Answer:
a. $54,000
Explanation:
The computation of income tax expense reported on the face of the income statement is shown below:-
Income before tax = Sales revenue + Dividend revenue - Cost of goods sold - Salaries and wages expenses - Depreciation expenses - Utilities expenses - Interest expenses
= $500,000 + $45,000 - $300,000 - $40,000 - $55,000 - $5,000 - $10,000
= $135,000
Income tax expenses = Before Income tax × Income tax rate
= $135,000 × 40%
= $54,000
Marin Inc. issues $2, 084, 300 of 10% bonds due in 13 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 11%. What amount will Marin receive when it issues the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458, 581.) Amount received by Marin when bonds were issued $________________
Answer:
$1,943,618.62
Explanation:
the current market price of the bond = present value of the face value + present value of coupon payments
present value of face value = $2,084,300 / (1 + 11%)¹³ = $536,736.96
present value of coupon payments = $208,430 x 6.7499 (annuity factor, 11%, 13 years) = $1,406.881.66
market value of the bonds = $1,943,618.62
the journal entry to record the issuance of the bonds:
Dr Cash 1,943,618.62
Dr Discount on bonds payable 140,681.38
Cr Bonds payable 2,084,300
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $35 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Per Unit 15,000 Units Per Year Direct materials $ 14 $ 210,000 Direct labor 10 150,000 Variable manufacturing overhead 3 45,000 Fixed manufacturing overhead, traceable 6 * 90,000 Fixed manufacturing overhead, allocated 9 135,000 Total cost $ 42 $ 630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
Required:
1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
2. Should the outside supplier’s offer be accepted?
3. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
4. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?
Answer:
1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
financial disadvantage = $525,000 - $435,000 = $90,0002. Should the outside supplier’s offer be accepted?
No, it shouldn't be accepted3. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?
financial advantage = -$90,000 + $150,000 = $60,0004. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?
Yes, it should be acceptedExplanation:
outside vendor offer: cost per unit $35 x 15,000 = $525,000
production costs:
direct materials $14 x 15,000 = $210,000
Direct labor $10 x 15,000 = $150,000
Variable manufacturing overhead $3 x 15,000 = $45,000
Fixed manufacturing overhead, traceable $6 x 15,000 = $90,000 ($60,000 are non-avoidable)
Fixed manufacturing overhead, allocated $9 x 15,000 = $135,000 (all are non-avoidable)
Total cost $42 x 15,000 = $630,000
avoidable production costs = $435,000
The requirements are detailed as follows:
1. Make Buy Difference
Direct materials $ 210,000
Direct labor 150,000
Variable manufacturing overhead 45,000
Fixed manufacturing overhead, traceable 60,000
Total cost $465,000 $525,000 $60,000
Thus, the financial disadvantage of buying 15,000 carburetors from the outside supplier is $60,000.
2. The outside supplier's offer should not be accepted as it costs more.
3. Based on the new assumption of obtaining segment margin of $150,000 from alternative use of capacity, the financial advantage of buying 15,000 carburetors from the outside supplier is $90,000.
4. Based on the new assumption, the outside supplier's offer should be accepted.
Data and Calculations:
Outside supplier's price per unit = $35
Per Unit 15,000 Units Per Year
Direct materials $ 14 $ 210,000
Direct labor 10 150,000
Variable manufacturing overhead 3 45,000
Fixed manufacturing overhead, traceable 6 90,000
Fixed manufacturing overhead, allocated 9 135,000
Total cost $ 42 $ 630,000
Supervisory salaries = $30,000 ($90,000 x 1/3)
Depreciation of special equipment = $60,000 ($90,000 x 2/3)
Outside supplier's cost = $525,000 ($35 x 15,000)
Learn more: https://brainly.com/question/23412337
On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $33,600. The drill press is expected to last 10 years and has a residual value of $6,400. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2018 and 2019, 27,000 and 88,000 units, respectively, were produced.
Required:
Compute depreciation for 2018 and 2019 and the book value of the drill press at December 31, 2018 and 2019, assuming the sum-of- the-years'-digits method is used.
