Answer:
5.82%
Explanation:
NPER = 5
PMT = 80
FV = 1,070
PV = 1145
RATE = YTC
Yield to call = RATE(Nper, Pmt, -PV, FV)
Yield to call = RATE(5, 80, -1145, 1070)
Yield to call = 0.058207481
Yield to call = 5.82%
Windsor, Inc. decided to establish a petty cash fund to help ensure internal control over its small cash expenditures. The following information is available for the month of April.
1. On April 1, it established a petty cash fund in the amount of $268.
2. A summary of the petty cash expenditures made by the petty cash custodian as of April 10 is as follows. Delivery charges paid on merchandise purchased $76 Supplies purchased and used 41 Postage expense 49 I.O.U. from employees 33 Miscellaneous expense 52 The petty cash fund was replenished on April 10. The balance in the fund was $8.
3. The petty cash fund balance was increased $116 to $384 on April 20.
Prepare the journal entries to record transactions related to petty cash for the month of April.
april 1
pety cash 342 (d)
cash 342 (c)
april 10
???????????????????? 72 (d)
miscellaneous expense 48 (d)
postage expense 52 (d)
accounts recievable 29 (d)
???????????????????
??????????????????
??????????????????
petty cash ??
cash ??
Answer:
April 1
Dr Petty cash $268
Cr Cash $268
April 10
Dr Freight-in (Or Inventory) $76
Dr Supplies expense $41
Dr Dr Postage expense $49
Dr Accounts Receivable/Loan to employees $33
Dr Miscellaneous expense $52
Cr Cash over and short $9
Cr Cash $260
April 20
Dr Petty cash $116
Cr Cash $116
Explanation:
Preparation of the journal entries to record transactions related to petty cash for the month of April.
April 1
Dr Petty cash $268
Cr Cash $268
April 10
Dr Freight-in (Or Inventory) $76
Dr Supplies expense $41
Dr Dr Postage expense $49
Dr Accounts Receivable/Loan to employees $33
Dr Miscellaneous expense $52
Cr Cash over and short $9
($260-$76-$41-$49-$33-$52)
Cr Cash $260
($268-$8)
April 20
Dr Petty cash $116
Cr Cash $116
A truck was acquired on July 1, 2018, at a cost of $311,850. The truck had a six-year useful life and an estimated salvage value of $34,650. The straight-line method of depreciation was used. On January 1, 2021, the truck was overhauled at a cost of $28,875, which extended the useful life of the truck for an additional two years beyond that originally estimated (salvage value is still estimated at $34,650). In computing depreciation for annual adjustment purposes, expense is calculated for each month the asset is owned.
Answer:
Details Amount($)
Cost $311,850
Less: Salvage value ($34,650)
Depreciation base July 1, 2018 $277,200
Less: Depreciation to date ($277,200/6)*2.5 ($115,500)
Depreciation base Jan 1, 2021 (unadjusted) $161,700
Overhaul $28,875
Depreciation base Jan 1, 2021 (adjusted) $190,575
Date Particulars Debit($) Credit($)
2021, Jan 1 Depreciation accumulated A/c Dr $34,650
To cash A/c $34,650
2021, Dec 31 Expense for depreciation A/c Dr $19,922
($109,575/5.5)
To Depreciation accumulated A/c $19,922
Sunland purchased the license for distribution of a popular consumer product on January 1, 2020, for $158,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Sunland can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2020
Answer:
No amount should be amortized since the license can be renewed indefinitely for successive 5-year terms.
Instead, the license should be tested for impairment annually to determine impairment loss.
Explanation:
An intangible asset that can be used indefinitely is treated like purchased Goodwill. It should never be amortized. Annually, the asset should be tested for impairment. The test is to compare the market value of the license with the book value.
The following is the ending balances of accounts at June 30, 2021, for Excell Company.
Account Title Debits Credits
Cash $ 93,000
Short-term investments 75,000
Accounts receivable (net) 290,000
Prepaid expenses (for the next 12 months) 42,000
Land 85,000
Buildings 330,000
Accumulated depreciation—buildings $ 165,000
Equipment 270,000
Accumulated depreciation—equipment 125,000
Accounts payable 178,000
Accrued liabilities 50,000
Notes payable 110,000
Mortgage payable 240,000
Common stock 150,000
Retained earnings 167,000
Totals $ 1,185,000 $ 1,185,000
Additional information:
The short-term investments account includes $23,000 in U.S. treasury bills purchased in May. The bills mature in July, 2021.
