Answer:
1. By comparing the opportunity cost of producing shoes in the two countries, you can tell that Portugal has a comparative advantage in the production of shoes and Austria has a comparative advantage in the production of oil.
Portugal has a lower opportunity cost of 4 barrels of oil when producing a pair of shoes so it has a Comparative Advantage there.
Austria on the other hand produces more oil per shoe than Portugal so it has comparative advantage in Oil production.
2. Portugal can gain from specialization and trade as long as it receives more than 4 barrels of oil for each pair of shoes it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than 0.1 pairs of shoes for each barrel of oil it exports to Portugal.
If Portugal was not engaging in trade, it would be able to make 4 barrels of oil if it was not making a shoe. A gain for them therefore would be more than 4 barrels of oil for one shoe because it would be higher than the opportunity cost of 4 barrels per shoe.
The same logic applies to Austria, they need to get more shoes than they would have made if they gave up oil. They would have made 1/10 = 0.1 pairs of shoes if they gave up 1 barrel of oil so if they receive more than 0.1 pairs of shoes for the same 1 barrels then they would have made a gain.
3. b. 9 barrels of oil per pair of shoes
d. 8 barrels of oil per pair of shoes
Both of these would be favorable as they would benefit both parties.
Portugal would get more barrels than they can produce per shoe and Austria would get more shoes than they can produce per barrel of oil.
Last year, XYZ Corporation incurred the following expenditures in the development of a new plant process:
Salaries $250,000
Materials 90,000
Utilities 20,000
Quality control testing costs 40,000
Management study costs 5,000
Depreciation of equipment 18,000
During the current year, benefits from the project began being realized in May. If XYZ Corporation elects a 60 month deferral and amortization period, determine the amount of the deduction for the current year.
Answer:
$50,400
Explanation:
Amount
Salary $250,000
Materials $90,000
Utilities $20,000
Depreciation $18,000
Research and experimental costs $378,000
Current deduction = $378,000/60 * 8(May-December)
Current deduction = $50,400
On December 1, Bruney Company introduces a new product that includes a one-year warranty on parts. In December, 1,000 units are sold. Management believes that 5% of the units will be defective and that the average warranty costs will be $90 per unit.
Required:
Prepare the adjusting entry at December 31 to accrue the estimated warranty cost, assuming no warranty claims have been honored to date.
Answer:
Dr Warranty Expense 4,500
Cr Warranty liability 4,500
Explanation:
Preparation of the journal entry at December 31
Based on the information given we were told that the company new product 1,000 units were sold in December in which the Management of the company think that 5% of the units sold will be damaged and that the warranty costs will be the amount of $90 per unit which means that the adjusting journal entry at December 31 in order to accrue the estimated warranty cost will be recorded as:
Dr Warranty Expense 4,500
(1,000x 90x 5%)
Cr Warranty liability 4,500
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.15 million. The fixed asset qualifies for 100 percent bonus depreciation. The project is estimated to generate $2.23 million in annual sales, with costs of $1.25 million. The project requires an initial investment in net working capital of $150,000, and the fixed asset will have a market value of $185,000 at the end of the project. Assume that the tax rate is 23 percent and the required return on the project is 14 percent.
What is the project’s NPV?
Answer:
The net present value (NPV) of the project is $2,266,552.
Explanation:
Note: See the attached excel file for the calculation of the NPV of this project.
The following explanation and the formula are employed in the attached excel file.
Net present value (NPV) is calculated by deducting the present value of cash outflows from the present value of inflows of cash over a certain time period.
Also, present value (PV) can be described as the current value of a future sum of money or stream of cash flows given a specific return rate.
The following is the formula for calculating the PV:
PV = FV / (1 + r)^n
Where,
FV = Future value = Total future cash flow for each year ascalculated in the excel file
r = required return rate = 14%
n = Each relevant year
Safety training in the workplace should be focused on _______.
Answer:
prevention of accidents
Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:
Activity Cost Pool Estimated Overhead Cost Expected Activity
Labor-related $31,200 5,000 direct labor-hours
Machine-related $1,250 5,000 machine-hours
Machine setups $36,000 1,200 setups
Production orders $18,000 500 orders
Product testing $22,000 1,100 tests
Packaging $42,900 3,900 packages
General factory $56,000 5,000 direct labor-hours
Required:
a. Compute the activity rate for each activity cost pool.
b. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours.
Answer and Explanation:
a. The computation of activity rate for each activity cost pool is shown below:-
Activity cost Estimated Expected Activity
pool overhead Activity Rate
cost
a b a ÷ b
Labor-related $31,200 5,000 $6.24
Machine-related $1,250 5,000 $0.25
Machine setups $36,000 1,200 $30
Production orders $18,000 500 $36
Product testing $22,000 1,100 $20
Packaging $42,900 3,900 $11
General factory $56,000 5,000 $11.2
Total $207,350
b. The computation of company's predetermined overhead rate is shown below:-
Company's predetermined overhead rate = Total estimated overhead cost ÷ Total expected direct labor hours
= $207,350 ÷ 5,000
= $41.47
Presented below is selected data related to Mike Corporation at December 31, 2020. Mike reports financial information monthly.
Service Revenue $36,000 Utilities Expense $4,000
Cash 8,000 Accounts Receivable 9,000
Equipment 10,000 Salaries and Wages Expense 7,000
Rent Expense 11,000 Notes Payable 16,500
Accounts payable 2,000 Dividends 5,000
Required:
a. Determine the total assets of the firm.
b. Determine the net income of the firm.
