Answer:
Explanation:
Prepare the journal entry to record the sale of merchandise on account, and the cost of goods sold.
Date Particulars Debit Credit
May 24 Accounts receivable – O T Cafe $18,450
Sales $18,450
(To record sale of merchandise on account)
May 24 Cost of merchandise sold $11,000
Merchandise inventory $11,000
(To record the cost of goods sold)
Table (1)
Sale on account increases accounts receivable and sales revenue account. Hence, an increase in accounts receivable (asset account) is debited with $18,450 and an increase in sales revenue (stockholders’ equity account) is credited with $18,450.
Cost of goods sold is $11,000. Thus the expense incurred must be recognized by increasing cost of goods sold account and the merchandise inventory which is sold out should be decreased to record the inventory which is sold out. Hence, an increase in Cost of goods sold (expense account) is debited with $11,000 and a decrease in Merchandise inventory (asset account) is credited with $11,000.
2.
Prepare the journal entry to record the collection of cash and write-off of uncollectible accounts, under direct write-off method.
Date Particulars Debit Credit
September 30 Cash $6,000
Allowance for doubtful accounts $12,450
Account receivable – O T Cafe $18,450
(To record cash collection and write-off of uncollectible account receivable )
Table (2)
To record the collection of cash on account, cash account must be increased and accounts receivable must be decreased by $6,000.
To record this write-off of uncollectible receivables of $12,450 ($18,450−$6,000)($18,450−$6,000) under allowance method, both allowance for doubtful accounts and accounts receivable must be decreased by $12,450
Marian, a top graduate from Loyola in Humanities, was hired by a major corporation into a management position. Marian finished the corporation's management training program top in her group, and is performing above the norm in her position. She is really enjoying her work.
As a black woman she feels isolated, as there are no other black women managers and few women in her area. One night at a company party she heard a conversation between two of her male co-workers and their supervisor. They were complaining to him about Marian's lack of qualifications and her unpleasant personality. They cursed affirmative action regulations for making the hiring of Marian necessary.
Genesis Scents has two divisions: the Cologne Division and the Bottle Division. The Bottle Division produces containers that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost is $4.00, the shipping cost is $0.30, and the external sales price is $5.00. No shipping costs are incurred on sales to the Cologne Division, and the Cologne Division can purchase similar containers in the external market for $4.60. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Cologne Division. Using the general rule, the transfer price from the Bottle Division to the Cologne Division would be:
Answer: $4
Explanation:
The Bottle division is said to be able to meet all excess demand outside as well as that of the Cologne Division.
When this is the case in a company, individual divisions are allowed to transfer to each other at a rate equal to their Variable Costs. This is the general rule.
The Variable Costs for the containers is $4 so that is the transfer price as well.
A refinery blends three petroleum components into three grades of gasoline –regular, premium, and diesel. The maximum quantities available of each component and the cost per barrel are as follows: Component Cost/Barrel Maximum Barrels Available/Day A 9 6,000 B 7 3,000 C 10 4,500 To ensure that each gasoline grade retains certain essential characteristics, the refinery has put limits on the percentages of the components in each blend. The limits, as well as the selling prices for the various grades, are as follows:
Grade Selling Price/Barrel Component Specifications
R (regular) 18 Not less than 30% of A
Not more than 30% of B
Not less than 30% of C
P (premium) 25 Not less than 60% of C
A (diesel) 15 Not more than 50% of B
less than 10% of A
The refinery wants to produce at least 5,000 barrels of each grade of gasoline. The management wishes to determine the optimal mix of the three components that will maximize profit.
a. Define the decision variables.
b. Build an objective function.
c. Build all the constraints.
Answer:
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Explanation:
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Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 22,200 units of product to finished goods inventory. Its 3,000 units of beginning work in process consisted of $19,800 of direct materials and $221,940 of conversion costs. It has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $496,800 of direct material costs and $2,165,940 of conversion costs were charged to production.
Prepare the company's process cost summary for May using the weighted-average method.
Answer:
Valuation of output
$
Completed units = 2,544,000.
Closing WIP = 240,480
Explanation:
Equivalent unit for conversion cost
Item units equivalent unit
Completed 22,200 100%× 22,200 22,200
Closing WIP 2,2400 80%× 2,400 1,920
Total equivalent unit 24,120
Cost per equivalent unit for conversion cost =
(221,940 + 2,165,940)/=24,120= $99
Equivalent unit for material cost
Equivalent unit for Material = 22,200 + 2,400 =24,600
Cost per equivalent unit for material cost
= 19800+496800/24,600= $21
Valuation of output $
Completed units = (21+99)× 21,200 = 2,544,000.
Closing WIP = 99× 1920 + (21 × 2,400) = 240,480
At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $840,000, and direct materials costs, $400,000. At year-end, the company’s records show that actual overhead costs for the year are $1,151,500. Actual direct materials cost had been assigned to jobs as follows.
Jobs completed and sold $390,000
Jobs in finished goods inventory 83,000
Jobs in work in process inventory 55,000
Total actual direct materials cost $528,000
Required:
a. Determine the predetermined overhead rate.
b. Enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.
c. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.
