Tyler buys a futures contract from Alex that gives him the right to buy 1,000 barrels of oil at $125 per barrel in 48 months. What happens in 48 months if the actual price per barrel of oil is $100? Group of answer choices Alex must give Tyler $10,000. The contract becomes void because the price turned out lower than expected. Tyler must pay Alex $25,000. Tyler makes a profit of $25 per barrel, or $25,000.
Answer: Tyler must pay Alex $25,000.
Explanation:
This is a Futures contract which means that there must be a settling of losses and profits. Tyler went into a contract with Alex in which Tyler would buy oil from him at $125 a barrel in 48 months.
In 48 months however, the price is $100 per barrel. This means that Tyler would be paying $25 more for the barrel than it is worth.
Seeing as there are 1,000 barrels that comes to,
= $25 * 1,000
= $25,000
Tyler must therefore pay this $25,000 to Alex to settle the contract.
If the actual price per barrel of Oil is $100 in 48 months, than the option C is correct.
Future Contract
The Objective of the Future Contract is to settle the issue of profit and loss sharing. In the given question we know that, Tyler would buy oil from him at $125 a barrel in 48 months.
But the actual price oil is $100 per barrel, hence Tyler would be paying $25 more.
There are 1000 barrels whith exceeding cost by $25 per barrel, hence Tyler would be giving = 1000 × 25 = $25000. Therefore, the Option C "Tyler must pay Alex $25,000" is correct.
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Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available:
• Pan Asia Mining Co.’s stock (Ticker: PAMC) is trading at $22.50.
• The company’s stock is expected to pay a year-end dividend of $1.08 that is expected to grow at a certain rate.
• The stock’s expected rate of return is 10.80%.
Based on this information, Robert's forecast of PAMC's growth rate of earning and dividends should be:__________.
Answer:
Growth rate in dividend and earnings = 10%
Explanation:
The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return.
The model is given as
P = D× g/(r-g)
P- price of stock, g - growth rate in dividend, r- required rate of return
P- 22.50, r- 10.80%, g- ?
22.50 = ( 1.80 ×g)/(0.108-g)
Cross multiplying
22.50 × (0.108 - g) = 1.80 × g
2.43 - 22.50g= 1.80 g
1.80g + 22.50g = 2.43
24.3 g = 2.43
g= 2.43/24.3= 0.1
g = 0.1 × 100 = 10%
Growth rate = 10%
Gains from trade
Consider two neighboring island countries called Felicidad and Arcadia. They each have 4 million labor hours available per week that they can use to produce jeans, rye, or a combination of both. The following table shows the amount of jeans or rye that can be produced using 1 hour of labor.
Jeans Rye
Country
(Pairs per hour of labor) (Bushels per hour of labor)
Felicidad 5 20
Arcadia 8 16
Initially, suppose Arcadia uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce rye while Felicidad uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce rye. Consequently, Felicidad produces 15 million pairs of jeans and 20 million bushels of rye, and Arcadia produces 8 million pairs of jeans and 48 million bushels of rye. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of jeans and rye it produces.
1. Felicidad's opportunity cost of producing 1 pair of jeans is (1/2, 1/4, 2, 4 Buschels) of rye, and Arcadia's opportunity cost of producing 1 pair of jeans is (1/2, 1/4, 2, 4 Buschels) of rye. Therefore, (Arcadia, Felicia) has a comparative advantage in the production of jeans, and has a comparative advantage in the production of rye.
2. Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces jeans will produce _____ million pairs per week, and the country that produces rye will produce ____ million bushels per week.
Suppose the country that produces jeans trades 18 million pairs of jeans to the other country in exchange for 54 million bushels of rye.
3. When the two countries did not specialize, the total production of jeans was 23 million pairs per week, and the total production of rye was 68 million bushels per week. Because of specialization, the total production of jeans has increased by_____million pairs per week, and the total production of rye has increased by____million bushels per week.
Because the two countries produce more jeans and more rye under specialization, each country is able to gain from trade.
4. Complete the table: Production, Consumption, Trade Action, Increase in Consumption. For the answer choices of Trade Action: Jeans(Exports 18, Imports 18), Rye (Exports 54, Imports 54) Everything else are numerical values.
Felicia Felica Arcadia Arcadia
Jeans Rye Jeans Rye
(Millions) (Millions) (Millions) (Millions)
Without Trade
Production 15 20 8 48
Consumption 15 20 8 48
With Trade
Production
Trade Action
Consumption
Gains from Trade
Increase in Trade
Find the given attachments
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates:
Direct labor-hours required to support estimated production 150,000
Machine-hours required to support estimated production 75,000
Fixed manufacturing overhead cost $ 420,000
Variable manufacturing overhead cost per direct labor-hour $ 4.60
Variable manufacturing overhead cost per machine-hour $ 9.20
During the year, Job 550 was started and completed. The following information is available with respect to this job:
Direct materials $ 195
Direct labor cost $ 288
Direct labor-hours 15
Machine-hours 5
Required:
1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach:
a. Compute the plantwide predetermined overhead rate.
b. Compute the total manufacturing cost of Job 550.
c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?
2. Assume that Landen’s controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach:
a. Compute the plantwide predetermined overhead rate.
b. Compute the total manufacturing cost of Job 550.
c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?
(Round your intermediate calculations to 2 decimal places. Round your Predetermined Overhead Rate answers to 2 decimal places and all other answers to the nearest whole dollar
Answer:
Instructions are below.
Explanation:
Giving the following information:
Estimated Direct labor-hours= 150,000
Estimated machine-hours= 75,000
Fixed manufacturing overhead cost $ 420,000
Variable manufacturing overhead cost per direct labor-hour $ 4.60
Variable manufacturing overhead cost per machine-hour $ 9.20
Job 550:
Direct materials $ 195
Direct labor cost $ 288
Direct labor-hours 15
Machine-hours 5
1. To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 420,000/150,000 + 4.6
Estimated manufacturing overhead rate= $7.4 per direct labor hour
Job 550:
Total cost= 195 + 288 + (7.4*15)= $594
Selling price= 594*2= $1,188
2) Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 420,000/75,000 + 9.2
Estimated manufacturing overhead rate= $14.8 per machine-hour
Job 550:
Total cost= 195 + 288 + (14.8*5)= $557
Selling price= 557*2= $1,114
Required: Access the American Eagle 2014 Annual Report/10K (In the appendix to the textbook or obtain online). Look at the financial statements and Notes to the financial statements closely and attempt to infer what kinds of information they report. Then, answer the following questions based on the Report.