Answer:
a. Total assets of the firm:
Cash $8,000
Equipments $10,000
Accounts Receivable $9,000
Total Assets $27,000
b. Net income of the firm
Service Revenue $36,000
Less: Rent Expenses $11,000
Less: Utilities Expense $4,000
Less: Salaries and Wages Expense $7,000
Net Income $14,000
Trade Theories, a Historical Approach
Read the overview below and complete the activities that follow.
Free trade refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country, or what they can produce and sell to another country. The economic arguments surrounding the benefits and costs of free trade in goods and services are not abstract academic ones. International trade theory has shaped the economic policy of many nations for the past 50 years.
The textbook reviews six main trade theories: Adam Smith's theory of absolute advantage; David Ricardo's theory of comparative advantage; the Heckscher-Ohlin theory and the product life-cycle theory, which extend various aspects of Ricardo's theory; the new trade theory explaining the benefits from trade without national differences in resource endowments or technology; and Michael Porter's theory of national competitive advantage that draws attention to an international success in a particular industry. All these theories identify the specific benefits of international trade, help to explain the patterns of international trade, and government trade.
Match the correct theory with its corresponding description and time period in the evolution of international trade theory.1. Established in 1776, Adam Smith stated in this theory that countries should specialize in the production of goods and services for which they can produce most efficiently and then trade these for goods produced by other countries.A. Absolute advantage theory.B. New trade theory.C. Heckscher-Ohlin theory.D. National competitive advantage theory.E. Comparative advantage theory.F. Product life-cycle theory2. In 1817, David Ricardo stated that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries.A. Absolute advantage theory.B. New trade theory.C. Heckscher-Ohlin theory.D. National competitive advantage theory.E. Comparative advantage theory.F. Product life-cycle theory3. In the early 1900s, this theory predicts that countries will export those goods that make intensive use of factors that are locally abundant and import goods that make intensive use of factors that are locally scarce.A. Absolute advantage theory.
B. New trade theory.
C. Heckscher-Ohlin theory.
D. National competitive advantage theory.
E. Comparative advantage theory.
F. Product life-cycle theory4. In the mid-1960s, a theory initially proposed by Raymond Vernon, points out that where a new product is introduced is important. Over time, cost considerations start playing a greater role in the competitive process.A. Absolute advantage theory.B. New trade theory.C. Heckscher-Ohlin theory.D. National competitive advantage theory.E. Comparative advantage theory.F. Product life-cycle theory5. Emerging in the 1970s, this theory states that through its impact on economies of scale, trade can increase the variety of goods available to consumers while decreasing the average cost of those goods.A. Absolute advantage theory.B. New trade theory.C. Heckscher-Ohlin theory.D. National competitive advantage theory.E. Comparative advantage theory.F. Product life-cycle theory6. The most current theory was developed by Michael Porter and states that four broad attributes of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage.A. Absolute advantage theory.B. New trade theory.C. Heckscher-Ohlin theory.D. National competitive advantage theory.E. Comparative advantage theory.F. Product life-cycle theory
Answer:
Trade Theories, a Historical Approach
Matching correct theory with its corresponding description and time period in the evolution of international trade theory.
1. Established in 1776, Adam Smith stated in this theory that countries should specialize in the production of goods and services for which they can produce most efficiently and then trade these for goods produced by other countries.
A. Absolute advantage theory.
2. In 1817, David Ricardo stated that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries.
E. Comparative advantage theory.
3. 3. In the early 1900s, this theory predicts that countries will export those goods that make intensive use of factors that are locally abundant and import goods that make intensive use of factors that are locally scarce.
C. Heckscher-Ohlin theory.
4. In the mid-1960s, a theory initially proposed by Raymond Vernon, points out that where a new product is introduced is important. Over time, cost considerations start playing a greater role in the competitive process.
F. Product life-cycle theory.
5. Emerging in the 1970s, this theory states that through its impact on economies of scale, trade can increase the variety of goods available to consumers while decreasing the average cost of those goods.
B. New trade theory.
6. The most current theory was developed by Michael Porter and states that four broad attributes of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage.
D. National competitive advantage theory.
Explanation:
These various trade theories show where the world trade is coming from and where it is now. Indeed, it has come from a long place. Adam Smith commenced discussions on economic theories by first discussing the wealth of the nation. Currently, international trade is deviled by many national intrigues hindering free trade, including the threats posed by growing Chinese hegemony and national fears triggered by that country's unconventional trade practices.
Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+) or subtraction (−). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders' equity.
1) The firm borrowed $4,000 from the bank; a short-term note was signed.
2) Merchandise inventory costing $1,500 was purchased; cash of $400 was paid and the balance is due in 30 days.
3) Employee wages of $2,000 were accrued at the end of the month.
4) Merchandise that cost $700 was sold for $900 in cash.
5) This month's rent of $1,400 was paid.
6) Revenues from services during month totaled $13,000. Of this amount, $4,000 was received in cash and the balance is expected to be received within 30 days.
7) During the month, supplies were purchased on account at a cost of $1,040, and debited into the Supplies (asset) account. A total of $800 of supplies were used during the month.
8) Interest of $480 has been earned on a note receivable, but has not yet been received.