Answer:
a) Predetermined overhead rate is 210%
b. Overhead is under-applied by $42,700
c. Particulars Debit credit
cost of goods sold $42,700 $42,700
factory overhead
Explanation:
Beginning of the year
Overhead costs = $840,000
Direct materials costs = $400,000
End of the year actual overhead cost = $1,151,500
Jobs completed and sold = $390,000
Jobs in finished goods inventory = $83,000
Jobs in work in process inventory = $55,000
Total actual direct materials cost = $528,000
a. Calculating the predetermined overhead rate= (Overhead ÷direct labor) × 100
Predetermined overhead rate= ($840,000 ÷ $400,000) × 100
= 210%
b. Factory overhead
Actual overhead = $1,151,500
Applied overhead = $528000 × 210% = $1,108,800
Difference = actual overhead- applied overhead
= $1,151,500 - $1,108,800
= $42,700 Under-applied overhead
c. Adjusting entry to allocate the above under-applied overhead cost of goods sold
Particulars Debit credit
cost of goods sold $42,700 $42,700
factory overhead
What is a challenge to reporting to more than one manager in a matrix organization? What might be a benefit?What is a challenge to reporting to more than one manager in a matrix organization? What might be a benefit?
Answer:
Matrixed organisations can be more efficient than conventional hierarchical organisations in maximising resource use and delivering job development at a faster rate. They could also be slightly frustrating, noisy and more effective if performed incorrectly.
Potential drawbacks in answering to several executives:
Specific Management goals
Diverse modes of service
Varying political strategies
Related Space Access
Specific timescales of their intentions
Potential benefits of answering to several executives:
Connection to a broader network
Chances to switch to other areas of the company improved
Project development opportunities to develop organisational skills
Expanded capabilities for the company to see the larger picture
the two mean sets of accounting standards followed by business are Gaapand IFRS. breifly explain how the balance sheet is formatted under each set??
Answer:GAAP arranged balance sheet in their order of liquidity. From current asset to non current asset then to current liabilities to non current liabilities and finally to owners Equity. Under IFRS they start with non current asset, then to current asset, then to owners Equity and from owners Equity to non current asset and finally to current liabilities.
Explanation:
A balance sheet is a classified list of the debit and credit balances remaining on the books after the preparation of the trading profit and loss account. The purpose of a balance sheet is to present a true and fair view of the financial position of the business at a given date. Under the GAAP, balance sheet are arranged in their order of liquidity. In other words asset are arranged in the reverse order of their realisability or in their ease of conversion into cash. Under GAAP, current asset comes first followed by non current asset, then followed by current liabilities, then by non current liabilities, and lastly by owners Equity.
Under IFRS, the order accepted by them is that balance sheet should be arranged in reverse order to that of GAAP. They start with non current asset, followed by current asset, then followed by owners equity, then followed by non current liabilities and lastly by current liabilities.
1. For each of the following payment schemes, choose which is better at an interest rate of 5%
a. Receiving $7,000 right now, or $750 per year for 12 years, starting next year.
b. Receiving $10,000 in 10 years, or receiving $1,000 per year for 5 years, starting now.
2. For each of the following pairs of options, find the interest rate which would make you indifferent between them.
a. Receiving $1,000 now, or $1,402.55 in five years.
b. Receiving $166,666.67 now, or $15,000 per year in perpetuity starting next year.
Answer:
Explanation:
The pictures attached shows the solution, and its explanatory i hope it helps you. Thank you
For each of the following characteristics, indicate whether it describes a perfectly competitive firm, a monopolistically competitive firm, both, or neither. (Note: If the characteristic describes neither, leave the entire row unchecked.) Check all that apply.
Characteristic Perfectly Competitive Monopolistically Competitive
Sells a product identical to that of its competitors
Can earn economic profit in the short run
Produces above the minimum of average total cost in the long run
Charges a price that is the same as marginal cost
Produces welfare-maximizing level of output
Has marginal revenue less than price
Answer:
Monopolistically competitive Monopolistically competitive Perfectly competitive Monopolistically competitive Perfectly competitive Monopolistically competitiveExplanation:
Monopolistic competition is the representative of a company in which the multiple companies is providing the identical but not ideal replacements for the goods or the services. All such companies that have no capacity to decide the supply reductions or to raise the profits are comes under the Monopolistic competitive for example In the short to mid term obtain economic profit, Has lower marginal profit than cost etc.
Perfect competition is a standard with which the real-life family firms could be the measured, to the optimal form. Perfect competition is the opposite of monopolistic competition.In the Perfect competition there are several buyers and sellers, and costs represent market forces. Industries only gain sufficient income to keep in the business environment such as Brings in welfare-maximizing efficiency rates.
A mercury manometer (\rhorho= 13,600 kg/m^3) is connected to an air duct to measure the pressure inside. The difference in the manometer levels is 30 mm, and the atmospheric pressure is 100 kPa.
(a) Determine if the pressure in the duct is above or below the atmospheric pressure.
(b) Determine the absolute pressure in the duct.
Answer:
A) The pressure is below atm pressure
B) Pabs = 96 kPa
Explanation:
Pressure exerted by mercury = pgh
Where: p = density (13600 kg/m^3)
g = acceleration due to gravity 9.81 m/s^2
h = level difference within manometer = 30 mm = 30x10^-3 m
Pressure = 13600 x 9.81 x 30x10^-3
= 4002.43 Pa = 4.00243 kPa
This is below atmospheric pressure
Absolute pressure is calculated as:
Pabs = Pg + Patm
Pabs = -4 + 100 = 96 kPa
David is certified by his doctor as terminally ill with liver disease. His doctor certifies that he cannot reasonably be expected to live for more than a year. He sells his life insurance policy to Viatical Settlements, Inc., for $250,000. He has paid $20,000 so far for the policy.