Answer:
2018 = $4,945.46
2019 - $4,450.91
Explanation:
sum-of- the-years'-digits depreciation expense =( number of useful lives remaining / sum of the years ) x (Cost of asset - residual value)
sum of the years = 1 +2 +3 + 4 + 5 + 6 + 7 + 8 + 9 + 10 = 55
depreciation expense in 2018 = (10 / 55 ) x ( $33,600 - $6,400) = $27,200 X 0.181818 = $4,945.46
depreciation expense in 2018 = (9 / 55 ) x ( $33,600 - $6,400) = $27,200 X 0.163636 = $4,450.91
Brief Exercise 5-12 Crane Beverage Company reported the following items in the most recent year. Net income $48,300 Dividends paid 6,320 Increase in accounts receivable 11,860 Increase in accounts payable 7,470 Purchase of equipment (capital expenditure) 8,710 Depreciation expense 4,470 Issue of notes payable 22,850 Compute net cash provided by operating activities, the net change in cash during the year
Answer:
Crane Beverage Company
Statement of Cash Flows
Particulars Details Amount
Cash Flow from Operating Activities:
Net Income $48,300
Adjustments to reconcile net income to
cash flow from operating activities:
Depreciation $ 4,470
Increase in Accounts receivable -$11,860
Increase in Accounts payable $7,470 $80
Net Cash Flow From Operating Activities (A) $48,380
Cash Flow from Investing Activities:
Purchase of Equipment -$8,710
Net Cash Flow From Investing Activities (B) -$8,710
Cash Flow from Financing Activities:
Issue of note payable $22,850
Dividend paid -$6,320
Net Cash Flow From Financing Activities (C) $16,530
Net Change in Cash (A + B+ C) $56,200
Free Cash flow = Net cash provided by operating activities - Purchase of equipment - Dividend paid
= $48,380 -$8,710 - $6,320
= $33,350
Effect of Inventory Errors During the taking of its physical inventory on December 31, 20Y3, Sellers Company incorrectly counted its inventory as $303,295 instead of the correct amount of $327,560 Indicate the effect of the misstatement on Sellers's December 31, 20Y3, balance sheet or income statement for the year ended December 31, 20Y3. For each, select if the amount is overstated or understated. Then, input the over or under amount, entered as a positive value
Cost of goods sold
Current assets
Gross profit
Inventory
Net income
Stockholders' equity
Total assets
Answer:
Cost of goods sold = overstated : $24,265
Current assets = understated : $24,265
Gross profit = understated : $24,265
Inventory = understated : $24,265
Net income = understated : $24,265
Stockholders' equity = understated : $24,265
Total assets = understated : $24,265
Explanation:
Inventory was understated by $24,265 ($327,560 - $303,295). Since inventory is an Asset, also it is a Income Statement element and consequently affects Retained Earnings (Distributions to Shareholders) , the effect is shown above.
On April 1, Garcia Publishing Company received $3,258 from Otisco, Inc. for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Garcia Publishing Company for the first year of the subscription assuming the company uses a calendar-year reporting period?
Answer:
$814.50
Explanation:
The computation of the amount of revenue recorded by using a calender year is shown below:
= Received amount × number of months ÷ total number of months in a year
= $3,258 × 9 months ÷ 36 months
= $814.50
The nine months should be considered from April 1 to December 31 and the same is to be considered for this computation part
The Green Balloon just paid its first annual dividend of $0.49 a share. The firm plans to increase the dividend by 3.7 percent per year indefinitely. What is the firm's cost of equity if the current stock price is $17.2 a share
Answer:
3.80%
Explanation:
The computation of the cost of equity is shown below:
Cost of equity is
= Annual dividend paid × (1 + growth rate) ÷ Stock price + Growth rate
where,
Annual dividend paid is $0.49
Growth rate is 3.7%
And, the stock price is $17.2
Now placing these values to the above formula
So, the cost of equity is
= $0.49 × (1 + 0.037) ÷ $17.20 + 0.037
= 0.00105 + 0.037
= 3.80%
California Surf Clothing Company issues 1,000 shares of $1 par value common stock at $23 per share. Later in the year, the company decides to purchase 100 shares at a cost of $26 per share.
Required:
Record the transaction if California Surf resells the 100 shares of treasury stock at $28 per share.
Answer:
Treasury stock = Number of shares repurchased × Cost of repurchased share
=100 Shares×$26
=$2,600
Additional paid-in-capital= Number of shares repurchased × (Reissue price - Cost)
=100 Shares × ($28−$26)
=$200
Hence, the treasury stock and additional paid in capital to be recorded in the journal entry will be $2,600 and $300 respectively.
