Answer with its Explanation:
Requirement 1. Expected Annual Savings and Expected NPV
As we know that:
Expected Value = Probability P1 * Expected Value E1 + Probability P2 * Expected Value E2 + Probability P3 * Expected Value E3 + ....... Probability Pn * Expected Value En
Here
P1 is 0.3 and E1 is $7000
P2 is 0.4 and E2 is $8500
P3 is 0.3 and E3 is $9500
By putting values, we have
Expected Annual Savings = 0.3 * $7,000 + 0.4 * $8,500 + 0.3 * $9,500 = $8,350
The above amount would be for first four years, hence it must be discounted using the annuity formula to calculate the present value of four annual receipts.
Annuity = [1 - (1 + r)^-n] / r
By putting values, we have:
Annuity = $8,350 * [1 - (1 + 12%)^-4] / 12%
And
Expected NPV = ($25,000) + $8,350 * [1 - (1 + 12%)^-4] / 12%
= $361.87
Requirement 2. Probable Return Percentage
Return Percentage = NPV / Investment = $361.87/ $25,000
= 1.45%
Requirement 3. Associated risk
As we know that
Minimum return = Minimum annual savings – Uniform annual costs
Here
Minimum annual savings are $7,000
Uniform Annual Costs were $8,350
By putting values, we have:
Minimum return = $7,000 – $8,350 = -$1,350 per year
Requirement 4. Risk Amount Percentage
Risk Amount percentage = Minimum Return / Uniform annual costs * 100
Risk Amount percentage = $1,350 / 8,350 * 100 = 16.17%
Mackinac purchased 10% of ABC stock for $100,000 on 1/1/17. For the Year Ended Market Value December 31, 2017 $109,000 December 31, 2018 89,000 December 31, 2019 106,000 The 12/31/19 balance of the Securities Fair Value Adjustment account is:
Answer:
$17,000 debit balance
Explanation:
Purchase price 1/1/17 $100,000
market price 12/31/17 $109,000
market price 12/31/18 $89,000
market price 12/31/19 $106,000
12/31/17
Dr Securities fair value adjustment (ABC stock) 9,000
Cr Unrealized gain/loss on ABC stock 9,000
12/31/18
Dr Unrealized gain/loss on ABC stock 20,000
Cr Securities fair value adjustment (ABC stock) 20,000
12/31/19
Dr Securities fair value adjustment (ABC stock) 17,000
Cr Unrealized gain/loss on ABC stock 17,000
Barb Campbell owns an entertainment company which has increased both its profits and revenues over an extended period of time. Barb's firm is experiencing:
Answer:
sustained growth
Explanation:
Based on this information it seems that Barb's firm is experiencing sustained growth. This term refers to the realistically attainable amount of growth that a company can have without running into problems. If a business grows way too fast it will not be able to fund that growth, but if they do not grow enough then they will amass debt and fail. Sustainable Growth is usually the goal for new companies.
The standard deviation of return on investment A is 25%, while the standard deviation of return on investment B is 20%. If the correlation coefficient between the returns on A and B is −0.260, the covariance of returns on A and B is _________. Multiple Choice –0.2080 –0.0130 0.0130 0.2080
Answer: –0.0130
Explanation:
Correlation given the variance and the standard deviation of the two returns can be calculated by;
Correlation coefficient = Covariance of returns on investment A and B / (Standard deviation of return on investment A * Standard deviation of return on investment B).
Rearranging the formula, Covariance becomes;
Covariance of returns on investment A and B = Correlation coefficient * (Standard deviation of return on investment A * Standard deviation of return on investment B)
Covariance of returns on investment A and B = -0.260 * 0.25 * 0.20
Covariance of returns on investment A and B = –0.0130
You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T-bill with a rate of return of 0.03. What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.08?
Answer:
62.5% and 37.5%.
Explanation:
The computation of percentage is shown below:-
Let us assume the X be the weight in Risky Asset
And, 1 - X is the weight in Risk Free asset.
SO,
Particulars Rate Weight Weighted rate
Stock 11.00% X 0.11X
Risk free assets 3% 1 - X 0.03 - 0.03X
So, the equation will be
0.03 + 0.08 X = 0.08
0.08 X = 0.08 - 0.03
0.08 X = 0.05
X = 0.05 ÷ 0.08
= 0.625
Which of the following is a reason cash flows may differ from accounting income? The total number of units sold will be different for accounting income and cash flows. Depreciation is a tax-deductible expense but is not a cash outlay. Which of the following best describes incremental cash flows? They are the difference between the cash flows the firm will have if it accepts the project versus the cash flows it will have if it rejects the project. Incremental cash flows are not relevant because they will occur whether or not the project is accepted.
