Answer and Explanation:
The computation is shown below:
a. The current value of the company is
As it is mentioned that the company has no debt that means it is unlevered firm that is equivalent to unlevered value of the company
Unlevered value of the firm = Vu
Vu = EBIT × (1 - tax rate ) ÷ unlevered Cost of Equity
= EBIT × (1 - tax rate ) ÷ R0
= $25,000 × (1 - 0.22 ) ÷ 12%
= $162,500
b-1.
The computation of the value of the firm in the case when the value of the firm is equivalent to 50% of unlevered value
VL = Vu + Borrowing × tax rate
where,
Debt = borrowing = 50% × unlevered value of company
Debt = borrowing = 50% x Vu
So,
VL = Vu + Borrowing x tax rate
VL = $162,500 + ($162,500 × 50%) × 22%
= $162,500 + $17,875
= $180,375
b-2.
The computation of the value of the firm in the case when the value of the firm is equivalent to 100% of unlevered value
Levered value of the firm VL
VL = Vu + Borrowing × tax rate
Debt = borrowing = 100% × unlevered value of company
Debt = borrowing = 100% × Vu
So,
VL = Vu + Borrowing x tax rate
= $162,500 + ($162,500 × 100%) × 22%
= $162,500 + 35,750
= $198,250
C.1.
The computation of the value of the firm in the case when the value of the firm is equivalent to 50% of the levered value
VL = Vu + Borrowing × tax rate
= Vu + (VL × 50%) × tax rate
VL = Vu + (VL × 50%) × 22%
VL = Vu + 0.11 VL
VL - 0.11 VL = 162,500
0.89 VL = 162,500
VL= 182,584.27
C.2.
The computation of the value of the firm in the case when the value of the firm is equivalent to 100% of the levered value
Levered value of the firm VL
VL = Vu + Borrowing x tax rate
VL = Vu + (VL × 100%) × tax rate
= Vu + (VL × 100%) × 22%
= Vu + 0.22 VL
VL - 0.22 VL = 162,500
0.78 VL = 162,500
VL= $208,333.33
You need a 35-year, fixed-rate mortgage to buy a new home for $295,000. Your mortgage bank will lend you the money at an APR of 5.9 percent. However, you can only afford monthly payments of $1,350, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $1,350
Answer:
$434,780.69
Explanation:
The computation of the large the ballon payment would be is determined by using the future value formula i.e. to be shown in the attachment
Provided that
Present value = $295,000
Rate of interest = 5.9% ÷ 12 months = 0.49166%
NPER = 35 years × 12 months = 420 months
PMT = $1,350
The formula is shown below:
= -FV(Rate;NPER;PMT;-PV;type)
So, after applying the above formula, the future value is $434,780.69
Gamma Company adjusts its accounts at the end of each month. The following information has been assembled in order to prepare the required adjusting entries at December 31:
1. A one-year bank loan of $720,000 at an annual interest rate of 6% had been obtained on December 1.
2. The company's pays all employees up-to-date each Friday. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two day's pay. Employees earn a total of $12,800 per week.
3. On December 1, rent on the office building had been paid for three months. The monthly rent is $7,000.
4. Depreciation of office equipment is based on an estimated useful life of five years. The balance in the Office Equipment account is $12,360; no change has occurred in the account during the year.
5. All fees totaling $19,800 were earned during the month for clients who had paid in advance.
What should be the balance of the Prepaid Rent?
a. $0
b. $7,000
c. $14,000
d. $21,000
Answer; c. $14,000
Explanation
On December 1, rent had been paid for 3 months. At a rate of $7,000 a month this will come to;
= 7,000 * 3
= $21,000
The Prepaid rent account will reduce every month by the rent due for that month. The balance on the Prepaid account as at December 31 will therefore have reduced by one month from December 1.
= 21,000 - 7,000
= $14,000
Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $64 billion. Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist A believes that the government spending multiplier is 8 and the tax multiplier is 2. Economist B believes that the government spending multiplier is 4 and the tax multiplier is 8.