The accounts receivable account consists of the following:
a. Amounts owed by customers $ 232,000
b. Allowance for uncollectible accounts—trade customers (18,000 )
c. Nontrade notes receivable (due in three years) 70,000
d. Interest receivable on notes (due in four months) 6,000
Total $ 290,000
The notes payable account consists of two notes of $55,000 each. One note is due on September 30, 2021, and the other is due on November 30, 2022.
The mortgage payable is a loan payable to the bank in semiannual installments of $4,800 each plus interest. The next payment is due on October 31, 2021. Interest has been properly accrued and is included in accrued expenses.
Eight hundred thousand shares of no par common stock are authorized, of which 300,000 shares have been issued and are outstanding.
The land account includes $55,000 representing the cost of the land on which the company's office building resides. The remaining $30,000 is the cost of land that the company is holding for investment purposes.
Answer:
Total Assets $895,000
Total liabilities and stockholders'equity $895,000
Explanation:
Preparation of a classified balance sheet for the Excell Company at June 30, 2021
EXCELL COMPANY Balance Sheet At June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents $116,000
($93,000+$23,000)
Short-term investments $52,000
($75,000-$23,000)
Accounts receivable, net of allowance for uncollectible accounts $214,000
($232,000-$18,000)
Interest receivable $6,000
Prepaid expenses $42,000
Total current assets $430,000
($116,000+$52,000+$214,000+$6,000+$42,000)
Investments:
Note receivable $70,000
Land held for sale $30,000
$100,000
($70,000+$30,000)
Property, plant, and equipment:
Land $55,000
Buildings $330,000
Equipment $270,000
($55,000+$330,000+$270,000)
$655,000
Less: Accumulated depreciation ($290,000)
Net property, plant, and equipment $365,000
($655,000-$290,000)
TOTAL ASSETS $895,000
($430,000+$100,000+$365,000)
LIABILITIES AND STOCKHOLDERS'S EQUITY
Current liabilities:
Accounts payable $178,000
Accrued expenses $50,000
Note payable $55,000
Current maturities of long-term debt $9,600
(4800*2)
Total current liabilities $292,600
($178,000+$50,000+$55,000+$9,600)
Long-term liabilities:
Note payable $55,000
Mortgage payable $230,400
($240,000-$9,600)
Total long-term liabilities $285,400
($55,000+$230,400)
Shareholders’ equity:
Common stock, no par value; 800,000 shares
authorized; 300,000 shares issued and outstanding $150,000
Retained earnings $167,000
Total shareholders ’equity $317,000
($150,000+$167,000)
TOTAL LIABILITIES AND STOCKHOLDERS'S EQUITY $895,000
($292,600+$285,400+$317,000)
Therefore the classified balance sheet for the Excell Company at June 30, 2021 will be :
Total Assets $895,000
Total liabilities and stockholders'equity $895,000
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 5.0%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 11% 40% Bond fund (B) 6 20 The correlation between the fund returns is 0.16. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio.
Answer:
portfolio invested in stocks = 73.20%
Portfolio invested in Bond = 26.80%
Expected return on optimal risky portfolio [ E(rp) ] = 9.66%
STD on Optimal Risky portfolio = 30.60%
Explanation:
Correlation between the funds return = 0.16
Determine the portfolio invested in each asset ( using excel )
expected risk premium on stock fund [ E(rps)] = 6%
Expected risk premium on Bond fund [ E(rpb) ] = 1%
std of stock rise premium ( бs) = 40%
std on bond rise premium ( бb) = 20%
correlation between funds [ rp(sb) ] = 0.16
Variance of stock fund ( бs^2 ) = 0.16
variance of bond fund ( бb^2 ) = 0.04
Using excel formula ( as seen in the attached screen shot )
First calculate the covariance of stock and Bond fund = 0.0128
portfolio invested in stocks = 73.20%
Portfolio invested in Bond = 26.80%
Expected return on optimal risky portfolio [ E(rp) ] = 9.66%
STD on Optimal Risky portfolio = 30.60%
An investment project has annual cash inflows of $4,300, $4,000, $5,200, and $4,400, for the next four years, respectively. The discount rate is 13 percent. a. What is the discounted payback period for these cash flows if the initial cost is $5,800? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period for these cash flows if the initial cost is $7,900? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the discounted payback period for these cash flows if the initial cost is $10,900? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
1.64 years
2.27 years
3.13 years
Explanation:
Discounted payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative discounted cash flows
Present value of cash flow in year 1 = 4300 / 1.13 = 3805.31
Amount recovered in year 1 = -5800 + 3805.31 = -1994.69
Present value of cash flow in year 2 = 4000 / (1.13^2) = 3132.59
Amount recovered in year 2 =-1994.69 + 3132.59 = 1137.90
Payback period = 1 + 1994.69/3132.59 = 1.64 years
B