1. What type of product does it sell?
2. On what date does American Eagle Outfitters most recent reporting year end?
3. Are its financial statement audited by independent CPA's?
4. Does its total assests increase or decrease over the last year?
Answer:
1) apparel, accessories for men and women and personal care product for women.
2) Feb 1 2020 for the year 2019
3) Yes
4) Increase
Explanation:
For this question annual report of 2019 was used. The report obtained online.
Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows:
Sales $ 6,200,000
Variable costs (50% of sales) 3,100,000
Fixed costs 1,920,000
Earnings before interest and taxes (EBIT) $ 1,180,000
Interest (10% cost) 440,000
Earnings before taxes (EBT) $ 740,000
Tax (30%) 222,000
Earnings after taxes (EAT) $ 518,000
Shares of common stock 320,000
Earnings per share $ 1.62
The company is currently financed with 50 percent debt and 50 percent equity (common stock, par value of $10). In order to expand the facilities, Mr. Delsing estimates a need for $3.2 million in additional financing. His investment banker has laid out three plans for him to consider:
Sell $3.2 million of debt at 14 percent.
Sell $3.2 million of common stock at $20 per share.
Sell $1.60 million of debt at 13 percent and $1.60 million of common stock at $25 per share.
Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,420,000 per year. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1.60 million per year for the next five years.
Delsing is interested in a thorough analysis of his expansion plans and methods of financing.He would like you to analyze the following:
Required:
a. The break-even point for operating expenses before and after expansion (in sales dollars). (Enter your answers in dollars not in millions, i.e, $1,234,567.)
b. The degree of operating leverage before and after expansion. Assume sales of $6.2 million before expansion and $7.2 million after expansion. Use the formula: DOL = (S − TVC) / (S − TVC − FC). (Round your answers to 2 decimal places.)
c-1. The degree of financial leverage before expansion. (Round your answers to 2 decimal places.)
c-2. The degree of financial leverage for all three methods after expansion. Assume sales of $7.2 million for this question. (Round your answers to 2 decimal places.)
d. Compute EPS under all three methods of financing the expansion at $7.2 million in sales (first year) and $10.1 million in sales (last year). (Round your answers to 2 decimal places.)
Answer:
Explanation:jl
Please check the file attached for the solution to the given problem
On January 1, 2016, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2017. Expenditures on the project were as follows:
January 1, 2016 $200,000
September 1, 2016 $300,000
December 31, 2016 $300,000
March 31, 2017 $300,000
September 30, 2017 $200,000
Kendall borrowed $750,000 on a construction loan at 12% interest on January 1, 2016. This loan was outstanding throughout the construction period. The company had $4,500,000 in 9% bonds payable outstanding in 2016 and 2017.
Interest capitalized for 2017 was ?
Answer:
$86,805
Explanation:
For computing the interest capitalized for 2017 we need to do following calculations
Average accumulated expenditures for year 2016 is
= (Jan 1 expenditure × number of months ÷ total number of months) + (Sep 1 expenditure × number of months ÷ total number of months) + (Dec 31 expenditure × number of months ÷ total number of months)
= (200,000 × 12 ÷ 12) + (300,000 × 4 ÷ 12) + (300,000 × 0 ÷ 12)
= 200,000 + 100,000 + 0
= $300,000
Now
Interest capitalized for 2016 was:
= (Jan 1 expenditure × number of months ÷ total number of months) + (Sep 1 expenditure × number of months ÷ total number of months) + (Dec 31 expenditure × number of months ÷ total number of months) × interest on construction loan
= (200,000 × 12 ÷ 12) + (300,000 × 4 ÷ 12) + (300,000 × 0 ÷ 12) × 12%
= $300,000 × 12%
= 36,000
Now
Average accumulated expenditures for 2017 was:
Accumulated expenditure in 2016 is
= (Jan 1 expenditure + Sep 1 expenditure + Dec 1 expenditure + interest capitalized) × number of months ÷ total number of months
= (200,000 + 300,000 + 300,000 + 36,000) × 9 ÷ 9
= (836,000) × 9 ÷9
= 836,000
And,
March 31, 2017 = 300,000 × 6 ÷9 = 200,000
September 30, 2017 = 200,000 × 0 ÷ 9 = 0
So,
Average accumulated expenditures for 2017 was
= 836,000 + 200,000 + 0
= 1,036,000
Finally
Interest capitalized for 2017 was:
Specific borrowing is
= 750,000 × 9 ÷ 12 × 12%
= 67,500
Therefore
Excess = (Accumulated expenditure in 2017) – (Total borrowing in 2016)
= (1,036,000 - 750,000) × number of months ÷ total number of months × bond payable discount
= 286,000 × 9 ÷ 12 × 9%
= 19,305
Hence,
Interest capitalized for 2017
= 67,500 + 19,305
= 86,805
Western Electric has 33,500 shares of common stock outstanding at a price per share of $82 and a rate of return of 12.85 percent. The firm has 7,450 shares of 8.10 percent preferred stock outstanding at a price of $96.50 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $413,000 and currently sells for 112.5 percent of face. The yield to maturity on the debt is 8.17 percent. What is the firm's weighted average cost of capital if the tax rate is 39 percent
Answer:
11.05
Explanation:
WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.