Compute the amount the government would have to increase spending to close the output gap according to each economist's belief. Then, for each scenario, compute the size of the tax cut that would achieve this same effect.
Policy Options for Closing Output Gap
Spending Multiplier Tax Multiplier Increase in Spending (Billions of dollars) Tax Cut (Billions of dollars)
Economist A 8 2
Economist B 4 8
1. Economist C favors tax cuts over increases in government spending. This means that Economist C likely believes that:
a. Tax cuts induce investment spending and improve workers incentives.
b. A dollar in tax cuts immediately and fully adds to aggregate demand.
2. Economist D argues that it is not possible to remove the economy from the recessionary gap by increasing government spending. Which of the following statements is consistent with Economist D's belief?
a. A rise in government spending does not crowd out private sector spending.
b. A rise in government spending completely crowds out private sector spending.
Answer:
1a.Economist A
Government spending multiplier= $8 billion
Tax multiplier=$32 billion
1b.Economist B
Government spending multiplier = $16 billion
Tax multiplier=$8 billion
2a
a. Tax cuts induce investment spending and improve workers incentives.
2b
b. A rise in government spending will tend to completely crowds out private sector spending.
Explanation:
1a.Calculation for Economist A government spending multiplier and tax multiplier
Using this formula
Spending multiplier =Deficient aggregate demand/Government spending multiplier
Tax multiplier =Deficient aggregate demand/Tax multiplier
Economist A
Government spending multiplier =64/8
Government spending multiplier=$8 billion
Tax multiplier=64/2
Tax multiplier=$32 billion
1b.Calculation for Economist B government spending multiplier and Tax multiplier
Economist B
Government spending multiplier =64/4
Government spending multiplier =$16 billion
Tax multiplier=64/8
Tax multiplier=$8 billion
2a. Economist C likely believes that the Tax cuts will induce investment spending and help to improve workers incentives.
2b.Economist D belief that a rise in government spending will completely crowds out private sector spending.
Assume that the required reserve ratio is set at 0.5 . What is the value of the money (deposit) multiplier
Answer:
2
Explanation:
The term "reserve ratio" may be defined as the the portion of the reservable liabilities which the commercial banks must hold onto, they cannot lend this reserves out or invest this money.
Given that the required reserve ratio is 0.5
Money (deposit) multiplier = 1/Required reserve ratio = 1/0.5 = 2
Thus the money multiplier value should be 2.
On a given day, the discount rate is 3.65%, the prime rate is 3.55%, the LIBOR is 3.30%, the federal funds rate is 3.25%, and the federal funds target rate is 3.20%
On the same day, Bank XYZ's reserve balance held at the Federal Reserve is lower than the reserve requirement, and Bank XYZ needs to borrow funds from those member institutions of the Federal Reserve who have excess funds in their reserve. Let x be the rate at which Bank XYZ borrows from these excess funds.
Determine x.
(A) 3.20%
(B) 3.25%
(C) 3.30%
(D) 3.55%
(E) 3.65%
Answer: (B) 3.25%
Explanation:
Commercial banks are meant to keep a portion of their total deposits with the Fed. This is called the Reserve requirement. Every day, these commercial banks have to meet this reserve requirement but sometimes they cannot.
When this happens they can balance their account by borrowing from other banks or member institutions of the Federal Reserve who have an excess balance on their reserve. The rate at which they can borrow from these other institutions is called the Federal Funds Rate which according to the question is 3.25%. That is therefore x.
Oklahoma Oil Corp. paid interest of $780,000 during 2021, and the interest payable account decreased by $132,000. What was interest expense for the year
Answer:
$648,000
Explanation:
interest expense for the year = total interest paid - interest payable = $780,000 - $132,000 = $648,000
The interest payable was carried over form the previous year, so it was recorded as interest expense for 2020. This is why it cannot be included in the interest expense for this year.
