Answer:
Financial advantage of purchasing Cisco from outside vendor = $9,440
Explanation:
7,900 units produced
variable costs allocated to Cisco units (avoidable):
direct materials $4.58 per unitdirect labor $4.51 per unitindirect labor $0.45 per unitutilities $0.41 per unittotal $9.95 x 7,900 units = $78,650fixed manufacturing costs allocated to Cisco:
depreciation $860property taxes $320Insurance $610total $1,790an outside supplier can provide Cisco for $63,200 plus:
freight and inspection costs $0.60 per unit x $7,900 = $4,740total receiving costs $1,270total $6,010Incremental Analysis
Produce Purchase Difference
Cisco Cisco amount
Variable production $78,650 $78,650
costs
Purchase price $63,200 ($63,200)
Additional expenses $6,010 ($6,010)
Financial advantage of purchasing Cisco $9,440
Allocated fixed costs are not included in this analysis since they cannot be avoided by either action, producing or purchasing.
Indicate in general journal form how the items below would be entered in a worksheet for the preparation of the statement of cash flows. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) (a) Net income is $340,000. (b) Cash dividends declared and paid totaled $112,000. (c) Equipment was purchased for $113,000. (d) Equipment that originally cost $46,000 and had accumulated depreciation of $36,800 was sold for $11,500.
Answer:
a.
Cash flow Statement $340,000 (debit)
Net Income $340,000 (credit)
b.
Cash Dividend $112,000 (debit)
Cash flow Statement $112,000 (credit)
c.
Equipment $113,000 (debit)
Cash flow Statement $113,000 (credit)
d.
J1
Cash flow Statement $11,500 (debit)
Equipment $11,500 (credit)
J2
Profit of Loss $2,300 (debit)
Cash flow Statement $2,300 (credit)
Explanation:
a.
To record Net Income from Operating Activities
b.
To record cash outflow from Dividend Payout
c.
To record cost of Purchase of Equipment
d.
J1
To record proceeds from Sale of Equipment
J2
To record profit on sale of Equipment
Mixed Costs and Cost Formula Callie's Gym is a complete fitness center. Owner Callie Ducain employs various fitness trainers who are expected to staff the front desk and to teach fitness classes. While on the front desk, trainers answer the phone, handle walk-ins and show them around the gym, answer member questions about the weight machines, and do light cleaning (wiping down the equipment, vacuuming the floor). The trainers also teach fitness classes (e.g., pilates, spinning, body pump) according to their own interest and training level. The cost of the fitness trainers is $600 per month and $20 per class taught. Last month, 100 classes were taught. Required: 1. Develop a cost equation for total cost of labor. Total labor cost = $ + $ per class taught 2. What was total variable labor cost last month? $ 3. What was total labor cost last month? $ 4. What was the unit cost of labor (per class) for last month? $ per class 5. What if Callie increased the number of classes offered by 50 percent? a. What would be the total labor cost? $ b. The unit labor cost? $ c. Explain why the unit labor cost d
Answer:
1 = $600 + $20 × X
2. = $2000
3 = $2,600
4 = $26 per class
5 = a = $3,600
b = $24
c = the cost per unit has reduced from $26 to $24.
Explanation:
According to the scenario, computation of the given data are as follow:-
We assume no. of units = X
1.Total Labor Cost =Total Fixed Cost + (Variable Cost Per Unit × No. of Units)
= $600 + $20 × X
2. Last month 100 classes were taught.
Total Variable Cost = No. of Classes Taught × Variable Cost Per Class
= 100 × $20 = $2000
3. When 100 classes were taught, total labor cost is-
Total Labor Cost = Total Fixed Cost + (No. of Units × Variable Cost Per Units)
= $600 + 100 × $20
= $600 + $2,000
= $2,600
4. Per Classes Unit Cost of Labor =Total Labor Cost ÷ No. of Classes Taught
= $2,600 ÷ 100
= $26 per class
5. If the No. of taught classes increase by 50% then the no. of classes is offered = 100 + (100 × 50 ÷ 100) = 150
a). Total Labor Cost if the no. of classes taught are 150
Total Labor Cost = Total Fixed Cost + (No. of Units × Variable Cost Per Units)
= $600 + 150 × $20
= $600 + $3,000
= $3,600
b). Per Classes Unit Cost of Labor = Total Labor Cost ÷ No. of Classes Taught
= $3,600 ÷ 150
= $24
c). After the change in the level of the activity variable cost per unit and fixed cost per unit remain same. So if there is an increase in the taught classes then the cost per unit has reduced from $26 to $24.
