Answer:
Bridgeport Housewares Inc.
1. Monthly Cash Budget with supporting schedules for September, October, and November:
a. Cash Budget for September, October, and November:
September October November
Beginning balance $40,000 $111,0000 $137,500
Cash receipts 253,000 259,500 288,000
Total cash available $293,000 $370,500 $425,500
Cash Payments:
Payment for manufacturing costs 140,000 130,000 135,000
Income tax 55,000
Dividend 25,000
Selling & administrative expenses 42,000 48,000 51,000
Capital expenditures _ _ 200,000
Total cash payment $182,000 $233,000 $411,000
Balance $111,000 $137,500 $14,500
Minimum Cash Balance 50,000 50,000 50,000
Cash to invest or borrow $61,000 $87,500 -$35,500
b. Supporting Schedules:
i) Cash Collections:
September October November
10% Cash Sales, month of sales $25,000 $30,000 $31,500
Sales on account: 90%
70% following month of sales 157,500 189,000
30% 2nd month following sale 67,500
30% of July Sales 60,000
70% of August 168,000
30% of August 72,000
Total cash receipts $253,000 $259,500 $288,000
2. The budget indicates that the minimum cash balance (will or will not) be maintained in November. This situation can be corrected by (investing or borrowing) and/or by the (purchase or sale) of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will (exceed or be sort of) the minimum desired balance.
Explanation:
a) Data and Calculations:
1. Budget Information:
September October November
Sales $250,000 $300,000 $315,000
Manufacturing costs 150,000 180,000 185,000
Selling and administrative expenses 42,000 48,000 51,000
Capital expenditures _ _ 200,000
2. Cash Collections:
September October November
10% Cash Sales, month of sales $25,000 $30,000 $31,500
Sales on account: 90%
70% following month of sales 157,500 189,000
30% 2nd month following sale 67,500
30% of July Sales 60,000
70% of August 168,000
30% of August 72,000
Total cash receipts $253,000 $259,500 $288,000
3. Manufacturing Costs:
Manufacturing costs 150,000 180,000 185,000
less Depreciation, insurance, &
property tax expenses 50,000 50,000 50,000
Remainder 100,000 130,000 135,000
4. Remainder of Manufacturing costs:
80% paid in the month incurred 80,000 104,000 108,000
Remainder 20%, month following 20,000 26,000 27,000
August manufacturing cost: 40,000
Payment for manufacturing costs $140,000 $130,000 $135,000
5. Cash Payments:
Payment for manufacturing costs 140,000 130,000 135,000
Income tax 55,000
Dividend 25,000
Selling & administrative expenses 42,000 48,000 51,000
Capital expenditures _ _ 200,000
Total cash payment $182,000 $233,000 $411,000
Other relevant information:
Current assets as of September 1:
Cash of $40,000
Marketable securities of $75,000
Accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively
Current Liabilities:
September 1 Accounts payable = $40,000 incurred in August for manufacturing costs.
Selling and administrative expenses are paid in cash in the period they are incurred.
Income tax = $55,000 October
Quarterly Dividend of $25,000 in November
Minimum cash balance of $50,000 monthly
b) When Bridgeport Housewares Inc prepares budgeted monthly cash budgets, important highlights are indicated. For instance, it becomes easier for the management of Bridgeport to know when to borrow cash to meet the minimum cash balance or in the alternative sell off some marketable securities. It is also easier for Bridgeport to understand that it can be having excess cash which should not be allowed to sit idle, but can be invested in marketable securities. The cash budgets and their preparation also help Bridgeport to be better prepared to exert the required efforts to generate sales revenue in order not to jeopardize its liquidity position. It can also help Bridgeport to understand that the capital expenditure could have been paid for instalmentally starting from September or so instead of lumping the sum in November. There are many other insights garnered from the cash budgets and their preparation.
g The aggregate supply curve shifts A. rightward if the money wage rate falls. B. leftward if the aggregate demand curve shifts leftward. C. rightward if potential GDP decreases. D. leftward if potential GDP increases. E. rightward if the money wage rate rises.
Answer:
The correct option to the question above is option A "rightward if the money wage rate falls."