Mega Dynamics is considering a project that has the following cash flows:
Year Project Cash Flow
YEAR PROJECTED CASH FLOW
0 ?
1 2000
2 3000
3 3000
4 1500
The project has a payback of 2.5 years. The firm's cost of capital is 12 percent. What is the project's net present value (NPV)?
A) $765.91
B) $1,049.80
C) $2,761.32
D) $577.68
E) $3,765.91
Answer:
The NPV of the project is $765.91 and option A is the correct answer.
Explanation:
To calculate the initial outlay or cost of the project, we will use the payback period of the project. The payback period is the time taken by the project's cash flows to cover up the initial cost.
A payback period of 2.5 years means that the initial cost was,
Initial cost = 2000 + 3000 + 3000 * 0.5
Initial cost = $6500
To calculate the NPV of the project, we use the following formula,
NPV = CF1 / (1+r) + CF2 / (1+r)^2 + ... + CFn / (1+r)^n - Initial cost
Where,
CF1, CF2 , ... represents the cash flow in year 1, cash flow in year 2 and so on.r is the cost of capitalNPV = 2000 / (1+0.12) + 3000 / (1+0.12)^2 + 3000 / (1+0.12)^3 +
1500 / (1+0.12)^4 - 6500
NPV = $765.9137794 rounded off to $765.91
Suppose an initial investment of $80 will return $30/year for three years (assume the $30 is received each year at the end of the year).
At a discount rate of 25%, this investment ________ profitable.
Answer:
not profitable
Explanation:
The computation of investment profitable is shown below:-
The present value of the return is
= 30 ÷ 1.25 + 30 ÷ 1.25^2 + 30 ÷ 1.25^3
= 24 + 19.2 + 15.36
= 58.56 < 80
Therefore, the present value for the return is lower than the initial investment so, the investment is not profitable and hence the same is not to be considered
Crane Company wants to sell a sufficient quantity of products to earn a profit of $100000. If the unit sales price is $9, unit variable cost is $8, and total fixed costs are $200000, how many units must be sold to earn income of $100000?
Answer:
Break-even point in units= 300,000 units
Explanation:
Giving the following information:
Desired profit= $100,000
Selling price per unit= $9
Unit variable cost= $8
The total fixed costs are $200,000
To calculate the number of units to be sold, we need to use the break-even point in units formula:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (200,000 + 100,000) / (9 - 8)
Break-even point in units= 300,000 units
Consider each of the transactions below. All of the expenditures were made in cash.
1. The Edison Company spent $22,000 during the year for experimental purposes in connection with the development of a new product.
2. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $7,000.
3. In March, the Cleanway Laundromat bought equipment. Cleanway paid $16,000 down and signed a noninterest-bearing note requiring the payment of $23,000 in nine months. The cash price for this equipment was $35,000.
4. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $38,000.
4. The Mayer Company, plaintiff, paid $22,000 in legal fees in November, in connection with a successful infringement suit on its patent.
5. The Johnson Company traded its old equipment for new equipment. The new equipment has a fair value of $13,000. The old equipment had an original cost of $12,400 and a book value of $6,000 at the time of the trade. Johnson also paid cash of $10,000 as part of the trade. The exchange has commercial substance.
Required:
Prepare journal entries to record each of the above transactions.
