changes in demand and thus sales
In this limited market with two providers, the equilibrium price and profits cannot be decisively calculated without specific demand and supply information. However, the decline in demand will likely bring about price competition or differentiation in services or products.
Explanation:In this scenario, tattoo artists Dumphy and Funke operate in a duopoly market as there are no other competitors. As they perform identical work and have similar costs, they will likely end up charging the same price to remain competitive.
a) Equilibrium Price: The equilibrium price is determined by market forces - supply and demand. Given that demand has dropped, the equilibrium price would likely be lower than $200. However, the exact equilibrium price can't be determined without specific demand and supply information.
b) Profits: To calculate the profit, subtract the total cost of producing the service from the total revenue (price x quantity). As the cost of production for each tattoo is $30, anything above this would be profit. However, in a scenario of reduced demand, both artists might not have enough work to optimize their profits. Exact profits can't be determined without knowing how many tattoos they sell at the equilibrium price.
c) Type of Competition: After the decrease in demand, Dumphy and Funke could engage in price competition, where each attempts to undercut the other's price. Alternatively, they might differentiate their services by offering additional services or unique tattoo designs.
Learn more about Market Equilibrium here:https://brainly.com/question/32940222
#SPJ11
A piece of equipment is purchased for $110,000 and has an estimated salvage value of $10,000 at the end of the recovery period. (a) Prepare a depreciation schedule for the piece of equipment using the straight-line method with a recovery period of seven years. (b) Prepare a depreciation schedule for the piece of equipment using the sum-of the-years method. (c) Prepare a depreciation schedule using the 200% declining balance method. (d) Prepare a depreciation schedule using the 150% declining balance method.
Answer:
Year //dep expense //ac dep //book value
- $110,000.00
1 $14,285.71 $14,285.71 $95,714.29
2 $14,285.71 $28,571.43 $81,428.57
3 $14,285.71 $42,857.14 $67,142.86
4 $14,285.71 $57,142.86 $52,857.14
5 $14,285.71 $71,428.57 $38,571.43
6 $14,285.71 $85,714.29 $24,285.71
7 $14,285.71 $100,000.00 $10,000.00
SUM OF YEARS
Year //factor// dep expense //ac dep //book value
- $110,000.00
1 0.25 $25,000.00 $25,000.00 $85,000.00
2 0.21 $21,428.57 $46,428.57 $63,571.43
3 0.18 $17,857.14 $64,285.71 $45,714.29
4 0.14 $14,285.71 $78,571.43 $31,428.57
5 0.11 $10,714.29 $89,285.71 $20,714.29
6 0.07 $7,142.86 $96,428.57 $13,571.43
7 0.04 $3,571.43 $100,000.00 $10,000.00
200% double declining:
[tex]\left[\begin{array}{ccccc}Year&Beginning&Dep-Expense&Acc. \: Dep&Ending\\0&-&-&-&110000\\1&110000&31428.57&31428.57&78571.43\\2&78571.43&22448.98&53877.55&56122.45\\3&56122.45&16034.99&69912.54&40087.46\\4&40087.46&11453.56&81366.1&28633.9\\5&28633.9&8181.11&89547.21&20452.79\\6&20452.79&5843.65&95390.86&14609.14\\7&14609.14&4609.14&100000&10000\\\end{array}\right][/tex]
150% accelerated depreaciation:
[tex]\left[\begin{array}{cccccc}Year&Beginning&Dep-Expense&Acc. \: Dep&Ending\\0&-&-&-&110000\\1&110000&23571.43&23571.43&86428.57\\2&86428.57&18520.41&42091.84&67908.16\\3&67908.16&14551.75&56643.59&53356.41\\4&53356.41&11433.52&68077.11&41922.89\\5&41922.89&8983.48&77060.59&32939.41\\6&32939.41&7058.45&84119.04&25880.96\\7&25880.96&15880.96&100000&10000\\\end{array}\right][/tex]
Explanation:
Straight Line:
Acquisition Value 110,000
Salvage Value 10,000
ammount subject to depreciation 100000
Useful Life 7
depreciation per year:
depreciable amount divided by useful life 14285.71
This amount is repeatead throughout the life of the equipment.
