Answer:
about $4,100 a month
Explanation:
Forest Company sells a product for $120 per unit. The variable cost is $50 per unit, and fixed costs are $392,000. Determine (a) the break-even point in sales units and (b) the break-even point in sales units required for the company to achieve a target profit of $152,880.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Selling price per unit= $120
Unitary variable cost= $50
Fixed costs= $392,000
First, we need to calculate the break-even point in units and dollars, using the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 392,000/ (120 - 50)
Break-even point in units= 5,600 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 392,000 / (70/120)
Break-even point (dollars)= $672,000
Now, we need to determine the number of units to be sold for the desired profit of $152,880:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (392,000 + 152,880) / 70
Break-even point in units= 7,784 units
Because orders in organizational buying are typically much larger than in consumer buying, buyers must often __________ when the order is above a specific amount, such as $5,000.
Answer:
get competitive bids from at least three prospective suppliers
Explanation:
In these specific situations, organizational buyers must often get competitive bids from at least three prospective suppliers. This is because due to the fact that the purchasing amounts are very large there can also be large amounts of money saved by saving a couple of percentages on a purchase. Also since the seller can make large profits from a large order like this one, most suppliers place competitive bids in order to win the transaction.
________ refers to the idea that policy-makers have formulated and implemented policy that addresses problems in an optimal or efficient manner.
Answer:
Rationality.
Explanation:
Rationality refers to the idea that policy-makers have formulated and implemented policy that addresses problems in an optimal or efficient manner.
This ultimately implies that, policy-makers act rationally in order to achieve best goals, objectives and interests of the people effectively and efficiently.
For instance, in a bid to mitigate or eliminate global warming, policy-makers developed and enacted the pollution prevention act. This would limit or regulate the amount of pollutants that is being emitted by an organization in a particular geographical location as well as improving environmental sanitation and reducing environmental degradation.
Principal-principal conflicts occur within one class of principals, such as a disagreement among certain majority stockholders and other majority stockholders.
a. True
b. False
Answer: False
Explanation:
The principal to principal conflict typically exists between the two main categories of shareholders, which are the controlling shareholders and the second one which is the minority shareholders
Therefore, the analysis in the question that the principal-principal conflicts occur within one class of principals, such as a disagreement among certain majority stockholders and other majority stockholders is not true.
Mason Automotive is an automotive parts company that sells car parts and provides car service to customers. This is Mason's first year of operations and they have hired you as their CPA to prepare the income statement and balance sheet for their company. As such, January 1st , 2018 was the first day that Mason was in business. For the month of January, record all the necessary journal entries for transactions that occurred during the month. In addition, please prepare all necessary adjusting journal entries as of the end of the month.
From the information below, please fill out the "journal entries tab" for all the necessary journal entries. Furthermore, please complete the "T-Accounts" tab for the individual accounts so that the trial balance tab can be updated (automatically). I prepared the first journal entry for you in the journal entries tab and T-Accounts tab. Ensure you label the entries similar to how I have shown in Entry #1.
Once all entries are recored and the T-Accounts tab is updated, please prepare the financial statements (income statement and balance sheet) for the month of January.
Journal Entry #1
Mason Automotive sells 10,000,000 shares at $5 par for $30 on January 1st, 2018.
Journal Entry #2
Ed Mason, the CEO, hires 3,000 employees, whom will receive a combined salary of $12 Million on a monthly basis. The employees started on January 1st and will be paid for the month of January on February 5th. Employee's withholdings are as follows: 10% for federal income taxes 5% for state income taxes and 7% for FICA. Record the necessary entry as of January 1st, 2018.
Journal Entry #3
Mason Automotive issues a bond payable on January 1st, 2018 with a face value of $200 Million at 102. The bond will have a useful life of 5 years and interest is paid out monthly based on a rate of 5% APR. Record the necessary journal entry as of January 1st 2018.
(Note: Assume straight line amortization for the bond discount/premium).
Journal Entry #4
Mason Automotive purchased $80 Million dollars worth of inventory on account on January 2nd, 2018. Mason notes that it will use a perpetual inventory system to track inventory.
Journal Entry #5
Mason Automotive purchases fixed assets of $120 Million that will have a useful life of 10 years and no salvage value on January 2, 2018. $20 million was paid with cash with the remaining balance on account. These assets are depreciated using the straight-line method.