Explanation:
The aggregate supply curve is a graphical illustration of how the total quantity of goods and services is available for a given price and time.
When the aggregate supply curve shifts to the right, it increases. While, when the aggregate supply curve shifts to the left, it decreases.
An increase in the aggregate supply curve shows a fall in price, which makes a high price level resulting in a greater supply of real GDP.
Money wages is the amount of money paid in wages. Money wages is indirectly proportional to real wages. The aggregate supply curve decreases if the money wage rate increases and the aggregate supply curve increases when the money wage rate falls.
Aggregate supply is affected by GDP. When A GDP decreases, it also decreases aggregate supply.
An online-only bank currently offers a 7-year CD (certificate of deposit) paying simple interest rate of 4% per quarter. If you want to get $4,240 from this CD 7 years later, how much do you have to purchase today?
Answer:
The answer is $1,413.94
Explanation:
Number of periods(N) = 28 periods (7 years x 4 quarters)
Interest rate(I/Y) = 4% per quarter. Therefore, interest rate per year is 16% per year(4% x 4 quarters)
Future value(FV) = $4,240
Present Value (PV) = ?
Let's use a financial calculator:
N = 28; I/Y = 4, FV = 4,240; CPT PV= -1,413.94
Therefore, the present value is $1,413.94
Lena plans to invest 7,200 dollars in 6 year(s) and 7,500 dollars in 5 year(s). She expects to earn 15.6 percent, compounded quarterly. How much money does Lena expect to have in 11 years
Answer:
The expected amount is $34154.83
Explanation:
Lena invested the amount = $7200
$7200 invested for time period = 6 years
Second amount invested = $7500
$7500 invested for the time period = 5 years.
The expected interest rate = 15.6 %
Total amount = A=P(1+r/400)^4n
A=future value
P=present value
r=rate of interest
n=time period.
Hence
A=7200(1+15.6/400)^(4*6) + 7500(1+15.6/400)^(4*5)
= 18034.5636 + 16120.2664
= $34154.83
The original cost of the machine was $1,800,000. The machine has a class life of 15 years, but after 13 years, the firm has decided to sell the machine for $320,000. If Monster Potato has a marginal tax rate of 21%, what is the tax effect associated with the decision?
Answer: $16,800 tax payment.
Explanation:
Annual depreciation on machine = [tex]\frac{1,800,000}{15}[/tex]
= $120,000
Accumulated Depreciation in 13 years;
= 120,000*13
= $1,560,000
Book Value at 13 years
= 1,800,000 - 1,560,000
= $240,000
Company sold it at a higher price than its book value so there will be a capital gain of;
= 320,000 - 240,000
= $80,000
Tax is charged on the marginal gain;
= 80,000 * 21%
= $16,800
Craigmont Company's direct materials costs are $3,700,000, its direct labor costs total $7,630,000, and its factory overhead costs total $5,630,000. Its conversion costs total:
Answer:
$13,260,000
Explanation:
Craigmont's company has a direct material cost of $3,700,000
Its direct labor cost is $7,630,000
Its factory overhead cost is $5,630,000
Therefore, the conversion costs can be calculated as follows
Conversion costs= Direct labor+Factory overhead
= $7,630,000+$5,630,000
= $13,260,000
Hence the conversion costs total is $13,260,000
Factory Overhead Rates, Entries, and Account Balance Eclipse Solar Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows: Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning August 1 $18,500,000 $44,000,000 Estimated direct labor hours for year 800,000 Estimated machine hours for year 1,250,000 Actual factory overhead costs for August $1,515,800 $3,606,300 Actual direct labor hours for August 64,500 Actual machine hours for August 105,000 a. Determine the factory overhead rate for Factory 1. Round your answer to two decimal places.