SUM OF YEARS FACTORS:
sum of year: 7*8/2 = 28
remaining years over sum of year
1st 7/28
2nd 6/28
3rd 5/28
4th 4/28
5th 3/28
6th 2/28
7th 1/28
Double declining 200%
we have to multiply 1/useful life by the double declining facot
in this case as it is 200% it will be 2.
threfore the carrying vlue is multiplied by 2/7 each year to determinatethe depreciation expense
declining 150%
here we multiply by 1.5 resulting in a factor of 3/14 to obtain the depreciation expense
Answer:
Depreciation schedule using Straight Line Method
Straight Sum of 200 % declining 150 % declining
Line the years balance balance
Method Method Method Method
Year 1 $ 14,285 $ 25,000 $ 31,427 $ 23,570
Year 2 $ 14,285 $ 21,429 $ 22,448 $ 18,520
Year 3 $ 14,285 $ 17,857 $ 16,035 $ 14,551
Year 4 $ 14,285 $ 14,286 $ 11,454 $ 11,433
Year 5 $ 14,285 $ 10,714 $ 8,181 $ 8,984
Year 6 $ 14,285 $ 7,143 $ 5,844 $ 7,059
Year 7 $ 14,285 $ 3,571` $ 4,174 $ 5,546
Explanation:
Computation of Depreciation under the straight Line Method
Cost of equipment $ 110,000
Salvage Value $( 10,000)
Depreciable Basis $ 100,000
Estimated Useful Life 7 years
Depreciation % per year 14.285%
Depreciation per year for each year $ 14,285
Computation of Depreciation under the Sum of the years method
In a sum of the years balance method the no of years recovery life is added together as a denominator and the first year the highest depreciation is charged. The salvage value is considered and the depreciable basis is the same as the Straight Line Method
Sum of the years ( 7 + 6 + 5 + 4 + 3 + 2 + 1) = 28
Depreciable basis $ 100,000
Depreciation Year 1 7/28 * $ 100,000 $ 25,000
Depreciation Year 2 6/28 * $ 100,000 $ 21,429
Depreciation Year 3 5/28 * $ 100,000 $ 17,857
Depreciation Year 4 4/28 * $ 100,000 $ 14,286
Depreciation Year 5 3/28 * $ 100,000 $ 10,714
Depreciation Year 6 2/28 * $ 100,000 $ 7,143
Depreciation Year 6 1/28 * $ 100,000 $ 3,571
Computation of Depreciation under 200 % declining balance method
In a declining balance method the salvage value is not considered and the depreciation is applied on a declining balance on double the straight line method depreciation %
Depreciable Basis - same as cost $ 110,000
Depreciation Rate - 14.285 % * 2 = 28,57 %
Depreciation for Year 1 - $ 110,000 * 28.57 % = $ 31,427
Depreciation Basis for Year 2 $ 78,573
Depreciation for Year 2 - $ 78,573 * 28.57 % = $ 22,448
Depreciation Basis for Year 3 $ 56, 125
Depreciation for Year 3 - $ 56,125 * 28.57 % $ 16,035
Depreciation Basis for Year 4 $ 40,090
Depreciation for Year 4 - $ 40,090 * 28.57 % $ 11,454
Depreciation Basis for Year 5 $ 28,636
Depreciation for Year 5 - $ 28,636 * 28.57 % $ 8,181
Depreciation Basis for Year 6 $ 20,455
Depreciation for Year 6 - $ 20,455 * 28.57 % $ 5,844
Depreciation Basis for Year 7 $ 14,611
Depreciation for Year 7 - $ 14,611 * 28.57 % $ 4,174
Computation of Depreciation under 150 % declining balance method
In a declining balance method the salvage value is not considered and the depreciation is applied on a declining balance on one and half times the straight line method depreciation %
Depreciable Basis - same as cost $ 110,000
Depreciation Rate - 14.285 % * 1.50 = 21,4275 %
Depreciation for Year 1 - $ 110,000 * 21.4275 % = $ 23,570
Depreciation Basis for Year 2 $ 86,430
Depreciation for Year 2 - $ 86,430 * 21.4275 % = $ 18,520
Depreciation Basis for Year 3 $ 67,910