Answer:
1. Depreciation is a tax-deductible expense but is not a cash outlay.
2. They are the difference between the cash flows the firm will have if it accepts the project versus the cash flows it will have if it rejects the project.
Explanation:
1. Depreciation as a non-cash outlay is removed from the Net Income when it is calculated for tax purposes. However, when calculating the Net Cash-flow, it is added back because the Cash-flow statement deals with how much actual money the business has and because depreciation does not actually take any money, it would need to be added back in the cash-flows as opposed to Accounting income where it is removed.
2. Incremental Cash-flows get their name from the fact that they will add income to a firm. This cash-flow comes if the company accepts a project as opposed to rejecting it and the cash they get from this increases their cash-flow making it incremental.
To determine the realized return on an investmen, the investor needs to know:________
1. Income received
2. The cost of an investment
3. The sale price of the investment
a. 2 and 3
b. 2 and 4
c. 1 and 4
d. 1 and 3
Answer:
The correct answer all of the above is missing
Explanation:
In order to determine the realized return on investment, for instance, stock, one needs to the income received(dividend) the initial purchase price as well as the sale price of the investment as shown in the formula below:
return on investment=P1-Po+D/Po
P1 is the sale price of investment
Po is the initial cost of investment
D is the income received
On January 1, 2020, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000 for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Instructions
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare a bond amortization schedule.
c. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020.
d. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021.
Answer:
a. Prepare the journal entry at the date of the bond purchase.
January 1, 2020, bonds purchased at a premium
Dr Bonds receivable 300,000
Dr Premium on bonds receivable 22,744.44
Cr Cash 322,744.44
b. Prepare a bond amortization schedule.
Date Interest Cash Premium Unamortized Carrying
revenue received amortization premium value
1/1/20 - -322,744.44 - 22,744.44 277,255.56
1/1/21 32,274.44 36,000 3,725.56 19,018.88 280,981.12
1/1/22 31,901.89 36,000 4,098.11 14,920.77 285,079.23
1/1/23 31,492.08 36,000 4,507.92 10,412.85 289,587.15
1/1/24 31,041.23 36,000 4,958.77 5,454.08 294,545.92
1/1/25 30,545.92 336,000 5,454.08 0 0
c. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020.
Dr Interest receivable 36,000
Cr Interest revenue 32,274.44
Cr Premium on bonds receivable 3,725.56
(322,744.44 x 10%) - (300,000 x 12%) = 32,274.44 - 36,000 = 3,725.56
d. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021.
Dr Interest receivable 36,000
Cr Interest revenue 31,901.89
Cr Premium on bonds receivable 4,098.11
(319,018.88 x 10%) - (300,000 x 12%) = 31,901.89 - 36,000 = 4,098.11
amortization year 3:
(314,920.77 x 10%) - (300,000 x 12%) = 31,492.08 - 36,000 = 4,507.92
amortization year 4:
(310,412.85 x 10%) - (300,000 x 12%) = 31,041.23 - 36,000 = 4,958.77
amortization year 5:
5,454.08
Karim Corp. requires a minimum $9,900 cash balance. If necessary, loans are taken to meet this requirement at a cost of 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $10,300 and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.
July August September
Cash receipts $25,900 $33,900 $41,900
Cash payments 30,850 31,900 33,900
Prepare a cash budget for July, August, and September.
Answer:
Karim Corp.
Cash Budget
For July, August and September
JULY$ AUGUST$ SEPTEMBER$
Beginning cash balance 10,300 9,900 9,900
Cash receipts 25,900 33,900 41,900
Total cash available 36,200 43,800 51,800
Cash payment 30,850 31,900 33,900
Interest on bank loan 0 91 53
Preliminary cash balance 5,350 11,809 17,847
Additional loan(loan repayment) 4,550 -1,909 -2,641
Ending cash balance 9,900 9,900 15,206
Loan Balance
Loan balance - Beginning of month 0 4,550 2,641
Additional loan(loan repayment) 4,550 -1,909 -2,641
Loan balance - End of month 4,550 2,641 0
August Interest on bank loan = 4550 * 2% = $91
September interest on loan = 2641 * 2% = 52.82 = $53
A food manufacturer reports the following for two of its divisions for a recent year.