Journal Entry #6
On January 2nd, Mason Automotive shipped an order to Corby Panther Company. The shipping terms were FOB shipping point and the value of the order was $50 Million and the inventory cost was $20 Million. Assume that this sale was made on account.
Journal Entry #7
On January 3rd, Mason Automotive receives $75 Million advance payment from a customer, Michael Scott Paper Company, to manufacture 7,500 cars.
Journal Entry #8
Mason Automotive buys a patent from Apple for $24 Million on January 3rd, 2018. The patent has a legal life of 20 years, but a useful life of 10 years. Record the necessary entry as of January 3rd, 2018. Assume the patent was purchased using cash.
Journal Entry #9
Mason Automotive purchased $2 Million dollars worth of supplies January 4th, 2018. $1.5 Million was paid with cash with the remaining balance on account.
Journal Entry #10
Mason Automotive pre-pays for Rent Expense for the next year of $12 Million and Insurance Expense of $2.4 Million on January 4th, 2018
Journal Entry #11
On January 20th, Mason Automotive decides to purchase 2,000,000 shares of Treasury stock at $25 per share.
Month End Adjusting Entries
There are 10 applicable adjusting entries that need to be made as of the end of the month based on the information provided above. When recording these adjusting entries consider the following facts:
1) Interest expense will be recorded as a operating expense items on the income statement.
2) Record the necessary adjusting entries related to pre-paid expense as separate journal entries.
3) When reviewing the supply room as of the end of the month, Mason Automation noted that it had $1.5 Million worth of supplies still on hand.
4) As of the end of the month, 4,000 cars were completed for Michael Scott Paper Company and the performance obligation had been met on those 4,000 cars. As such, revenue was determined to be earned on those 4,000 vehicles and it was noted that each vehicle costed $8,000 to manufacture.
5) Mason Automation uses the balance sheet approach in estimating the allowance for doubtful accounts as of the end of the period. Based on industry average, Mason noted that it will use 5% of receivables as an estimation.
6) When preparing the balance sheet, close out net income to retained earnings.
Answer:
1) Mason Automotive sells 10,000,000 shares at $5 par for $30 on January 1st, 2018.
Dr Cash 300,000,000
Cr Common stock 50,000,000
Cr Additional paid in capital 250,000,000
2) Ed Mason, the CEO, hires 3,000 employees, whom will receive a combined salary of $12 Million on a monthly basis. The employees started on January 1st and will be paid for the month of January on February 5th. Employee's withholdings are as follows: 10% for federal income taxes 5% for state income taxes and 7% for FICA. Record the necessary entry as of January 1st, 2019.
No journal entry required
Adjusting entry:
January 31, 2018, wages expense
Dr Wages expense 12,000,000
Dr FICA taxes expense 840,000
Cr Federal income taxes withheld payable 1,200,000
Cr State income taxes withheld payable 600,000
Cr FICA taxes withheld payable 840,000
Cr FICA taxes payable 840,000
Cr Wages payable 9,360,000
3) Mason Automotive issues a bond payable on January 1st, 2018 with a face value of $200 Million at 102. The bond will have a useful life of 5 years with an interest payment of 5% (Annual Percentage Rate) due at the end of the month. Record the necessary journal entry as of January 1st, 2018.
Dr Cash 204,000,000
Cr Premium on bonds payable 4,000,000
Cr Bonds payable 200,000,000
(Note: When considering the amortization of the discount or premium, assume the straight line method is used).
Adjusting entry
January 31, 2018, interest expense
Dr interest expense 766,666.66
Dr Premium on bonds payable 66,666.67
Cr Interest payable 833,333.33
4) Mason Automotive purchased $80 Million dollars worth of inventory on January 2nd, 2018. $80 Million was paid with cash with the remaining balance on account. Mason notes that it will use a perpetual inventory system to track inventory.
Dr Inventory 80,000,000
Cr Accounts payable 80,000,000
5) Mason Automotive purchases fixed assets of $120 Million that will have a useful life of 10 years and no salvage value on January 2, 2018. $20 million was paid with cash with the remaining balance on account. These assets are depreciated using the straight-line method.
Dr Fixed assets 120,000,000
Cr Cash 20,000,000
Cr Accounts payable 100,000,000
Adjusting entry:
January 31, 2019, depreciation expense
Dr Depreciation expense 1,000,000
Cr Accumulated depreciation - fixed assets 1,000,000
6) On January 2nd, Mason Automotive shipped an order to Corby Panther Company. The shipping terms were FOB shipping point and the value of the order was $50 Million and the inventory cost was $20 Million. Assume that this sale was made on account.