Date Account Title Debit Credit
Cash (100 shares * $28) $2,800
Treasury stock (100 shares * $26) $2,600
Additional paid in capital ( 100 shares * $2) $200
(To record the reissue of treasury stock shares)
g The Federal Reserve can lower short-run output by Group of answer choices lowering the real interest rate. increasing the money supply. decreasing the money supply. lowering the nominal interest rate. None of these answers is correct
Answer: Decreasing the money supply
Explanation:
When the Fed reduces money supply, it will remove the amount of excess money that people have to spend in the economy. This will lead to prices reducing because people no longer have a lot of money to spend on products therefore they will demand less goods. This will lead to the Aggregate demand curve shifting to the left. The new intersection with the Aggregate Supply curve will be at a point where prices will be lower and less quantity will be demanded which will signify a drop in the short-run output of the economy.
I have recently received from your office a request to conduct evaluations this month on three of my employees. As you probably know, I was promoted to this supervisory position just one week ago as a result of the former supervisor’s termination. I don’t feel that I can presently conduct a fair evaluation of these employees. Do you want me to do them anyway?
Explanation:
Since this is a performance appraisal problem I say it's best we commend the employee for been honest and bold in sharing his concerns.
However, I do feel you are capable of carrying out this responsibilities, although you may need to get some tips. Why don't you check by my office tomorrow and we'll discuss for 15 minutes.
Paul Company completed the salary and wage payroll for March 2011. The Payroll provided the following details:
Salary and Wages earned: $200,000
Employee Income Taxes withheld: 40,000
Insurance Premiums withheld: 1,000
FICA payroll taxes*: 15,000
15,000 each for employer and employee
Required:
1. Give the Journal entry to record the payroll for March, including employee deductions.
2. Give journal entry to record the employer's payroll taxes.
3. Give a combined journal entry to show the payment of amounts owed to governmental agencies.
Answer:
1. Journal Entry
Date Account Titles and Explanation Debit Credit
March Salary and Wage Expenses $200,000
2011 Liability for income tax withheld - $40,000
Employee
Liability for insurance premium $1,000
withheld - employee
FICA taxes payable - Employees $15,000
Cash $144,000
(Payroll for February including employee deductions)
2. Journal Entry
Date Account Titles and Explanation Debit Credit
March Payroll tax expenses $15,000
2011 FICA taxes payable - Employer $15,000
(Employer Payroll taxes on February payroll)
3. Journal Entry
Date Account Titles and Explanation Debit Credit
March Liability for income tax withheld $40,000
2011 - Employee
Liability for insurance premium $1,000
withheld - employee
FICA taxes payable - Employees $15,000
FICA taxes payable - Employers $15,000
Cash $71,000
(Remittance of payroll taxes and deduction for February payroll)
Assume that both labor and capital exhibit diminishing returns. Suppose you can hire an additional unit of labor for $10, and she can product 50 units. You could also buy an additional machine at the cost of $200, and that machine would allow you to produce 1000 units.
If your main concern is minimizing average cost, what should you do?
a) Buy the machine, because it will allow you to produce more
b) Nothing, because you are already minimizing cost
c) There is not enough information to make a legitimate response
d) Hire more labor, because it is cheaper
Answer:
b) Nothing, because you are already minimizing cost
Explanation:
cost of producing one additional unit by hiring more workers = $10 / 50 units = $0.20 per unit
cost of producing one additional unit by buying the machine = $200 / 1,000 units = $0.20 per unit
Since labor exhibits a diminishing return, the next unit of labor will produce less than 50 units. This means that if you want to increase production, you should buy the machine.
Using the same logic, the previous units of labor were able to produce more than 50 units, which means that the average total cost was lower using labor than the machine. So if the company's concern is to minimize costs, then they are already doing so.