($millions) Beverage Division Cheese Division
Invested assets, beginning $ 2,662 $ 4,455
Invested assets, ending 2,593 4,400
Sales 2,681 3,925
Operating income 349 634
1. Compute return on investment.
2. Compute profit margin.
3. Compute investment turnover for the year.A food manufacturer reports the following for two of its divisions for a recent year.
Compute return on investment
Return on Investment
Choose Numerator: / Choose Denominator: = Return on Investment
Investment Center / = Return on investment
Beverage / = 0
Cheese / = 0
Compute profit margin.
Profit Margin
Choose Numerator: / Choose Denominator: = Profit Margin
Investment Center / = Profit margin
Beverage / = 0
Cheese / = 0
Compute investment turnover for the year.
Investment Turnover
Choose Numerator: / Choose Denominator: = Investment Turnover
Investment Center / = Investment turnover
Beverage / = 0
Cheese / = 0
Answer:
1. Computation of the Return on Investment:
= Profit/Average Invested Assets x 100
Beverage Division = $349/$2,627.5 x100 = 13.28%
Cheese Division = $634/$4,427.5 x 100 = 14.32%
2. Computation of the profit margin:
= Operating Income/Sales x 100
Beverage Division = $349/$2,681 x 100 = 13%
Cheese Division = $634/$3,925 x 100 = 16.2%
3. Computation of Investment Turnover:
= Sales/Shareholders' Equity + Debt
= Sales/Assets
Beverage Division = $2,681/$2,627.5 = 1 : 1
Cheese Division = $3,925/$4,427.5 = 0.89 : 1
Shareholders' Equity + Debt = Assets
Explanation:
a) Data:
Beverage Division Cheese Division Total
Invested assets, beginning $ 2,662 $ 4,455 $ 7,117
Invested assets, ending 2,593 4,400 6,993
Sales 2,681 3,925 6,606
Operating income 349 634 983
Average invested assets 2,627.5 4,427.5 6,799.5
b) In the balance sheet, the total assets are always equal to the Shareholders' Equity and Total Liabilities. Since they are equal, the value of the assets can be used to substitute for Shareholders' Equity plus total liabilities. We have chosen to use the average invested assets for the Beverage and Cheese divisions as this smoothens the changes during the year.
c) The Return on Investment for this company is a profitability ratio which shows the efficiency of the investments made in the Beverage and Cheese divisions.
d) The profit margin per division is the percentage of the operating profit over the sales revenue for the Beverage and Cheese divisions. It shows how much of the divisional sales revenue was turned into divisional profit. It is also an efficiency measure that demonstrates management's ability to manage the costs of goods and services and the general costs of running the business, in order to generate enough divisional profits for the company.
e) The Investment Turnover compares the divisional sales revenues with the total investments made in generating the revenue. It shows the ability of the company's management to generate revenue from business funding for both the Beverage and Cheese divisions.
Select a problem that a firm might have bringing out a new product or service and discuss how the firm could overcome that problem.
Explanation:
A potentially serious problem for a company is to launch a new product or service on the market without conducting marketing research to investigate the acceptance of its product to its target audience.
Marketing research is an essential tool for a company to collect relevant data and information about what the consumers' needs and desires are, what benefits they expect from a product or service, what features the product should have, the design, the price, and several other essential variables to help the company better understand the market and make the best decisions when launching a new product
Charlie Plumbing Supplies has a return on assets (ROA) of 24%, while the industry average of similar companies is 13%. This means that Charlie Plumbing Supplies' asset turnover is higher than the industry average.
a. True
b. False
Exercise C The marketing department of Specialty Coffees estimates the following monthly demand for espresso in these four price-quantity relationships: Demand 1 9,000 cups at $1.00 per cup 2 8,000 cups at $1.25 per cup 3 6,000 cups at $1.50 per cup 4 4,000 cups at $1.75 per cup The fixed costs of $3,000 per month are not affected by the different price-volume alternatives. Variable costs are $0.25 per cup. What price should Specialty Coffees set for espresso
Answer:
It should price the espresso at $1.25
Explanation:
[tex]\left[\begin{array}{ccccc}&D1&D2&D3&D4\\$Sales Price&1&1.25&1.5&1.75\\$Variable Cost&0.25&0.25&0.25&0.25\\$Margin&0.75&1&1.25&1.5\\$Quantity&9,000&8,000&6,000&4,000\\$Contribution&6,750&8,000&7500&6,000\\$Fixed Cost&3,000&3,000&3,000&3,000\\$Income&3,750&5,000&4,500&3,000\\\end{array}\right][/tex]
The best Income is generated at the price of 1.25 dollar
Therefore, this is the amount to Specialty Coffees set for espresso.
