Explanation:
means how quickly you can get your hands on your cash. In simpler terms, liquidity is to get your money whenever you need it.
Suppose you are the money manager of a $5.21 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 320,000 1.50 B 780,000 (0.50) C 1,260,000 1.25 D 2,850,000 0.75 If the market's required rate of return is 10% and the risk-free rate is 5%, what is the fund's required rate of return
Answer: 8.65%
Explanation:
First find the weights of the stocks:
Total = 320,000 + 780,000 + 1,260,000 + 2,850,000
= $5,210,000
Stock A:
= 320,000 / 5,210,000
= 6.14%
Stock B:
= 780,000 / 5,210,000
= 14.97%
Stock C:
= 1,260,000 / 5,210,000
= 24.18%
Stock D:
= 2,850,000 / 5,210,000
= 54.70%
Then calculate Portfolio Beta.
Portfolio beta = (6.14% * 1.50) + (14.97% * - 0.5) + (24.18% * 1.25) + (54.72% * 0.75)
= 0.7299
Required rate of return using Capital Asset Pricing Model (CAPM)
= Risk free rate + Beta * (Market return - risk free rate)
= 5% + 0.7299 * (10% - 5%)
= 8.65%
he adjusted trial balance for China Tea Company at December 31, 2021, is presented below: Accounts Debit Credit Cash $ 11,000 Accounts receivable 163,000 Prepaid rent 9,000 Supplies 31,000 Equipment 330,000 Accumulated depreciation $ 126,000 Accounts payable 10,000 Salaries payable 3,700 Interest payable 1,700 Notes payable (due in two years) 39,000 Common stock 240,000 Retained earnings 214,400 Dividends 26,000 Service revenue 300,000 Salaries expense 200,000 Advertising expense 75,000 Rent expense 16,000 Depreciation expense 38,000 Interest expense 2,800 Utilities expense 33,000 Totals $ 934,800 $ 934,800 Prepare an income statement for China Tea Company for the year ended December 31, 2021:
Answer:
China Tea Company Income Statement
For the Year Ended December 31, 2021
$ $
Revenue
Service Revenue 300,000
Less Expenses:
Salaries expense 200,000
Advertising expense 75,000
Rent expense 16,000
Depreciation expense 38,000
Interest expense 2,800
Utilities expense 33,000 (364,800)
Net Loss ( 64,800)
James, a cash basis taxpayer, received the following compensation and fringe benefits in the current year: Salary $66,000 Disability income protection premiums 3,000 Long-term care insurance premiums 4,000 His actual salary was $72,000. He received only $66,000 because his salary was garnished and the employer paid the $6,000 owed on James's credit card. The wage continuation insurance is available to all employees and pays the employee three-fourths of the regular salary if the employee is sick or disabled. The long-term care insurance is available to all employees and pays $150 per day toward a nursing home or similar facility. What is James's gross income from the above
Answer: $72,000
Explanation:
Gross income simply refers to the total income that is earned by an individual before taxes and every other deductions are made from the income earned. Gross income include wages, salaries, dividends, rental income, and interest income.
Based on the above explanation, James's gross income from the above will be $72000 which is his actual salary. This means the actual salary consist of every other income since his salary is $66000.