Answer: Please see explanation column for answers
Explanation:
1.Journal to record amount spent on experimental purposes for development of new product
Date Account Debit Credit
Research and development expense $ 22,000.00
Cash $22,000.00
2. Journal to record amount paid for legal fees for lost in infringement suit
Date Account Debit Credit
April legal fee expense $7,000.00
Cash $ 7,000.00
3. Journal to record amount and note payable for purchase of equipment
Date Account Debit Credit
March Equipment $ 35,000.00
Discount on note payable 4,000.00
Cash $ 16,000.00
Note payable $ 23,000.00
Calculation:
Discount on note payable= (23,000 +16,000)- $35,000 = $4000
4Journal to record amount paid for installation of sprinkler system
Date Account Debit Credit
June 1 Building- sprinkler system $ 38,000.00
Cash $ 38,000.00
5
Journal to record amount received by plaintiff for successful infringement
Date Account Debit Credit
patent $ 22,000.00
Cash $ 22,000.00
6.Journal to record purchase of new machine in exchange of old one
Date Account Debit Credit
new machine-fair value $ 13,000.00
lost in trade-in $ 3,000.00
Accumulated depreciation $6,400.00
old machine $ 12,400.00
Cash $ 10,000.00
Calculation:
lost in trade-in = book value of old machine + cash paid for machine - fair value of new equipment =(6000+10000-13000)
= $3000
Accumulated depreciation=original cost of old machine - book value = $12400- $6000=$6,400
The primary purpose of a budget is to provide estimates of future revenues and expenses. True False
Answer:
True
Explanation:
The budget is prepared to estimate the company revenues and expenses for the given period of time. Through with the help of budget, the company can get to know for the revenues to be earned and the expenses to be incurred.
It also gives an overview of company expenses and revenues
hence, the given statement is true
Many professionals display their educational diplomas and awards on office walls to remind visitors of their expertise. This is an example of
Answer:
Visibility
Explanation: Visibility is a term used to describe the situation of being able to see or be seen by others persons. Many professionals continue to expose their competence and market themselves using various means of which includes the display of their professional certifications,awards and licenses etc this will help them to be easily seen and noticed by visitors and clients.
Tessmer Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During January, the kennel budgeted for 3,100 tenant-days, but its actual level of activity was 3,090 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting: Fixed Element per Month Variable element per tenant-day Revenue $ 0 $33.60 Wages and salaries $ 3,500 $ 7.40 Food and supplies 500 10.50 Facility expenses 9,500 4.70 Administrative expenses 6,600 0.30 Total expenses $20,100 $22.90 Actual results for January: Revenue $105,934 Wages and salaries $ 27,186 Food and supplies $ 32,485 Facility expenses $ 24,873 Administrative expenses $ 7,557 The food and supplies in the flexible budget for January would be closest to:__________.
(Round your intermediate calculations to 2 decimal places.)
A. $13,788
B. $12,963
C. $13,878
D. $13,070
"A customer invests $500,000 in a limited partnership for a 20% interest. The partnership takes a loan for $10,000,000, for which each of the partners has signed and is personally liable. The partnership liquidates and $8,000,000 of the debt is paid off from the proceeds. The limited partner's remaining liability is:"
Answer:
The limited partner's remaining liability is $400,000
Explanation:
The remaining liability after the debt payment of $8,000,000 is $2,000,000 ($10,000,000-$8,000,000)
The limited partner has a 20% interest in the business that entitles the partner to 20% share of profit or liabilities.
The limited partner's share of the remaining liability is 20% of the liability balance i.e $400,000($2,000,000*20%)
If house A had a sale price of $70,000, monthly rent of $500, and a GRM of 140; House B had a sale price of $68,500, monthly rent of $490, and GRM of 139.8 and House C had a sale price of $70,500, a monthly rent of $485, and a GRM of 139.6, what would be the value of a property which rented for $495 in the same neighborhood, assuming that house A is the best comparable?
Answer:
$69,300
Explanation:
Given the following :
House A :
Sales price = $70,000
Monthly rent = $500
GRM = 140
House B :
Sales price = $68,500
Monthly rent = $490
GRM = 139.8
House C :
Sales price = $70,500
Monthly rent = $485
GRM = 139.6
The gross rent multiplier GRM is obtained as the proportion of the sale price of a property to it's monthly rent.
GRM = (Sales price / monthly rent)
If a property is rented for 495 and house A is the
most comparable, then
Sales price will be closest to:
GRM of House A × monthly rent of property
140 × $495 = $69,300
Perch Co. acquired 80% of the common stock of Float Corp for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp are not actively traded.