Answer:
Predetermined manufacturing overhead rate= $14.8 per machine hour
Explanation:
Giving the following information:
Factory 1
Estimated factory overhead= $18,500,000
Estimated machine hours for year 1,250,000
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 18,500,000/1,250,000
Predetermined manufacturing overhead rate= $14.8 per machine hour
On December 31, it was estimated that goodwill of $51,500 was impaired. In addition, a patent with an estimated useful economic life of 12 years was acquired for $115,200 on April 1.
a. Journalize the adjusting entry on December 31 for the impaired goodwill
b. Journalize the adjusting entry on December 31 for the amortization of the paten
Answer:
a. The journal entries for the impaired goodwill as at Dec 31 would be:
Debit Impairment expense/charge $51,500
Credit Goodwill/Allowance for impairment $51,500
(To recognize impairment expense on goodwill)
b. Journal entries for the amortization of the patent as at Dec 31 would be:
Debit Amortization expense $9,600 [$115,200/12]
Credit Accumulated amortization $9,600
(To recognize amortization expense on patent)
Explanation:
A goodwill is impaired when its carrying value exceeds its fair value. The impairment test is carried out annually and the difference by which the carrying value of the goodwill exceeds the fair value is charged to the profit or loss account as impairment expense. The impairment reduces the goodwill to its fair value.
Goodwill belongs to a class of intangible asset and it arises essentially as a result of business combination. A business combination occurs when a company acquires another company.
suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 3.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
Price of bond = €875.09
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond would be worked out as follows:
Step 1
Calculate the PV of interest payments
Annual interest payment
= 3.8% × 1,000 = 38
PV of interest payment = A ×(1- (1+r)^(-n))/r
r- annual yield = 4.7%
n- 23
PV of interest payment= 38 × (1-(1.047^(-23)/0.047 = €527.37
Step 2
PV of redemption Value
PV = RV × (1+r)^(-n)
PV = 1,000 × (1.047)^(-23) = €347.717
Step 3
Price of bond
= 527.37+ 347.717 = €875.09
Price of bond = €875.09
Singing Fish Fine Foods has a current annual cash dividend policy of $2.25. The price of the stock is set to yield a return of 14 %. What is the price of this stock if the dividend will be paid a. for 12 years? b. for 16 years? c. for 40 years? d. for 60 years? e. for 100 years? f. forever? a. What is the price of this stock if the dividend will be paid for 12 years?
Answer:
Price = $12.73
Explanation:
DATA:
Dividend = 2,25
Yield / r = 14%
n (number of years) = 12 years
Price = ?
Price of the stock can be calculated by the following formula
Formula: Price = Dividend x [tex]1-\frac{\frac{1}{(1+r)^{n} } }{r}[/tex]
Price = Dividend x [tex]1-\frac{\frac{1}{(1+0.14)^{12} } }{0.14}[/tex]
Price = $2.25 x 5.66
Price = $12.73
The price of this stock if the dividend will be paid for 12 years will be $12.73
Larned Corporation recorded the following transactions for the just completed month.
1. $89,000 in raw materials were purchased on account.
2. $87,000 in raw materials were used in production.
3. Of this amount, $76,000 was for direct materials and the remainder was for indirect materials.
4. Total labor wages of $128,500 were paid in cash. Of this amount, $103,000 was for direct labor and the remainder was for indirect labor.
5. Depreciation of $190,000 was incurred on factory equipment.
Required:
Record the above transactions in journal entries.
Answer with its Explanation:
Part 1: $89,000 in raw materials were purchased on account.
The purchase of raw material inventory on account is treated as increase in raw material inventory and accounts payables. The journal entry would be as under:
Dr Raw Material Inventory $89,000
Cr Accounts Payables $89,000
Part 2: $87,000 in raw materials were used in production. Of this amount, $76,000 was for direct materials and the remainder was for indirect materials.
The entry would be increase in work in progress by $76,000 & Manufacturing overhead by $11,000 and would decrease the raw material inventory with $87,000.
The journal entry would be as under:
Dr Work In Progress $76,000
Dr Manufacturing Overhead $11,000
Cr Raw Material Inventory $87,000
Part 3: Total labor wages of $128,500 were paid in cash. Of this amount, $103,000 was for direct labor and the remainder was for indirect labor.
The direct cost are allocated to the work in progress and indirect costs are allocated to manufacturing overheads.
The journal entry would be as under:
Dr Work In Progress $128,500
Dr Manufacturing Overhead $103,000
Cr Cash Account $231,500
Part 4: Depreciation of $190,000 was incurred on factory equipment.