Ayala Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. Both the traditional and the activity-based costing systems include direct materials and direct labor costs Total Costs
Products Sales Revenue Traditional ABC
Product 540X $201,000 $56,000 $45,600
Product 137Y 159,000 55,000 25,000
Product 249S 89,000 15,000 55,400
Required:
1. For each product line, compute operating income using the traditional costing system
2. Compute operating income using the activity-based costing system
Answer:
1) Part 1. Operating Income = Revenue - Operating cost
=201,000 - 56,000
=$145,000
Part 2. Operating Income = Revenue - Operating cost
= 159,000 - 55,000
= $104,000
Part 3. Operating Income = Revenue - Operating cost
= 89,000 - 15,000
=$74,000
2. Part 1. Operating Income = Revenue - Operating cost
=201,000 - 45,600
=$155,400
Part 2. Operating Income = Revenue - Operating cost
=159,000 - 25,000
=$134,000
Part 3. Operating Income = Revenue - Operating cost
=89,000 - 55,400
=$33,600
If the dividend yield for year one is expected to be 5% based on the current price of $50, what will year three dividend (DIV3) be if dividends grow at a constant 4%
Answer:
Div₃ = $2.81
Explanation:
dividend yield = current dividend / current stock price
0.05 = current dividend / $50
current dividend = $50 x 0.5 = $2.50
Div₀ = $.250
Div₁ = $2.50 x 1.04 = $2.60
Div₂ = $2.60 x 1.04 = $2.704 = $2.70
Div₃ = $2.704 x 1.04 = $2.81
On January 1, 2014, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date. Sales Company's stockholders' equity consisted of common stock, $100,000; other contributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of net assets acquired because the recorded cost of Sales Company's land was significantly less than its fair value.
During 2014 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Company used the partial equity method to record its investment in Sales Company.
Required:
1. Prepare the investment-related entries on Pert Company's books for 2014.
2. Prepare the working paper eliminating entries for a working paper on December 31, 2014.
Answer and Explanation:
The journal entries are shown below:
a. For investment related entries
Investment in sales Dr $350,000
To cash $350,000
(being the investment is recorded)
Investment in sales Dr ($148,000 × 85%) $125,800
To Subsidiary income $125,800
(Being the investment in sales is recorded)
Cash Dr $42,500
To Dividend income $42,500
(Being the dividend income is recorded)
b. For work paper eliminating entries
Equity income ($148,000 × 85%) $125,800
To Dividend $42,500
To investment in sales $83,300
(Being the equity income is recorded)
Common stock Dr $100,000
Other contributed capital Dr $40,000
Retained earnings Dr $140,000
Difference between implied and book value Dr $131,765 (Bal figure)
To Investment in S Company $350,000
To Non controlling interest $61,765 ($350,000 ÷ 0.85 × 0.15)
(Being the consolidated items are recorded)
Land Dr $131,765
To Difference between implied and book value Dr $131,765
(Being the land is recorded)
Working note:
Particulars Parent share Non-conrolling interest Total value
Purchase price
& implied value $350,000 $61,765 $411,765
Less:
Book value -$238,000 -$42,000 -$280,000
Difference
amount $112,000 $19,765 $131,765
Less:
Land value -$112,000 -$19,765 -$131,765
Balance $0 $0 $0
a. Galaxy Sales has sales of $746,700, cost of goods sold of $603,200, and inventory of $94,300. How long on average does it take the firm to sell its inventory
Answer:
days of inventory on hand if 360 days is used = 360 / 6.396607 = 56.28 days
days of inventory on hand if 365 days is used = 365 / 6.396607 = 57.06 days
Explanation:
We are to determine the days of inventory on hand
days of inventory on hand = number of days in a period / inventory turnover
inventory turnover = cost of goods sold / inventory - $603,200 / $94,300 = 6.396607
days of inventory on hand if 360 days is used = 360 / 6.396607 = 56.28 days
days of inventory on hand if 365 days is used = 365 / 6.396607 = 57.06 days
The intrinsic value of CSR sees it as an opportunity that can maximize core competencies and identify new competitive ______.