1) What is the total amount of goodwill recognized at the date of acquisition?
a) $150,000
b) $250,000
c) $0
d) $120,000
e) $170,000
2. What amount of goodwill should be attributed to the non-controlling interest at the date of acquisition?
a) $0
b) $20,000
c) $30,000
d) $100,000
e) $120,000
Answer:
1. a) $150,000
2. c) $30,000
Explanation:
1) Goodwill of Controlling Interest = Purchase price - (FMV of Net Asset * % ownership)
= $1,600,000 - ( $1,850,000 * 80%)
= $120,000
Total amount of goodwill recognized at the date of acquisition = Goodwill of Controlling Interest / %ownership
= $120,000 / 80%
= $150,000
2. Amount of goodwill to be attributed to the non-controlling interest at the date of acquisition = Total amount of goodwill recognized at the date of acquisition - Goodwill of Controlling Interest
= $150,000 - $120,000
= $30,000
Foley Foods is a mid-size food processing facility that has had a significant increase in business lately. The firm needs to hire additional workers and develop a second shift to meet productivity needs. The HR manager at Foley Foods recommends implementing a safety program. Which of the following most likely undermines the need for a safety program?
A) Foley Foods has a high employee turnover rate.
B) All machines at Foley Foods are equipped with safety interlocks.
C) Foley Foods' workers' compensation costs are the highest in the industry.
D) Employees at Foley Foods have the option of wearing safety goggles and other PPE.
B. If the machines have safety interlocks already, why would there need to be a safety program?
Winnebagel Corp. currently sells 30,000 motorhomes per year at $45,000 each, and 12,000 luxury motor coaches per year at $85,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 19,000 of these campers per year at $12,000 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motorhomes by 4,500 units per year, and reduce the sales of its motor coaches by 900 units per year.
Required: What is the amount to use as the annual sales figure when evaluating this project?
a. $336,300,000 b. $354,000,000 c. $371,700,000 d. $507,000,000 e. $228,000,000
Answer:
b. $354,000,000
Explanation:
Sales revenue from new portable campers $228,000,000
(19,000 campers * $12,000)
Add: Increased revenue from motor homes $202,500,000
(4,500 unit * $45,000 )
Less: Decreased revenue from Luxury $76,500,000
motor coaches (900 unit * $85,000 )
Annual sales figure when evaluating this $354,000,000
project
The S&P 500 index delivered a return of 10%, 15%, 15%, and −25% over four successive years. What is the arithmetic average annual return per year?
Answer:arithmetic average annual return per year= 3.75%
Explanation:
Year 1 = 10%
Year 2= 15%
Year 3 = 15%
Year 4 = -25%
total return = 15%
Arithmetic average annual return per year =(Return of year1 + return of year 2 + return of year 3+ return of year 4 )/4 = 15% /4 = 3.75%
Top Growth Farms, a farming cooperative, is considering purchasing a tractor for $551,500. The machine has a 10-year life and an estimated salvage value of $36,000. Delivery costs and set-up charges will be $12,100 and $400, respectively. Top Growth uses straight-line depreciation. Top Growth estimates that the tractor will be used five times a week with the average charge to the individual farmers of $400. Fuel is $50 for each use of the tractor. The present value of an annuity of 1 for 10 years at 9% is 6.418. For the new tractor, compute the:
A) Calculate the payback period.
B) Calculate the net present value.