How much of the $250,000 must David include in his taxtable income?
Answer:
0$
Explanation:
Life insurance proceeds are not included in gross income based on the premise that it would not be appropriate when the time of need to tax the proceeds from life insurance policy. For this reason, the major exclusion from gross income is been given for life insurance proceeds. To be excluded, the proceeds has to be paid to the beneficiary by reason of the death of the insured. Let's say the proceeds are taken over some years instead of in a lump sum, the insurance company will pay interest on the that proceeds that are not paid.
Answer:
Taxable income must not include $250,000
Explanation:
Since the life insurance payment is exempt from tax and is the reason why it is excluded from the computation of the gross income for those who are declared terminally ill persons. So $250,000 must not be included in the David's Taxable Income.
Heather cracked the screen of her old mobile phone a few months ago. She could still read the screen and conduct calls and read emails, but as the months have gone by the touch capability is becoming erratic. One weekend she decides it's time to go visit the local big box electronics store to be able to see the variety of new phones available. She hasn’t looked for a new phone for four or five years, so she wants to get a good feel for the options, sizes, and prices available now. When Heather is in the electronics store Karina, the salesperson, asks Heather if she can help her. Noticing that Heather is looking at the mobile phone aisle, what should Karina’s next step be?
a. Work at closing a sale with the consumer with the top end mobile phones
b. Build a relationship with the consumer and discover what the consumers' needs are
c. Provide the consumer with solutions and resolve the consumers needs
Answer:
Letter b is correct. Build a relationship with the consumer and discover what the consumers' needs are.
Explanation:
Analyzing the steps of a sales process, it can be said that Karina's next step in serving Heather would be to create a relationship with the client and discover her needs.
In order to achieve success in a sale, it is necessary for the salesperson to know the stages of the sales process well and to execute them in such a way that it is possible to understand the consumer's profile and find out what his needs and desires are, in order to offer the ideal product or service.
The creation of a relationship is important so that the seller can analyze specific characteristics of the consumer's profile, his wants and needs, it is important to be friendly, attentive and know how to argue, in order to make a good impression on the consumer and close the sale.
Four key markets and the circular flow of income
The circular-flow diagram is a visual model of the economy. The circular
flow of income is coordinated by four key markets.
1. The resource market coordinates businesses demanding resources and
households supplying them in exchange for income capital into balance with
the borrowing by businesses and governments. with sales (exports plus net
inflow of capital) to them government purchases, and net exports) with the
supply of domestically produced goods and.
2. The loanable funds market brings the net saving of households plus the net
inflow of foreign.
3. The foreign exchange market brings the purchases (imports) from foreigners into
balance.
4. The goods and services market coordinates the demand (consumption,
investment, services (real GDP). For each transaction in the following table,
identify which of the four key markets the transaction
Transaction Goods and Foreign Loanable Resource
Services Exchange Funds Market
Marke Market Market
A domestic car company purchases
a new welding machine from a local manufacturer.
The government spends more than it has in tax
revenue, running a budget deficit that is financed
with government bonds.
A local business borrows $100,000 from a bank.
A local business hires a consultant to retrain its employees.
Answer and Explanation:
As per the data given in the question,
1)
A domestic car company buys a new welding machine from a local manufacturer = Goods and service market
Goods and service market is that place where households purchase items and business person sell their products.This market includes stores, Internet, and other places where customer can exchange goods and services.
2)
Government pays more amount than it has it its tax revenue which indicates it's running budget deficit that is financed with government bonds = Foreign exchange market
Foreign exchange market is a platform where global decentralized trading of currencies takes place. This market defines foreign exchange rates for every currency.
3)
A local business takes $100,000 for temporary use form bank = Loanable fund market
loanable fund market determines the market interest rate. According to this, the interest rate is determined by demand and supply of loanable funds.
4)
A local business hires consultant to counsel its employee = Resource market
Resource market is a market in which the business person can go in the market to buy the resources in order to purchased the goods and services
Exercise 21-15 Direct materials and direct labor variances LO P2 The following information describes production activities of Mercer Manufacturing for the year.
Actual direct materials used 16,000 lbs. at $4.05 per lb.
Actual direct labor used 5,545 hours for a total of $105,355
Actual units produced 30,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound and 10 minutes of direct labor at $20 per hour.
Compute the direct materials price and quantity variances
Answer:
Instructions are below.
Explanation:
Giving the following information:
Actual direct materials used 16,000 lbs. at $4.05 per lb.
Actual units produced 30,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound.
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (4 - 4.05)*16,000
Direct material price variance= $800 unfavorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 30,000*0.5= 15,000
Direct material quantity variance= (15,000 - 16,000)*4
Direct material quantity variance= $4,000 unfavorable
Answer:
Direct materials price variance = $800 Unfavorable
Direct materials quantity variance = $4,000 Unfavorable
Explanation:
Direct materials price variance = Aq×Ap-Aq×Sp
= (16,000×$4.05) - (16,000×$4.00)
= $800 Unfavorable
Direct materials quantity variance = Aq×Sp - Sq×Sp
= (16,000×$4.00) - (30,000×0.50 pounds×$4.00 )
= $4,000 Unfavorable
Fredrick Paulson Tie Co. manufactures neckties and scarves. Two overhead application bases are used; some overhead is applied on the basis of raw material cost at a rate of 150% of material cost, and the balance of the overhead is applied at the rate of $7.25 per direct labor hour. Required: Calculate the cost per unit of a production run of 540 neckties that required raw materials costing $2,110 and 69 direct labor hours at a total cost of $865. (Round your answer to 2 decimal places.)