Formula for WACC
Weighted Average Cost of Capital = (Cost of Equity x Weightage of equity) + (Cost of preferred Stock x Weightage of preferred Stock ) + (Cost of Debt (1 -t) x Weightage of Debt)
Market Value
Equity = 33,500 x $82 = $2,747,000
Preferred Stock = 7,450 x $96.50 = $718,925
Debt = $413,000 x 112.5% = $464,625
Total Value = $2,747,000 + $718,925 + $464,625 = $3,930,550
Cost of Equity = 12.85%
Cost of Preferred stock = 8.1%
Cost of Debt = 8.17%
Placing values in the formula
Weighted Average Cost of Capital = (12.85% x $2,747,000 / $3,930,550) + (8.1% x $718,625 / $3,930,550 ) + (8.17% (1 - 0.39) x $464,625 / $3,930,550)
Weighted Average Cost of Capital = 8.98% + 1.48% + 0.59% = 11.05%
The trial balance of Wikki Cleaners at December 31, 2012, the end of the current fiscal year, is as follows:
Wikki Cleaners Trial Balance December 31, 2012
Cash $13,200
Cleaning Supplies 22,000
Prepaid Insurance 5,400
Equipment 206,000
Accumulated Depreciation $74,100
Accounts Payable 8,500
Common Stock 60,000
Retained Earnings 31,200
Dividends 27,000
Revenue 171,560
Rent Expense 28,500
Wages Expense 39,720
Utilities Expense 2,130
Miscellaneous Expense 1,410$
345,360 $345,360
Information for the adjusting entries is as follows:
a. Cleaning supplies on hand on December 31, 2012, $18,750.
b. Insurance premiums expired during the year, $1,800.
c. Depreciation on equipment during the year, $21,600.
d. Wages accrued but not paid at December 31, 2012, $1,830.
Required:
Journalize the the entries.
Answer:
a.
Inventory $18,750 (debit)
Supplies $18,750 (credit)
b.
Insurance Expense $1,800 (debit)
Insurance Prepaid $1,800 (credit)
c.
Depreciation : Equipment $21,600 (debit)
Accumulated Depreciation : Equipment $21,600 (credit)
d.
Wages Expense $1,830 (debit)
Wages Payable$1,830 (credit)
Explanation:
a.
Recognize Inventory and de-recognize Supplies
b.
Recognize Insurance Expense and de-recognize insurance prepaid asset
c.
Recognize the depreciation expense
d.
Recognize the Wages expense and de-recognize the Wages payable liability.
Herzberg's motivational factors and Maslow's esteem and self-actualization needs are similar. Explain how organizations can meet these needs.
Answer:
Organizations can meet the human needs identified by Maslow by studying and implementing the motivational factors specified by Herzberg.
The similarity of Herzberg's motivational factors and Maslow's esteem and self-actualization needs is addressed by the following questions: "What do people really want from their work?" "How do organizations go about meeting these needs or ensuring that the needs are met?"
The answer is in the awareness of what workers want from the work they carry out for organizations. As Maslow stated, people generally have five human needs: physiological needs, safety needs, social belonging, self-esteem, and self-actualization (later described as transcendence). It is only when the basic needs (physiological needs, safety needs, and social belonging and love needs) are satisfied in that order, that workers would seek self-esteem and self-actualization or transcendence. It is also at this level of seeking self-esteem and self-actualization that organizations would derive the greatest benefits from their workers. It then behoves organizations to ensure that the basic needs are not denied, but to push forward to help their workers attain self-esteem and self-actualization.
Herzberg's motivational factors show that it is the responsibility of organizations to ensure that their workers achieve a sense of achievement in the work they do. They should also be recognized for doing good jobs. The nature of the work should be such that it does not demean the worker. There should be dignity of labor. Workers achieve more when they are made responsible for the outcome of their work. Being assigned responsibilities help them to advance and and grow. Organizations also need to manage well the extrinsic job elements that Herzberg identified as "hygiene factors," which concentrate on the work environment.
Explanation:
a) Frederick Herzberg identified certain job factors that bring about employee job satisfaction whereas others can create job dissatisfaction. According to Herzberg, "motivating factors (also called satisfiers) are primarily intrinsic job elements that lead to satisfaction, such as achievement, recognition, the (nature of) work itself, responsibility, advancement, and growth." The dissatisfiers, on the other hand, he called "hygiene factors." They are "extrinsic elements of the work environment such as company policy, relationships with supervisors, working conditions, relationships with peers and subordinates, salary and benefits, and job security, which can result in job dissatisfaction if not well managed." An interesting result of Herzberg’s studies was that "the opposite of satisfaction is not dissatisfaction." Herzberg's studies established that proper management of hygiene factors could prevent employee dissatisfaction, but that these factors could not serve as a source of satisfaction or motivation. The summary is that motivational factors are quite distinct from hygiene factors.
b) Maslow identified the following hierarchy of human needs: physiological needs, safety needs, social belonging, self-esteem, and self-actualization (later described as transcendence). The hierarchy of needs, according to Maslow, show how humans essentially partake in behavioral motivation. The summary of Maslow's hierarchy of human needs is that "people are motivated to fulfill basic needs before moving on to other, more advanced needs."
Moss County Bank agrees to lend the Sandhill Co. $635000 on January 1. Sandhill Co. signs a $635000, 6%, 9-month note. The entry made by Sandhill Co. on January 1 to record the proceeds and issuance of the note is
a
Interest Expense 28575
Cash 606425
Notes Payable 635000
b
Cash 635000
Interest Expense 28575
Notes Payable 635000
Interest Payable 28575
c
Cash 635000
Notes Payable 635000
d
Cash 635000
Interest Expense 28575
Notes Payable 663575
Answer:
Cash 635000
Notes Payable 635000
Explanation:
As per the data given in the question,
The journal entry for issuance of the note is
Cash $635,000
To Notes payable $635,000
(Being the issuance of the note is recorded)
Here, Cash will increase the assets value and Notes payable will increase the liabilities value so both the accounts are debited and credited respectively.
Therefore, option C is correct
For the following error, considered individually, indicate whether the error would cause the trial balance totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.
a. The payment of cash for the purchase of office equipment of $10,100 was debited to Land for $10,100 and credited to Cash for $10,100.
Answer:
No, it will not cause the trial balance to be unequal because both debit and credit entry is balanced.