Turnbull Co. is considering a project that requires an initial investment of $270,000. The firm will raise the $270,000 in capital by issuing $100,000 of debt at a before-tax cost of 8.7%, $30,000 of preferred stock at a cost of 9.9%, and $140,000 of equity at a cost of 13.2%. The firm faces a tax rate of 40%. What will be the WACC for this project
Answer:
The answer 9.88%
Explanation:
Value of Debt = $100,000
Value of Preferred Stock = $30,000
Value of Equity = $140,000
Weight of Debt = $100,000 / $270,000
Weight of Debt = 0.37
Weight of Preferred Stock = $30,000 / $270,000
Weight of Preferred Stock = 0.11
Weight of Equity = $140,000 / $270,000
Weight of Equity = 0.52
After Tax Cost of Debt = 8.7% (1 – 0.40)
After Tax Cost of Debt = 5.22%
WACC = (Weight of Debt x After Tax Cost of Debt) + (Weight of Preferred Stock x Cost of Preferred Stock) + (Weight of Equity x Cost of Equity)
WACC = (0.37 x 5.22%) + (0.11 x 9.9%) + (0.52 x 13.2%)
WACC = 9.88%
In January, Prahbu purchased a new machine for use in an existing production line of his manufacturing business for $98,000. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $3,925 to install the machine, and after the machine is installed, he pays $2,250 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $5,200 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine
Answer:
$104,175
Explanation:
Calculation to determine How much will Prahbu be required to capitalize as the cost of the machine
Purchase price $98,000
Add Installation cost $3,925
Add Critical test cost $2,250
Machine Capitalize cost $104,175
($98,000+$3,925+$2,250)
Therefore How much will Prahbu be required to capitalize as the cost of the machine is $104,175
In its income statement for the year ended December 31, 2022, Pharoah Company reported the following condensed data. Salaries and wages expenses $595,200 Loss on disposal of plant assets $106,880 Cost of goods sold 1,263,360 Sales revenue 2,828,800 Interest expense 85,200 Income tax expense 32,000 Interest revenue 83,200 Sales discounts 204,800 Depreciation expense 396,800 Utilities expense 140,800
Prepare a multiple-step income statement. (List other revenues before other expenses.)
Pharoah Company
Income Statement
Answer:
Net income is $86,960.
Explanation:
A multi-step income statement is an income statement which dsplayes th gross profit and the detailed of each category of expenses and incomes to arrive at a company's net income for a particular period.
A multi-step income statement can be prepared as follows:
Pharoah Company
Income statement
For the year ended December 31, 2022
Details $
Sales revenue 2,828,800
Sales discounts (204,800)
Net sales revenue 2,624,000
Cost of goods sold (1,263,360)
Gross profit 1,360,640
Operating expenses:
Salaries and wages expenses (595,200)
Depreciation expense (396,800)
Utilities expense (140,800)
Operating income 227,840
Other income (loss):
Loss on disposal of plant assets (106,880)
Interest income (expense):
Interest expense (85,200)
Interest revenue 83,200
Income before tax 118,960
Income tax expense (32,000)
Net income 86,960
Exercise 8-3 Lump-sum purchase of plant assets LO C1 Rodriguez Company pays $394,875 for real estate with land, land improvements, and a building. Land is appraised at $202,500; land improvements are appraised at $45,000; and a building is appraised at $202,500. Required: 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase.
Answer:
Part 1
Land = $176,712
Land Improvements = $29,269
Building = $176,712
Part 2
Debit : Land $176,712
Debit : Land Improvements $29,269
Debit : Building $176,712
Credit : Cash $394,875
Explanation:
Cost allocations based on appraised values
Land = $202,500 / $452,500 x $394,875 = $176,712
Land Improvements = $45,000 / $452,500 x $394,875 = $29,269
Building = $202,500 / $452,500 x $394,875 = $176,712
Journal :
Debit the Assets with their allocated costs and credit cash
Beginning inventory 0
Units produced 49,000
Units sold 44,000
Selling price per unit $81
Selling and administrative expenses:
Variable per unit $2
Fixed (total) $562,000
Manufacturing costs:
Direct materials cost per unit $18
Direct labor cost per unit $9
Variable manufacturing overhead cost per unit $4
Fixed manufacturing overhead cost (total) $980,000
Requirement 1:
Assume that the company uses absorption costing.
(a) Determine the unit product cost. (Omit the "$" sign in your response.)
Unit product cost $
(b)
Prepare an income statement for May. (Input all amounts as positive values. Omit the "$" sign in your response.)