Answer:
Unitary cost= $12.30
Explanation:
Giving the following information:
Overhead rate:
Rate 1= 150% of material costs
Rate 2= $7.25 per direct labor hour.
Production:
540 neckties
raw materials= $2,110
Direct labor hours= 69 direct labor hours at a total cost of $865.
First, we need to calculate the total cost:
Total cost= 2,110 + 865 + (1.5*2,110 + 7.25*69)
Total cost= $6,640.25
Unitary cost= 6,640.25/540= $12.30
Consider the following premerger information about Firm X and Firm Y: Firm X Firm Y Total earnings $ 86,000 $ 17,500 Shares outstanding 43,000 18,000 Per-share values: Market $ 58 $ 14 Book $ 18 $ 9 Assume that Firm X acquires Firm Y by issuing long-term debt for all the shares outstanding at a merger premium of $7 per share, and that neither firm has any debt before the merger. List the assets of the combined firm assuming the purchase accounting method is used.
Answer:
Total assets X Y 1,152,000
Explanation:
Since both the firms do not have any liability -Book value of equity = Carrying value of assets
Goodwill = Net consideration - Market Value of Assets of Y
Assets from X 18 x 43000 774000
Assets From y 14 x 18000 252000
Goodwill (18000 x (14+7)) - 252000 = 126000
Total assets X Y 1152000
Which of the following statements does correctly explain the effect of additional debt on the weighted average cost of capital (WACC)? Debtholders’ prior and "fixed" claim decreases the risk of stockholders’ "residual" claim, so the cost of stock (rs) goes down. Additional debt decreases the pre-tax of cost of debt (rd) because the decresaed risk of bankruptcy. The net effect of additional debt on WACC is to increase WACC. The net effect of additional debt on WACC is uncertain.
Answer: The net effect of additional debt on WACC is uncertain.
Explanation:
Weighted Average Cost of Capital (WACC) refers to the rate of return that a company is paying it's capital providers on average be it debt holders or shareholders.
Adding additional debt to the mix effects the WACC in an uncertain way due to the different ways the WACC could react. For example, adding additional debt decreases the after-tax cost of debt because debt is tax deductible which means that more money can flow to shareholders so that reduces the cost of equity. At the same time however, Additional debt can increase the risk of bankruptcy meaning that the before tax cost of debt rises which also increase the WACC.
The effect can swing either way thereby making it uncertain.
What is the difference between a horizontal merger and a vertical merger? A horizontal merger is a merger A. between firms of different sizes, while a vertical merger is a merger between firms of the same size. B. that would increase efficiency, while a vertical merger is a merger that would decrease efficiency. C. between firms in the same industry, while a vertical merger is a merger between firms at different stages of the production of a good. D. between firms that have market power, while a vertical merger is a merger between firms that are price takers. E. between firms in different industries, while a vertical merger is a merger between firms in the same industry. Which type of merger is more likely to increase the market power of a newly merged firm? __________ mergers are more likely to increase market power.
Answer:
A) A horizontal merger is a merger between firms in the same industry while a vertical merger is a merger between firms at different stages of production of a good.
B) Horizontal mergers are more likely to increase the market power of the newly merged firm.
Explanation:
A) A horizontal merger is a type of merger which takes place between businesses that sell the same type of product. It can also be described as the coming together of two or more companies that manufacture similar products, this is done to reduce the amount of competition in the market, share different types of skills that can boost the amount of profit incurred, increase the rate of expansion.
A vertical merger is a merger that exists between two of more organisations that manufacture products which are not alike in any way. The main objective of this merger is to lower the cost of production.
B) Horizontal mergers have the tendency to increase the market power by causing a decline in the amount of companies that are competing for the same product in the market.
A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 76 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally with a standard deviation of 13 pounds per day). After ordering (fixed cost = $19 per order), beans are always delivered from Hawaii in exactly 4 days. Per-pound annual holding costs for the beans are $2. Refer to the standard normal tableLOADING... for z-values.
Answer:
Explanation:
Base on the scenario been described in the question, we use the following method to solve the question
d = 75 lbs/day 200 days per year
D= 15,000 lb/year H= $3/lb/year S= $16/order
Scenario: Your best friend works for an In-Home Health Provider Company (IHHPC) in Palm Beach County, Florida. Your friend comes to you and explains that the In-Home Health Provider Co. wants to expand the next year to Broward County and Dade County. Your friend explains the company is dealing with a cash flow problem and if it is not figured out over the next six months the IHHPC will not meet the asset requirement for the expansion loan. IHHPC Revenue:
80% private pay patients.
10% Health insurance.
10% Long Term Care Insurance Policy.
Process at IHHPC: Your friend explains this is how the IHHPC works. A patient would call in and request a nurse for eight hours, seven days a week, starting the next day. The company would send the nurse the next day, then bill the patient on a weekly cycle. The IHHPC would mail a statement to the patient at the end of the first week of service. By the time the patient would get around to writing a check, and mailing it back in to the IHHPC, sometimes the company would not receive payment for six to eight weeks. The company would be paying the nurse weekly although not receiving payment for services yet.