Transaction/Adjustment Assets Liabilities Stockholders' Eguity Net Income
1
2
3
4
5
6
7
8
Answer:
I used an excel spreadsheet since there is not enough room here
Explanation:
Emily Lim owns and runs an ice cream parlor in San Diego. Last year, she had sales of $490,000 and an average tax rate of 32%. She spent $49,000 on ingredients, $24,500 on utilities, and $88,200 to rent the premises. Emily has a few employees and paid them $98,000 in wages in total. She also paid herself a salary of $73,500 and spent $49,000 to pay for employee benefits. A few years ago, Emily borrowed money to buy the ice making equipment. Last year, she paid $24,500 in interest on that loan. Depreciation for the equipment was $14,700.
Required:
a. What was operating income (EBIT) for the year?
b. What was net income for the year?
Answer:
1). EBIT = Sales - Expenses - Depreciation
= $490,000 -($49,000 - $24,500 - $73,500 - $98,000 - $73,500 - $49,000) - $14,700
= $490,000 - $367,500 - $14,700
= $107,800
2. Net Income = [EBIT - Interest] x [1 - t]
= ($107,800 - $24,500) *(1 - 32%)
= $83,300 * 0.68
= $56,644
Larned Corporation recorded the following transactions for the just completed month.
a. $80,000 in raw materials were purchased on account.
b. $71,000 in raw materials were used in production. Of this amount, $62,000 was for direct materials and the remainder was for indirect materials.
c. Total labor wages of $112,000 were paid in cash. Of this amount, $101,000 was for direct labor and the remainder was for indirect labor.
d. Depreciation of $175,000 was incurred on factory equipment.
Required:
Record the above transactions in journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. $80,000 in raw materials were purchased on account.
2. $71,000 in raw materials were used in production. Of this amount, $62,000 was for direct materials and the remainder was for indirect materials.
3. Total labor wages of $112,000 were paid in cash. Of this amount, $101,000 was for direct labor and the remainder was for indirect labor.
4. Depreciation of $175,000 was incurred on factory equipment $80,000 in raw materials were purchaased on account.
Answer:
1. Dr Raw materials $80,000
Cr Account payable $80,000
2. Dr Work-in-Process $62,000
Dr Manufacturing overhead $9,000
Cr Raw materials $71,000
3. Dr Work-in-Process $101,000
Dr Manufacturing overhead $11,000
Cr Cash $112,000
4. Dr Manufacturing overhead $175,000
Cr Accumulated depreciation $175,000
Explanation:
Preparation of Journal entries
1. Based on the information given we were told that the amount of$80,000 in raw materials were been purchased on account which means that the Journal entry will be :
Dr Raw materials $80,000
Cr Account payable $80,000
(Raw materials purchased on account)
2. Based on the information given we were told that the amount of $71,000 in raw materials were been used in production in which the amount of $62,000 was for used for direct materials while the remaining was for indirect materials which means that the Journal entry will be:
Dr Work-in-Process $62,000
Dr Manufacturing overhead $9,000
(71,000-62,000)
Cr Raw materials $71,000
(raw material charged to production)
3. Based on the information given we were told that the Total labor wages amount of $112,000 were been paid in cash in which the amount of $101,000 was for direct labor while the remaining was for indirect labor which means that the Journal entry will be :
Dr Work-in-Process $101,000
Dr Manufacturing overhead $11,000
(112,000-101,000)
Cr Cash $112,000
(Wages charged to production)
4. Based on the information given we were told that the Depreciation of the amount of $175,000 was incurred on factory equipment which means that the Journal entry will be :
Dr Manufacturing overhead $175,000
Cr Accumulated depreciation $175,000
(Depreciation charged)
The 2021 balance sheet for Hallbrook Industries, Inc., is shown below.
HALLBROOK INDUSTRIES, INC.
Balance Sheet December 31, 2021 ($ in thousands)
Assets
Cash $ 330
Short-term investments 280
Accounts receivable 330
Inventory 360
Property, plant, and equipment (net) 2,300
Total assets $ 3,600
Liabilities and Shareholders’ Equity
Current liabilities $ 530
Long-term liabilities 480
Paid-in capital 1,400
Retained earnings 1,190
Total liabilities and shareholders’ equity $ 3,600
The company’s 2021 income statement reported the following amounts ($ in thousands):
Net sales $ 5,900
Interest expense 50
Income tax expense 120
Net income 290
Required:
1. Calculate the current ratio. (Round your answer to 2 decimal places.)
2. Calculate the acid-test ratio. (Round your answer to 3 decimal places.)
3. Calculate the debt to equity ratio. (Round your answer to 2 decimal places.)
4. Calculate the times interest earned ratio. (Round your answer to 1 decimal place.)
Answer:
HALLBROOK INDUSTRIES, INC.
1. Current Ratio = Current assets/Current liabilities
= $1,300/530
= 2.45
2. Acid-test ratio = (Current assets - Inventory)/Current liabilities
= $940/530
= 1.77
3. Debt to Equity ratio = Total Liabilities/Equity
= $1,010/$2,590 * 100
= 0.39
4. Times Interest Earned = EBIT/Interest Expense
= $460/$50
= 9.2 times
Explanation:
a) Data and Calculations:
HALLBROOK INDUSTRIES, INC.