Depreciation for Year 3 - $ 67,910 * 21..4275 % $ 14,551
Depreciation Basis for Year 4 $ 53,359
Depreciation for Year 4 - $ 53,359 * 21.4275 % $ 11,433
Depreciation Basis for Year 5 $ 41,925
Depreciation for Year 5 - $ 41,925 * 21.4275 % $ 8,984
Depreciation Basis for Year 6 $ 32,942
Depreciation for Year 6 - $ 32,944 * 21.4275 % $ 7,059
Depreciation Basis for Year 7 $ 25,883
Depreciation for Year 7 - $ 25,883 * 21.4275 % $ 5,546
In the economy of Cycladia, the total unemployment rate is equal to 11.0 percent, the structural unemployment rate is 2.42.4 percent, and the frictional unemployment rate is 4.4 percent. The cyclical unemployment rate equals ____ percent. (Enter your response rounded to one decimal place.)
The cyclical unemployment rate in the economy of Cycladia is 4.2%.
Explanation:The cyclical unemployment rate in the economy of Cycladia can be calculated by subtracting the sum of structural and frictional unemployment rates from the total unemployment rate.
In this case, the total unemployment rate is 11.0%, the structural rate is 2.4%, and the frictional rate is 4.4%.
So, to find the cyclical unemployment rate, we subtract 2.4% and 4.4% from 11.0%, resulting in a cyclical unemployment rate of 4.2%.
Final answer:
The cyclical unemployment rate in Cycladia is 4.2 percent, calculated by subtracting the sum of the frictional (4.4%) and structural (2.4%) unemployment rates from the total unemployment rate (11.0%).
Explanation:
To calculate the cyclical unemployment rate in Cycladia, we start by understanding that the total unemployment is the sum of frictional, structural, and cyclical unemployment. The total unemployment rate in Cycladia is 11.0 percent, the frictional unemployment rate is 4.4 percent, and the structural unemployment rate is 2.4 percent. To find the cyclical unemployment rate, we subtract the sum of frictional and structural unemployment rates from the total unemployment rate:
Total Unemployment = Frictional Unemployment + Structural Unemployment + Cyclical Unemployment11.0% = 4.4% + 2.4% + Cyclical UnemploymentCyclical Unemployment = 11.0% - (4.4% + 2.4%)Cyclical Unemployment = 11.0% - 6.8%Cyclical Unemployment = 4.2%The cyclical unemployment rate in Cycladia equals 4.2 percent.
Sunland Company had 1570000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021 an additional 1259000 shares were issued for cash. Sunland also had stock options outstanding at the beginning and end of 2021 which allow the holders to purchase 373000 shares of common stock at $15 per share. The average market price of Sunland's common stock was $20 during 2021. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2021?
Answer:
3,202,000 shares.
Explanation:
Diluted earning per share (EPS) is an EPS that is calculated using both the common stock and all convertible securities like convertible preferred stock, convertible debt, equity options, warrants, or convertible bonds which are converted into common stock or equity.
Diluted EPS is different from an EPS that is calculated using only the common stock.
From the common stock, the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2021 are the addition of all the shares obtained as follows:
Number of shares for diluted EPS = 1,570,000 + 1,259,000 + 373,000
= 3,202,000 shares.
Therefore, the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2021 is 3,202,000 shares.