Present value of cash flow in year 1 = 4300 / 1.13 = 3805.31
Amount recovered in year 1 = -7900 + 3805.31 = -4094.69
Present value of cash flow in year 2 = 4000 / (1.13^2) = 3132.59
Amount recovered in year 2 = -4094.69 + 3132.59 = -962.10
Present value of cash flow in year 3 = 5200 / (1.13^3) = 3603.86
Amount recovered in year 3 = -962.10 + 3603.86 = 2641.76
Payback period = 2 years + -962.10 / 3603.86 = 2.27 years
C
Present value of cash flow in year 1 = 4300 / 1.13 = 3805.31
Amount recovered in year 1 = -10900 + 3805.31 = -7094.69
Present value of cash flow in year 2 = 4000 / (1.13^2) = 3132.59
Amount recovered in year 2 = -7094.69 + 3132.59 = -3962.10
Present value of cash flow in year 3 = 5200 / (1.13^3) = 3603.86
Amount recovered in year 3 = -3962.10 + 3603.86 = -358.24
Present value in year 4 = 4400 / (1.13^4) = 2698.60
Amount recovered in year 4 = -358.24 + 2698.60 = 2340.36
Payback period = 3 years + 358.24 + 2698.60 = 3.13 years
Total demand for Oxy is 10,000 units and for Sonic is 6,000 units. Machine time is a scarce resource. During the year, 50,000 machine hours are available. Oxy requires 4 machine hours per unit, while Sonic requires 2.5 machine hours per unit. What is the maximum contribution margin Garrison can achieve during a year
Answer:
$444,250
Explanation:
Calculation to determine the maximum contribution margin Garrison can achieve during a year
First step is to calculate the Contribution margin per hour
Oxy sonic
Sales $75 $44
Less: variable cost $40 $21
=Contribution margin per unit 35 23
÷Machine hour per unit 4 2.5
=Contribution margin per hour $8.75 $9.2
Ranking 2 1
Second step is to calculate the Hour required for sonic
Hour required for sonic = 6,000*2.5
Hour required for sonic= 15,000 hours
Third step is to calculate the Hour available for oxy
Hour available for oxy = 50,000-15,000
Hour available for oxy = 35,000 hours
Fourth step is to calculate the Production of Oxy
Production of Oxy = 35,000/4
Production of Oxy= 8,750 units
Now let calculate the Maximum contribution margin
Maximum contribution margin = 8,750*35+ 6000*23
Maximum contribution margin =306,250+,138,000
Maximum contribution margin = $444,250
Therefore the maximum contribution margin Garrison can achieve during a year is $444,250
The following events took place when Managers A, B, and C were preparing budgets for the upcoming period:
I. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local authorities.
II. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor.
III. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the department when preparing the labor budget.
Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example of building slack in budgets?
a. Il only.
b. I only.
c. II and III.
d. Ill only
e. I and II.
Answer:
Assuming that the percentage amounts given are reasonable, an example of building slack in budgets is:
d. Ill only
Explanation:
By using the highest wage rate in the department, Manager C deliberately overestimated her departmental expenses. However, her action is dictated by the need to ensure that there are no budget shortages for wages. By this slack, the actual performance of the department will be better than the budgeted performance because the department will likely spend less than its allotted costs.
The cases that represent an example of the building slacks in budgets should be option III.
Usage of highest wage rate:
Here we use the high wage rate with respect to the department. Also, the manager c should be overestimated the department expenses. The action should be dictated via the need for assurance that there should no shortages with respect to the wages. Also, the actual performance should be more than the budgeted performance since the department should lower than it
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X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the cost of the sale by selecting all of the correct actions below.
a. Debit Merchandise Inventory $500.
b. Credit Cost of Goods Sold $500.
c. Credit Merchandise Inventory $500.
d. Debit Cost of Goods Sold $500.
Answer:
d. Debit Cost of Goods Sold $500.
c. Credit Merchandise Inventory $500.
Explanation:
The journal entry to record the cost of the sale is shown below:
Cost of Goods Sold $500
To Merchandise inventory $500
(To record the cost of the sale)
Here the cost of goods sold is debited as it increased the expenses and credited the merchandise inventory as it reduced the assets
The correct options for the journal entry are under the perpetual inventory system are:
Debit Cost of Goods Sold $500.Credit Merchandise Inventory $500.What is the perpetual inventory system?A perpetual inventory system is a system of recording inventory transactions on a real-time basis. The book inventory, therefore, shows the real stock.
The perpetual inventory system debits COGS upon each sale transaction and credits the inventories.
Therefore the correct options are c and d.