Dr Accounts receivable 50,000,000
Cr Sales revenue 50,000,000
Dr Cost of goods sold 20,000,000
Cr Inventory 20,000,000
Adjusting entry:
January 31, 2018, allowance for doubtful accounts (5%)
Dr Bad debt expense 2,500,000
Cr Allowance for doubtful accounts 2,500,000
7) On January 3, Mason Automotive receives $75 Million advance payment from a customer, Michael Scott Paper Company, to manufacture 7,500 cars.
Dr Cash 75,000,000
Cr Deferred revenue 75,000,000
Adjusting entry:
January 31, 2019, 4,000 cars were finished and delivered
Dr Deferred revenue 40,000,000
Cr Sales revenue 40,000,000
Dr Cost of goods sold 32,000,000
Cr Inventory: finished cars 32,000,000
8) Mason Automotive buys a patent from Apple for $24 Million on January 3rd, 2018. The patent has a legal life of 20 years, but a the useful life of 10. Record the necessary entry as of January 3rd, 2018. Assume the patent was purchased using cash.
Dr Patent 24,000,000
Cr Cash 24,000,000
Adjusting entry:
January 31, 2018, patent amortization expense
Dr Patent amortization expense 200,000
Cr Patent 200,000
9) Mason Automotive purchased $2 Million dollars worth of supplies on account on January 4, 2018.
Dr Supplies 2,000,000
Cr Cash 1,500,000
Cr Accounts payable 500,000
Adjusting entry
January 31, 2018, supplies expense
Dr Supplies expense 500,000
Cr Supplies 500,000
10) Mason Automotive pre-pays for Rent Expense for the next year of $12 Million and Insurance Expense of $2.4 Million on January 4, 2018.
Dr Prepaid rent 12,000,000
Dr Prepaid insurance 2,400,000
Cr Cash 14,400,000
Adjusting entries:
January 31, 2019, rent expense
Dr Rent expense 1,000,000
Cr Prepaid rent 1,000,000
January 31, 2019, insurance expense
Dr Insurance expense 200,000
Cr Prepaid insurance 200,000
11) On January 20th, Mason Automotive decides to purchase 2,000,000 shares of Treasury stock at $25 per share.
Dr Treasury stock 50,000,000
Cr Cash 50,000,000
Closing journal entries:Dr Sales revenue 90,000,000
Cr Income summary 90,000,000
Dr Income summary 71,006,66.66
Cr Wages expense 12,000,000
Cr FICA taxes expense 840,000
Cr interest expense 766,666.66
Cr Depreciation expense 1,000,000
Cr Cost of goods sold 52,000,000
Cr Bad debt expense 2,500,000
Cr Patent amortization expense 200,000
Cr Supplies expense 500,000
Cr Rent expense 1,000,000
Cr Insurance expense 200,000
Dr Income summary 18,993,333.34
Cr Retained earnings 18,993,333.34
Answer:
i think this is correct
Explanation:
A classified income statement has four major sections—operating revenues, cost of goods sold, operating expenses, and non-operating revenues and accounts receivables.
A. True
B. False
Answer: False
Explanation:
The statement in the question that a classified income statement has four major sections which are the operating revenues, cost of goods sold, operating expenses, and non-operating revenues and accounts receivables is not true.
It should be noted that a classified income statement is made up of the revenue, the expenses and the non operating revenues and expenses.
On September 3, 20X8, Jackson Corporation purchases goods for a U.S. dollar equivalent of $17,000 from a Swiss company. The transaction is denominated in Swiss francs (SFr). The payment is made on October 10. The exchange rates were
Answer:
A.
DR Foreign Currency Transaction loss 1,000
CR Accounts Payable (SFr) $1,000
Explanation:
When the transaction was agreed on September 3, 20X8, the exchange rate was;
$0.85 : 1 franc
Therefore the $17,000 was valued at;
= 17,000/0.85
= 20,000 francs
When the transaction was paid for however, on October 10, the Franc had gained on the dollar by;
= 0.9 - 0.85
= $0.05
This means that the dollar got weaker by $0.05 so the company made a loss of
= 20,000 francs * 0.05
= 1,000 francs
This will be recorded as;
DR Foreign Currency Transaction loss 1,000
CR Accounts Payable (SFr) $1,000
Which of the following companies use a mass customization approach? Dell Align Technology Arnold Palmer hospital Frito-Lay Dell and Align Technology
Answer: Dell and Align technology
Explanation:
Mass customization, is used in marketing and it is a term that describes using computer aided manufacturing systems that are flexible in order make custom output.