Answer:
"Advantages" is the correct answer.
Explanation:
Intrinsic value can be calculated of what might be valuable of such an object. CSR can indeed be described as combining ethical principles that support cultures, individuals as well as the community with either the commercial management of an organization, a collaborative effort by such a financial institution to based on the assessment that affects mankind.Assume that we are in the MM world. The beta of an all-equity firm is 1.4. Suppose the firm changes its capital structure to 40 percent debt and 60 percent equity. What is the equity beta of the levered firm
Answer:
2.3
Explanation:
Levered Beta = Unlevered Beta x (1+D/E)
D/E = Debt-to-Equity Ratio
1.4 x (1 + 04 / 0.6) = 1.4 x 1.667 = 2.3
Fortune Enterprises is an all-equity firm that is considering issuing $13.5 million of perpetual debt. The interest rate is 10%. The firm will use the proceeds of the bond sale to repurchase equity. Fortune distributes all earnings available to stockholders immediately as dividends. The firm will generate $3 million of earnings before interest and taxes (EBIT) every year into perpetuity. Fortune is subject to a corporate tax rate of 40%. Suppose the personal tax rate on interest income is 55%, and the personal tax rate on equity income is 20%.
What is the annual after-tax cash flow to debt holders under each plan in Q7?
A. Debt holders get $0 mil. under the unlevered plan vs. 1.2 mil. under the levered plan
B. Debt holders get $1.2 mil. under the unlevered plan vs. 0.66 mil. under the levered plan
C. Debt holders get $0 mil. under the unlevered plan vs. 0.66 mil. under the levered plan
D. Debt holders get $0 mil. under the unlevered plan vs. 0.6075 mil. under the levered plan
Answer:
D. Debt holders get $0 mil. under the unlevered plan vs. 0.6075 mil. under the levered plan
Explanation:
interests paid to debt holders = $13,500,000 x 10% = $1,350,000
generally, interest revenue is taxed as ordinary revenue = corporate income tax rate (if debt holder is a business) or personal income tax (if debt holder is an individual).
under the first plan, debt holders get nothing because there is no outstanding debt since the company is an all equity firm.
under the second plan, if the personal tax rate on interest income is 55%, which is really high, the debt holders will earn $1,350,000 x (1 - 55%) = $607,500
Bob is evaluating a bond issue to determine the right price for the bond. In his evaluation, he gathers the following information:
N = 8 years INT = .025 or 2.5% PMT = $25 FV = $1,000 (par value)
What is the above bond issue worth in today's dollars?
a. $1,000
b. $1,181.63
c. $1,200.50
d. None of the above
Answer:
The price of the bond is $1000. Thus, option a is the correct answer.
Explanation:
The price of a bond is calculated using the present value of the interest payments made by the bond, which is in the form of an annuity, plus the present value of the face value of the bond. The present value is calculated by discounting the annuity of interest and the face value by the YTM or yield to maturity. In case YTM is not provided, we assume that it is same as or equal to the coupon rate paid by the bond.
The formula for the price of the bond is attached.
Bond Price = 25 * [(1 - (1+0.025)^-8) / 0.025] + 1000 / (1+0.025)^8
Bond Price = $1000
Kiley Corporation had these transactions during 2017 Analyze the transactions and indicate whether each transaction is an operating activity, investing acivity, financing activity, ar noncash investing and financing activity
(a) Purchased a machine for $30,000, giving a long term note in exchange
(b) Issued $50,00D par value common stock for cash. 38%
(c) Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000.
(d) Declared and paid a cash dividend of $13,000.
e) Sold a long-term investment with a cost of $15,000 for $15,000 cash
(f) Collected $16,000 from sale of goads.
(g) Paid $18,00D to suppliars.
Answer:
Operating Activities in a business's Cash-flow statement involve activities that have to do with the core business of firm which include the provision of its goods or service to the market. An example would be Revenue.
Investing Activities involve activities related to long term assets as well as securities related to other company's such as ownership of other company stocks and bonds.
Financing Activities refer to how the business raises cash to conduct its operations and this includes Equity transactions (including dividends) and Debt.
Non-cash investing and financing activity are Investing or Financing activities that are done by exchanging one for the other devoid of the use of cash.