Balance Sheet December 31, 2021 ($ in thousands)
Assets
Cash $ 330
Short-term investments 280
Accounts receivable 330
Inventory 360
Total current assets $1,300
Property, plant, & equipment (net) 2,300
Total assets $ 3,600
Liabilities and Shareholders’ Equity
Current liabilities $ 530
Long-term liabilities 480
Total liabilities $1,010
Equity
Paid-in capital 1,400
Retained earnings 1,190
Total Equity $2,590
Total liabilities and
shareholders’ equity $ 3,600
2021 Income Statement reported the following amounts ($ in thousands):
Net sales $ 5,900
Interest expense 50
Income tax expense 120
Net income 290
EBIT = $460
Junker’s Stash started the Year 2 accounting period with the balances given in the following horizontal financial statements model. During Year 2, Junker’s Stash experienced the following business events:_______. 1. Paid cash to purchase $70,000 of merchandise inventory. 2. The goods that were purchased in Event 1 were delivered FOB destination. Transportation costs of $1,400 were paid in cash by the responsible party. 3a. Sold merchandise for $72,000 under terms 1/10, n/30. 3b. Recognized $41,900 of cost of goods sold. 4a. Junker’s Stash customers returned merchandise that was sold for $2,100. 4b. The merchandise returned in Event 4a had cost Junker’s Stash $1,250. 5. The merchandise in Event 3a was sold to customers FOB destination. Transportation costs of $1,650 were paid in cash by the responsible party. 6a. The customers paid for the merchandise sold in Event 3a within the discount period. Recognized the sales discount. 6b. Collected the balance in the accounts receivable account. 7. Paid cash of $6,850 for selling and administrative expenses. 8. Sold the land for $9,100 cash.Required:
Record the above transactions in a financial statements model like the one shown below:
Event Number Cash + Accounts Receivable + Inventory + Land = Common Stock + Retained Earnings Rev./ Gain - Expense = Net income Cash Flow
Balance 80,000.00 0 15,000.00 11,000.00 70,000.00 36,000.00 N/A N/A N/A N/A
Determine the amount of net sales.
Prepare a multistep income statement. Include common size percentages on the income statement.
Junker’s Stash return on sales ratio in 2015 was 12 percent. Based on the common size data in the income statement, did Junker’s Stash expenses increase or decrease in 2016?
Explain why the term loss is used to describe the results due to the sale of land.
Answer:
I used an excel spreadsheet for the financial statements model since there is not enough room here.
Junker's Stash
Income Statement
For the year ended December 31, year 2
Sales $72,000 100%
Sales returns ($2,100) 2.92%
Sales discounts ($699) 0.97%
Net sales $69,201 96.11%
Cost of goods sold ($40,650) 56.46%
Gross profit $28,551 39.65%
Operating expenses:
Delivery Costs ($1,650) 2.29%Other S&A expenses ($6,850) 9.51%Operating income $20,051 27.85%
Other revenue and expenses:
Loss from sale of land ($1,900) 2.64%
Net income before taxes $18,151 25.21%
Current return on sales ratio = operating income / net revenue = $20,051 / $69,201 = 28.98%
The land's basis was $11,000 and the selling price was $9,100:
gain/loss form sale = selling price - basis = $9,100 - $11,000 = ($1,900)
you sold the land for less than its book value
An increase in the market price of men's haircuts, from $ per haircut to $ per haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from to . When the $ market price remains unchanged for several weeks and all other things remain equal as well, the barbershop hires additional employees and provides haircuts per day.
Required:
What is the short-run price elasticity of supply?
Answer :
Meaning & formula of short run price elasticity of supply, its numerical example as per given case
Explanation:
Short Run Price Elasticity of Supply denotes the proportionate change in quantity supplied due change in price. Price & quantity supplied change in same directions, as per law of supply.
In given case, increase in price of haircut increases the quantity supplied of the service of haircut, by more per labour service rate or more labour.
Short Run price elasticity of supply = percentage change in quantity supply/ percentage change in price =
Eg : If price increases from 5 to 10, & 5 workers' haircut increase from 4 to 6 haircuts for each worker, then total haircuts increase from 4 x 5 = 20 to 6 x 5 = 30
Short Run Price Elasticity of supply = 100/50 = 2
Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:_______. Total machine-hours 30,300 Total fixed manufacturing overhead cost $575,700 Variable manufacturing overhead per machine-hour $ 4.00 Recently, Job T687 was completed with the following characteristics:_______. Number of units in the job 10 Total machine-hours 30 Direct materials $ 730 Direct labor cost $1,460 If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to:_______.
Answer: $316.80
Explanation:
First the total cost for the product = Direct material + Direct labor + Total overhead
Total Overhead;
Estimated Variable Overhead = 4 * 30,300 = $121,200
Total Overhead = Estimated Variable Overhead + Total fixed manufacturing overhead cost
= 121,200 + 575,700
= $696,900
Predetermined Overhead rate = Total Overhead/ Machine hours = 696,900/30,300
= $23 per hour
Overhead for Job T687 = 23 * 30 = $690
Total cost = 730 + 1,460 + 690
= $2,880
Sales price with 40% markup = 2,880 * (1 + 40%)
= $3,168
Selling price per unit in Job T687;
= 3,168/10
= $316.80You have been asked to estimate the beta for a large South Korean company, with large holdings in steel and financial services. A regression of stock returns against the local market index yields a beta of 1.10, but the firm is 15% of the index. You have collected the average betas for global companies in each of the sectors, as well as the average debt equity ratios in each sector:
Setor Average Regression Beta Average D/E ratio
Steel 1.18 30%
Financial
Services 1.14 70%
The average tax rate for these industries is 40%.
In the most recent period, the company you are analyzing earned 70% of its operating income from steel and 30% from financial services. The firm also had a debt/equity ratio of 150%, and a tax rate of 30%. Estimate the levered beta for the company.