Explanation:
Both Debit and credit side of the journal entry made is equal so, it will not effect the trial balance.
Entry made
Dr. Land $10,100
Cr. Cash $10,100
Actual Entry
Dr. Office Equipment $10,100
Cr. Cash $10,100
Adjusting Entry
Dr. Office Equipment $10,100
Cr. Land $10,100
Laura Bryant joined Kellogg's straight after university in 2002. She joined the Field Sales team initially. This involved visiting five to ten supermarkets a day to develop relationships at a local level. After two years her hard work was rewarded and she was promoted to Customer Marketing Manager at Head Office. This helped to raise her profile as she wanted to move into marketing. With support from her manager, Laura made the transition from Sales to Marketing as Assistant Brand Manager on Rice Krispies and Frosties. In 2009 she was promoted again to manage the marketing plan for Special K and she is now Brand Manager for Kellogg's Cornflakes. The company has helped motivate her to climb the hierarchy of needs and achieve her career ambitions. Identify and explain the theory of motivation applied by the manager at Kellog’s company. Identify each level and support your answer from examples from the case. Herzberg's motivational factors and Maslow's esteem and self-actualization needs are similar. Explain how organizations can meet these needs.
Answer: The answer is provided below
Explanation:
The theory of motivation that is applied by the manager at Kellog’s company is Hertzberg's two factor theory.
Hertzberg divided needs into two categories which are the hygiene factors and motivating factors. The hygiene factors are factors that are essential to work, hygiene factors do not work as motivating factor but absence will lead to dissatisfaction. Hygiene factors include salary, safe working environment, break time, etc.
Motivating factors are factors that motivates the employees to work harder. Motivating factors lead to satisfaction among the employees and they include responsibility, growth, status, recognition, achievement, etc.
In this scenario, Hertzberg motivating factor theory was used. The manager helped Laura Bryant climb the corporate hierarchy. At first, she was a sales field worker, she was then promoted after 2 years to customer marketing manager post. This helped Laura enter the marketing field after which she was promoted again to help manage marketing plan of special K.
Recognition, responsibility, social status, and growth are all motivating factors that were applied by the manager in this scenario. Laura is satisfied and motivated and the manager here helped her to reach her goals and grow over the years.
Herzberg's motivational factors and Maslow's esteem and self-actualization needs are similar and can be met by organizations in the following ways:
• Management should give employees challenging and complex tasks as this tends to motivate workers.
• Recognition and appreciation: Employees are motivated when they are recognised and appreciated for their work. When employees are recognised, they tend to put in more effort at their workplace and work harder.
•Decision making: Employers should allow their employees participate in the decision making process of the organization.
• Growth opportunities: Employees must be provided with opportunities that allow them grow. This can help in taking their career up and be more productive for the company.
Hertzberg motivational factors theory and Maslow self esteem and self actualisation needs are identical because both needs are satisfied by growth, power, recognition, appreciation, responsibility, and social status.
On January 1, 2012, Piper Co., purchased a machine (its only depreciable asset) for $600,000. The machine has a five-year life, and no salvage value. Sum-of-the-years'-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2015, for financial statement reporting, Piper decided to change to the straight-line method for depreciation of the machine. Assume that Piper can justify the change.
Piper's income before depreciation, before income taxes, and before the cumulative effect of the accounting change (if any), for the year ended December 31, 2015, is $500,000. The income tax rate for 2015, as well as for the years 2012-2014, is 30%.
Required:
A) What amount should Piper report as net income for the year ended December 31, 2015?
O $120,000
O $182,000
O $308,000
O $350,000
Answer:
Piper should report $308,000 as net income for the year . Option C
Explanation:
Accumulated Depreciation till 2014 = [$600,000×(5+4+3)] ÷ 15 = $ 480,000
Book Value at beginning 2015 = $600,000 - $480,000 = $120,000
Depreciation Expense in 2015 = $120,000 ÷ 2 = $60,000
Net Income before depreciation & taxes = $ 500,000
Depreciation = $ 60,000
Electronic Benefits Transfer = Net Income before depreciation & taxes - Depreciation
= $ 500,000 - $ 60,000
=$ 440000
Tax Expenses = $440,000 × 30% = $132,000
Net Income =$ 308,000
Crane is a book publisher that reissues old titles. The company offers these books with either a standard machine-glued hard cover or a deluxe, hand-embossed, hand-stitched, leather cover. Crane currently allocates overhead to the books based on direct labor hours. A recent activity analysis conducted by the controller revealed the following information.
Standard Edition Deluxe Edition
Units produced 404000 13000
Direct labor hours 444400 35100
Printing press hours 68380 2210
Sales orders 12120 14300
Calculate the following for each product:
Standard edition Deluxe edition
Direct labor hours per unit __________DLH / unit _______DLH / unit
Printing press hours per unit _________PPH / unit _______PPH / unit
Sales orders per unit __________order / unit _______order / unit
Answer:
Instructions are below.
Explanation:
Giving the following information:
Standard Edition - Deluxe Edition
Units produced= 404,000 - 13,000
Direct labor hours= 444,400 - 35,100
Printing press hours= 68,380 - 2,210
Sales orders= 12,120 - 14,300
Direct labor hours per unit= total direct labor hours/ total units
Standard= 444,400/404,000= 1.1 hours per unit
Deluxe= 35,100/13,000= 2.7 hours per unit
Printing press hours per unit:
Standard= 68,380/404,000= 0.1693 hours per unit
Deluxe= 2,210/13,000= 0.17 hours per unit
Sales orders per unit:
Standard= 12,120/404,000= 0.03 hours per unit
Deluxe= 14,300/13,000= 1.1 hours per unit
Pacific Bank provides loans to businesses in the community through its Commercial Lending Department. Small loans (less than $100,000) may be approved by an individual loan officer, while larger loans (greater than $100,000) must be approved by a board of loan officers. Once a loan is approved, the funds are made available to the loan applicant under agreed-upon terms. Pacific Bank has instituted a policy whereby its president has the individual authority to approve loans up to $5,000,000. The president believes that this policy will allow flexibility to approve loans to valued clients much quicker than under the previous policy. As an intern auditor of Pacific Bank, how would you reposnd to this change in policy?