The depreciation of the factory equipment is an indirect cost and all the indirect costs are charged to manufacturing overhead.
The journal entry would be as under:
Dr Manufacturing Overhead $190,000
Cr Cash Account $190,000
Marquette purchased 7% of RST stock for $50,000 on 1/1/21. Data regarding these securities follow: Year-end Date Market Value December 31, 2021 $47,000 December 31, 2022 57,000 December 31, 2023 68,000 The 12/31/23 balance of the Securities Fair Value Adjustment account will be: Select one:
Answer:
The security at December 31th 2023 will be listed for 68,000 under current assets.
Explanation:
The securities will be listed at their fair balance.
But, as the gain is unrealized until sale the company will record it within the concept of other comprehensive income.
The dividend will be considered gain of the period thus, they will be recognized ither cash or shares are received.
The following information is available for the first month of operations of Lane Inc., a manufacturer of mechanical pencils:
Sales $416,720
Gross profit 242,950
Indirect labor 90,430
Indirect materials 45,220
Other factory overhead 13,750
Materials purchased 128,350
Total manufacturing costs for the period 239,610
Materials inventory, end of period 17,090
Using the above information, determine the following:
a. The cost of finished goods available for sale minus the ending finished goods inventory.Cost of goods sold.
b. The cost of materials that are an integral part of the finished product.Direct materials cost.
c. The wages of factory workers who are directly involved in converting materials into a finished product.Direct labor cost.
Answer:
a. Cost of goods sold = Sales - Gross profit
= $416,720 - $242,950
= $173,770
b. Direct materials cost = Materials purchased -Indirect materials - Materials inventory, end of period
= $128,350 - $45,220 - $17,090
= $66,060
c. Direct labor cost =Total manufacturing costs for the period - Direct materials cost - Factory overhead
= $239,610 - $66,060 - ($90,430 + $45,220 + $13,750)
= $239,610 - $66,060 - $149,380
=$239,610 - $215,440
=$24,170
The burn down chart for a team showed a peculiar trend. It started dropping rapidly at the beginning of the Sprint and then seemed to plateau in the middle. A day before the Sprint, the line dipped rapidly and reached the horizontal axis. Whiat is the most likely reason for this trend?
Answer:
Explanation:
In the scenario being described, it is the most likely that the team encountered a major blocking issue in the middle of the Sprint which was resolved only toward the end. This can be deduced from the graph due to it plateauing in the middle, which usually happens when tasks are not finishing, which ultimately causes a blocking issue and since the chart went back to normal afterwards, they most likely resolved the blocking issue.
On October 5, Ivanhoe Company buys merchandise on account from Pharoah Company. The selling price of the goods is $5,240, and the cost to Pharoah Company is $3,180. On October 8, Ivanhoe Company returns defective goods with a selling price of $640 and a scrap value of $310. Record the transactions on the books of Pharoah Company, assuming a perpetual approach. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit choose a transaction date enter an account title to record credit sales Inventory enter a debit amount enter a credit amount enter an account title to record credit sales Accounts Payable enter a debit amount enter a credit amount (To record credit sales) enter an account title to record cost of goods sold on account Accounts Payable enter a debit amount enter a credit amount enter an account title to record cost of goods sold on account Inventory enter a debit amount enter a credit amount (To record cost of goods sold on account) choose a transaction date enter an account title to record credit granted for receipt of returned goods Accounts Receivable enter a debit amount enter a credit amount enter an account title to record credit granted for receipt of returned goods Sales Revenue enter a debit amount enter a credit amount (To record credit granted for receipt of returned goods) enter an account title to record scrap value of goods returned enter a debit amount enter a credit amount enter an account title to record scrap value of goods returned enter a debit amount enter a credit amount (To record scrap value of goods returned)
Answer:
From Pharaoh's point of view:
October 5, merchandise sold on account to Ivanhoe Company
Dr Accounts receivable 5,240
Cr Sales revenue 5,240
Dr Cost of goods sold 3,180
Cr Inventory 3,180
October 8, defective merchandise is returned
Dr Sales returns and allowances 640
Cr Accounts receivable 640
Dr Inventory 310
Cr Cost of goods sold 310
From Ivanhoe's point of view:
October 5, merchandise sold on account from Pharaoh Company
Dr Inventory 5,240
Cr Accounts payable 5,240
October 8, defective merchandise is returned
Dr Accounts payable 640
Cr Inventory 640
One of the oldest debates in economics is whether a currency should have a fixed or floating exchange rate. There is no single solution that fits all economies. The choice of an exchange rate system depends on many factors, including the openness to international trade, maturity of the financial system, inflation, labor market flexibility, and credibility of policymakers.