Answer:
The levered beta for the company is 1.93.
Explanation:
Levered beta for the company = (Weight of steel business*levered beta of steel business) + (Weight of financial services business*levered beta of financial services business)
Levered beta of steel business = Unlevered beta of steel sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)
levered beta of financial services business = Unlevered beta of financial services sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)
Unlevered beta of steel sector = Current beta of steel sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)
Unlevered beta of steel sector = 1.18/[1+((1-0.4)*0.3)]
Unlevered beta of steel sector = 1.18/[1+(0.6*0.3)]
Unlevered beta of steel sector = 1.18/(1+0.18)
Unlevered beta of steel sector = 1.18/1.18
Unlevered beta of steel sector = 1
Levered beta of steel business = 1*[1+((1-0.3)*1.5)]
Levered beta of steel business = 1*[1+(0.7*1.5)]
Levered beta of steel business = 1*(1+1.05)
Levered beta of steel business = 1*2.05
Levered beta of steel business = 2.05
Unlevered beta of financial services sector = Current beta of financial services sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)
Unlevered beta of financial services sector = 1.14/[1+((1-0.4)*0.7)]
Unlevered beta of financial services sector =1.14/[1+(0.6*0.7)]
Unlevered beta of financial services sector = 1.14/(1+0.42)
Unlevered beta of financial services sector = 1.14/1.42
Unlevered beta of financial services sector = 0.80
Levered beta of financial services business = 0.8*[1+((1-0.3)*1.5)] = 0.8*[1+(0.7*1.5)] = 0.8*(1+1.05) = 0.8*2.05 = 1.64
Levered beta for the company = (0.7*2.05) + (0.3*1.64)
Levered beta for the company = 1.44 + 0.49
Levered beta for the company = 1.93
Hence, the levered beta for the company is 1.93.
Assume that Atlas Sporting Goods Inc. has $1,040,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 14 percent, but with a high-liquidity plan the return will be 11 percent. If the firm goes with a short-term financing plan, the financing costs on the $1,040,000 will be 8 percent, and with a long-term financing plan the financing costs on the $1,040,000 will be 9 percent.
a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.
Anticipated return $
b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.
Anticipated return $
c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.
Anticipated Return
Low liquidity $
High liquidity $
Answer:
A. Anticipated return= $62,400
B. Anticipated return= $20,800
C. Low liquidity Anticipated return=$52,000
High liquidity Anticipated return=$31,200
Explanation:
a. Computation for the anticipated return after financing costs with the most aggressive asset-financing mix.
Anticipated return=($1,040,000*14%)-($1,040,000*8%)
Anticipated return= $145,600-$83,200
Anticipated return= $62,400
b. Computation for the anticipated return after financing costs with the most conservative asset-financing mix.
Anticipated return=($1,040,000*11%)-($1,040,000*9%)
Anticipated return= $114,400-$93,600
Anticipated return= $20,800
c. Computation for the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.
Anticipated Return
Low liquidity =($1,040,000*14%)-($1,040,000*9%)
Low liquidity =$145,600-$93,600
Low liquidity =$52,000
High liquidity =($1,040,000*11%)-($1,040,000*8%)
High liquidity =$114,400-$83,200
High liquidity =$31,200
Morrison Company uses a job-order costing system to assign manufacturing costs to Jobs. Its balance sheet on January 1 is as follows:Morrison Company Balance Sheet January 1 Assets Cash $42,000Raw materials $13,600 Work in process 7,450 Finished goods 18,000 39,050Prepaid expenses 2,150Property, plant, and equipment (net) 105,000Total assets $188,200Liabilities and Stockholders' Equity Accounts payable $16,900Retained earnings 171,300Total liabilities and stockholders' equity $188,200During January the company completed the following transactions:a. Purchased raw materials on account, $76,200.b. Raw materials used in production, $84,900 ($68,000 was direct materials and $16,900 was indirect materials).c. Paid $189,450 of salaries and wages in cash ($97,200 was direct labor $43,200 was indirect labor, and $49,050 was related to employees responsible for selling and administration).d. Various manufacturing overhead costs incurred (on account) to support production $46,650.e. Depreciation recorded on property, plant, and equipment, $56,000 (70% related to manufacturing equipment and 30% related to assets that support selling and administrative.f. Various selling expenses paid in cash $39,050.g. Prepaid insurance expired during the month, $1,300 (80% related to production, and 20% related to selling and administration).h. Manufacturing overhead applied to production, $140,400.i. Cost of goods manufactured, $303,800.j. Cash sales t customers, $416,840.k. Cost of goods sold (unadjusted), $300,600.l. Cash payments to creditors, $62,000.m. Underapplied or overapplied overhead|$_____Required:1. Calculate the ending balance that would be reported on the company?s balance sheet on January 31.2. What is Marrison Company?s net operating income for the month of January?