A) Purchased a machine for $30,000, giving a long-term note in exchange. - Non-cash Investing and Financing activity
B) Issued $50,000 par value common stock for cash. - Financing Activities
C) Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000. - Non-cash Investing and Financing activity
D) Declared and paid a cash dividend of $13,000. - Financing Activities
E) Sold a long-term investment with a cost of $15,000 for $15,000 cash. - Investing Activities
F) Collected $16,000 from sale of goods. - Operating Activities
G) Paid $18,000 to suppliers. - Operating Activities
Functioning as a Bill of Rights for Americans with all types of disabilities, the Worker Adjustment and Retraining Notification Act prohibits discrimination in advancement, discharge, compensation, training, and other terms and conditions of employment.
a. True
b. False
Answer:
***********************************************************
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I think it can be A.true
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Exhibit 24-4 Price Quantity Demanded Total Fixed Cost Total Variable Cost Total Revenue Total Cost Marginal Revenue Marginal Cost $50 0 $8 $0 (C) (H) 45 1 8 20 (D) (I) (L) (R) 40 2 (A) 30 (E) (J) (M) (S) 35 3 8 55 105 63 (N) (T) 30 4 8 (B) (F) 93 (P) (U) 25 5 8 125 (G) (K) (Q) (V) Refer to Exhibit 24-4. What dollar amounts go in blanks (F), (G), (H), (I), and (J), respectively
Answer:
F = Total Revenue at 4 units
= Price * Quantity demanded
= 30 * 4
= $120
G = Total Revenue at 5 units
= Price * Quantity demanded
= 30 * 5
= $150
H = Total Cost at 0 units
= Fixed Costs + Variable Costs
= 8 + 0
= $8
I = Total Cost at 1 unit
= Fixed Costs + Variable Costs
= 8 + 20
= $28
J = Total Cost at 2 units
= Fixed Costs + Variable Costs
Fixed costs are fixed at $8 so (A) is $8
= 8 + 30
= $38
Pinkin Inc. needs to determine a price for a new phone model. Pinkin desires a 20% markup on the total cost of the phone. Pinkin expects to sell 43,000 phones. Additional information is as follows:
Variable product cost per unit $82
Variable administrative cost per unit $66
Total fixed overhead $110,000
Total fixed administrative $90,000
Using the total cost method what price should Pinkin charge?
a. $178.08
b. $190.00
c. $152.08
d. $170.92
e. $188.75
Answer: $183.18
Explanation:
Pinkin aims to make a 20% markup on the total cost of selling the product.
Costs
Fixed Cost Per Unit
= (Total fixed overhead + Total fixed administrative) / no. of units
= (110,000 + 90,000)/43,000
= $4.65
Variable Costs Per Unit
= Variable product cost per unit + Variable administrative cost per unit
= 82 + 66
= $148
Total Cost per unit = 4.65 + 148
= $152.65
Price Pinkin should charge
= Total Cost ( 1 + Markup)
= 152.65 ( 1 + 20%)
= $183.18
Note; Answer is not in the options. Either Options are for another question or question has wrong details.
On January 1, 20X0, Hunter Corporation issued 8,000 of its $15 par value shares to acquire 45 percent of the shares of Arrow Manufacturing. Arrow Manufacturing's balance sheet immediately before the acquisition contained the following items:
ARROW MANUFACTURING
Balance Sheet
January 1, 20X0
Book Value Fair Value
Assets
Cash and Receivables $36,000 $36,000
Land 70,000 80,000
Buildings & Equipment (net) 126,000 156,000
Patent 80,000 80,000
Total Assets 312,000
Liabilities & Equities
Accounts Payable $126,000 126,000
Common Stock 138,000
Retained Earnings 48,000
Total Liabilities & Equities $312,000
On the date of the stock acquisition, Hunter's shares were selling at $40, and Arrow Manufacturing's buildings and equipment had a remaining economic life of 5 years. The amount of the differential assigned to goodwill is not impaired.
In the two years following the stock acquisition, Arrow Manufacturing reported net income of $85,000 and $55,000 and paid dividends of $27,000 and $45,000, respectively. Hunter used the equity method in accounting for its ownership of Arrow Manufacturing.
a. Prepare the entry recorded by Hunter Corporation at the time of acquisition.
b-1. Prepare the journal entries recorded by Hunter during 20X0 related to its investment in Arrow Manufacturing.
b-2. Prepare the journal entries recorded by Hunter during 20X1 related to its investment in Arrow Manufacturing.
c.What balance will be reported in Hunter’s investment account on December 31, 20X1?