Align Technology and Dell uses mass customization method. This brings about efficiency and low cost.
Baj Corporation uses a predetermined overhead rate base on machine-hours that it recalculates at the beginning of each year. The company has provided the following data for the most recent year. Estimated total fixed manufacturing overhead from the beginning of the year $ 534,000 Estimated activity level from the beginning of the year 30,000machine-hours Actual total fixed manufacturing overhead $ 487,000 Actual activity level 27,400machine-hours The predetermined overhead rate per machine-hour would be closest to:__________
A) $17.80
B) $19.49
C) $16.23
D) $17.77
Answer:
A) $17.80
Explanation:
The computation of the predetermined overhead rate per machine hour is shown below:
= Estimated total fixed manufacturing overhead from the beginning of the year ÷ estimated activity level from the beginning year machine hours
= $534,000 ÷30,000 machine hours
= $17.80
We simply applied the above formula so that the predetermined overhead rate could come
Which of the following is true for a company that doesn't adjust their WACC for project risk? a. The company would accept more average risk projects than they should otherwise. b. The company's risk would decrease. c. The company would accept more less than average risk projects than they should otherwise. d. The company would accept more riskier than average projects than they should otherwise.
Answer: d. The company would accept more riskier than average projects than they should otherwise.
Explanation:
A company's Weighted Average Cost of Capital can enable it know the calibre of risk to accept from new project because it shows the business risk of funding current business operations.
If a project will bring more risk to the company, the WACC should be adjusted so that the company will get a fair rate of return from the new project. If they do not adjust the new project for risk, not only will the company not get a fair return but they might also accept riskier projects because they will accept projects that they think have a lower risk than their WACC even though they are higher because they did not adjust their WACC.
Blackwelder Factory produces two similar products-small lamps and desk lamps. The total plant overhead budget is $667,000 with 465,000 estimated direct labor hours. It is further estimated that small lamp production will require 299,000 direct labor hours and desk lamp production will need 166,000 direct labor hours. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 249,000. a.$356,070 b.$800,936 c.$1,000,500 d.$310,930
Answer:
Allocated MOH= $356,070
Explanation:
Giving the following information:
Estimated overhead= $667,000
Estimated direct labor hours= 465,000
Actual direct labor hours for lamp desk= 249,000
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 667,000/465,000
Predetermined manufacturing overhead rate= $1.43 per direct labor hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 1.43*249,000
Allocated MOH= $356,070
The number of new domestic wind turbine generators installed each year in a particular country has been forecast to increase at a constant multiplicative rate of 15% per annum for the foreseeable future. This year (t = 0) 100 new generators were installed. What is the total number of new generators including this year's, that would have been installed within the next ten years (that is up to and including year t = 9)? Use a discrete model for the growth process.
a. 2030
b. 235
c. 1679
d. 900
Answer:
2030
Explanation:
The computation of the total number of new generators including this year is shown below
Given that
(A) = 100
Common Ratio (r) = 1.15
n = 10
Now
Sum of 10 terms Sn is
= A × (r n - 1) ÷ (r - 1)
= 100 × (1.1510 - 1) ÷ (1.15 - 1)
= 100 × 3.0456 ÷ 0.15
= 2030
We simply applied the above formula so that the total number of new generators could come
Chester Corp. is downsizing the size of their workforce by 10% (to the nearest person) next year from various strategic initiatives. How much will the company pay in separation costs if each worker receives $5,000 when separated?
Answer:
$293,500
Explanation:
The computation of the amount pay in separation cost is shown below:
As there are 587 employees
but 10% are downsized
So, separation cost is
= Current employees × downsized percentage × received amount by workers
= 587 employees × 10% × $5,000
= $293,500
We simply applied the above formula so that the amount pay by the company with respect to the separation cost could arrive
In the United States, the standard methodology for consumers with respect to privacy is to _______________, whereas in the EU it is to ______________.
Answer:
In the United States, the standard methodology for consumers with respect to privacy is opt-out with respect to the United States and her Privacy Law, whereas in the EU it is opt-in.