Answer:
Morrison Company
1. Ending balance in the balance sheet:
Cash $168,340
Raw materials $4,900
Work in process $9,250
Finished goods $21,200
Prepaid expenses 850
Property, plant, and equipment (net) $49,000
Total assets $253,540
Liabilities and Stockholders' Equity
Accounts payable $77,750
Retained Earnings 175,790
Total Liabilities + Equity $253,540
2. Net Operating income for the month of January is: $4,490
Explanation:
a) Data and Calculations:
Morrison Company
Balance Sheet
January 1 Assets
Cash $42,000
Raw materials $13,600
Work in process 7,450
Finished goods 18,000 39,050
Prepaid expenses 2,150
Property, plant, and equipment (net) 105,000
Total assets $188,200
Liabilities and Stockholders' Equity
Accounts payable $16,900
Retained earnings 171,300
Total liabilities and stockholders' equity $188,200
Transactions:
a. Purchased raw materials on account, $76,200.
b. Raw materials used in production, $84,900 ($68,000 was direct materials and $16,900 was indirect materials).
c. Paid $189,450 of salaries and wages in cash ($97,200 was direct labor $43,200 was indirect labor, and $49,050 was related to employees responsible for selling and administration).
d. Various manufacturing overhead costs incurred (on account) to support production $46,650.
e. Depreciation recorded on property, plant, and equipment, $56,000 (70% related to manufacturing equipment and 30% related to assets that support selling and administrative.
f. Various selling expenses paid in cash $39,050.
g. Prepaid insurance expired during the month, $1,300 (80% related to production, and 20% related to selling and administration).
h. Manufacturing overhead applied to production, $140,400.
i. Cost of goods manufactured, $303,800.
j. Cash sales to customers, $416,840.
k. Cost of goods sold (unadjusted), $300,600.
l. Cash payments to creditors, $62,000.
m. Underapplied or overapplied overhead|$__$6,590___
Cash
Account Title DR. CR.
Balance $42,000
Salaries $189,450
Selling expense 39,050
Sales $416,840
Suppliers $62,000
Bal. $168,340
Raw materials
Account Title DR. CR.
Balance. $13,600
Accounts Payable$76,200
Work in Process $84,900
Bal. $4,900
Work in process
Account Title DR. CR.
Balance 7,450
Raw Materials $68,000
Salaries $97,200
Overhead $140,400
Finished Goods $303,800
Bal. $9,250
Finished goods
Account Title DR. CR.
Balance 18,000
Work in Process $303,800
Cost of Goods Sold $300,600
Bal. $21,200
Cost of goods sold (adjusted)
Account Title DR. CR.
Finished Goods $300,600
Underapplied $6,590
Income Statement $307,190
Prepaid expenses
Account Title DR. CR.
Balance $2,150
Insurance Expense $1,300
Balance 850
Manufacturing overhead
Account Title DR. CR.
Raw materials $16,900
Salaries $43,200
Depreciation $39,200
Miscellaneous $46,650
Insurance $1,040
Work in Process $140,400
Bal. (underapplied) $6,590
Selling Expense
Account Title DR. CR.
Salaries 49,050
Others $39,050
Insurance 260
Depreciation $16,800
Income Summary $105,400
Property, plant, and equipment (net) 105,000
Depreciation for the year - $56,000
Balance = $49,000
Accounts payable
Account Title DR. CR.
Balance $16,900
Raw materials $76,200
Overhead $46,650
Cash $62,000
Balance $77,750
Income Statement and Statement of Retained Earnings:
Sales Revenue $416,840
Cost of goods sold 307,190
Gross profit $109,650
Salaries 49,050
Selling 39,050
Insurance 260
Depreciation 16,800 $105,160
Net Income $4,490
Retained earnings 171,300
Retained earnings $175,790
The following transactions occurred during 2021 for the Beehive Honey Corporation:
Feb. 1 Borrowed $24,000 from a bank and signed a note. Principal and interest at 8% will be paid on January 31, 2022.
Apr. 1 Paid $6,000 to an insurance company for a two-year fire insurance policy.
July 17 Purchased supplies costing $4,000 on account. The company records supplies purchased in an asset account. At the year-end on December 31, 2021, supplies costing $1,850 remained on hand.
Nov. 1 A customer borrowed $9,600 and signed a note requiring the customer to pay principal and 6% interest on April 30, 2022.
Required:
1. Record each transaction in general journal form.
2. Prepare any necessary adjusting entries at the year-end on December 31, 2021. No adjusting entries were recorded during the year for any item.
Answer:
Given Below
Explanation:
Beehive Honey Corporation:
General Journal
Journal Entries
Date Particulars Debit Credit
Feb.1. Cash $ 24,000 Dr.
Notes Payable $ 24,000 Cr.
Feb. 1 Borrowed $24,000 from a bank and signed a note. Principal and interest at 8% will be paid on January 31, 2022.
Apr. 1 Prepaid Insurance 6,000 Dr.
Cash $ 6000 Cr
Apr. 1 Paid $6,000 to an insurance company for a two-year fire insurance policy.
July 17 Supplies Account $ 4000 Dr.
Accounts Payable $ 4000 Cr.
July 17 Purchased supplies costing $4,000 on account. The company records supplies purchased in an asset account.
Nov. 1 Notes Receivable $ 9,600 Dr.
Cash $ 9,600 Cr.
Nov. 1 A customer borrowed $9,600 and signed a note requiring the customer to pay principal and 6% interest on April 30, 2022.
Beehive Honey Corporation:
General Journal
Adjusting Entries December 31st
Sr. No Particulars Debit Credit
1. Interest Expense $ 1600 Dr.
Interest Payable $ 1600 Cr.
Interest accrued from Feb to December. ( $ 24000* 8% * 10/12 = $ 1600)
2. Insurance Expense $ 2250 Dr.
Prepaid Insurance 2250 Cr.
Insurance of $ 2250 expired during April to December. ( $ 3000 *9/12* = $ 2250)
3. Supplies Expense $ 2150 Dr.
Supplies Account $ 2150 Cr.