A recent start-up company, which we will call Dronegistics, has developed an innovative unmanned aerial vehicle, or drone. The company plans to sell its drones to companies who would use them to make commercial deliveries within congested urban areas. Dronegistics has identified several markets in Asia as having high commercial potential. Japan and Singapore are perceived to have the strongest market potential currently, but mainland China, Thailand, and Malaysia are perceived to have strong and growing potential over time, even if their potential may not be as strong currently. Despite expectations that several other firms will introduce competitive products in the near future, which will have an impact on the attractiveness for later entrants, Dronegistics lacks the experience and resources to enter more than one Asian market at a time. The decision-making challenge facing Dronegistics incorporates all of the following location clocks associated with timing decisions EXCEPT the:
__a. firm clock.
__b. location clock.
__c. incentives clock.
__d. competitive clock.
Answer:
c. incentives clock
Explanation:
Dronegistics as a recent startup is faced with the following location clocks' decision-making challenges:
a) Firm clock: It is a recent startup and lacks the resources to enter more than one Asian market at a time.
b) Location clock: It does not know which location to start with in Asia, with no experience locating in more than one location at the same time.
c) Competitive clock: It is afraid of the timing of new entrants into the drones market with competitive products.
Barnes Company reports the following operating results for the month of August: sales $300,000 (units 5,000); variable costs $214,000; and fixed costs $71,800. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net income $Enter the net income in dollars 2. Reduce variable costs to 55% of sales. Net income $Enter the net income in dollars 3. Reduce fixed costs by $23,000. Net income $Enter the net income in dollars Which course of action will produce the highest net income? Select an option
Answer:
$14,200
$44,200
$63,200
$37,200
Explanation:
As per the data given in the question,
Presentation of profitability Statement
Particulars Amount Per unit
Sales $300,000 $60 ($300,000÷5,000)
Less: Variable cost $214,000
Contribution $86,000
Less: Fixed cost $71,800
Net income $14,200
Alternative 1 : increase selling price by 10%
Presentation of profitability Statement
Particulars Amount
Sales ($60+10% of $60) × 5,000 $330,000
Less: Variable cost $214,000
Contribution $116,000
Less: Fixed cost $71,800
Net income $44,200
Alternative 2 : reduce variable cost to 55% sales
Presentation of profitability Statement
Particulars Amount
Sales $300,000
Less: Variable cost(300,000×55%) $165,000
Contribution $135,000
Less: Fixed cost $71,800
Net income $63,200
Alternative 3 : reduce fixed cost by 23,000
Presentation of profitability Statement
Particulars Amount
Sales $300,000
Less: Variable cost $214,000
Contribution $86,000
Less: Fixed cost($71,800-$23,000) $48,800
Net income $37,200
Therefore alternative 2 produced highest net income.
Opponents of tax reforms intended to raise saving argue that such reforms a. favor those with high income, and that saving may not rise because of the substitution effect. b. favor those with high income, and that saving may not rise because of the income effect. c. favor those with low income, and that saving may not rise because of the substitution effect. d. favor those with low income, and that saving may not rise because of the income effect.
Answer:
Option B
Explanation:
In simple words, under such tax reforms the government is intending to raise indirect taxes which will lead to higher prices of certain goods and is also declining taxes on savings. Both of these steps will work as an incentive for individuals to save more.
However a big majority of community is stating that this will only lead to more burden on the weaker section due to higher prices of commodities and will eventually result in lower standard of living for certain individuals.
You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customers:
Price (Dollars) Adults (Tickets) Children (Tickets)
20 0 0
18 25 0
16 50 0
14 100 0
12 150 0
10 200 0
8 300 25
6 300 50
4 300 100
2 300 150
0 300 200
To maximize profit, you would charge _____ (number) for an adult's ticket and _____ (number) for a child?s ticket. Total profit in this case would be _____ (number).
The city council passes a law prohibiting you from charging different prices to different customers.