Explanation:
Privacy laws are laws that provide protection and regulation against storing, using data that might be considered private to an individual or any organisation. such laws act as a guard against any usage of information by governments, public or private organisations, or even other individuals in any part of the world without the owner of such data giving their consent.
Privacy laws, rules, and policies are different from one country to another which all depends on their legal framework and cultural sensitivities in such a nation.
In the United States, the standard methodology for consumers with respect to privacy is opt-out with respect to the United States and her Privacy Law, whereas in the EU it is opt-in.
Opting-out laws cover a spectrum that consists of methods used by an individual to avoid receiving unsolicited service information. When receiving unsolicited service information as a result of data collection a consumer might seek an out way to stop it and to opt-out require affirmative steps to prevent unsolicited service and products. Under opt-out a user can be signed up much more easily.
Opt-In is when an individual chooses to join or participate in something and acknowledging interest in a product or service. Opt-in is used under European data protection rules which grant individuals more control of their data when the person agrees to receive the specified services.
The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year 2017 are as follows: January 1 finished goods, $765,000; December 31 finished goods, $540,000; cost of goods sold for the year, $2,560,000. The budgeted cost of goods manufactured for the year is a.$1,255,000. b.$2,335,000. c.$2,785,000. d.$3,100,000.
Answer:
$2,335,000= cost of goods manufactured
Explanation:
Giving the following information:
January 1 finished goods, $765,000
December 31 finished goods, $540,000
Cost of goods sold for the year, $2,560,000
To calculate the cost of goods manufactured, we need to use the following formula:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
2,560,000 = 765,000 + cost of goods manufactured - 540,000
2,335,000= cost of goods manufactured
Hicks Health Clubs, Inc., expects to generate an annual EBIT of $750,000 and needs to obtain financing for $1,200,000 of assets. Its tax bracket is 40%. If the firm uses short-term debt, its rate will be 7.5%, and if it uses long-term debt, its rate will be 9%. By how much will their earnings after taxes change if they choose the more aggressive financing plan instead of the more conservative plan
Answer:
Hicks Health Clubs, Inc. earnings after taxes will change by minus $10,800 if they choose the more aggressive financing plan instead of the more conservative plan.
Explanation:
Note: I experienced a difficulty submitting the explanation here. Kindly find attached the full answer and explanation in the attached Microsoft word document.
Below are several amounts reported at the end of the year.
Currency located at the company 800
Supplies 2200
Short-term investments that mature within three months 1700
Accounts receivable 2500
Balance in savings account 7500
Checks received from customers but not yet deposited 400
Prepaid rent 1200
Coins located at the company 100
Equipment 8400
Balance in checking account 5200
Required: Calculate the amount of cash to report in the balance sheet.
Answer:
Calculation of the amount of cash to report in the balance sheet
Particulars Amount
Currency located at the company $800
Short-term investments that mature $1,700
within three months
Balance in savings account $7,500
Checks received from customers $400
but not yet deposited
Coins located at the company $100
Balance in checking account $5,200
Cash at the end of the year $15,700
Thus, the amount of cash to report in the balance sheet is $15,700,
Note: Supplies ,account receivables and prepaid rent are current asset of the company other than cash. Equipment are non cash
The manufacturer Mike and Ike, the fruit-flavored chewy candies, has changed its packaging and developed contests all geared to 12- to 17-year-olds. What type of market segmentation identifies its market
Answer:
Demographic
Explanation:
A market is segmented so as to narrow down a large market into a narrow base, or a target market. This helps the organization to be better focused on providing its services to these target groups of people. A market can be segmented on the basis of demography, psychography, behavior, and geography. Demography deals more with statistical data of the population being studied and would typically include; age, gender, race, income levels, etc.
So, when the manufacturer Mike and Ike changes its packaging and developed contests all geared to 12-17-years-old, he has segmented the market according to demography and age.
Answer:
im sorry
Explanation:
Land Services, Inc. owns 35% of voting stock of World Investments, Inc. During the year 2018, World Investments, Inc. earned profits of $300,000. Under the equity method, which of the following journal entries will Land Services record?