( $ 4000 - $ 1850= $ 2150)
At the year-end on December 31, 2021, supplies costing $1,850 remained on hand.
4. Interest Receivable $ 192 Dr.
Interest Income $ 192 Cr.
$9,600 * 6% * 2/6= $ 192 Accrued Interest not yet received.
In 1990, Ivanhoe Company completed the construction of a building at a cost of $800,000 and first occupied it in January 1991. It was estimated that the building would have a useful life of 40 years and a salvage value of $24,000 at the end of that time. Early in 2001, an addition to the building was constructed at a cost of $200,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $8,000.
In 2019, it is determined that the probable life of the building and addition will extend to the end of 2050, or 20 years beyond the original estimate.
Required:
a. Using the straight-line method, compute the annual depreciation that would have been charged from 1991 through 2000:
b. Compute the annual depreciation that would have been charged from 2001 through 2018.
c. Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2019.
Answer:
(a) 19,400 dep expense for building 1991-2000 period
(b) 25,800 dep expense for building 2001-2018 period
(c) no entry required as this additional information arises during this year and wasn't available in the previous year. It wasn't a lack of sufficient information or accoutning mistake that produced.
Explanation:
(a)
cost - salvage value / useful life = depreication per year
(800,000 - 24,000) / 40 = depreciation expense per year
dep expense 19,400
(b)
building book value:
cost - accumulated depreciation
800,000 - 19,400 x 10 years = 606,000
addtional construction 200,000
total value 806,000
salvage value: 24,000 + 8,000= 38,000
useful life 30 years
deprecation expense betwene 2001 and 2018 related to building
(806,000 - 32,000 ) / 30 years = 25,800
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $17,000 bill from her accountant for consulting services related to her small business. Reese can pay the $17,000 bill anytime before January 30 of next year without penalty. Assume Reese’s marginal tax rate is 32% this year and will be 37% next year, and that she can earn an after-tax rate of return of 11% on her investments.
A. What is the after-tax cost if she pays the $31,000 bill in December?
B. What is the after-tax cost if she pays the $31,000 bill in January?
Answer:
$11,560
$5666.661
Explanation:
Given the following :
Bill received from accountant = $17,000
This year's marginal tax rate = 32%
Next year's marginal tax rate = 37%
After tax return on investment = 11%
After tax cost of bill is paid in December :
Billed amount * this year's tax rate
$17,000 * ( 1 - 0.32)
= $17,000 * 0.68
= $11,560
B) After tax cost of bill was paid in January:
Billed amount * next year's tax rate * PV factor
From the present value factor table;
PV factor (1 years, 11%) = 0.9009
Hence,
$17,000 * 0.37 * 0.9009 = $5666.661
Two alternatives are under consideration. The first alternative will cost $100,000, require $20,000 in maintenance and operation costs each year, and a life cycle of 4 years. The second alternative will cost $300,000, require $5,000 in maintenance and operation costs each year and a life of 6 years. Neither option will have a salvage value. In order to compute the present worth or future worth, how many years of each alternative should I use to accurately compare the two alternatives.
Answer:
12 years
Explanation:
Since the life of two alternatives are unequal, for comparison using present or future worth method, we have to take Least Common Multiple(LCM) of the life of the alternatives. Here, the LCM of 4 and 6 = 12 years. Thus, in order to compute the present worth or future worth, 12 years of each alternative I should use to accurately compare the two alternatives.
During 2019, John was the chief executive officer and a shareholder of Maze, Inc. He owned 60% of the outstanding stock of Maze. In 2016, John and Maze, as co-borrowers, obtained a $100,000 loan from United National Bank. This loan was secured by John’s personal residence. Although Maze was listed as a co-borrower, John repaid the loan in full in 2019. On Maze’s Form 1120 tax returns, no loans from shareholders were reported. Discuss whether John is entitled to a bad debt deduction for the amount of the payment on the loan.
Answer:
Throughout the clarification segment elsewhere here, the definition of the concern is outlined.
Explanation:
Yes, Mr. John becomes qualified to something like a bad debt benefit for the balance including its interest made on either the loan.Although Maze is obligated to declare the same here in his tax filing throughout respect including its loan lent over him from the United National Bank mostly as professional and non-borrower.Champion Company purchased and installed carpet in its new general offices on March 31 for a total cost of $18,000. The carpet is estimated to have a 15-year useful life and no residual value.
Required:
a. Prepare the journal entries necessary for recording the purchase of the new carpet.
b. Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet assuming that Champion Company uses the straight-line method.
Answer and Explanation:
The journal entries are shown below:
a. Carpet $18,000
To Cash $18,000
(Being the cash paid is recorded)
b. Deprecation $900
To Accumulated Depreciation $900
(Being Depreciation expense recorded)
The computation is shown below:
= $18,000 ÷ 5 years × 9 months ÷ 12 months
= $900
After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $19,300 price, but financing through the dealer is no bargain. He has $3,000 cash for a down payment, so he needs an $16,300 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $16,300 for a period of four years at an add-on interest rate of 10 percent.1. What is the total interest on Richard's loan? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
2. What is the total cost of the car? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
3. What is the monthly payment? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
4. What is the annual percentage rate (APR)? (Do not round your intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Answer:
Explanation:
Price of car = $19300
Down payment = $3000
Loan. Amount = $16300
Number of years = 4
Rate = 10%
1. What is the total interest on Richard's loan?
Simple interest = PRT/100
where p = principal = 16300
R = rate = 10%
T = Time = 4 years
Simple interest= (16300 × 10 × 4)/100
= $6520
2. What is the total cost of the car?
Total cost = Price + Interest
= 19300 + 6520
= $25820
3. What is the monthly payment?
This will be calculated as:
= (Loan amount + Interest)/Number of months
= (16300 + 6520)/4 years
= (16300 + 6520)/48
= 22820/48
= $475.41667
4. What is the annual percentage rate (APR)?
APR = (2×n×l)/P(N+1)
where,
n = number of payments period in a year.