Consider two countries, Opland and Lovenia. Opland is a small, open economy with a large share of its national output created through trade. Lovenia has much higher inflation than its trading partners.
In the following table, indicate the exchange-rate system that would be more beneficial for each country.
Pegged (Fixed) Exchange Rates Flexible Exchange Rates
Opland
Lovenia
Answer:
Opland and Lovenia
Beneficial Exchange Rate:
Opland Flexible (Floating) Exchange Rates
Lovenia Pegged (Fixed) Exchange Rates
Explanation:
A flexible or floating exchange rate for Opland allows the market economy to determine the prevailing exchange rate between it and Lovenia, for instance. The market forces of demand and supply interacting in an open and mature financial system ensure that the appropriate exchange is established at each transaction point. In such a system, the credibility of policymakers is not under question, and the market enjoys labor flexibility with low inflation.
On the other hand, Lovenia, suffering from hyperinflation due to lack of investor confidence in its economy, will not be able to operate a floating exchange rate. It needs to rein on inflation by fixing the exchange rates for transactions with other nations in order to stop capital flight.
Project x has cash flows of $8000, $7500 and $7000 for years 1 to 4, respectively. Project y has cash flows of 7000,7500, 8000, and 8500 for years 1 to 4 respectivel. which one of the following statements is true concerning these two project given a positive discount rate?
a. Both projects have the same future value at the end of Year 4.
b. Both projects have the same value at Time 0.
c. Both projects are ordinary annuities.
d. Project Y has a higher present value than Project X.
e. Project X has both a higher present and a higher future value than Project Y.
Answer:
e. Project X has both a higher present and a higher future value than Project Y.
Explanation:
year project X project Y
1 8,500 7,000
2 8,000 7,500
3 7,500 8,000
4 7,000 8,500
One of the basic principles in economics and finance is the time value of money. One dollar today is worth more than one dollar tomorrow. In this case, the more money you receive during the first years, the higher the value of the money. E.g. if you receive $1,000 today, you can invest it and earn interests and it will be worth more than $1,000 that you receive in a couple of years.
How can there ever exist negative real interest rates in the economy?
Answer:
Negative real interest rates occur in "high inflation environments".
Explanation:
Rates of interest can sometimes be unfavorable, as can completely accurate rates. Under high-inflation environments, declining real expectations appear especially when inflation continues rising rapidly, that is, quicker than prices.If prices are 5 percent, however, unemployment is 7 percent, so the actual rate becomes 2 percent negative.Short-term notes payable: Multiple Choice Cannot replace an account payable. Can be issued in return for money borrowed from a bank. Are not negotiable. Are a conditional promise to pay. Rarely involve interest charges.
Answer:
Can be issued in return for money borrowed from a bank.
Explanation:
The short term note payable is a note payable that can be issued against the borrowed amount. Since it is short term so its duration is within one year and it is an amount of loan in which the person has to pay within the specified time period along with the interest charges. It is shown in the liabilities side of the balance sheet
Hence, the second option is correct
All of the following are normally found in a corporation's stockholders' equity section, exceptAll of the following are normally found in a corporation's stockholders' equity section, except a. Paid-in-capital in excess of par b. Unearned Rent c. Retained Earnings d. Common Stock
Answer:
b. Unearned Rent
Explanation:
Shareholders Equity is the residual amount of Assets after deducting the Liabilities.
The Unearned Rent is a Liability and is not found in the Shareholders Equity Section.
Liabilities are Present obligations of an entity that arise as a result of past events, the settlement of which will result in out flow of economic benefits from the entity.
Required: 1. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the gross method of accounting for cash discounts is used. 2. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2021, assuming that the gross method of accounting for cash discounts is used.