A) Long-term Investments—Grey Investments Inc.: 250,000
Cash: 250,000
B) Cash: 75,000
Dividend Revenue: 75,000
C) Cash: 75,000
Long-term Investments—Grey Investments Inc.: 75,000
D) Long-term Investments—Grey Investments Inc.: 75,000
Revenue from Investments: 75,000
The correct question is:
Glitter Services Inc. owns 30% of voting stock of Grey Investments Inc. During the year 2015, Grey Investments Inc. earned profits of $250,000. Under the equity method, which of the following journal entries will Glitter Services record?
Answer:
D) Debit Long-term Investments—Grey Investments Inc.: 75,000
Credit Revenue from Investments: 75,000
Explanation:
Equity method is used in accounting to treat a companie's investment in associate companies. Usually equity accounting is used when a company owns 20 to 50% of shares in an associate company.
In this case Glitter Services, Inc. owns 30% of voting stock of World Investments, Inc.
Grey Investments, Inc. earned profits of $250,000.
So the value of investment is 0.3 * 250,000 = $75,000
So this amount is Debited from Long Term Investment account and credited to Revenue from Investments
Smathers Corp. stock has a beta of .89. The market risk premium is 7.20 percent and the risk-free rate is 2.93 percent annually. What is the company's cost of equity
Answer: 9.31%
Explanation:
Given: Smathers Corp. stock has a beta of 0.89.
⇒ Beta = 0.89
Risk-free rate = 2.93 percent
Market risk premium = 7.20 percent
Formula: Cost of Equity = [ Risk free rate + (Beta) × ( Market risk premium) ]
Substitute all values, we get
Cost of Equity = [ 2.9 + (0.89) × ( 7.20) ]%
= [2.9+6.41]%
= 9.31%
Hence, the company's cost of equity is 9.31%.
A company issues a ten-year bond at par with a coupon rate of 6.4% paid semi-annually. The YTM at the beginning of the third year of the bond (8 years left to maturity) is 9.1%. What is the new price of the bond?
Answer:
[tex]\mathbf{current \ price \ of \ the \ bond= \$848.78}[/tex]
Explanation:
The current price of the bond can be calculated by using the formula:
[tex]current \ price \ of \ the \ bond= ( coupon \times \dfrac{ (1- \dfrac{1}{(1+YTM)^{no \ of \ period }})}{YTM} + \dfrac{Face \ Value }{(1+YTM ) ^{no \ of \ period}}[/tex]
[tex]current \ price \ of \ the \ bond= ( \dfrac{0.064 \times \$1000}{2} \times \dfrac{ (1- \dfrac{1}{(1+ \dfrac{0.091}{2})^{8 \times 2}})}{\dfrac{0.091}{2}} + \dfrac{\$1000 }{(1+\dfrac{0.091}{2} ) ^{8 \times 2}})[/tex]
[tex]current \ price \ of \ the \ bond= \$32 \times $11.19 + \$490.70[/tex]
[tex]current \ price \ of \ the \ bond= \$358.08+ \$490.70[/tex]
[tex]\mathbf{current \ price \ of \ the \ bond= \$848.78}[/tex]
As the name suggests, convertible bonds allow the owner the option to convert the bonds into a fixed number of shares of common stock.
Innovative Energy LLC is a start-up company that just raised $100,000 to conduct a third-party feasibility study on its business model. the company agreed to treat the $100,000 investment as debt at 10% interest rate; however, the investor has the right to exchange the debt for common stock during the company's next financing round. Which of the following terms best describes the $100,000 investment?
Convertible bond
Warrant
Consider the case of an investor, Nazem:
Nazem wants to include bonds in his investment portfolio, but he wants the option to sell the bond to the issuer at a specified price at a certain date before the maturity of the bond. Which of the following bond redemption features should he pick?
Warrants
Puttable bond
Nazem also recently bought bonds that have their interest rate tied to the consumer price index (CPI) so that he will be protected if inflation rates increase. Nazem has invested in:_________
Answer: 1. Convertible bond
2. Putable bond
3. Purchasing power bond.
Explanation:
The $100,000 investment is a convertible bond. This is a fixed-income debt security which yields interest payments. It should be noted that it can also be converted to equity shares or common stock.
Nazeem should pick a putable bond. This is because the puttable bond has a put option that is embedded ans he can also demand his principal to be paid early.
Nazem also recently bought bonds that have their interest rate tied to the consumer price index (CPI) so that he will be protected if inflation rates increase. Nazem has invested in purchasing power bond .