(Click to select)Cost of goods manufacturedBeginning inventoryEnding inventoryGoods available for saleSales $
(Click to select)SalesEnding inventoryBeginning inventoryGoods available for saleCost of goods sold
(Click to select)Gross lossGross profit
(Click to select)SalesEnding inventoryGoods available for saleSelling and administrative expensesCost of goods manufactured
(Click to select)Net operating lossNet operating income
$
Answer:
a) The unit product cost under absorption costing is $51.
b) Income Statement for May:
Sales Revenue $3,564,000
Cost of goods sold 2,244,000
Gross profit $1,320,000
Selling and admin.
expenses 650,000
Net operating income $670,000
Explanation:
a) Data and Calculations:
Beginning inventory 0
Units produced 49,000
Units sold 44,000
Ending inventory 5,000
Selling price per unit $81
Selling and administrative expenses:
Variable per unit $2
Fixed (total) $562,000
Manufacturing costs:
Direct materials cost per unit $18
Direct labor cost per unit $9
Variable manufacturing
overhead cost per unit $4
Total direct costs per unit $31
Fixed manufacturing overhead cost (total) $980,000
Unit product cost under absorption costing:
Manufacturing costs:
Direct materials cost per unit $18
Direct labor cost per unit $9
Variable manufacturing
overhead cost per unit $4
Total direct costs per unit $31
Fixed manufacturing
overhead cost (total) $20 ($980,000/49,000)
Total unit product cost = $51
Cost of goods manufactured = $2,499,000 ($51 * 49,000)
Cost of goods sold = $2,244,000 ($51 * 44,000)
Selling and administrative expenses = $650,000 ($2 * 44,000 + 562,000)
In late 2020, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 6,000,000 shares of common stock carrying a $1 par value, and 2,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2021, 4,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2, all 2,000,000 shares of preferred stock are issued at $20 per share.
Required:
1. Prepare journal entries to record these transactions.
2. Prepare the shareholders' equity section of the Nicklaus balance sheet as of March 31, 2021. (Assume net income for the first quarter 2021 was $1,750,000.)
Part B
During 2021, the Nicklaus Corporation participated in three treasury stock transactions:
On June 30, 2021, the corporation reacquires 250,000 shares for the treasury at a price of $12 per share.
On July 31, 2021, 25,000 treasury shares are reissued at $15 per share.
On September 30, 2021, 25,000 treasury shares are reissued at $10 per share.
Required:
1. Prepare journal entries to record these transactions.
2. Prepare the Nicklaus Corporation shareholders' equity section as it would appear in a balance sheet prepared at September 30, 2021. (Assume net income for the second and third quarter was $3,250,000.)
Part C
On October 1, 2021, Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,800,000 shares outstanding) with a new common stock issue having a $0.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $0.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation.
On November 1, 2021, the Nicklaus Corporation declares a $0.18 per share cash dividend on common stock and a $0.35 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2021, to shareholders of record on November 15, 2021.
On December 2, 2021, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2021, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $10 per share. The dividend will result in 76,000 (0.01 Ã 7,600,000) additional shares being issued to shareholders.
Required:
1. Prepare journal entries to record the declaration and payment of these stock and cash dividends.
2. Prepare the December 31, 2021, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $2,750,000.)
3. Prepare a statement of shareholders' equity for Nicklaus Corporation for 2021.
Answer:
Nicklaus Corporation
1. Journal Entries:
Debit Cash $40 million
Credit Common Stock $4 million
Credit Additional paid-in capital- Common stock $36 million
To record the issue of 4 million shares at $10 each.
Debit Cash $40 million
Credit Preferred stock $10 million
Credit Additional paid-in capital - preferred $30 million
To record the issue of 2 million share at $20 per share.
2. Shareholders' equity as of March 31, 2021:
Capital
Authorized:
Common stock 6 million, $1 par value
Noncumulative, nonparticipating preferred stock, 2 million, $5 par value
Issued and outstanding:
Common stock 4 million, $1 par value $4 million
Additional paid in capital - common stock 36 million
Preferred stock 2 million, $5 par value 10 million
Additional paid in capital- preferred stock 30 million
Retained Earnings 1.75 million
3. Journal Entries:
June 30, 2021:
Debit Treasury stock $3 million
Credit Cash $3 million
To record the purchase of 250,ooo shares of treasury stock at $12.
July 31, 2021:
Debit Cash $375,000
Credit Treasury stock $375,000
To record the reissue of 25,000 shares of treasury stock at $15 per share.
Sept 30, 2021:
Debit Cash $250,000
Credit Treasury stock $250,000
To record the reissue of 25,000 shares of treasury stock at $10 per share.