Answer:
Explanation:
As auditor, I may not agree with the policy that is been changed. It
is believed that, by default there is a normal loan risk that is been associated with the business of Pacific Bank. A way to help reduce this risk is to carefully asses the loan applications. Loans that are large has greater risk in the event of default compared to smaller loans. Therefore, it is reasonable to have more than several individual involved in decision making give a loan that is very big. In addition, loans should be given base on those that meet the requirements, it should not be on the base on favoritism or people with relationship with bank president. Giving the bank president the power to give huge loans may lead to him granting loans to people who he is familiar with, without the required due process been followed. This may cause the bank to be credit exposed risks that are poor.
Ben, an accountant for AirLift, Inc., a ride service, learns of undisclosed company plans to distribute a new app. Ben buys 10,000 shares of AirLift stock. He reveals the company plans to Carly, who buys 5,000 shares. Carly tells Don, who tells Erwin, and each buys 1,000 shares. They know that Carly got her information from Ben. When AirLift publicly announces its new app, Ben, Carly, Don, and Erwin sell their stock for a profit. If Ben is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of AirLift stock was:
A. a forward-looking forecast.B. not material.C. not yet public.D. not yet true.
Answer:
C. not yet public.
Explanation:
Securities Exchange Act: The term "Securities Exchange Act" is also denoted as SEA and was created during 1934, it was developed to govern or carry out "securities transactions" based on the less manipulation or fraud, secondary market, ensures huge financial accuracy and transparency and after issues.
Basically, it refers to the law that is responsible for governing the "Secondary trading securities" in the USA. It also prevents unfair and inequitable practices on specific market and exchange.
In the question above, the correct option is C.
Answer:
C. not yet public.
Explanation:
Securities Exchange Act 1934 is a legal framework governing secondary trading of securities in USA.
Ben is liable under Securities Exchange Act of 1934, as he has leaked the 'not yet public' information for personal motives. His act of disclosing about app launch & buying shares then (for reselling further after launch) : is a case of Insider Trading. Insider Trading refers to deliberate disclosure of company's confidential information, for selfish motives accomplishment.
n 50 Which of the following statements is true of test marketing? A. The amount of test marketing needed remains constant for each new product. B. When the costs of developing and introducing the product are low, the company will have to do significant test marketing. C. Test marketing is seldom done on products that are risky. D. Test marketing is seldom done when management is not sure of the product or its marketing program. E. Test marketing costs can be high, and it takes time that may allow competitors to gain advantages.
Answer:
Option E
Explanation:
In simple words, Test marketing relates to the exercise performed in a research environment (the study market) that consists of live retailers as well as real-life purchasing scenarios, without the consumers realizing that they are taking part in an assessment workout. To assess customer response, it simulates the expected market-mix.
Thus, from the above we can conclude that the correct option is E.
The adjusted trial balance for Tybalt Construction as of December 31, 2017, follows.
TYBALT CONSTRUCTION
Adjusted Trial Balance
December 31, 2017
No. Account Title Debit Credit
101 Cash $ 6,500
104 Short-term investments 22,000
126 Supplies 8,000
128 Prepaid insurance 8,300
167 Equipment 50,000
168 Accumulated depreciation—Equipment $ 25,000
173 Building 162,000
174 Accumulated depreciation—Building 54,000
183 Land 68,020
201 Accounts payable 16,500
203 Interest payable 3,000
208 Rent payable 3,200
210 Wages payable 2,400
213 Property taxes payable 1,200
233 Unearned professional fees 7,400
251 Long-term notes payable 68,000
301 O. Tybalt, Capital 132,800
302 O. Tybalt, Withdrawals 10,000
401 Professional fees earned 100,000
406 Rent earned 15,500
407 Dividends earned 2,000
409 Interest ear 2,400
606 Depreciation expense—Building 11,880
612 Depreciation expense—Equipment 7,500
623 Wages expense 28,500
633 Interest expense 4,800
637 Insurance expense 7,300
640 Rent expense 11,600
652 Supplies expense 7,100
682 Postage expense 3,500
683 Property taxes expense 3,100
684 Repairs expense 7,800
688 Telephone expense 2,100
690 Utilities expense 3,400
Totals $ 433,400 $ 433,400
O. Tybalt invested $6,500 cash in the business during year 2017 (the December 31, 2016, credit balance of the O. Tybalt, Capital account was $126,300). Tybalt Construction is required to make a $8,500 payment on its long-term notes payable during 2018.
Required:
1a. Prepare the income statement for the calendar-year 2017.
1b. Prepare the statement of owner's equity for the calendar-year 2017.
1c. Prepare the classified balance sheet at December 31, 2017.
2. Prepare the necessary closing entries at December 31, 2017.
Answer and Explanation:
According to the scenario, The presentation are presented below:
1a. Income Statement
Particular Amount ($)
Professionals fees earned 100,000
Add - Rent earned 15,500
Add - Dividends Earned 2,000
Add - Interest earned 2,400
Total Revenue 119,900
Less - Building depreciation expenses 11,880
Less - Equipment depreciation expenses 7,500
Less - Wages expenses 28,500
Less - Interest expenses 4,800
Less - Insurance expenses 7,300
Less - Rent expenses 11,600
Less - Repair expenses 7,800
Less - Property taxes expenses 3,100
Less - supplies expenses 7,100
Less - Telephone expenses 2,100
Less - Postage expenses 3,500
Less - Utilities expenses 3,400
Net income 21,320
1 b Statement of Owner’s Equity
Particular Amount ($)
Tybalt capital on 31 Dec. 2016 126,300
Add-Additional invested cash 6,500
Add - Net income 21,320
Less - withdrawals 10,000
Tybalt capital on 31 Dec. 2017 144,120
1 c Balance Sheet
Assets Amount ($) Liabilities Amount ($)
Cash 6,500 Accounts payable 16,500
Short term
investment 22,000 Interest payable 3,000
supplies 8,000 Rent payable 3,200
Prepaid insurance 8,300 Wages payable 2,400
Equipment
($50,000-$25,000 25,000 Property taxes payable 1,200
Building
($162,000-$54,000) 108,000 Unearned professional fees 7,400
Land 68,020 Long term notes payable 68,000
Tybolt capital on 31 Dec. 2017 144,120
Total 245,820 Total 245,820
2.