What would you advise him or her and explain why?
Answer: Please refer to Explanation
Explanation:
Advise I would give.
1. The process for the collection of cash should be changed to bring in revenue faster. This can be done in a variety of ways,.
- By including in the terms of the contract that the service has to be paid for within a certain period such as a maximum of 4 weeks and then follow up each week on the customer so that they remember that they have a due bill.
- Giving payment based discounts such as a 5% discount if the service is paid for within a fortnight.
- Telling the customer to pay first, if not the full amount, at least a down payment with the total being settled at a later date.
These are but just some ways of getting the money faster but the bottomline is that payment needs to be received faster because the nurses are paid on a weekly basis.
2. Focus more on Patients with Insurance.
The company has a very low clientele base that use insurance and they should aim to increase that figure. This is because Insurance pays out timely and IHHPC will be sure that their payment will come because an Insurance company is bound by certain rules and regulations. For security of payments therefore, they should increase their insurance based clientele.
Given the following information for Watson Power Co., find the WACC. Assume the companyâs tax rate is 21 percent.
Debt: 15,000 bonds with a 5.8 percent coupon outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments.
Common stock: 575,000 shares outstanding, selling for $64 per share; the beta is 1.09.
Preferred stock: 35,000 shares of 2.8 percent preferred stock outstanding, currently selling for $65 per share.
Market: 7 percent market risk premium and 3.2 percent risk-free rate.
Required:
What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16)
Answer:
8.60%
Explanation:
For computing the WACC first we need to find the following items
Debt:
Value of Debt is
= Number of bonds × Par value × Given percentage
= 15,000 × $1,000 × 108%
= $16,200,000
Now
Par Value = $1,000
So,
Current Price is
= 108% × $1,000
= $1,080
Given that
Annual Coupon Rate = 5.8%
So, Semiannual Coupon Rate = 2.90%
Now its Semiannual Coupon amount is = 2.90% × $1,000 = $29
Time period = 25 years
Semiannual time period = 50 years
Let we assume the semiannual yield to maturity be x%
Current Price = Coupon amount × PVIFA (x%, time period) + Par value × PVIF(x%, time period)
$1,080 = $29 * PVIFA(x%, 50) + $1,000 × PVIF(x%, 50)
Using financial calculator:
N = 50
PV = -$1,080
PMT = 29
FV = $1,000
We got the X i.e interest rate is 2.612%
Semiannual YTM = 2.612%
Annual YTM = 2 × 2.612% = 5.224%
Now this is a before tax cost of debt
So, after cost of debts is
= Before tax cost of debt × (1 - tax rate)
= 5.224% × (1 - 0.21)
= 4.127%
For Common Stock:
As we know that
Expected Rate of Return = Risk Free Rate + Beta × Market Risk Premium
= 0.032 + 1.09 × 0.07
= 0.032 + 0.0763
= 0.1083 or 10.83%
Now
Value of Equity is
= Number of outstanding shares × selling price per share
= 575,000 × $64
= $36,800,000
For Preferred Stock:
Cost of Preferred Stock = Expected Dividend ÷ Current Price
where,
Expected Dividend = $100 × 2.8% = $2.80
So,
Cost of Preferred Stock = 2.80 ÷ $65
= 4.308%
Now
Value of Preferred Stock = 35,000 × $65
= $2,275,000
So,
Value of Firm = Debt value + Common Stock value + Preferred Stock value
= $16,200,000 + $36,800,000 + $2,275,000
= $55,275,000
Weight of Debt is
= Debt value ÷ Total value of firm
= $16,200,000 ÷ $55,275,000
= 0.2930
Weight of Common Stock
= Common stock value ÷ Total firms value
= $36,800,000 ÷ $55,275,000
= 0.6658
Weight of Preferred Stock
= Preferred stock value ÷ Total firms value
= $2,275,000 ÷ $55,275,000
= 0.0412
Now
WACC = (Weight of Debt × After-tax Cost of Debt) + (Weight of Common Stock × Cost of Common Stock)+ (Weight of Preferred Stock × Cost of Preferred Stock )
= (0.2930 × 0.04127) + (0.6658 × 0.1083) + (0.0412 × 0.04308)
= 1.209211 + 7.210614 + 0.17749
= 8.60%
The following direct materials and direct labor data pertain to the operations of Laurel Company for the month of August.
Costs:
Actual labor rate $12 per hour
Actual materials price $190 per ton
Standard labor rate $11.50 per hour
Standard materials price $193 per ton
Quantities:
Actual hours incurred and used 4,100 hours
Actual quantity of materials purchased and used 1,500 tons
Standard hours used 4,140 hours
Standard quantity of materials used 1,490 tons
Required:
(a) Compute the total, price, and quantity variances for materials and labor.