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Presented below are long-term liability items for Pharoah Company at December 31, 2020. Bonds payable, due 2022 $625,000 Lease liability 60,000 Notes payable, due 2025 70,000 Discount on bonds payable 46,875 Prepare the long-term liabilities section of the balance sheet for Pharoah Company. (Enter account name only and do not provide descriptive information.)
Answer:
See explanation
Explanation:
Consider liabilities due within period of more than 12 months for the long-term liabilities section of the balance sheet.
A callable bond:
A. Is generally call protected during the entire term of the bond issue,
B. generally will have a call protection period during the final three years prior to maturity.
C. may be structured to pay bondholders the current value of the bond on the date of call.
D. is prohibited from having a sinking fund also.
E. Is frequently called at a price that is less than par value
Answer:
C. may be structured to pay bondholders the current value of the bond on the date of call.
Explanation:
A callable bond is also called a redeemable bond. It a debt instrument that the issuer may decide to call or redeem before the maturity date.
This is used by bond issuers to have a cheaper cost of borrowing funds.
For example when interests are low the issuer can buy back his bonds at a lower cost this reducing his debt burden.
So callable bonds are structured to pay bondholders the current value of the bond on the date of call or redemption.
Phillip, the proprietor of a vineyard, estimates that the first 10900 bottles of wine produced this season will fetch a profit of $6 per bottle. However, the profit from each bottle beyond 10900 drops by $0.0001 for each additional bottle sold. Assuming at least 10900 bottles of wine are produced and sold, what is the maximum profit
Answer:
See below
Explanation:
With regards to the above information, we can write out the equation to be;
P = (10,900 + y)($6 - 0.0001y)
= 65,400 - 1.09y + 6y - 0.0001y^2
= 65,400 + 4.9y - 0.0001y^2
dp/dx = 4.9 - 0.002y
Set equal to zero to find maximum
4.9 - 0.002y = 0
y = 8,000
So, maximum profit is $
Exercise 5-10 (Algo) Multiproduct Break-Even Analysis [LO5-9] Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below: Claimjumper Makeover Total Sales $ 112,000 $ 56,000 $ 168,000 Variable expenses 41,320 9,080 50,400 Contribution margin $ 70,680 $ 46,920 117,600 Fixed expenses 81,060 Net operating income $ 36,540 Required: 1. What is the overall contribution margin (CM) ratio for the company
Answer:
Contribution margin ratio= 0.7
Explanation:
Giving the following information:
Total
Sales $168,000
Variable expenses 50,400
To calculate the contribution margin ratio, we need to use the following formula:
Contribution margin ratio= (sales - total variable cost) / sales
Contribution margin ratio= (168,000 - 50,400) / 168,000
Contribution margin ratio= 0.7
Compute the cost of 1,000 gallons of each flavor of ice cream using the department allocation rates computed in requirement (b) if the number of machine-hours for 1,000 gallons of each of the three flavors of ice cream are as follows:
Strawberry Vanilla Chocolate
Direct labor (per 1,000 gallons) $766 $841 $1,141
Raw materials (per 1,000 gallons) 816 516 616
Required:
If the number of hours of labor per 1,000 gallons is 60 for strawberry, 70 for vanilla, and 100 for chocolate, compute the total cost of 1,000 gallons of each flavor using plantwide allocation.
Answer:
As you did not include the departmental allocation rate calculated or the question relating to it, I shall provide an allocation rate and you can relate this with your assignment.
Assume the allocation rate is $3.00
Labor, raw materials and overhead cost allocation hours are given in terms of 1,000 gallons already.
Cost of Strawberry:
= Direct labor + Raw materials + Overhead cost
= 766 + 816 + (60 hours * $3.00 allocation)
= 766 + 816 + 180
= $1,762
Cost of Vanilla:
= 841 + 516 + (70 * 3)
= 841 + 516 + 210
= $1,567
Cost of Chocolate:
= 1,141 + 616 + (100 * 3)
= 1,141 + 616 + 300
= $2,057
American Chemical Company manufactures a chemical compound that is sold for $57 per gallon. A new variant of the chemical has been discovered, and if the basic compound were processed into the new variant, the selling price would be $81 per gallon. American expects the market for the new compound variant to be 8,100 gallons initially and determines that processing costs to refine the basic compound into the new variant would be $162,000. Required: a. What would be the effect on total profit if American produces the new compound variant
Answer:
Effect on income= $32,400 increase
Explanation:
Giving the following information:
Difference in selling price= 81 - 57= $24
Number of units= 8,100
Increase in costs= $162,000
To calculate the effect on income, we need to use the following formula:
Effect on income= Increase in revenue - increase in costs
Effect on income= 24*8,100 - 162,000
Effect on income= $32,400 increase
At the beginning of 2021, VHF Industries acquired a machine with a fair value of $4,803,660 by issuing a three-year, noninterest-bearing note in the face amount of $6 million. The note is payable in three annual installments of $2 million at the end of each year.