Following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2018:
Penske Stanza
Revenues 700,000 400,000
Cost of goods sold 250,000 100,000
Depreciation expense 150,000 200,000
Investment income Not given __
Dividend declared 80,000 60,000
Retained earnings 600,000 200,000
Current assets 400,000 500,000
Copyrights 900,000 400,000
Royal agreements 600,000 1,00,0000
Investment in stanza ---- -------
Liabilities 500,000 13,80,000
Common stock 600,000 200,000
Additional paid capital 150,000 80,000
On January 1, 2018, Penske acquired all of Stanza's outstanding stock for $680,000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition, copyrights (with a six-year remaining life) have a $440,000 book value but a fair value of $560,000.
a. As of December 31, 2018, what is the consolidated copyrights balance?
b. For the year ending December 31, 2018, what is consolidated net income?
c. As of December 31, 2018, what is the consolidated retained earnings balance?
d. As of December 31, 2018, what is the consolidated balance to be reported for goodwill?
Answer:
a. Consolidated Copyright
Penske (Book value) $900,000
Stanza (Book value) $400,000
Allocation $120,000
Less: Excess Amortization ($20,000)
Total $1,400,000
b. Consolidated Net Income 2019
Revenues $1,100,000
Expenses:
Cost of goods sold $350,000
Depreciation Expenses $350,000
$700,000
Excess amortization $20,000 $720,000
Consolidated Net Income $380,000
Workings
Cost of goods sold = 250,000 + 100,000 = 350,000
Depreciation Expenses = 150,000 + 200,000 = 350,000
3. Consolidated Retainer earnings on December 31,2018
Retained Earnings 1/1/28 $600,000
Net Income 2018 $380,000
Less: Dividend Declared 2018 (Penske) ($80,000)
Total $900,000
d. Consolidated Balance to be reported for goodwill
Stanza acquisition fair value $680,000
(10,000 in stock issue costs reduced
additional paid in capital)
Book value of subsidiary $480,000
(1/1/18 Stockholder equity balance)
Fair value in excess of book value $200,000
Less: Excess fair value allocated $120,000
to copy right based on fair value
Goodwill $80,000
Workings
Stockholder equity balance 1/1/18
Common stock 200,000
Additional paid-in capital 80,000
Retained earnings 200,000
Stockholder equity 480,000
Excess fair value
Copyright fair value 560,000
Less Copyright book value 440,000
Excess fair value allocated 120,000
Copyright year 6 years
Annual Excess Amortization $20,000
During 2018, Skechers USA had Sales of $1,846.4, Gross profit of $818.8 million and Selling, General and Administration expenses of $730.7 million. What was Skechers' Cost of sales for 2018
Answer:
The answer is $1,027.6 million
Explanation:
Gross profit = Sales - Cost of Sales(cost of goods sold)
Gross profit = $818.8 million
Sales of $1,846.4 million.
To find Cost of Sales, we rearrange the formula to now be:
Sales - Gross profit
$1,846.4 million - $818.8 million
=$1,027.6 million
Therefore, Skechers' Cost of sales for 2018 is $1,027.6 million
Mary, a merchant, was in the business of selling flowers to local florists. Melissa was the owner of Little Flower, Inc. and she regularly purchased her flowers from Mary. One day, Melissa called Mary and ordered 20 dozen roses, 15 dozen carnations, 10 dozen daisies, baby breaths, 6 dozen tulips, and some plants. Everything totaled $1,200, and was to be delivered in 14 days. After the two ended their call, Mary sent Melissa an e-mail detailing the order and her acceptance. Melissa never responded to the e-mail. Eleven days later, Mary delivered the merchandise to Melissa, but she refused shipment. Mary sued Melissa for breach of contract. What is the likely result?
Answer:
Generally UCC rules establish that contracts involving the sale of goods worth more than $500 must be in writing and signed. But this rule doesn't apply to merchants that are involved in routine buy/sell activities. In this case, both Mary and Melissa are considered merchants and the phone call and the email are enough proof against Melissa for breach of contract. In my opinion, Mary would win the lawsuit.
Duerr company makes a $75,000, 60-day, 11% cash loan to Ryan Co. The maturity value of the loan is: (Use 360 days a year.)
Answer:
The maturity value of the loan is $76,375.00
Explanation:
The maturity value of the loan comprises of the face value of the loan plus the interest accrued over the 60-day period as shown below:
face value of the loan=$75000
interest=$75000*11%*60/360
interest on loan=$1375
maturity value=$75000+$1375
maturity value=$76,375.00
A corporation in a 40% tax bracket invests in the preferred stock of another company and earns a 5% pretax rate of return. An individual investor in a 20% tax bracket invests in the same preferred stock and earns the same pretax return. The after-tax return to the corporation is ________, and the after-tax return to the individual investor is
Answer:
The after-tax return to the corporation is __3%______, and the after-tax return to the individual investor is 4%.