Now you set a price of _____(number) for all tickets, resulting in _____(number) in profit.
Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination.
Groups of People Better Off Worse Off Unchanged
Adults
Children
You, the Producer
Suppose the fixed cost of the play were $2,600 rather than $2,000.
Complete the following sentences indicating how this would change your answers to the previous parts.
In the presence of price discrimination, the adult price of a ticket would _____ (increase, decrease, remain the same), and the child price would _____ (increase, decrease, remain the same). Total profit would _____ (rise, fall) to (number).
If price discrimination were banned and the monopolist continued to produce the play no matter what the profit, the price of a ticket would _____ (increase, decrease, remain the same), and total profit would _____ (rise, fall) to _____ (number).
Answer:
Explanation:
To maximize profit, you would charge $8 for an adult's ticket and $4 for a child?s ticket. Total profit in this case would be $800.
The city council passes a law prohibiting you from charging different prices to different customers.
Now you set a price of $8 for all tickets, resulting in $600 in profit.
Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination.
Groups of People Better Off Worse Off Unchanged
Adults x
Children x
You, the Producer x
Suppose the fixed cost of the play were $2,600 rather than $2,000.
Complete the following sentences indicating how this would change your answers to the previous parts.
In the presence of price discrimination, the adult price of a ticket would remain the same, and the child price would remain the same. Total profit would fall to $200.
If price discrimination were banned and the monopolist continued to produce the play no matter what the profit, the price of a ticket would remain the same, and total profit would fall to $0.
Lazar Corporation is evaluating a proposal to invest in a machine costing $89,000. The machine has an estimated useful life of ten years, and an estimated salvage value of $14,000. The machine will increase the company's net income by approximately $9,600 per year. All revenue and expenses other than depreciation will be received and paid in cash.
Required:
1. The expected rate of return on average investment of the machine is ____________.
a. 10.0%
b. 48.0%
c. 17.0%
d. 18.6%
Answer:
Option D is correct
Expected rate of return = 18.6%
Explanation:
The expected rate of return is the proportion of average investment that is earned as income . It is calculated as follows:
Rate of return on investment = average return / Average investment
Average investment = (Initial cost + salvage value)/ 2
Average investment = 89,000 +14,000/ 2= 51500
Net income = $9,600
Expected rate of return = 9,600/51,500× 100
= 18.6%
Based on the following Information and the post-closing trial Balance that follow, prepare a balance sheet in report form at December 31 of the current year:
The Merchandise inventory is stated at cost by the LIFO method.
The product warrant payable is a current liability.
Vacation pay payable:
Current liability $7,140
Long-term liability 3,360
The unfunded pension liability is a long-term liability.
Notes Payable:
Current liability $70,000
Long-term liability 630,000
Kornett Company
POST-CLOSING TRIAL BALANCE
December 31, 2016
Petty cash 4,500
Cash 243,960
Notes Receivable 100,000
Accounts Receivable 470,000
Allowance for Doubtful Accounts 16,000
Merchandise Inventory 320,000
Interest Receivable 1,875
Prepaid Insurance 45,640
Office Supplies 13,400
Land 654,925
Buildings 900,000
Accumulated Depreciation-Buildings 36,000
Office Equipment 246,000
Accumulated Depreciation- 44,000
Office Equipment
Store Equipment 112,000
Accumulated Depreciation-Store 5,000
Equipment
Mineral Rights 546,000
Accumulated Depletion 30,000
Patents 42,000
Social Security Tax payable 25,470
Medicare Tax payable 4,710
Employees federal Income Tax payable 40,000
State Unemployment Tax Payable 270
Federal Unemployment Tax payable 40
Salaries Payable 157,000
Accounts Payable 131,600
Interest Payable 28,000
Product Warrenty Payable 76,000
Vacation Pay Payable 10,500
Unfunded Pension Liability 50,700
Notes Payable 700,000
J. Kornett, Capital 2,345,010
3,700,300 3,700,300
Find the given attachments
The following information relates to the manufacturing operations of the Abbra Publishing Company for the year:
Beginning Ending
Raw materials inventory $563,000 $626,000
The raw materials used in manufacturing during the year totaled $1,098,000. Raw materials purchased during the year amount to:
a. $955,000.
b. $892,000.
c. $1,565,000.
d. $408,000.
e. $1,081,000.