Required:
a. What is the effective rate of interest implicit in the agreement?
b. Prepare the necessary journal entry.
c. Suppose the market value of the equipment was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 11%. Prepare the journal entry to record the purchase of the equipment.
Answer:
a. What is the effective rate of interest implicit in the agreement?
I used an Excel spreadsheet and the RATE function:
PV = 4,803,660
FV = 6,000,000 (optional)
Nper = 3
Payment = -2,000,000
Rate = 12%
b. Prepare the necessary journal entry.
Dr Machinery 4,803,660
Dr Discount on notes payable 1,196,340
Cr Notes payable 6,000,000
c. Suppose the market value of the equipment was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 11%. Prepare the journal entry to record the purchase of the equipment.
we would need to determine the present value, again using an Excel spreadsheet and the PV function:
PV = $4,887,429.43 ≈ $4,887,429
Dr Machinery 4,887,429
Dr Discount on notes payable 1,112,571
Cr Notes payable 6,000,000
Zolas' Heaters is approached by Ms. Leila, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Zolas' Heaters has excess capacity. The following per unit data apply for sales to regular customers: Direct materials $450.00 Direct manufacturing labor 160.00 Variable manufacturing support 100.00 Fixed manufacturing support 210.00 Total manufacturing costs 920.00 Markup (25% of total manufacturing costs) 230.00 Estimated selling price $1150.00 For Zolas' Heaters, what is the minimum acceptable price of this one-time-only special order
Answer:
Zolas' Heaters
The minimum acceptable price of this one-time-only special order is:
= $887.50.
Explanation:
a) Data and Calculations:
Direct materials $450.00
Direct manufacturing labor 160.00
Variable manufacturing support 100.00
Fixed manufacturing support 210.00
Total manufacturing costs 920.00
Markup (25% of total manufacturing costs) 230.00
Estimated selling price $1,150.00
The minimum acceptable price of this one-time-only special order:
Direct materials $450.00
Direct manufacturing labor 160.00
Variable manufacturing support 100.00
Total manufacturing costs 710.00
Markup (25% of total variable mfg costs) 177.50
Selling price $887.50
Ticketsales, Inc., receives $7,720,000 cash in advance ticket sales for a four-date tour of Bon Jovi. Record the advance ticket sales on October 31. Record the revenue earned for the first concert date of November 5, assuming it represents one-fourth of the advance ticket sales. Ticketsales, Inc. initially records prepaid and unearned items in balance sheet accounts.
Required:
Record the revenue earned for the first concert date of November 5.
Answer:
November 5
Dr Unearned Ticket Revenue $1,930,000
Cr Ticket Revenue $1,930,000
Explanation:
Preparation of the journal entry to Record the revenue earned for the first concert date of November 5.
Based on the information given if Ticketsales receives the amount of $7,720,000 cash in advance ticket sales for a four-date tour of Bon Jovi which means that assuming it represents one-fourth of the advance ticket sales the revenue earned for the first concert date of November 5 will be :
November 5
Dr Unearned Ticket Revenue $1,930,000
Cr Ticket Revenue $1,930,000
($7,720,000 x 1/4)
(To Record the revenue earned for the first concert date of November 5.)
Bingham Company manufactures and sells Product J. Results for last year's manufacture and sale of Product J are as follows:
Sales: 10,000 units at $160 each $1,600,000
Less costs:
Variable production costs 960,000
Sales commissions: 15% of sales 240,000
Salaries of line supervisors 195,000
Traceable fixed advertising expense 180,000
Fixed general factory overhead (allocated to
products on the basis of square feet occupied)
170,000
Total costs 1,745,000
Net loss ($145,000)
Bingham Company anticipates no change in the operating results for Product J in the foreseeable future if the product is produced. Bingham is re-examining all of its products and is trying to decide whether to discontinue the manufacture and sale of Product J. The company's total fixed factory overhead cost would not be affected by this decision.
Assume that discontinuing Product J would result in a $100,000 increase in the contribution margin of other product lines. How many units of Product J would have to be sold next year for the company to be as well off as if it just dropped Product J and enjoyed the increase in contribution margin from other products?
a. 15,500 units.
b. 11,875 units.
c. 16,125 units.
d. 2,500 units.