Explanation:
A. The after-tax return is the return that is earned by the corporation or individual after the deduction of income tax. Since the corporation and the individual are in different tax brackets, you will normally expect them to earn different after-tax returns.
B. Calculation of the after-tax returns:
After-tax return = Pre-tax return minus income tax
1. Corporation = (100% - 40%) x 5% = 3%
2. Individual = (100% - 20%) x 5% = 4%
Compute the payback for each of these two seperate investments:
a. A new operating system for an existing machine is expected to cost $250000 and have a useful life of 6 years. The system yields an incremental after-tax income of $72115 each year after deducting its straight line depreciation. The predicted salvage value of the system is $10000.
b. A machine costs $200,000, has a $13,000 salvage value, is expected to last eight years, and will generate an after-tax income of $39,000 per year after straight-line depreciation.
Answer:
a. 2.23
b. 3.21
Explanation:
a. Answer to Part A
Payback Period = Investment / Annual Cash Inflow
= 250000 / 112115
= 2.23
Answer to Part B
Payback Period = Investment / Annual Cash Inflow
= 200000 / 62375
= 3.21
Working Note
Particulars Case A Case B
After Tax Income 72115 39000
Add: Depreciation 40000 23375
Cash Inflow 11,2115 62375
Particulars Case A Case B
Cost of Machine 250000 200000
Less: salvage Value 10000 13000
Depreciable Value 240000 187000
Life of the Asset 6 8
Annual Depreciation 40000 23375
A bakery works out a demand function for its chocolate chip cookies and finds it to be q = D(x)= 760-13x, where q is the quantity of cookies sold when the price per cookie, in cents, is x.
Required:
a. Find the elasticity.
b. At what price is the elasticity of demand equal to 1?
c. At what prices is the elasticity of demand elastic?
d. At what prices is the elasticity of demand inelastic?
Answer:
Please refer to the below for explanation.
Explanation:
From the above, the demand function is given as ;
D(x)=760-13x
a) Find the elasticity
It means finding the derivative of the function
D'(X)=-13, hence elasticity is expressed as
xD'(x) / D'(x)
= x(-13) / 760 - 13x
= 13x / 760 - 13x
The elasticity expression is thus ; E(x)= 13x / 760 - 13x
b) At what price is the elasticity demand equal to 1.
The above means that E(X) = 1
Putting 1 for E(X) in the elasticity equation,
E(x) = 13x / 760 - 13x
1 = 13x / 760 - 13x
When you cross multiply, you'll have
760 - 13x = 13x
Collecting like terms, you'll have
760 = 13x + 13x
760 = 26x
Dividing both sides by 26, you'll have
x = 760 /26
x = 29.23
It means that the elasticity at the price of demand = 1 is 29.23
c) At what price is the elasticity of demand elastic.
The above means that E(X) > 1
Thus;
13x / 760 - 13x > 1
When you cross multiply, you'll have
13x > 760 - 13x
Collecting like terms, you'll have
13x + 13x > 760
26x > 760
Dividing both sides by 26, you'll have
x > 760/26
x > 29.23
It means that the elasticity of demand is elastic at x > 29.23
d) At what price is the elasticity of demand inelastic
The above means that E(X) < 1
Hence;
13x / 760 - 13x < 1
When you cross multiply, you'll have
13x < 760 - 13x
Collecting like terms, you'll have
13x + 13x < 76
26x < 760
Dividing both sides by 26, you'll have
x < 760/26
x < 29.23
It means that the elasticity of demand is inelastic at x < 29.23
Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $186,700 $517,500 Variable costs 74,900 310,500 Contribution margin $111,800 $207,000 Fixed costs 68,800 92,000 Income from operations $43,000 $115,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. Beck Inc. Bryant Inc. b. How much would income from operations increase for each company if the sales of each increased by 20%
Answer:
a. Operating leverage = Contribution Margin / Income for operation
Beck Inc. = $111,800 / $43,000 = 2.6 times
Bryant Inc = $207,000 / $115,000 = 1.8 times
b. Increase on Income from operations for each company if the sales of each increased by 20%? will be:
Beck Inc = 2.6 * 10%
=0.52
=52%
Bryant Inc = 1.8 * 20
=0.36
=36%
Cooley Company's stock has a beta of 1.40, the risk-free rate is 25%, and the market risk premium is 5.50%. What is the firm's required rate of return
Answer: 12.2%
Explanation:
Given the variables available, the required rate of return can be computed using the Capital Asset Pricing Model with the formula;
Required Return = Risk-free rate + beta ( Market risk premium)
Required return = 4.25% + 1.4 * 5.5%
Required return = 4.25% + 7.7%
Required return = 12.2%
Note; The actual question says the Risk-free rate is 4.25%.