Answer:
Check Explanation section.
Explanation:
(1). The Gross method: in this kind of method, the sales and the cash are separately recorded.
Date: November 17, 2021.
Account titles and Explanation:
• Account receivable:
Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.
• Sales revenue:
Lf = 0, Debit($) = 0, Credit ($) = 42,000(100 units × 600 × 70% = 42,000).
NB: the account receivable is debited in order to record sales.
Date: November 26, 2021.
Account titles and Explanation:
• cash:
Lf = 0, debit($) = 41,160( 42,000 × 98%), Credit ($) = 0.
• Sales discount:
Lf = 0, debit($) = 840( 42,000 × 2%). Credit ($) = 0.
• Account receivable:
Lf = 0, Debit($) = 0, credit ($) = 42,000.
(2). Date: November 17, 2021.
Account titles and Explanation:
• Account receivable:
Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.
• Sales revenue:
Lf = 0, Debit($) = 0, Credit ($) = 42,000.
Date: December 15, 2021.
Account titles and Explanation:
• cash:
Lf = 0, debit($) = 42,000, Credit ($) = 0.
• Sales discount:
Lf = 0, debit($) = 42,000, Credit ($) = 0.
• Account receivable:
Lf = 0, Debit($) = 0, credit ($) = 42,000.
Computing and analyzing acid-test and current ratios LO A1
Case X Case Y Case Z
Cash $ 2,000 $ 110 $ 1,000
Short-term investments 50 0 580
Current receivables 350 470 700
Inventory 2,600 2,420 4,230
Prepaid expenses 200 500 900
Total current assets $ 5,200 $ 3,500 $ 7,410
Current liabilities $ 2,000 $ 1,000 $ 3,800
Compute the current ratio and acid-test ratio for each of the above separate cases.
Current Ratio
Choose Numerator: Choose Denominaa Current Ratio
/ = Current ratio
Case X / = to 1
Case Y / = to 1
Case Z / = to 1
Acid-Test Ratio
Choose Numerator: Choose Denominator: Choose cid-Test Ratio
/ = Acid-test ratio
Case X / = to 1
Case Y / = to 1
Case Z / = to 1
Answer:
Current ratio
Case X 2.60
Case Y 3.50
Case Z 1.95
Acid -test ratio
Case X 1.20
Case Y 0.58
Case Z 0.60
Explanation:
Computation of the current ratio and acid-test ratio
CURRENT RATIO
Particulars Choose Numerator / Choose denominator = Current Ratio
Formula Current Assets / Current Liabilities = Current Ratio
Case X $5,200.00 / $2,000.00 = 2.60 to 1
Case Y $3,500.00 / $1,000.00 = 3.50 to 1
Case Z $7,410.00 / $3,800.00 = 1.95 to 1
ACID - TEST RATIO
Particulars Choose Numerator / Choose denominator = Acid Test Ratio
Formula Quick Assets / Current Liabilities = Acid Test Ratio
Case X $2,400.00 / $2,000.00 = 1.20 to 1
Case Y $580.00 / $1,000.00 = 0.58 to 1
Case Z $2,280.00 / $3,800.00 = 0.60 to 1
Note:
Quick Asset
Case X
Cash $ 2,000
Short-term investments 50
Current receivables 350
=$2,400
Case Y
Cash $ 110 $
Short-term investments 0
Current receivables 470
=$580
Case Z
Cash $ 1,000
Short-term investments 580
Current receivables 700
=$2,280
Therefore:
Current ratio will be:
Case X 2.60
Case Y 3.50
Case Z 1.95
Acid -test ratio will be:
Case X 1.20
Case Y 0.58
Case Z 0.60
Stock Y has a beta of .9 and an expected return of 11.2 percent. Stock Z has a beta of .5 and an expected return of 7.2 percent. What would the risk-free rate have to be for the two stocks to be correctly priced
Answer:
Required risk free rate for two stocks to be correctly priced would be 2.20%.
Explanation:
In order to determine this, the Capital Asset Pricing Model (CAPM) formula is used as follows:
Rs = Rf + (Beta * MR) .................................... (1)
Where;
For Stock Y:
Rs = Expected return on stock = 11.2%, or 0.112
Rf = Risk free return = ?