Answer:
Total Materials Variance = $2,570 Favorable
Materials Price Variance = $ 4,500 Favorable
Materials Quantity Variance = $ 1,930 Unfavorable
Total Labor Variance = $ 1,590 Unfavorable
Labor Price Variance = $ 2,050 Unfavorable
Labor Quantity Variance = $ 460 Favorable
Explanation:
Find the given attachments
Using the following information, compute the direct materials used. Raw materials inventory, January 1 $ 20000 Raw materials inventory, December 31 40000 Work in process, January 1 18000 Work in process, December 31 12000 Finished goods, January 1 40000 Finished goods, December 31 32000 Raw materials purchases 1800000 Direct labor 760000 Factory utilities 150000 Indirect labor 50000 Factory depreciation 400000 Operating expenses 420000
Answer:
$1,320,000
Explanation:
According to the scenario, computation of the given data are as follow:-
Purchase of raw material = $1,800,000
Opening stock of raw material = $20,000
Closing stock of raw material = -$3,140,000
Direct Material Used = Purchase of Raw Material + Opening Stock of Raw Material - Closing Stock of Raw Material
= $1,800,000 + $20,000 - $3,140,000
= $1,320,000
SnowDream operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 14 % return on investment on the company's $ 183,750,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. SnowDream projects fixed costs to be $ 33,000,000 for the ski season. The resort serves about 725,000 skiers and snowboarders each season. Variable costs are about $ 12 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices.. Assume that SnowDream's reputation has diminished and other resorts in the vicinity are charging only $ 62 per lift ticket. SnowDream has become a price-taker and won't be able to charge more than its competitors. At the market price, SnowDream's managers believe they will still serve 752,000 skiers and snowboarders each season.
A. If SnowDream can't reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets.
B. Will investors be happy with the profit level? Show your analysis.
C. Calculate SnowDream's projected income and excess profit or shortfall.
Answer:
company's assets = $183,750,000
expected return on investment = 14%
fixed costs = $33,000,000
number of customers = 725,000
variable costs = $12 per customer x 725,000 = $8,700,000
price per ticket = $62
total expected revenue = $62 x 725,000 = $44,950,000
A. If SnowDream can't reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets.
expected profit = total revenue - total variable costs - total fixed costs = $44,950,000 - $8,700,000 - $33,000,000 = $3,250,000
B. Will investors be happy with the profit level? Show your analysis.
expected return on investment = $3,250,000 / $183,750,000 = 1.77%, which means that investors will not be happy with the profit level.
C. Calculate SnowDream's projected income and excess profit or shortfall.
SnowDreamProjected Income Statement
Total revenues $44,950,000
- Variable costs ($8,700,000)
Gross profit $36,250,000
- Operating expenses ($33,000,000)
Net income $3,250,000
Martinez Corp. provides security services. Selected transactions for Martinez Corp. are presented below.
Oct. 1 Issued common stock in exchange for $59,400 cash from investors.
2 Hired part-time security consultant. Salary will be $1,800 per month. First day of work will be October 15.
4 Paid 1 month of rent for building for $1,800.
7 Purchased equipment for $16,200, paying $3,600 cash and the balance on account.
8 Paid $1,200 for advertising.
10 Received bill for equipment repair cost of $370.
12 Provided security services for event for $2,900 on account.
16 Purchased supplies for $370 on account.
21 Paid balance due from October 7 purchase of equipment.
24 Received and paid utility bill for $133.
27 Received payment from customer for October 12 services performed.
31 Paid employee salaries and wages of $4,600.
Required:
A) Journalize the transactions.
Answer and Explanation:
The Journal entry is shown below:-
On Oct 1
Cash Dr, $59,400
To Common stock $59,400
(Being the issuance of the common stock is recorded)
On Oct 2
No Journal entry is required
On Oct 4
Rent expenses Dr, $1,800
To Cash $1,800
(Being the rent expense is recorded
On Oct 7
Equipment Dr, $16,200
To Cash $3,600
To Accounts payable $12,600
(Being equipment is recorded)
On Oct 8
Advertisement Dr, $1,200
To Cash $1,200
(Being cash paid is recorded)
On Oct 10
Repair expenses Dr, $370
To Accounts payable $370
(Being repair expenses is recorded)
On Oct 12
Accounts receivable Dr, $2,900
To service revenue $2,900
(Being service provided is recorded)
On Oct 16
Supplies Dr, 4370
To Accounts payable $370
(Being supplies purchased on account is recorded)
On Oct 21
Accounts payable Dr, $12,600
($16,200 - $3,600)
To Cash $12,600
(Being cash paid is recorded)
On Oct 24
Utility expenses Dr, $133
To Cash $133
(Being utility expense is recorded)
On Oct 27
Cash Dr, $2,900
To Accounts receivable $2,900
(Being cash received is recorded)
On Oct 31
Salaries and wages expenses Dr, $4,600
To Cash $4,600
(Being cash paid is recorded)
Brick Co. has 170,000 shares of common stock outstanding at January 1, year 8. On May 1, year 8, it issued 30,000 additional shares of common stock. Outstanding all year were 12,000 shares of convertible cumulative preferred stock. Each share of the convertible preferred stock, which was dilutive in year 8, is convertible into one share of Bricks common stock. What is the number of shares that Brick should use to calculate year 8 diluted earnings per share
Answer:
202,000 shares
Explanation:
170,000 common stocks outstanding, January 1
30,000 additional common stock issued, May 1 ⇒ 30,000 x 8/12 = 20,000
diluted shares = 12,000 (since each preferred stock is convertible to common stock, then all of them must be included as diluted stocks)
total number of shares = 170,000 +20,000 + 12,000 = 202,000 shares
Consider the following statement.
"When unemployment is present, an increase in government spending will tend to increase aggregate demand and real output by a larger amount than the initial increase in government spending."
Complete the following statement.
This statement is __________ because an expansionary fiscal policy will cause the total increase in aggregate demand to be___________ the initial increase in aggregate demand due to the multiplier process.