Journal Entry
31, Dec. Rent earned A/c Dr. $100,000
Professional fees earned A/c Dr. $15,500
Dividends earned A/c Dr. $2,000
Interest earned A/c Dr. $2,400
To Income summary A/c $119,900
(Being the closing of revenue account is recorded)
31 Dec. Income summary A/c Dr. $98,580
To Building Depreciation expenses A/c $11,880
To Equipment Depreciation expenses A/c $7,500
To Wages expenses A/c $28,500
To Interest expenses A/c $4,800
To Insurance expenses A/c $7,300
To Rent expenses A/c $11,600
To Supplies expenses A/c $7,100
To Postage expenses A/c $3,500
To Property taxes expenses A/c $3,100
To Repairs expenses A/c $7,800
To Telephone expenses A/c $2,100
To Utilities expenses A/c $3,400
(Being the closing of expense account is recorded)
31 Dec. Income Summary A/c Dr. $21,320
To Tybalt capital A/c $21,320
(Being the closing of income summary is recorded)
31 Dec. Tybalt capital A/c Dr. $10,000
To Tybalt withdrawals A/c $10,000
(Being the closing of withdrawals account is recorded)
Seadrill Engineering sold software to oil-drilling firms. In addition to providing the software, the company also provides consulting services and support for 5 years to ensure smooth operation of the software. The total transaction price is $350,000. Based on standalone values, the company estimates the consulting services and support have a value of $150,000 and the software license has a value of $250,000. Seadrill generally records software sales using Sales Revenue account and consulting service using Service Revenue account. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes:A) a credit to sales revenue for $250,000 and a credit to unearned service revenue of $100,000.B) a credit to service revenue of $100,000.C) a credit to unearned service revenue of $100,000.D) a credit to sales revenue of $350,000.
Answer:
a credit to sales revenue for $250,000 and a credit to unearned service revenue of $150,000
Explanation:
The Journal entry is shown below:-
Cash Dr, $400,000
To Sales revenue $250,000
To unearned service revenue $150,000
(Being cash receipts is recorded)
The unearned revenue from service is the revenue in which the customer has paid the money, and the company does not provide the services. Acceptance of the money for the warranty which has been extended. The seller expects to continue to provide the services.The income will not be gained from this, because the company will not be reported until the company refuses to deliver the services in the future.
For recording this we debited the cash as it increased the assets and credited the sales revenue and unearned service revenue as it increased the revenue and liability
This is the answer but the same is not provided in the given options
Mr Sinclair has diabetes and heart trouble and is generally satisfied with the care he has received under original Medicare, but he would like to know more about Medicare advantage special needs plans
.
Answer:
SNPs have special programs for enrollees with chronic conditions, like Mr. Sinclair, and they provide prescription drug coverage that could be very helpful as well.
Explanation:
Chronic conditions and the fact that the customer has more than 1 chronic condition may qualify the beneficiary for a Special Needs Plan which may provide better health coverage for these medical conditions. (There are populations of beneficiaries who would benefit from these plans.).
SNPs have special programs for enrollees with chronic conditions, like Mr. Sinclair, and they provide prescription drug coverage that could be very helpful as well.
A Special Needs Plan, which may offer superior health coverage for various medical issues, may be available to beneficiaries with chronic diseases or multiple chronic ailments. These strategies might be advantageous to certain beneficiary demographics.
Individuals with chronic or debilitating diseases can enroll in Medicare Special Needs Plans (SNPs), a kind of Medicare Advantage Plan. These programs mandate that Medicare SNP-eligible individuals get treatment and services from medical professionals in such networks. SNP networks come in a variety of sizes and target demographics.
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Bachrodt Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Processing $ 21,600
Supervising $ 3,700
Other $ 10,700
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below
MHs (Processing) Batches (Supervising)
Product Y7 3,700 400
Product V0 6,300 600
Total 10,000 1,000
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Product Y7 Product V0
Sales (total) $ 102,200 $ 78,900
Direct materials (total) $ 40,800 $ 39,100
Direct labor (total) $ 47,200 $ 22,300
What is the product margin for Product Y7 under activity-based costing?
a. -$3,800
b. $4,728
c. $14,200
d. $6,208
Answer:
Product margin= $4,728
Explanation:
Giving the following information:
Processing $ 21,600
Supervising $ 3,700
MHs (Processing) Batches (Supervising)
Product Y7 3,700 400
Product V0 6,300 600
Total 10,000 1,000
First, we need to calculate the estimated overhead rate for each activity:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Pocessing= 21,600/10,000= $2.16 per machine hour
Supervising= 3,700/1,000= $3.7 per batch
Now, we can allocate overhead to product Y7:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Pocessing= 2.16*3,700= $7,992
Supervising=3.7*400= $1,480
Total= $9,472
Finally, we can determine the product margin:
Product Y7:
Sales (total)= 102,200
Direct materials= (40,800)
Direct labor= (47,200)
Allocated overhead= (9,472)
Product margin= $4,728
"Product margin= $4,728 So, The Correct Option is 'B' To understand more information check below".
Calculation of Product Margin
Giving the following information as per the question:
Processing is $21,600Supervising is $3,700Then MHs (Processing) Batches (Supervising)
After that, The Product Y7 3,700 400Product V0 6,300 600Hence, The Total is = 10,000 1,000Now, we need to calculate the estimated overhead rate for each activity:
Then Estimated manufacturing overhead rate is = the total estimated overhead costs for the period/ total amount of allocation base
Processing is = 21,600/10,000= $2.16 per machine hourAfter that, Supervising is = 3,700/1,000= $3.7 per batchThen, we can allocate overhead to product Y7:
After that, we are applying a formula Allocated MOH is = Estimated manufacturing overhead rate* Actual amount of allocation base
Then, Processing= 2.16*3,700= $7,992After that, Supervising=3.7*400= $1,480Then, The Total is = $9,472Now, we can determine the product margin:
Product Y7:
Sales (total)= 102,200Direct materials= (40,800)Direct labor= (47,200)Allocated overhead= (9,472)Therefore, The Product margin is = $4,728 So The correct optin is 'B'.