Beta = 0.9
MR = Market risk premium = ?
Substituting the values into equation (1), we have:
0.112 = Rf + (0.9 * MR) ................................. (2)
For Stock Z:
Rs = Expected return on stock = 7.2%, or 0.072
Rf = Risk free return = ?
Beta = 0.5
MR = Market risk premium = ?
Substituting the values into equation (1), we have:
0.072 = Rf + (0.5 * MR) ................................. (3)
If we deduct equation (3) from equation (2) and solve for MR, we have:
(0.112 - 0.072) = (Rf - Rf) + (0.9MR - 0.5MR)
0.04 = 0 + 0.4MR
MR = 0.04 / 0.4
MR = 0.10, or 10%
Substituting MR = 0.01 into equation (2) and solve for Rf, we have:
0.112 = Rf + (0.9 * 0.10)
0.112 = Rf + 0.09
Rf = 0.112 - 0.09
Rf = 0.022, or 2.20%
Therefore, required risk free rate for two stocks to be correctly priced would be 2.20%.
ower Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100,000 shares of common stock outstanding as of the beginning of 2021. Power Drive has the following transactions affecting stockholders' equity in 2021. March 1 Issues 52,000 additional shares of $1 par value common stock for $49 per share. May 10 Purchases 4,700 shares of treasury stock for $52 per share. June 1 Declares a cash dividend of $1.35 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.) July 1 Pays the cash dividend declared on June 1. October 21 Resells 2,350 shares of treasury stock purchased on May 10 for $57 per share. Power Drive Corporation has the following beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $4,200,000; and Retained Earnings, $1,700,000. Net income for the year ended December 31, 2021, is $570,000. Required: Prepare the stockholders' equity section of the balance sheet for Power Drive Corporation as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
Answer and Explanation:
The preparation of the statement of stockholder equity is presented below:
Power Drive Corporation
Balance sheet
(Stockholder's Equity Section)
At December 31, 2021
Stockholder's Equity:
Common stock $1,52,000
Additional Paid - in - Capital $67,07,750
Total Paid - in Capital $68,59,750
Retained earnings $20,71,145
Treasury Stock -$1,22,200
Total Stockholder's Equity $88,08,695
Workings note
Paid in capital in excess of par value, Common stock $24,96,000
(52000 × $48)
Paid in capital in from sale of treasury stock $11,750
[2350 × ($57-$52)]
Total Additional Paid - in - Capital $25,07,750 Now
Dividend declared [(152000 - 4700) × $1.35] $1,98,855
Treasury Stock [(4700 - 2350) × $52] $1,22,200
Particulars Beg. Balance Additions Deductions End. Bal
Common stock $100,000 $52,000 $152,000
Additional Paid - $42,00,000 $25,07,750 $67,07,750
in - Capital
Retained earnings $1,700,000 $570,000 $1,98,855 $20,71,145
Suppose a monopolist produces two different products. If the marginal cost of producing one is lower than the marginal cost of producing the other, and the monopolist charges a different price for the two goods, then the monopolist is:
Answer:
perfectly price discriminating.
Explanation:
here are the options to this question :
not maximizing its profit.
imperfectly price discriminating.
not price discriminating.
perfectly price discriminating.
perfect price discrimination also known as first-degree discrimination is when a seller sells his product at the maximum possible price for each unit consumed. Due to the price variance, the seller captures all available consumer surplus.
A monopoly is when there is only one firm operating in an industry.
Efficiency is attained when a. total surplus is maximized. b. producer surplus is maximized. c. all resources are being used. d. consumer surplus is maximized and producer surplus is minimized
Answer:
A.
Explanation:
Efficiency is attained when total surplus is maximized. At this point consumer surplus is equal to producers surplus which means that they are in equilibrium.
When efficiency is reached, the sum of the total amount of consumer surplus and producer surplus is maximized.
A $20,000 loan with interest at 3.5% is being repaid by 35 level annual payments. The first payment is due one year after the loan is issued. Beginning with the seventeenth payment, the borrower is permitted to pay only one-third the normal annual payment. After the twelfth reduced payment, the loan is renegotiated. The revised level payment P will yield the lender 4% per year over the remaining seven years. Find P.