2. Shareholders' equity as of September 30, 2021:
Capital
Authorized:
Common stock 6 million, $1 par value
Noncumulative, nonparticipating preferred stock, 2 million, $5 par value
Issued and outstanding:
Common stock 4 million, $1 par value $4 million
Additional paid in capital - common stock 36 million
Preferred stock 2 million, $5 par value 10 million
Additional paid in capital- preferred stock 30 million
Treasury stock - common stock, 200,000 ($2.375 million)
Retained Earnings 5 million
Part C:
1. Journal Entries:
Oct. 1, 2021: Memorandum record to note the change:
Stock-split Common stock, 8 million, $0.50 par value
Nov. 1, 2021:
Debit Cash Dividends:
Common stock = $1,368,000
Preferred stock = $700,000
Credit Cash $2,068,000
To record the payment of dividends.
Dec. 2, 2021:
Debit Stock dividend $38,000
Credit Common Stock $38,000
To record the issue of shares.
Debit Retained Earnings $38,000
Credit Stock dividends $38,000
To record the the declaration.
2. Shareholders' equity as of December 31, 2021:
Capital
Authorized:
Common stock 12 million, $0.50 par value
Noncumulative, nonparticipating preferred stock, 2 million, $5 par value
Issued and outstanding:
Common stock 8.076 million, $0.50 par value $4.038 million
Additional paid in capital - common stock 36 million
Preferred stock 2 million, $5 par value 10 million
Additional paid in capital- preferred stock 30 million
Treasury stock - common stock, 200,000 ($2.375 million)
Retained Earnings 5.644 million
3. Statement of Shareholders' equity:
Common stock 8.076 million, $0.50 par value $4.038 million
Additional paid in capital - common stock 36 million
Preferred stock 2 million, $5 par value 10 million
Additional paid in capital- preferred stock 30 million
Treasury stock - common stock, 200,000 ($2.375 million)
Retained Earnings $5,000,000
Net income 2,750,000
Dividends paid (2,068,000)
Stock dividends ($38,000) 5.644 million
Explanation:
a) Data and Calculations:
Capital
Authorized:
Common stock 6 million, $1 par value
Noncumulative, nonparticipating preferred stock, 2 million, $5 par value
Issued:
Common stock 4 million, $1 par value, issued at $10
Preferred stock 2 million, $5 par value, issued at $20
June 30, 2021 Treasury stock $3 million Cash $3 million
July 31, 2021 Cash $375,000 Treasury stock ($375,000)
Sept 30, 2021 Cash $250,000 Treasury stock ($250,000)
Oct. 1, 2021:
Stock-split Common stock, 8 million, $0.50 par value
Nov. 1, 2021:
Cash Dividends:
Common stock = $1,368,000 ($0.18 * 7,600,000)
Preferred stock = $700,000 ($0.35 * 2,000,000)
Dec. 2, 2021:
Stock dividends:
Additional shares issued = 76,000 (7,600,000 * 1%)
Issued at par $0.50
Stock dividend = $38,000
Branch Company, a building materials supplier, has $18,400,000 of notes payable due April 12, 2022. At December 31, 2021, Branch signed an agreement with First Bank to borrow up to $18,400,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 70% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2021, financial statements, the value of Branch's collateral was $19,600,000. On its December 31, 2021, balance sheet, Branch should classify the notes as follows:
a. $18,400,000 of long-term liabilities.
b. $18,400,000 of current liabilities.
c. $3,680,000 long-term and $14,720,000 current liabilities.
d. $15,680,000 long-term and $2,720,000 current liabilities.
Answer:
The answer is "Choice d"
Explanation:
Please find the complete question in the attached file.
Follows are the calculation to this question:
The notes on payable= [tex]\$18,400,000[/tex]
Calculating the Refinancing ability:
[tex]=\$ 19,600,000 \times 80\% \\\\ = \$ 19,600,000 \times \frac{80}{100} \\\\ = \$ 196,000 \times 80 \\\\ =\$15,680,000[/tex]
The current liability= [tex]\$2,720,000[/tex]