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 20 % 30 % Bond fund (B) 12 15 The correlation between the fund returns is 0.10. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) a-2. What is the expected value and standard deviation of the minimum variance portfolio rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)
The expected value and standard deviation of the minimum variance portfolio rate of return are 16.20% and 42.61% respectively.
The same old deviation of a portfolio measures how a good deal of the funding returns deviate from the suggestion of the opportunity distribution of investments. placed certainly, it tells traders how a good deal the investment will deviate from its anticipated return.
The same old deviation of the portfolio is usually the same to the weighted average of the same old deviations of the property in the portfolio. A high fashionable deviation in a portfolio indicates a high hazard as it suggests that the profits are especially volatile and unstable.
calculation:-
Weight of Stock =( (17%-5.6%)*40%^2 - (8%-5.6%)*(46%*40%*0.16))/((17%-5.6%)*40%^2 + (8%-5.6%)*46%^2 - (17%-5.6%+8%-5.6% )*(46%*40%*0.16))
Weight of Stock = 0.9106
Weight of Bond = 1- 0.9106= 0.0894
Portfolio invested in the stock = 91.06%
Portfolio invested in the bond = 8.94%
The expected return of portfolio = Weight of Stock* E(rs) + Weight of Bond *E(rb)
Expected return of portfolio = 91.06%*17 +8.94%*8
Expected return of portfolio = 16.20%
The standard deviation of Portfolio = (Weight of Stock^2 * SD of Stock^2 + Weight of Bond^2 * SD of Bond^2 + 2* weight of Stock*Weight of Bond* COV(S, B))^(1/2)
Standard deviation of Portfolio = (0.9106^2*46%^2 + 0.0894^2*40%^2 + 2*0.9106*0.0894*(46%*40%*0.16))^(1/2)
Standard deviation of Portfolio = 42.61%
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Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2014 for $406,000. At the time of purchase, Song Company’s total stockholders’ equity amounted to $480,500. Income and dividend distributions for Song Company from 2014 through 2016 are as follows: 2014 2015 2016 Net Income (loss) $60,600 $53,900 ($57,200 ) Dividend distribution 23,800 50,600 36,300 Required:Prepare journal entries on the books of Percy Company from the date of purchase through 2016 to account for its investment in Percy Company.
Answer:
since Percy Company's owns 80% of Song Company's stocks, we must use the equity method to record its investment in Song Company
Beginning 2014, investment in Song Company
Dr Investment in Song Company 406,000
Cr Cash 406,000
2014, to record Song's net income
Dr Investment in Song Company 48,480
Cr Investment revenue 48,480
2015, to record Song's net income
Dr Investment in Song Company 43,120
Cr Investment revenue 43,120
2016, to record Song's net loss
Dr Loss on investment 45,760
Cr Investment in Song Company 45,760
2014, to record Song's dividends
Dr Cash 19,040
Cr Investment in Song Company 19,040
2015, to record Song's dividends
Dr Cash 40,480
Cr Investment in Song Company 40,480
2016, to record Song's dividends
Dr Cash 29,040
Cr Investment in Song Company 29,040
Assume Strands, a local hair salon, provides cuts, perms, and hairstyling services. Annual fixed costs are $150,000, and variable costs are 40 percent of sales revenue. Last year's revenues totaled $300,000.
(a) Determine its break-even point in sales dollar
(b) Determine last year's margin of safety in sales dollars.
(c) Determine the sales volume required for an annual profit of $80,000.
Round your answer to the nearest dollar.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Annual fixed costs are $150,000, and variable costs are 40 percent of sales revenue. Last year's revenues totaled $300,000.
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 150,000 / [(300,000*0.6)/300,000]
Break-even point (dollars)= $250,000
Now, we can determine the margin of safety:
Margin of safety= (current sales level - break-even point)
Margin of safety= 300,000 - 250,000= $50,000
Finally, the sales dollar required to reach $80,000 profit:
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= (150,000 + 80,000) / 0.6
Break-even point (dollars)= $383,333.33
You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. ou think you can earn 11.0% per year on your investments and you plan to retire in 41 years, immediately after making your last $5,000 investment.
a. How much will you have in your retirement account on the day you retire?
b. If, instead of investing $5,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be?
c. If you hope to live for 28 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 28th withdrawal (assume your savings will continue to earn 11.0% in retirement)?
d. If, instead, you decide to withdraw $647,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings?
e. Assuming the most you can afford to save is $ 1 comma 000$1,000 per year, but you want to retire with
$1,000,000 in your investment account, how high of a return do you need to earn on your investments?