Answer:
a. Entry recorded by Hunter Corporation at the time of acquisition.
DR Investment in Arrow Manufacturing (8,000 * $40) $320,000
CR Common Stock (8,000 * 15) $120,000
CR Additional Paid-In Capital $200,000
(To record acquisition of Arrow Manufacturing stock)
b-1. Journal entries recorded by Hunter during 20X0 related to its investment in Arrow Manufacturing.
DR Investment in Arrow Manufacturing (8,000 * $40) $320,000
CR Common Stock (8,000 * 15) $120,000
CR Additional Paid-In Capital $200,000
DR Cash (27,000 * 45%) $12,150
CR Investment in Arrow Manufacturing Stock $12,150
(To record dividends from Arrow Manufacturing)
DR Investment in Arrow Manufacturing Stock ( $85,000 x 0.45) $38,250
CR Income from Arrow Manufacturing $38,250
(To record equity income from Arrow Manufacturing)
DR Income from Arrow Manufacturing $2,700
CR Investment in Arrow Manufacturing Stock $2,700
(To amortize differential assigned to buildings and equipment)
Working
Investment in Arrow Stock
(156,000 -126,000)*0.45) / 5 years remaining economic life.
b-2. The journal entries recorded by Hunter during 20X1 related to its investment in Arrow Manufacturing.
DR Cash (45,000 * 45%) $20,250
CR Investment in Arrow Manufacturing Stock $20,250
(To record dividends from Arrow Manufacturing)
DR Investment in Arrow Manufacturing Stock ( $55,000 x 0.45) $24,750
CR Income from Arrow Manufacturing $24,750
(To record equity income from Arrow Manufacturing)
DR Income from Arrow Manufacturing $2,700
CR Investment in Arrow Manufacturing Stock $2,700
(To amortize differential assigned to buildings and equipment)
c.
Purchase price on January 1, 20X0 $320,000
20X0: Income from Arrow Manufacturing
(38,250 - 2,700) $35,550
Less: Dividends received -12,150
Investment account balance, December 31, 20X0 $343,400
20X1: Income from Arrow Manufacturing
($24,750 - $2,700) $22,050
Dividends received -20,250
Investment account balance, December 31, 20X1 $345,200
Two college students share an apartment and split the cost of heating, electricity, and rent. They decide to include one more roommate and divide heat, electricity, and rent costs three ways instead of two ways.
If adding the third roommate reduces the amount of money they each pay for utilities and rent each month, this can be described as:_____________
Answer:
increasing returns to scale.
Explanation:
The returns to scale mean the rate at which there is change in the output when the inputs are changed by a similar factor
While on the other hand, an increasing return to scale refers that if there is an increase in input so by a larger proportion, the output is also increased as compared with the input
Therefore according to the given situation, since by adding the third roommate, it declines the amount of money by each one in respect to rent, utilities so it describes the increasing return to scale
Allowance for Doubtful Accounts has a debit balance of $441 at the end of the year (before adjustment), and Bad Debt Expense is estimated at 3% of sales. If net credit sales are $903,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is a.$26,649 b.$27,531 c.$27,090 d.$441
Answer: $27,090
Explanation:
From the question, we are informed that the allowance for doubtful accounts has a debit balance of $441 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of sales and that the net credit sales are $903,000.
The amount of the adjusting entry to record the estimate of the uncollectible accounts will be 3% of $903,000. This will be:
= 3% × $903,000
= 3/100 × $903,000
= 0.03 × $903,000
= $27,090
"Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials $34, direct labor $27, variable manufacturing overhead $15, fixed manufacturing overhead $43, variable selling and administrative expenses $20, and fixed selling and administrative expenses $28. Its desired ROI per unit is $31. Compute the markup percentage using absorption-cost pricing. (Round answer to 2 decimal places, e.g. 10.50%.)"
Answer:
Mark- up = 26.05%
Explanation:
Absorption costing is method of costing where overheads are charged to units produced using volume-based bases. e.g machine hours, labour hours e.t.c. Units are valued using full cost per unit
Full cost per unit= Direct material cost + direct labor cost + variable manufacturing overhead + fixed manufacturing overhead
Note that the selling and administrative expenses are period cost which are not to be considered as production cost, hence they are excluded.