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The following are Sheridan Corp.'s comparative balance sheet accounts at December 31, 2017, and 2016, with a column showing the increase (decrease) from 2016 to 2017.
COMPARATIVE BALANCE SHEETS
2017 2016 Increase (Decrease)
Cash $806,900 $700,900 $106,000
Accounts receivable 1,131,700 1,159,400 (27,700 )
Inventory 1,842,900 1,730,100 112,800
Property, plant, and equipment 3,300,200 2,968,200 332,000
Accumulated depreciation (1,173,600) (1,037,600) (136,000)
Investment in Myers Co. 307,300 277,000 30,300
Loan receivable 247,500 ? 247,500
Total assets $6,462,900 $5,798,000 $664,900
Accounts payable $1,020,900 $950,800 $70,100
Income taxes payable 30,000 50,200 (20,200 )
Dividends payable 80,500 100,500 (20,000)
Lease liabililty 392,000 ? 392,000
Common stock, $1 par 500,000 500,000 ?
Paid-in capital in excess of par-common stock 1,489,000 1,489,000 ?
Retained earnings 2,950,500 2,707,500 243,000
Total liabilities and stockholders' equity $6,462,900 $5,798,000 $664,900
Additional information:
1. On December 31, 2016, Sheridan acquired 25% of Myers Co.'s common stock for $277,000. On that date, the carrying value of Myers's assets and liabilities, which approximated their fair values, was $1,108,000. Myers reported income of $121,200 for the year ended December 31, 2017. No dividend was paid on Myers's common stock during the year.
2. During 2017, Sheridan loaned $291,600 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $44,100, plus interest at 10%, on December 31, 2017.
3. On January 2, 2017, Sheridan sold equipment costing $60,000, with a carrying amount of $38,100, for $40,400 cash.
4. On December 31, 2017, Sheridan entered into a capital lease for an office building. The present value of the annual rental payments is $392,000, which equals the fair value of the building. Sheridan made the first rental payment of $59,900 when due on January 2, 2018.
5. Net income for 2017 was $323,500.
6. Sheridan declared and paid the following cash dividends for 2017 and 2016.
2017 2016
Declared
December 15, 2017
December 15, 2016
Paid February 28, 2018
February 28, 2017
Amount $80,500 $100,500
Required:
1. Prepare a statement of cash flows for Sheridan Corp. for the year ended December 31, 2017, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Answer:
Sheridan Corp
Statement of Cash Flows for the year ended December 31, 2017, using the indirect method:
Operating Activities:
Net Income $323,500
Adjustments for non-cash flow:
Depreciation Charge 136,000
Accounts Receivable 27,700
Inventory -112,800
Accounts Payable 70,100
Income Taxes Payable -20,200
Net Cash from operating activities 424,300 424,300
Financing Activities:
Dividends Payable -20,000 -20,000
Investing Activities:
Property, Plant, & Equipment -$332,000
Equipment 40,400
Loan to TLC Co. -291,600
Loan Repayment 44,100
Interest on Loan 14,580
Net Cash from investing activities 139,480 139,480
Net Cash Flow $444,700
Explanation:
a) A Statement of Cash Flows is a financial statement prepared for a period, and it shows the inflows and outflows of cash based on three classifications: Operating activities, financing activities, and investing activities. It shows how well a company generates cash and has been able to manage its cash resources in its operating, financing, and investing activities.
b) The indirect method is one of the two accounting treatments used to prepare a cash flow statement. The indirect method uses increases and decreases in balance sheet line items to modify the operating section of the cash flow statement from the accrual method to cash method of accounting.
c) Investment in Myers which increased by $30,300 does not involve a cash flow since Myers did not pay any cash dividend. The increase was the result of accounting for the 25% investment in Myers using the equity method, which results for the recognition of Myers profit for the year.
d) The capital lease did not involve any cash flow in 2017, so the rental payment is not taken into account in the current Statement of cash flows.
Purchases and Cash Payments Journals Happy Tails Inc. has a September 1, 20Y4, accounts payable balance of $620, which consists of $320 due Labradore Inc. and $300 due Meow Mart Inc. Transactions related to purchases and cash payments completed by Happy Tails Inc. during the month of September 20Y4 are as follows: Sept. 4. Purchased pet supplies from Best Friend Supplies Inc. on account, $295. Sept. 6. Issued Check No. 345 to Labradore Inc. in payment of account, $320. Sept. 13. Purchased pet supplies from Poodle Pals Inc. on account, $790. Sept. 18. Issued Check No. 346 to Meow Mart Inc. in payment of account, $300. Sept. 19. Purchased office equipment from Office Helper Inc. on account, $2,510. Sept. 23. Issued Check No. 347 to Best Friend Supplies Inc. in payment of account from purchase made on September 4. Sept. 27. Purchased pet supplies from Meow Mart Inc. on account, $450. Sept. 30. Issued Check No. 348 to Jennings Inc. for cleaning expenses, $80. Happy Tails Inc. uses the following accounts: Cash 11 Pet Supplies 14 Office Equipment 18 Accounts Payable 21 Cleaning Expense 54 a. Prepare a purchases journal and a cash payments journal to record these transactions in chronological order. If an amount box does not require an entry, leave it blank. If no entry is required in "Other Accounts Dr." then select "No entry required".