Answer:
To find EMI (P) we know that the yearly EMI for the loan of $20000 for 35 years at an interest of 3.5% is $992 per year.
Therefore upon calculating the loan after the seventeenth year we have $19252
The EMI calculated after the one-third permitted on the seventeenth payment is, therefore: $992*1/3= 992/3=$330
Therefore, the balance calculated after the twenty-seventh instalment = $6150
Therefore the yearly EMI (P) for the loan of $6150 at 4% for the remaining eight years is $900 per year.
Explanation:
To find EMI (P) we know that the yearly EMI for the loan of $20000 for 35 years at an interest of 3.5% is $992 per year.
Therefore upon calculating the loan after the seventeenth year we have $19252
The EMI calculated after the one-third permitted on the seventeenth payment is, therefore: $992*1/3= 992/3=$330
Therefore, the balance calculated after the twenty-seventh instalment = $6150
Therefore the yearly EMI (P) for the loan of $6150 at 4% for the remaining eight years is $900 per year.
A company requisitioned $40,000 of materials during the year and incurred direct labor charges of $50,000. If the company began the year with a work-in-process inventory balance of $15,000 and applied overhead of $60,000, what is the ending balance of work-in-process inventory assuming no goods were moved to finished goods inventory for the year? g
Answer:
$165,000
Explanation:
The computation of the ending balance of work-in-process inventory is shown below:-
Ending balance of work-in-process inventory = Beginning + Direct material + Direct labor + Overhead applied
= $15,000 + $40,000 + $50,000 + $60,000
= $165,000
Therefore for computing the ending balance of work-in-process inventory we simply applied the above formula.
you have just deposited $11000 in to an account that promises to pay you an annual interest rate of 6.5 percent each year for the next 6 years. You will leave the money invested in the account and 10 years from today. you need to have $26300 in the account. What annual interest rate must you earn over the last 4 years to accomplish this goal
Answer:
Over the last 4 years to accomplish this goal the annual interest rate must be 13.14 %.
Explanation:
First find the Future value (FV) of $11,000 at the end of the 6th year as follows :
PV = -$11,000
r = 6.50%
p/yr = 1
n = 6
Pmt = $0
FV = ?
Using a financial calculator, the Future Value (FV) is $16,050.57
Therefore, the amount invested will amount to $16,050.57 in 6 year.
Next we then calculate the interest rate that will give us $26300 in the next four years (remainder of the 10 years)
PV = -$16,050.57
FV = $26,300
P/yr = 1
n = 4
Pmt = $0
r = ?
Using a financial calculator, the Interest rate (r) is 13.14 %
Conclusion :
Over the last 4 years to accomplish this goal the annual interest rate must be 13.14 %.
10. Security X has expected return of 12% and standard deviation of 20%. Security Y has expected return of 15% and standard deviation of 27%. If the two securities have a correlation coefficient of 0.7, what is their covariance
Answer: 0.0378
Explanation:
The Covariance of securities refer to the relationship between two securities in terms of their movement together. A postie covariance means that securities usually move in the same direction while a negative means that they move in opposite directions. It can therefore be useful in portfolio diversification.
The formula is;
= Standard deviation of X * Standard deviation of Y * Correlation Coefficeint
= 20% * 27 * 0.7
= 0.0378
If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is Group of answer choices
Complete Question:
If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is
Group of answer choices:
A. they will both increase market share.
B. they will simply neutralize one another's efforts.
C. they will both lose market share.
D. they will both improve their industrial position.
Answer:
B. they will simply neutralize one another's efforts.
Explanation:
If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is they will simply neutralize one another's efforts.
A monopolist can be defined as an individual who is engaged in selling a unique product in a market without any competitor. Also, a monopolistic competition involves various firms engaged in monopoly competes with one other, but selling products that are unique and distinct from the other.
Hence, when two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, this would result in one monopolist effort canceling or nullifying the effort of the other. This simply means that, it would have been as though none of them had made any effort at all because they were both involved in doing the same thing. Thus, making the market the same as it were originally prior to their advertising efforts.