Tri-coat Paints has a current market value of $50 per share with earnings of $5.97. What is the present value of its growth opportunities (PVGO) if the required return is 12%?
Answer: $0.25
Explanation:
Fron the question, we are informed that Tri-coat Paints has a current market value of $50 per share with earnings of $5.97. We are further told that the required return is 12%.
The present value of its growth opportunities (PVGO) will be:
= $50 - ($5.97/12%)
= $50 - ($5.97/0.12)
= $50 - $49.75
= $0.25
Therefore, the present value of its growth opportunities (PVGO) if the required return is 12% is $0.25.
Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. The policy will cause the natural rate of unemployment to
Options:
a. Fall
b. Shift the long-run aggregate supply curve to the right
Answer:
b. Shift the long-run aggregate supply curve to the right
Explanation:
Indeed, in the long run the aggregate supply or the number of available unemployed workers in the economy would increase, due to an increase in the number of those looking for jobs, since they stand to get reduced unemployment benefits.
This change would be clearly visible if plotted on a labor supply graph. In a sense, the unemployed no longer want to remain unemployed because of reduced unemployment benefits.
Buhao Construction currently is all-equity-financed. It has 17,000 shares of equity outstanding, selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $270,000 with the proceeds used to buy back stock. The debt will pay an interest rate of 11%. The firm pays no taxes.
a. What will be the debt-to-equity ratio if it borrows $220,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Debt-to-equity ratio
b. If earnings before interest and tax (EBIT) are $130,000, what will be earnings per share (EPS) if Reliable borrows $220,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
EPS $
c. What will EPS be if it borrows $420,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
EPS $
Answer:
Buhao Construction
a) Debt-to-Equity Ratio if it borrows $220,000
= Debit/Equity
= $220,000/$1,700,000
= 12.94%
b. EPS = $195,800/17,000
= $11.52
c. EPS = $173,800/17,000
= $10.22
Explanation:
a) Data and Calculations:
Outstanding Equity = 17,000 shares x $100 = $1,700,000
Interest rate = 11%
It is assumed that Buhao Construction pays no taxes
EBIT = $130,000
Debit = $220,000
Interest Expense = $24,200
Net Income = $195,800 ($220,000 - 24,200)
Debit = $420,000
Interest Expense = $46,200
Net Income = $173,800 ($220,000 - 46,200)
b) Debt-to-Equity Ratio of Buhao Construction is the relationship in ratio terms between debts and equity of the company. It shows the percentage of debts over the stockholders' equity.
c) EPS or Earnings per share shows the net income of Buhao Construction that can be attributed to each share. Stockholders use this measure to learn the profits that are generated for each share by the company during the period. A high EPS indicates that the business is profitable for stockholders.
Prepare journal entries to record the following four separate issuances of stock. A corporation issued 10,000 shares of $20 par value common stock for $240,000 cash. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $36,000. The stock has a $1 per share stated value. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $36,000. The stock has no stated value. A corporation issued 2,500 shares of $25 par value preferred stock for $98,500 cash.
Answer: Please see explanation column for answers
Explanation:
Accounts and explanation Debit Credit
1 Cash $240,000
Common Stock (10,000 X 20) $200,000
Paid in Excess of Par- Common Stock
($240,000- 200,000) $ 40,000
(Being common shares issued for cash)
2. Organisation Expenses $36,000
Common Stock (5000x1) $5000
Paid in Excess of Par- Common Stock = 36,000-5000 $31,000
(Being common shares issued to promoters)
3 Organisation Expenses $36,000
Common Stock $36000
Since There is no stated value, paid in excess of par will not be calculated
4 Cash $98,500
Preferred Stock (2500 x 25) $62,500
Paid in Excess of Par- Preferred Stock
(98,500- 62,500) $36,000
(Being preferred shares issued for cash)
Badger Company had $1,060,000 of sales in each of three consecutive years 2012–2014, and it purchased merchandise costing $580,000 in each of those years. It also maintained a $360,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of year 2012 that caused its year-end 2012 inventory to appear on its statements as $340,000 rather than the correct $360,000.
Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2012−2014.
Answer:
COGS more in 2012 less in 2013
Gross Profit Less in 2012 more in 2013
Explanation:
Badger Company
Comparative Income Statements
2012 2013 2014
Sales $1,060,000 $1,060,000 $1,060,000
Beginning Inventory $360,000 $340,000 $360,000
Add purchases $580,000 $580,000 $580,000
Less Ending $340,000 $360,000 $360,000
Cost Of Goods Sold $600,000 $ 560,000 $580,000
Gross Profit $ 460,000 $ 500,000 $480,000
The company's gross profit would be understated in 2012 by $ 20,000 and overstated in 2013 by $ 20,000. This $ 20,000 amount is equal to the the difference in the amount of the wrong inventory entry and the correct ending inventory. However the company will have regular profit in the third year. The wrong entry would have no effect in the third year.
The Cost of Goods Sold would be overstated both in 2012 by $ 20,000 and understated in 2013 by $ 20,000. The Cost of Goods Sold will show no effect of wrong entry in the third year.
The next dividend payment by Savitz, Inc., will be $1.44 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. The stock currently sells for $26 per share.
a. What is the dividend yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the expected capital gains yield? (Enter your answer as a percent.)
Answer:
Dividend yield = 5.54%
The expected capital gains yield = 6%
Explanation:
Next Dividend (D1) = $1.44
Growth rate (g) = 6%
Required return (Ke) = 6% + 5.54% = 11.54%
Ke-g = 11.54% - 6% = 5.54%
Price = D1 / (ke / g) = 1.44 / 5.54% = $25.9927 = $26
a. Dividend yield = D1 / Price = $1.44 / $26
Dividend yield = 0.05538
Dividend yield = 0.0554
Dividend yield = 5.54%
b. The expected capital gains yield = Required return (Ke) - Dividend yield
The expected capital gains yield = 11.54% - 5.54%
The expected capital gains yield = 6%
Beginning inventory, purchases, and sales data for hammers are as follows:
Mar. 3 Inventory 12 units at $15
11 Purchase 13 units at $17
14 Sale 18 units
21 Purchase 9 units at $20
25 Sale 10 units
Assuming the business maintains a perpetual inventory system, complete the subsidiary inventory ledger and calculate the cost of merchandise sold and ending inventory under the following assumptions:
(a) First-in, first-out
Purchases Cost of Merchandise Sold Inventory
Date Qty Unit Total Qty Unit Total Qty Unit Total
Cost Cost Cost Cost Cost Cost
Mar. 3
11
14
21
25
Balances
Cost of merchandise sold $
Ending Inventory $
(b) Last-in, first-out
Purchases Cost of Merchandise Sold Inventory
Date Qty Unit Total Qty Unit Total Qty Unit Total
Cost Cost Cost Cost Cost Cost
Mar. 3
11
14
21
25
Balances
Cost of merchandise sold $
Ending Inventory $
Answer:
a) under FIFO
COGS = $461
ending inventory = $120
b) under LIFO
COGS = $491
ending inventory = $90
Explanation:
inventory:
March 3 Inventory 12 units at $15
March 11 Purchase 13 units at $17
March 14 Sale 18 units
March 21 Purchase 9 units at $20
March 25 Sale 10 units
under FIFO COGS:
March 14
Dr Cost of goods sold 282
Cr Merchandise inventory 282
March 25
Dr Cost of goods sold 179
Cr Merchandise inventory 179
under LIFO COGS:
March 14
Dr Cost of goods sold 296
Cr Merchandise inventory 296
March 25
Dr Cost of goods sold 195
Cr Merchandise inventory 195
Southland Company is preparing a cash budget for August. The company has $16,300 cash at the beginning of August and anticipates $124,200 in cash receipts and $133,800 in cash payments during August. Southland Company wants to maintain a minimum cash balance of $10,000. The preliminary cash balance at the end of August before any loan activity is:
some of the ways that unfair and fraudulent practices can arise in financial transactions include _________________________________________________, deception, and churning
Answer:
Corruption, bribery
Explanation:
Hope im correct