Answer:
Break-even point in units= 16,125
Explanation:
To calculate the number of units of Product J to be sold next year, we can use the break-even point formula:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Fixed costs= 195,000 + 180,000 + 170,000= $545,000
Unitary contribution margin= 160 - (96 + 24)= $40
Desired profit= $100,000
Break-even point in units= (545,000 + 100,000) / 40
Break-even point in units= 16,125
Prove:
Sales= 16,125*160= 2,580,000
Variable production costs= 16,125*96= (1,548,000)
Sales commissions= 0.15*2,580,000= (387,000)
Salaries of line supervisors= (195,000)
Traceable fixed advertising expense= (180,000)
Fixed general factory overhead= (170,000)
Net operating income= 100,000
SUNLAND COMPANY
Income Statements
For the Years Ended December 31
2020 2021
Net sales $2,178,400 $2,030,000
Cost of goods sold 1,207,000 1,187,080
Gross profit 971,400 842,920
Selling and administrative expenses 590,000 565,220
Income from operations 381,400 277,700
Other expenses and losses
Interest expense 25,960 23,600
Income before income taxes 355,440 254,100
Income tax expense 106,632 76,230
Net income $ 248,808 $ 177,870
SUNLAND COMPANY
Balance Sheets
December 31
Assets 2022 2021
Current assets
Cash $ 70,918 $ 75,756
Debt investments (short-term) 87,320 59,000
Accounts receivable 139,004 121,304
Inventory 148,680 136,290
Total current assets 445,922 392,350
Plant assets (net) 765,820 613,954
Total assets $1,211,742 $1,006,304
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 188,800 $171,572
Income taxes payable 51,330 49,560
Total current liabilities 240,130 221,132
Bonds payable 259,600 236,000
Total liabilities 499,730 457,132
Stockholders’ equity
Common stock ($5 par) 342,200 354,000
Retained earnings 369,812 195,172
Total stockholders’ equity 712,012 549,172
Total liabilities and stockholders’ equity$1,211,742 $1,006,304
All sales were on account. Net cash provided by operating activities for 2022 was $259,600. Capital expenditures were $160,480, and cash dividends were $74,168.
Compute the following ratios for 2022. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)
(a) Earnings per share
$enter earnings per share in dollars
(b) Return on common stockholders’ equity
enter return on common stockholders’ equity in percentages %
(c) Return on assets
enter return on assets in percentages
%
(d) Current ratio
enter current ratio
(e) Accounts receivable turnover
enter accounts receivable turnover in times
(f) Average collection period
enter average collection period in days
(g) Inventory turnover
enter inventory turnover in times
(h) Days in inventory
enter days in inventory
(i) Times interest earned
enter times interest earned
(j) Asset turnover
enter asset turnover in times
(k) Debt to assets ratio
enter debt to assets ratio in percentages
(l) Free cash flow
$enter free cash flow in dollars
Answer:
a) $3.57
(b) Return on common stockholders’ equity = 39.46%
(c) Return On Assets = 22.43%
(d) Current Ratio = 1.86 times
(e) Account Receivables Turnover Ratio = 16.74 times
(f) Average collection period = 21.8 days
(g) Inventory Turnover = 8.47 times
(h) Days in inventory = 43.09 days
(i) Times interest earned = 14.69 times
(j) Asset turnover = 1.96 times
(k) Debt to assets ratio = 41.24%
(l) Free cash flow = $24,952
Explanation:
(a) Earnings per share
Net income = $248,808
Beginning number of shares = Beginning Common stock / Par value = $354,000 / $5 = 70,800
Ending number of shares = Ending Common stock / Par value = $342,200 / $5 = = 68,440
Average Number of Shares Outstanding = (Beginning number of shares + Ending number of shares) / 2 = (68,440 + 70,800) / 2 = 69,620
Earning Per Shares = Net Income/ Average Number of Shares Outstanding = $248,808 / 69,620 = $3.57
(b) Return on common stockholders’ equity
Average Stockholders Equity = (Beginning Stockholders Equity + Ending Stockholders Equity) / 2 = ($549,172 + $712,012) / 2 = $630,592
Return on Stockholders Equity = Net Income / Average Stockholders Equity = $248,808 / $630,592 = 0.3946, or 39.46%
(c) Return on assets
Average total assets = (Ending total assets + Beginning total assets) / 2 = ($1,211,742 + 1,006,304) / 2 = $1,109,023
Return On Assets = Net Income / Average total assets = $248,808 / $1,109,023 = 0.2243, or 22.43%
(d) Current ratio
Current Ratio = Current Assets / Current Liabilities = $445,922 / $240,130 = 1.86 times
(e) Accounts receivable turnover
Average Account Receivables = (Beginning Account Receivables + Ending Account Receivables) / 2 = ($139,004 + $121,304) / 2 = $130,154
Account Receivables Turnover Ratio = Sales / Average Account Receivables = $2,178,400 / $130,154 = 16.74 times
(f) Average collection period
Average collection period = 365 / Account Receivables turnover ratio = 365 days /16.74 = 21.8 days
(g) Inventory turnover
Average Inventory = (Beginning inventory + Ending inventory) / 2 = ($148,680 + $136,290) / 2 = $142,485