Answer:
a. How much will you have in your retirement account on the day you retire?
future value of the annuity = annual payment x (FV annuity factor, 11%, 40 periods) = $5,000 x 581.826 = $2,909,130b. If, instead of investing $5,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be?
present value = future value / (1 + interest rate)ⁿ = $2,909,130 / 1.11⁴¹ = $40,320.04c. If you hope to live for 28 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 28th withdrawal (assume your savings will continue to earn 11.0% in retirement)?
payment = present value / annuity factor (PV annuity factor, 11%, 28 years) = $2,909,130 / 8.60162 = $338,207.22d. If, instead, you decide to withdraw $647,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings?
We can first try to get an approximate answer. The annuity factor = $2,909,130 / $647,000 = 4.49633694. Now looking at an annuity table we can look at the closest amount for 11%. The answer is between 6 years (annuity factor 4.2305) and 7 years (annuity factor 4.7122). This means that in less than 7 years you will have no more money left.e. Assuming the most you can afford to save is $ 1 comma 000$1,000 per year, but you want to retire with $1,000,000 in your investment account, how high of a return do you need to earn on your investments?
Again we must use the future value to determine the annuity factor. Annuity factor = $1,000,000 / $1,000 = 1,000. Using an annuity calculator to determine the closest rate (for 40 periods) = 12.9515% ≈ 12.95%Speedster Bicycles, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. If sales are budgeted to be $250,000 for March and $280,000 for April, what are the budgeted cash receipts from sales on account for April
Answer:
Total cash April= $257,500
Explanation:
Giving the following information:
Speedster Bicycles, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the sale.
Sales:
March= $250,000
April= $280,000
Cash budget of April:
Sales on account from April= 280,000*0.25= 70,000
Sales on account from March= 250,000*0.75= 187,500
Total cash April= $257,500
For each of the following scenarios, determine if there is an increase or a decrease in supply for the good in italics.
a. The price of silver increases.
b. Growers of tomatoes experience an unusually good growing season.
c. New medical evidence reports that consumption of organic products reduces the incidence of cancer.
d. The wages of low-skill workers, a resource used to help produce clothing, increase.
Answer:
a. The price of silver increases. - Supply Increase
As the price of silver increases, it will make silver more profitable therefore producers will increase production to take advantage of the higher prices to make more profit in total.
b. Growers of tomatoes experience an unusually good growing season. - Supply Increase
If growers of tomatoes experience a good season, it means that there will be more tomatoes to harvest. This will increase the supply of tomatoes.
c. New medical evidence reports that consumption of organic products reduces the incidence of cancer. - Supply Increase.
Supply of organic products will increase as a result of an anticipated and an actual increase in the demand for organic products as more people will buy them to avoid getting cancer.
d. The wages of low-skill workers, a resource used to help produce clothing, increase. - Supply Decrease
When inputs into the production process increase, producers will tend to cut down production to enable them save cost and maintain profitability. If the wages of low-skill workers increase, it will mean that an input is now more expensive so production of clothing will reduce thereby reducing its supply.
In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations?
A. Cost of goods manufactured = Total manufacturing costs + Beginning finished goods inventory – Ending finished goods inventory.
B. Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory.
C. Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory – Beginning work in process inventory.
D. Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory – Beginning finished goods inventory.
Answer:
B
Explanation:
The cost of goods manufactured calculates the total production cost of manufactured goods in a particular period
Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal. Which of the following is true if Tony seeks to rescind the contract for the sale of the Mustang?
A. Tony may rescind the contract on grounds of duress.
B. Tony may rescind the contract on grounds of misappropriation of name or likeness.
C. Tony may rescind the contract on grounds of fraud.
D. Tony may not rescind the contract because truth is involved.
E. Tony may rescind the contract on grounds of defamation.
Answer: A. Tony may rescind the contract on grounds of duress.
Explanation:
For contracts to be considered enforceable, a key factor is that the parties involved must have entered into the agreement of their own accord and free will. Therefore Duress, which denies a person of that free will, becomes a reason why a contract can be voided.
Tony sold Peter the Mustang convertible because Peter had threatened to release details that Tony would rather were kept private so Tony capitulated and sold the Mustang. Had Peter not threatened him, Tony would not have sold the car. This shows that Tony only sold the car under duress and as such can void the contract.