C) Calculate the accounting rate of return
Answer:
a. 6.2
b. $20,038
c. 12.73%
Explanation:
Initial investment = $551,500 + $12,100 + $400
Initial investment = $564,000
Annual cash flows = 5 * 52 * ($400 - $50)
Annual cash flows = $91,000
a. Payback period
Cash payback = Initial investment / Annual cash flows
Cash payback =564000 / 91000
Cash payback = 6.2
b. Net present value
Net present value = Present value of cash flow - Capital investment
Where Present value of cash flow = Annual cash flows * PVA(1,10%,9)
Present value of cash flow = $91000*6.418
Present value of cash flow = $584,038
Capital investment = $564000
Net present value = $584,038 - $564000
Net present value = $20,038
c. Accounting rate of return
Average Investment= ($564,000 + $36,000) / 2
Average Investment = $300,000
Annual Net Income = $91,000 - ($564,000 - $36,000) / 10
Annual Net Income = $38,200
Accounting rate of return = Annual Net Income / Average Investment
Average Investment = $38,200 / $300,000
Average Investment = 12.73%
A financial institution offers a "double-your-money" savings account in which you will have $2 in 4 years for every dollar you invest today. What stated annual interest rate (assuming semi-annual compounding) does this account offer?
Answer:
The stated annual interest rate offered by this account is 41.42%.
Explanation:
The stated annual interest rate, r on the saving account can be determined as follows :
Pv = - $1
n = 4 × 2= 8
pmt = $ 0
p/yr = 2
Fv = $4
r = ?
Using a financial calculator the nominal rate,r compounded semi-annual is 37.8414 %
Then use the financial calculator to convert norminal rate to annual rate as follows :
37.8414 % Shift NOM%
P/YR 2
Shift EFF% 41.4213 or 41.42%
Which of the following types of businesses might have an operating cycle longer than one year?
A. Ski resort.
B. Clothing retailer.
C. Florist.
D. Wheat farmer.
E. Commercial airplane manufacturer.
Answer: E. Commercial airplane manufacturer.
Explanation:
An operating cycle refers to the amount of time it will take a company to produce or purchase goods, sell them and receive cash for the goods.
A Commercial airplane manufacturer might have an operating cycle longer than a year as it takes time to manufacture planes and then to sell them due to their high prices and even at that with the huge amounts involved, the payments might not come all at once.
In 2020, a customer buys 1 GE 10%, $1,000 par debenture, M '35, at 115. The interest payment dates are Jan 1st and Jul 1st. The bond is first callable in 2030 at 102. The yield to call on the bond is
Answer:
The yield to call on the bond is 9.37%.
Explanation:
This can be calculate using the YTC using the following equation:
YTC = (C + (CP - P) / t) / ((CP + P) / 2) .......................... (1)
Where:
YTC = YTW = yield to call or yield to worst = ?
C = Annual coupon interest payment = Bond interest rate * Bond face value = 10% * $1,000 = $100
CP = Call price of the bond = $1,000 * 102% = $1,020
P = price of the bond = $1,000 * 105 = $1,050
t = time in years remaining until the call date = 10 years
Substituting the values into equation (1), we have:
YTC = (100 + (1,020 - 1,050) / 10) / ((1,020 + 1,050) / 2)
YTC = (100 - 30 / 10) / (2,070 / 2)
YTC = (100 - 3) / 1,035
YTC = 97 / 1,035
YTC = 0.0937, or 9.37%
Therefore, the yield to call on the bond is 9.37%.
find examples of how intelligent systems can facilitate activities such as empowerment, mass customization, and teamwork
Explanation:
An intelligent system can be defined as a system that uses technology to transform data into relevant information for decision making, work improvement and problem solving.
In the workplace, these systems may be able to make work faster and more automated, reducing time, finding solutions to problems through intelligent learning, providing standards, etc., which helps with innovative work ideas and techniques that provide good teamwork and mass customization.
The training of employees can also be exercised through intelligent systems, such as platforms fed with information about courses or training, which guarantees a more dynamic and cheaper learning for the company.