Answer:
Explanation:
(21) (14/18) (11)
Payable Purchase Cash/ Bank
Date Particulars Dr Cr Dr Cr Dr Cr
Sept.1 Labradore 320
Sept.1 Meow 300
Sept 4 Best friend 295 295
Sept 6 Labradore 320 320
Sept 13 poodle 790 790
Sept 18 Meow 300 300
Sept 19 Helper 2510 2510
Sept 23 Best friend 295 295
Sept 27 Meow 450 450
Total 915 4665 4045 915
In recording purchase transaction ,purchase account is debited , payable account credited and the bank or cash account credited with corresponding payment
The roles of money Larry just graduated from college and is now in the market for a new car. He has saved up $4,000 for a down payment. He's deciding between a Super and a Duper. The Super is priced at $23,599, and the Duper is priced at $18,999. After agonizing over the decision, he decides to buy the Duper. He writes the dealership a check for $4,000 and takes out a loan for the remainder of the purchase price. Identify what role money plays in each of the following parts of the story. Hint: Select each role only once. Role of Money: Medium of Exchange, Unit of Account, Store of Value Larry writes a check for $4,000. Larry can easily determine that the price of the Super is more than the price of the Duper. Larry has saved $4,000 in his checking account.
Answer and Explanation:=
Medium of exchange - It is used to enable the sale and purchase between the parties. It represents the standard of value that is necessary to accept all the parties.
Larry writes a check for $4,000. It is a medium of exchange because it shows trade of goods between Larry and the car seller.
Unit of account - It gives permission to do the differentiation between two things.
Larry can easily differentiate the price of the super is more than the price of duper. It is unit of account because he knows the value of the super and duper.
Store of value - It is the value that can be saved and exchanged for a long time period.
Larry has saved checking amount is $4000. It is store of value because it is saved amount.
Explain three types of production technology defined by James D. Thomson and discuss what kind of structure (Mechanic Vs. Organic) best suits each of them?
Answer:
The three types of production technology defined by James D. Thomson are;
1. Long-linked technology
2 Mediating technology and,
3. Intensive technology.
Explanation:
James D. Thomson proposed that different types of technology would determine the organizational strategy used by some organizations. A Mechanistic structure is an organizational structure that requires a high degree of formalized and centralized activity. An Organic organizational structure is very dynamic and programmed to easily adapt to change. Three of the technology types proposed by him include;
1. Long-linked Technology- These are jobs that require an organized sequence. Task A is completed before task B and then Task C. They require formalization and an average level of complexity. An example is mass production of goods. It is an organic structure because changes can easily occur and it would therefore require dynamism.
2.Mediating Technology- These are jobs that unite the two different aspects of an organization, namely, the input and output units. They require low complexity and high formalization. An example is in the banking industry where peoples input and output are simultaneously attended to. It is a mechanistic structure because it requires a very formal arrangement.
3. Intensive Technology- These are jobs that give specialized care to different types of problems. It can be found in the hospital setting. It requires high complexity and low formalization. It is a mechanistic structure because of the specialized care rendered and the high level of interdependence of the units involved .
Potatoes cost Janice $1.25 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. If she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30, how many pounds of potatoes will she purchase? What if she only had $2.00 to spend?
Janice will purchase with her original $5.00 of income.
Janice will purchase when her income is $2.00
Answer:
1 pound is the correct answer to the given question .
Explanation:
AS the Janice is priced at the cost of $1,50 for the 1 pound of potatoes also the cost of the $1,14 for the second pound of the potatoes .
It simply means that if the cost is $1.25 per pound for the Potatoes , it provides the market excess from the 1 pound of the potatoes but the average willing to spend the drop below the second pound cost of Potatoes .
So Janice will purchase with the original $5.00 of income. as well as the income is $2.00 for the [tex]1 \ pound[/tex]
Jim Arnold began a business called Arnold's Shoe Repair.
Required:
1. Complete the T accounts for Cash; Supplies; Jim Arnold, Capital; and Utilities Expense. Identify the following transactions by letter and place them on the proper side of the T accounts:
a. Invested cash in the business, $7,000.
b. Purchased supplies for cash, $800.
c. Paid utility bill, $1,500.
Answer:
T account are attached in PDF format with this question please find it.
Explanation:
Journal Entries
a. Invested cash in the business, $7,000.
Dr. Cash $7,000
Cr. Jim Arnold, Capital $7,000
b. Purchased supplies for cash, $800.
Dr. Supplies $800
Cr. Cash $800
c. Paid utility bill, $1,500.
Dr. Utilities $1,500
Cr. Cash $1,500
Placker Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $155,000, variable manufacturing overhead of $3.40 per machine-hour, and 50,000 machine-hours. Recently, Job A881 was completed with the following characteristics:
Total machine-hours 100
Direct materials $ 645
Direct labor cost $ 2,300
The total job cost for Job A881 is closest to: (Round your intermediate calculations to 2 decimal places.)
a. $1,295
b. $3,595
c. $2,950
d. $2,945
Answer:
Option B,$ 3,595.00 is correct
Explanation:
The sum of both fixed and variable manufacturing overhead gives the below amount:
total overhead=$155,000+($3.40*50,000)=$ 325,000.00
Plantwide predetermined overhead rate=total overhead/machine hours=$325,000.00/50,000.00=$6.50
The job cost=(100*$6.50)+$645+$2,300=$650+$645+$2,300=$ 3,595.00
The correct option is B $ 3,595.00
Option C shows that the total job cost is sum of direct labor cost plus the overhead which is wrong.
Option D showed that the total cost is the sum of direct labor cost plus the direct material which is also wrong
Western Company is preparing a cash budget for June. The company has $12,000 in cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash payments during June. Western Company has an agreement with its bank to maintain a minimum cash balance of $10,000. As of May 31, the company has no loans outstanding. To maintain the $10,000 required balance, during June the company must:
a. Borrow $4,500.
b. Borrow $2,500.
c. Borrow $10,000.
d. Repay $7,500.
e. Repay $2,500.
Answer:
b. Borrow $2,500
Explanation:
Preliminary balance = $12,000 + 30,000 - $34,500 = $7,500
Amount to borrow = Minimum cash balance - Preliminary balance = $10,000 - $75,000 = $2,500
Therefore, to maintain the $10,000 required balance, during June the company must $2,500.