Inventory Turnover = Cost of goods sold / average inventory = $1,207,000 / $142,485 = 8.47 times
(h) Days in inventory
Days in inventory = 365/ inventory turnover ratio = 365 days / 8.47 = 43.09 days
(i) Times interest earned
Times Interest Earned = Earnings before interest, taxes, depreciation, and amortization / Interest expenses = Income from operations / Interest expenses = $381,400 / $25,960 = 14.69 times
(j) Asset turnover
Asset turnover = Net sales / Average total assets = 2,178,400 / $1,109,023 = 1.96 times
(k) Debt to assets ratio
Debt to Asset Ratio = Total Debt / Total Assets = $499,730 / $1,211,742 = 0.4124, or 41.24%
(l) Free cash flow
Free cash flow = Net cash provided by operating activities - Capital expenditures - Cash dividends = $259,600- $160,480 - $74,168 = $24,952
Priority Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 9,000 Actual variable overhead incurred: $54,400 Actual machine hours worked: 16,000 Standard variable overhead cost per machine hour: $3.50 If Priority estimates two hours to manufacture a completed unit, the company's variable-overhead efficiency variance is: Multiple Choice None of the answers is correct. $1,600 favorable. $7,000 favorable. $7,000 unfavorable. $1,600 unfavorable.
Answer:
The correct option is $7,000 favorable.
Explanation:
This can be calculated using the following formula:
Standard hours for actual units produced = Actual units produced * Estimated number of hours to manufacture a completed unit = 9,000 * 2 = 18,000
Variable-overhead efficiency variance = (Actual machine hours worked - Standard machine hours for actual units produced) * Standard variable overhead cost per machine hour = (16,000 - 18,000) * 3.50 = –$7,000
Since the calculated Variable-overhead efficiency variance is negative, that implies that it is favorable,
Therefore, the correct option is $7,000 favorable.
Suppose that you are considering the development of a residential subdivision. The development will require you to spend $300,000 today to acquire the land. You will also have to spend $750,000 in both years 1 and 2 in order to build the houses. You expect to make $1.5 million in year 3 and $2 million in year 4 from sales of the completed homes. What is the internal rate of return of this project
Answer:
32.52%
Explanation:
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = $-300,000.
Cash flow in year 1 and 2 = $-750,000
Cash flow in year 3 = $1.5 million
Cash flow in year 4 = $2 million
IRR = 32.52%
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
Marigold Corp. incurs the following costs to produce 10100 units of a subcomponent: Direct materials $8484 Direct labor 11413 Variable overhead 12726 Fixed overhead 16200 An outside supplier has offered to sell Marigold the subcomponent for $2.85 a unit. If Marigold could avoid $3000 of fixed overhead by accepting the offer, net income would increase (decrease) by $838. $(3364). $6838. $(5929).
Answer:
The effect on net income is an increase by $6838.
Explanation:
Analysis of Accepting Special Offer
Savings :
Direct materials $8,484
Direct labor $11,413
Variable overhead $12,726
Fixed Overheads $3,000 $35,623
Total Savings
Costs :
Purchase Price ( $2.85 x 10,100 units) ($28,785)
Effect on Net Income $6,838
Note : We have considered the avoidable component of fixed costs in this calculation. Ignore common fixed costs (unavoidable) since they are irrelevant for decision making.
Conclusion :
The effect on net income is an increase by $6838.
AP* Price discrimination occurs when differences in a product's price reflect differences in marginal costs differences in a product's price reflect differences in marginal costs a products's average cost is greater than its average revenue a products's average cost is greater than its average revenue differences in a product's price do not reflect differences in costs of production differences in a product's price do not reflect differences in costs of production a product's average cost is less than its average revenue a product's average cost is less than its average revenue the supply of the product is elastic
Answer:
differences in a product's price do not reflect differences in costs of production.
Explanation:
Price can be defined as the amount of money that is required to be paid by a buyer (customer) to a seller (producer) in order to acquire goods and services.
In sales and marketing, pricing of products is considered to be an essential element of a business firm's marketing mix because place, promotion and product largely depends on it.
One of the importance associated with the pricing of products is that, it improves the image of a business firm.
Price discrimination refers to the situation in which a business firm sells an identical product to different consumers at different selling price based on reasons that are not in any way associated or related with its manufacturing cost.