Use the following returns for X and Y. Returns Year X Y 1 21.6 % 25.8 % 2 – 16.6 – 3.6 3 9.6 27.8 4 19.2 – 14.2 5 4.6 31.8 a. Calculate the average returns for X and Y
Answer:
For Average X = 7.68%
For Average Y = 13.52%
Explanation:
The computation of average return for X and Y is shown below:-
Average return = sum of return ÷ n
Year X Y
1 21.60% 25.80%
2 -16.60% -3.60%
3 9.60% 27.80%
4 19.20% -14.20%
5 4.60% 31.80%
Total 38.40% 67.60%
Avg X = 38.40% ÷ 5
= 7.68%
Avg Y = 67.60% ÷ 5
= 13.52%
A two-year bond with par value $1,000 making annual coupon payments of $100 is priced at $1,000. a. What is the yield to maturity of the bond?
Answer: 10%
Explanation:
When the price of a bond is at par, it means that the coupon rate and the Yield to Maturity are the same.
The Coupon rate is the interest rate that the Issuer of the bond pays the bond holders as a percentage of Par.
The Coupon payment here is $100 and the rate is;
= 100/1,000
= 10%
Coupon Rate = 10% = Yield to Maturity
Marketing communications allow companies to link their brands to other people, places, events, brands, experiences, feelings, and things.
A. True
B. False
Answer:
True.
Explanation:
True, marketing communication is an advertisement that attracts people. It is the process to show the quality of commodity and how it will be suitable to the consumer. Companies use different types of tactics to make customer relations and to attract new customers. moreover, these marketing communications use the sentiments of the people and try to link that sentiment or feelings with the product. Therefore, following this way, they create their product’s link with people.
Olsen Company paid or collected during 2014 the following items:
Insurance premiums paid $ 25,800
Interest collected 62,800
Salaries paid 260,400
The following balances have been excerpted from Olsen's balance sheets:
Dec 31, 2014 Dec 31, 2013
Prepaid insurance $ 2,400 $ 3,000
Interest receivable 7,400 5,800
Salaries and wages payable24,600 21,200
The insurance expense on the income statement for 2014 was
A.
$26,400.
B.
$20,400.
C.
$25,200.
D.
$31,200.
Answer:
A. $26,400
Explanation:
Prepaid insurance beginning balance $3,000
Add: Insurance paid during year $25,800
$28,800
Less: Prepaid insurance Ending balance $2,400
Insurance expense $26,400
During August, Boxer Company sells $353,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 4% of the selling price. The warranty liability account has a credit balance of $11,500 before adjustment. Customers returned merchandise for warranty repairs during the month that used $8,100 in parts for repairs. The entry to record the estimated warranty expense for the month is:_________ a) Debit Warranty Expense $10,720; credit Estimated Warranty Liability $10,720. b) Debit Estimated Warranty Liability $14,120; credit Warranty Expense $14,120. c) Debit Estimated Warranty Liability $8,100; credit Warranty Expense $8,100. d) Debit Warranty Expense $2,620; credit Estimated Warranty Liability $2,620.
Answer:
Debit warranty expense $14,120 ; Credit estimated warranty liability $14,120
Explanation:
Per the above information, the journal entry to record the customer warranty expense for the month is;
Warranty expense Dr. $14,120
To estimated warranty liability Cr. $14,120
The estimated liability is computed on credit sales for the year and the estimated percentage.
Given that;
Credit sales for the year = $353,000
Estimated percentage of credit sales = 4%
Therefore,
Estimated warranty liability
= $353,00 × 4%
= $14,120
During 2016, Moore Corp. had the following two classes of stock issued and outstanding for the entire year: 100,000 shares of common stock, $1 par. 1,000 shares of 4% preferred stock, $100 par, convertible share for share into common stock. Moore's 2016 net income was $900,000, and its income tax rate for the year was 30%. In the computation of diluted earnings per share for 2016, the amount to be used in the numerator is
Answer:
the amount to be used in the numerator is $900,000.
Explanation:
Earnings Per Share = Earnings Attributable to Holders of Common Shares ÷ Weighted Average Number of Common Shares Outstanding.
Diluted Earnings per Share takes into account potential voting rights.
The Preference dividend is not deducted from Net Income as it carries a potential voting right.