Answer:
True;greater than.
Explanation:
The statement that "when unemployment is present, an increase in government spending will tend to increase aggregate demand and real output by a larger amount than the initial increase in government spending." is true because an expansionary fiscal policy will cause the total increase in aggregate demand to be greater than the initial increase in aggregate demand due to the multiplier process.
The above is in accordance with the theory of John M. Keynes, he was a notable British economist.
According to the Keynesian theory, government spending or expenditures should be increased and taxes should be lowered when faced with a recession, in order to create employment and boost the buying power of consumers.
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions:
May
3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $4,500.
5. Received cash from clients on account, $2,450.
9. Paid cash for a newspaper advertisement, $225.
13. Paid Office Station Co. for part of the debt incurred on April 5, $640.
15. Recorded services provided on account for the period May 1â15, $9,180.
16. Paid part-time receptionist for two weeks' salary including the amount owed on April 30, $750.
17. Recorded cash from cash clients for fees earned during the period May 1â16, $8,360.
Record the following transactions on Page 6 of the journal:
20. Purchased supplies on account, $735.
21. Recorded services provided on account for the period May 16â20, $4,820.
25. Recorded cash from cash clients for fees earned for the period May 17â23, $7,900.
27. Received cash from clients on account, $9,520.
28. Paid part-time receptionist for two weeks' salary, $750.
30. Paid telephone bill for May, $260.
31. Paid electricity bill for May, $810.
31. Recorded cash from cash clients for fees earned for the period May 26â31, $3,300.
31. Recorded services provided on account for the remainder of May, $2,650.
31. Kelly withdrew $10,500 for personal use.
Instructions:
Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet using the following adjustment data.
Insurance expired during May is $275.
Supplies on hand on May 31 are $715.
Depreciation of office equipment for May is $330.
Accrued receptionist salary on May 31 is $325.
Rent expired during May is $1,600.
Unearned fees on May 31 are $3,210.
If an amount box does not require an entry, leave it blank or enter "0".
Kelly Consulting End-of-Period Spreadsheet (Work Sheet) For the Month Ended May 31, 20Y8:
Unadjusted Adjustments Adjusted Income Balance
Trial Balance Trial Balance Statement Sheet
Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash
Accounts Receivable
Supplies
Prepaid Rent
Prepaid Insurance
Office Equipment
Accum. Depreciation
Accounts Payable
Salaries Payable
Unearned Fees
Common Stock
Retained Earnings
Dividends
Fees Earned
Salary Expense
Rent Expense
Supplies Expense
Depreciation Expense
Insurance Expense
Miscellaneous Expense
Net income
Missing information:
Kelly Consulting POST-CLOSING TRIAL BALANCE April 30, 2016
ACCOUNT TITLE DEBIT CREDIT
1 Cash 22,100.00
2 Accounts Receivable 3,400.00
3 Supplies 1,350.00
4 Prepaid Rent 3,200.00
5 Prepaid Insurance 1,500.00
6 Office Equipment 14,500.00
7 Accumulated Depreciation 330.00
8 Accounts Payable 800.00
9 Salaries Payable 120.00
10 Unearned Fees 2,500.00
11 Common Stock 30,000.00
12 Retained Earnings 12,300.00
13 Totals 46,050.00 46,050.00
Answer:
Kelly Consulting
Income statement
May 31st, 2016
Fees earned $40,000
Salary expense ($1,705)
Rent expense ($1,600)
Supplies expense ($1,370)
Depreciation expense ($330)
Insurance expense ($275)
Miscellaneous expense ($1,295)
Net income $33,425
Kelly Consulting
Balance Sheet
May 31st, 2016
Assets:
Cash $44,195
Accounts receivable $8,080
Supplies $715
Prepaid rent $1,600
Prepaid Insurance $1,225
Equipment $14,500
Accumulated depreciation office equipment ($660)
Total assets = $69,655
Liabilities:
Unearned fees $3,210
Accounts payable $895
Wages payable $325
Equity:
Capital, Kelly Pitney $30,000
Drawings, Kelly Pitney ($10,500)
Retained Earnings $45,725
Total liabilities and equity = $69,655
Explanation:
cash $4,500 + $2,450 - $225 - $640 - $750 + $8,360 + $7,900 + $9,520 - $750 - $1,070 + $3,300 - $10,500
unearned fees $4,500 - $1,290
accounts receivable -$2,450 + $9,180 + $4,820 - $9,520 + $2,650
advertising expense $225
accounts payable -$640 + $735
service revenue $9,180 + $8,360 + $4,820 + $7,900 + $3,300 + $2,650 + $3,790
wages expense $750 + $750 + $325 - $120
wages payable $325
supplies $735 - $20
utilities expense $260 + $810
drawings Kelly $10,500
insurance expense $275
supplies expense $1,370
depreciation $330
rent expense $1,600
Answer 1:
Kelly Consulting
POST-CLOSING TRIAL BALANCE April 30, 2016
Account - Debit and Credit
1 Cash 22,100.00
2 Accounts Receivable 3,400.00
3 Supplies 1,350.00
4 Prepaid Rent 3,200.00
5 Prepaid Insurance 1,500.00
6 Office Equipment 14,500.00
7 Accumulated Depreciation 330.00
8 Accounts Payable 800.00
9 Salaries Payable 120.00
10 Unearned Fees 2,500.00
11 Common Stock 30,000.00
12 Retained Earnings 12,300.00
13 Totals 46,050.00 46,050.00
Answer 2:
Kelly Consulting
Income statement
May 31st, 2016
Fees earned $40,000
Salary expense ($1,705)
Rent expense ($1,600)
Supplies expense ($1,370)
Depreciation expense ($330)