Full cost per unit= 34 + 27 +15 +43 = 119
ROI per unit/profit per unit = 31
Mark- up under absorption costing is profit expressed as a percentage of of the full cost.
Mark- up = 31/119 × 100 = 26.05%
Mark- up = 26.05%
Barnes Company uses a job order cost system. The following data summarize the operations related to production for October:
October 1 Materials purchased on account, $315,500.
2 Materials requisitioned, $290,100, of which $8,150 was for general factory use.
31 Factory labor used, $489,500, of which $34,200 was indirect.
31 Other costs incurred on account for factory overhead, $600,000; selling
expenses, $150,000; and administrative expenses, $100,000.
31 Prepaid expenses expired for factory overhead were $18,000; for selling
expenses, $6,000; and for administrative expenses, $5,000.
31 Depreciation of office building was $30,000; of office equipment, $7,500;
and of factory equipment, $60,000.
31 Factory overhead costs applied to jobs, $711,600.
31 Jobs completed, $1,425,000.
31 Cost of goods sold, $1,380,000.
Required:
Journalize the entries to record the summarized operations.
Answer:
October 1
Raw Materials Inventory $315,500 (debit)
Accounts Payable $315,500 (credit)
October 2
Work In Process : Direct Materials $281,950 (debit)
Work In Process : Indirect Materials $8,150 (debit)
Raw Materials $290,100 (credit)
October 31
Work In Process : Direct Labor $455,300 (debit)
Work In Process : Indirect Labor $34,200(debit)
Salaries Payable $489,500 (credit)
October 31
Work In Process : Factory Overhead $600,000 (debit);
Selling expenses $150,000 (debit)
Administrative expenses, $100,000 (debit)
Accounts Payable $850,000 (credit)
October 31
Factory Overhead $18,000 (debit);
Selling Expenses, $6,000 (debit)
Administrative expenses, $5,000 (debit)
Prepaid Factory Overhead were $18,000 (credit);
Prepaid Selling Expenses, $6,000 (credit)
Prepaid Administrative expenses, $5,000 (credit)
October 31
Depreciation : office building $30,000 (debit)
Depreciation : office equipment, $7,500 (debit)
Work In Process - Depreciation : factory equipment, $60,000 (debit)
Accumulated Depreciation : Buildings $30,000 (credit)
Accumulated Depreciation : Equipment $67,500 (credit)
October 31
Work In Process : Factory Overheads $711,600 (debit)
Factory Overheads $711,600 (credit)
October 31
Finished Good $1,425,000 (debit)
Work In Process Account $1,425,000 (credit)
October 31
Cost of Goods Sold $1,380,000 (debit)
Finished Goods $1,380,000 (credit)
Explanation:
Manufacturing Costs are accumulated in the Work In Process Account.
When Jobs are completed, De-recognize the cost of jobs completed from Work In Process Account into the Finished Goods Account.
When Jobs are Sold, De-recognize the cost of jobs sold from the Finished Goods Account into the Trading Account.
The Unadjusted Trial Balance columns of a work sheet total $97,500. The Adjustments columns contain entries for the following:
Office supplies used during the period, $5,700.
Expiration of prepaid rent, $2,050.
Accrued salaries expense, $1,850.
Depreciation expense, $2,150.
Accrued service fees receivable, $1,750.
The Adjusted Trial Balance columns total is:
Answer:
The total of adjusted trial balance is $103,750
Explanation:
ADJUSTMENT EFFECT ON TRIAL BALANCE
Office supplies used during the period No change in total balance
Expiration of prepaid rent No change in total balance
Accrued salaries expense Increase in total balance
Depreciation expense Increase in total balance
Accrued service fees receivable Increase in total balance
Hence, Adjusted trial balance total = Unadjusted work sheet total + Accrued salaries expense + Depreciation expense +Accrued service fees receivable
$97,500 + $1,850 + $2,150 + $1,750
= $103,750
Thus, the total of adjusted trial balance is $103,750.
Based on the information given the Adjusted Trial Balance columns total is: $103,250.
Adjusted trial balance
Unadjusted work sheet total $97,500
Add Accrued salaries expense $1,850
Add Depreciation expense $2,150
Add Accrued service fees receivable $1,750
Total Adjusted Trial Balance $103,250
($97,500 + $1,850 + $2,150 + $1,750)
Inconclusion the Adjusted Trial Balance columns total is: $103,250.
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