This ultimately implies that, price discrimination occurs when differences in a product's price do not reflect differences in costs of production.
Explain how political and international factors pose challenges to businesses.
Answer:
Synonyms:complicated, difficult, complex, elaborate, confused, confusing, incomprehensible, intricate, contorted, involved
Antonyms:straightforward, simple, make sense, understandable, intelligible, apparent, easy, evident, clear-cut, manifest
Entry:decadence
Synonyms:indulgence, self-indulgence, sybaritic, epicurean, extravagance, weakness, fun-loving, for fun, for a laugh
Entry:evil
Synonyms:the Devil, satanism, black mass, the forces of darkness/evil, satanic, Old Nick, horn, Satan
Entry:two-edged
Synonyms:mixed, patchy, spotty, mixed blessing, six of one, (and) half a dozen of the other, a double-edged/two-edged sword, work both ways, the rights and wrongs of something, cut both ways
Using the thesaurus
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make someone not want or like something
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Explanation:
Answer each of the following independent questions. Required: Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $88,000 cash immediately, (2) $34,000 cash immediately and a six-period annuity of $9,300 beginning one year from today, or (3) a six-period annuity of $18,400 beginning one year from today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1.1 Assuming an interest rate of 7%, determine the PV value for the above options.
1.2 Which option should Alex choose? Option (1) Option (2) Option (3)
2. The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2022. Weimer will make annual deposits of $175,000 into a special bank account at the end of each of 10 years beginning December 31, 2013. Assuming that the bank account pays 8% interest compounded annually, what will be the fund balance after the last payment is made on December 31, 2022?
Table of calculation function?
Payment?
N?
I?
Future value?
Answer:
option 1
$4,056,237.49
Explanation:
To determine the better option, we have to determine the present value of options 2 and 3
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
option 2
Cash flow in year 0 = $34,000
Cash flow in year 1 to 6 = $9,300
I = 7 %
PV = 78,328.82
Option 2
Cash flow in year 1 to 6 = $$18,400
I = 7 %
PV = 87704.33
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
It is the first option that has the highest value
The formula for calculating future value = A / annuity factor
Annuity factor = {[(1+r) n] - 1} / r
P = Present value
R = interest rate
N = number of years
Select the statement that is true of common stock. Companies issue dividends to common stockholders before preferred stockholders. Common stockholders do not have a right of first refusal when new stock is issued. Common stock has a stronger claim to a company's assets than preferred stock. Despite having fewer financial protections, common stock typically outperforms preferred stock.
Answer:
Despite having fewer financial protections, common stock typically outperforms preferred stock.
Explanation:
Secondary market can be defined as a market where various investors sell and buy securities from other investors.
Some examples of secondary market around the world are New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange (LSE) and National Stock Exchange (NSE).
On the other hand, the primary market refers to the market where these securities that are being sold are issued or created.
A common stock can be defined as a type of security or ownership interest that typically depicts ownership in a corporation. Common stockholders are usually saddled with the responsibility of electing the Board of Directors and voting in corporate policies. Also, it is to be reported on stockholders' equity section of a balance sheet.
The statement that is true of common stock is that, despite having fewer financial protections, common stock typically outperforms preferred stock.
which of the following statements are true
a. the balance sheet should be prepared before the income statement .
b. the income statement should be prepared before the balance sheet
c.the balance sheet and the income statenent should be prepared simultaneously.
d. the order in which the balance sheet and the income statement are prepared is irrelevent
Assume that Simple Co. had credit sales of $280,000 and cost of goods sold of $165,000 for the period. It estimates that 2 percent of credit sales in uncollectible accounts when it uses the percentage of credit sales method and it estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $6,900 when it uses the aging method. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $400.
Required:
Prepare the journal entry to record the end-of-period adjustment for bad debts under the (a) percentage of credit sales method and (b) aging of accounts receivable method.
Answer:
A. Dr Bad Debt Expense $5,600
Cr Allowance for Doubtful Accounts $5,600
B. Dr Bad Debt Expense $6,500
Cr Allowance for Doubtful Accounts $6,500
Explanation:
A. Preparation of the journal entry to record the end-of-period adjustment for bad debts under
percentage of credit sales method
Dr Bad Debt Expense $5,600
Cr Allowance for Doubtful Accounts $5,600
($280,000 x .02 = 5600)
(Being to record bad debts under percentage of credit sales method)
B. Preparation of the journal entry to record the end-of-period adjustment for bad debts under the aging of accounts receivable method.
Dr Bad Debt Expense $6,500
Cr Allowance for Doubtful Accounts $6,500
($6,900 - $400 = 6500)