Insurance expense ($275)
Miscellaneous expense ($1,295)
Net income $33,425
Answer 3 :
Kelly Consulting
Balance Sheet
May 31st, 2016
Assets:
Cash $44,195Accounts receivable $8,080Supplies $715Prepaid rent $1,600Prepaid Insurance $1,225Equipment $14,500Accumulated depreciation office equipment ($660)Total assets = $69,655Liabilities:
Unearned fees $3,210Accounts payable $895Wages payable $325Equity:Capital, Kelly Pitney $30,000Drawings, Kelly Pitney ($10,500)Retained Earnings $45,725Total liabilities and equity = $69,655Working notes:
Cash =$4,500 + $2,450 - $225 - $640 - $750 + $8,360 + $7,900 + $9,520 - $750 - $1,070 + $3,300 - $10,500
Unearned fees $4,500 - $1,290
Accounts receivable -$2,450 + $9,180 + $4,820 - $9,520 + $2,650
Advertising expense $225
Accounts payable -$640 + $735
Service revenue $9,180 + $8,360 + $4,820 + $7,900 + $3,300 + $2,650 + $3,790
Wages expense $750 + $750 + $325 - $120
Wages payable $325
Supplies $735 - $20
Utilities expense $260 + $810
Drawings Kelly $10,500
Insurance expense $275
Supplies expense $1,370
Depreciation $330
Rent expense $1,600
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Crystal Glasses recently paid a dividend of $2.70 per share, is currently expected to grow at a constant rate of 5%, and has a required return of 11%. Crystal Glasses has been approached to buy a new company. Crystal estimates if it buys the company, its constant growth rate would increase to 6.5%, but the firm would also be riskier, therefore increasing the required return of the company to 12%. Should Crystal go ahead with the purchase of the new company?
Answer:
The purchase of the new company increases the price per share of Crystal from $47.25 to $52.28.As the price of the share will increase from purchase of the new company, Crystal should go ahead with the project.
Explanation:
To determine whether to purchase the company or not, we first need to calculate the current share price or fair value of share. We will use the constant growth model of DDM to estimate the current fair value as the dividends are expected to grow at a constant rate. It bases the value of a share on the present value of the expected future dividends.
The share price today can be calculated as,
P0 = D1 / r - g
Where,
D1 is the dividend expected for the next periodr is the required rate of returng is the growth rate in dividendsP0 = 2.7 * (1+0.05) / (0.11 - 0.05)
P0 = $47.25
If the purchase of the new company increases the fair value of the share more than its current level, then Crystal Glasses should go ahead with the purchase. We estimate the price per share if the new company is purchased as,
P0 = 2.7 * (1+0.065) / (0.12 - 0.065)
P0 = $52.28
As the price of the share will increase from purchase of the new company, Crystal should go ahead with the project.
MA-4 (Static) Recording a Bond Investment Held as Trading Securities LO A-1
On January 1, 2018, Brian Company purchased at par $800,000, 6 percent bonds issued by Laura Company to be actively traded. At December 31, 2018, the bonds had a fair value of $775,000. The bond investment was sold on July 1, 2019, for $802,000. Brian Company’s fiscal year ends on December 31.
Record (1) the adjustment of the bond investment on December 31, 2018, and (2) the sale of the bonds on July 1, 2019. Ignore interest. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. Recognize the fair value of investments $775,000 on December 31, 2018.
2. Recognize the fair value of investments on July 01, 2019.
3. Recognize the cash received from sale of investments on July 01, 2019.
Date/General Journal/Debit/Credit/
Answer:
MA-4 Bond Investment Held as Trading Securities
1) Journal Entries:
December 31, 2018:
Debit Loss on Bond Investment $25,000
Credit Bond Investment (Held as Trading Securities) $25,000
To recognize the fair value of bonds.
July 1, 2019:
Debit Bond Investment (Held as Trading Securities) $27,000
Credit Gain on Bond Investment 27,000
To recognize the fair value of investments.
July 1, 2019:
Debit Cash Account $802,000
Credit Bond Investment 802,000
To recognize the cash from sale of investments.
Explanation:
a) Investments in Debt Securities, e.g. Bonds are classified into i) For Trading, ii) Available for Sale, and iii) Held to Maturity. They have different account treatments.
b) Debt Securities for Trading are held for short-term profits in the price movements of the investment. They are accounted for using the Fair Value method. With this method, the fair value of the investment is recognized and the Gains and Losses at each accounting period are taken to operating income.
The appropriate journal entries to record the adjustment of the bond investment on December 31, 2018, and the sale of the bonds on July 1, 2019 are:
1. December 31, 2018
Debit Unrealized holding loss $25,000
Credit Fair value adjustment- Trading Securities $25,000
($800,000-$775,000)
(To record unrealized loss on trading investment)
2. July 1, 2019
Debit Fair value adjustment-Trading Securities $27,000
Credit Unrealized holding gain $27,000
($802,000-$775,000)
(To record unrealized gain on trading investment)
July 1, 2019
Debit Cash $802,000
Credit Fair value adjustment-Trading Securities $802,000
(To record sale of trading securities)
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