I = Interest
P= Loan amount
N = Total number of payments
APR = (2×12×6520)/16300(48+1)
= 156480/16300(49)
= 156480/798700
= 0.1959
= 19.59%
What is the most popular method of filing in Nepal?
why?
Answer:
OK this is your ans to the ques
The most popular method of filing in Nepal is the Electronic Filing System. This is because it is faster, more convenient, and more efficient than traditional paper filing.
What is the most popular method of filing in Nepal?
The most popular method of filing in Nepal is paper-based filing.
This is because electronic filing systems are not widely used or accessible in many parts of the country, particularly in rural areas where there may not be reliable internet access or electricity.
Additionally, many people in Nepal may not have access to computers or other electronic devices, so paper-based filing is often seen as the most practical and accessible method.
However, the government of Nepal has been working to promote the use of electronic filing systems in recent years, particularly for businesses and other organizations, as part of its efforts to modernize and streamline administrative processes.
Learn more about filing in Nepal here:
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As the manager of a company, you are concerned that not all customer orders are being shipped. To test whether all orders for the year have been shipped, you would:__________.
A. Review all customer order and make sure that each has a related bill of lading
B. Review all customer order and make sure that each has a related sales invoice
C. Review all bills of lading and make sure that each has a related sales invoice
D. Review all sales invoice to make sure that they have been posted in the related journal
E. Review all customer orders to make sure that each has been posted in the related journal
Answer:
A. Review all customer order and make sure that each has a related bill of lading
Explanation:
A manager of a company through the managerial role in an organization uses interpersonal skills, decision making and others to ensure that the goal and objectives of the organization are met. A manager plan, organize and control. And he is usually oversee section or department in an organization.it should be noted that the manager must make sure customers orders are been delivered by reviewing of customer orders.
In the case whereby the manager is informed that not all customer orders are being shipped. For him/her to test whether all orders for the year have been shipped, he would review all customer order and make sure that each has a related bill of lading.
An individual has total assets of 120,000 and total liabilities of 80,000. what is his net worth?
Answer:
40,000
Explanation:
Net worth is the value of a person or a firm's assets minus the liabilities. It is the net value of all the assets owned by an individual or organization. Calculation of net worth is by deducting liabilities from assets,
i.e., Asset - liabilities.
For this individual, net worth will be
=120,000 - 80,000
=40,000
Magnus Co. controls Anand Co. and wants to prepare consolidated financial statements. However, the controller of Magnus Co. did not study ACCY 410 course at the UIUC and does not know whether the retained earnings of Anand Co. should (or should not) be reported in the consolidated retained earnings, in the consolidated financial statements.
Research and cite a specific paragraph in the Accounting Standard Codification that can help the controller to determine whether retained earnings of the subsidiary should be reported in the consolidated retained earnings. Unless specifically requested, your response should not cite implementation guidance and illustrations.
FASB ASC - - -
Answer and Explanation:
Magnus Co should refer to FAS 160/ARB-51-9
Retained earnings are profits of the business after deduction of dividend. It is located in the equity section of the statement of financial position/balance sheet of the reporting entity
Calculated retained earnings +profit/loss for the year - dividends
A
A subsidiary must be consolidated and reported by an entity with an interest in it if it has a majority stake in the company of over 50 percent voting shares
FAS 160 has replaced ARB 51
The gain on the disposal of equipment is recognized when: Multiple Choice The book value of the equipment is greater than the value received. The book value of the equipment is less than the value received. A salvage value exists. A gain should not be recognized on the disposal of an asset.
Answer:
The correct option:The book value of the equipment is less than the value received
Explanation:
The gain on the disposal of an equipment will be recognized when the book value of the equipment which is the amount in which the equipment was bought is LESS or lower than the value received. Example if the book value of an equipment before disposal is $150,000 in which the equipment was later dispose off at the value of $200,000 which means that the amount of $200,000 will be the value or the amount that will be recognized because the book value amount of $150,000 is less than the value received which is $200,000 making us to have a gain of $50,000 on the Equipment which is calculated as:
Gain on disposal= Book value -Value received
Gain on disposal =$150,000-$200,000
Gain on disposal =$50,000 will be recognized
Sportly, Inc. completed Job No. B14 during 2012. The job cost sheet listed the following:Direct materials $55,000Direct labor $30,000Manufacturing overhead applied $20,000Units produced 3,000 unitsUnits sold 1,800 unitsHow much is the cost of the finished goods on hand from this job? a.$51,000 b.$105,000 c.$42,000 d.$63,000
Answer:
Ending inventory= $42,000
Explanation:
Giving the following information:
Direct materials $55,000
Direct labor $30,000
Manufacturing overhead applied $20,000
Units produced 3,000 units
Units sold 1,800 units
First, we need to calculate the total cost:
Total cost= 55,000 + 30,000 + 20,000= $105,000
Now, the unitary cost:
Unitary cost= 105,000/3,000= $35
Finally, the ending inventory:
Ending inventory= 1,200*35= $42,000