Answer:
Raw material purchased = $1,161,000
Explanation:
Raw material purchase budget is determined by adjusting the raw material usage budget for opening and closing inventory of materials.
Purchase budget = usage budgeted + closing inventory - Opening inventory
Purchase budget = 1,098,000 + 626,000 - 563,000= $1,161,000
Note the closing inventory represents the stock of materials needed to be kept, hence it will increase the purchase budget. So we added.
On the other hand hands, the opening inventory represented what already existed , hence we subtracted it as it will reduce what will be required.
Raw material purchased = $1,161,000
Suppose that JVC is trying to decide how to price a new stereo system composed of a receiver, CD player, and speakers. The company's economists have estimated that two different groups will purchase these products: students and club owners. The economists analysis suggests that the total market for its brand of stereos consists of 10,000 students and 50,000 club owners. In addition, it is estimated that the maximum amount each group will pay for each stereo component is as follows:
Group Receiver CD Player Speakers
Students $250 $150 $100
Club owners $200 $75 $250
Required:
a) Suppose that JVC markets the receiver, CD player, and speakers are sold separately and together. What prices should JVC charge to maximize revenues?
The revenues table is:
[tex]\text{Receivers} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 200\\\\\text{CD player}\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 75\\\\\text{Speaker} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 250\\\\\text{Combined ( bundling )} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 500[/tex]
Calculating the pricing JVC will charge in order to increase revenues:Calculating the separate price for the receiver:
when
[tex]P = 250[/tex] only for the students to buy
[tex]\to TR = 250 \times 10,000 = 2,500,000[/tex]
[tex]P = 200[/tex], both types will buy
[tex]\to TR = 200 \times (60,000) = 12,000,000[/tex]
Therefore, the higher [tex]TR[/tex], with [tex]P = 200[/tex], and the charge [tex]P = 200[/tex], for Receiver:
Calculating the value of CD player:
[tex]If \ P = 150,\ \ TR = 150\times 10,000 = 1,500,000 \\\\If \ P = 75, \ \ TR = 75 \times (60,000) = 4,500,000[/tex]
Therefore, the higher [tex]TR[/tex], with [tex]P = 75[/tex],
Speakers,
if[tex]P = 100[/tex] , both types buy
[tex]\to TR = 100 \times (60,000) = 6,000,000[/tex]
If [tex]P = 250[/tex], only club owners buy
[tex]\to TR = 250 \times 50,000 = 12,500,000[/tex]
So higher [tex]TR[/tex] with [tex]P = 250[/tex]
Now combined Willingness to pay
For students, [tex]250+150+100 = 500[/tex]
For club owners, [tex]200+75+250 = 525[/tex]
So if [tex]P = 500[/tex], both types buy
[tex]\to TR = 500 \times 60,000 = 30,000,000[/tex]
if [tex]P = 525[/tex], only club owners buy, then
[tex]\to TR = 525 \times 50,000 = 26,250,000[/tex]
so higher [tex]TR[/tex] with [tex]P = 500[/tex]
Therefore, the calculated table values are:
[tex]\text{Receivers} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 200\\\\\text{CD player}\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 75\\\\\text{Speaker} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 250\\\\\text{Combined ( bundling )} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 500[/tex]
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On January 1, Year 1, Parker Company issued bonds with a face value of $75,000, a stated rate of interest of 6 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 8 percent at the time the bonds were issued. The bonds sold for $69,011. Parker used the effective interest rate method to amortize the bond discount. (Round your intermediate calculations and final answers to the nearest whole dollar amount.) Required a. Prepare an amortization table. b. What is the carrying value that would appear on the Year 4 balance sheet? c. What is the interest expense that would appear on the Year 4 income statement? d. What is the amount of cash outflow for interest that would appear in the operating activities section of the Year 4 statement of cash flows?
Answer:
The carrying value of the bond in year 4 is $73,611
The interest expense that would appear in year 4 income statement is $5,786 The amount of cash outflow for interest that would appear in the operating activities section of the Year 4 statement of cash flows is $ 4,500
Explanation:
Find attached amortization schedule for Parker company
The balance at end of each is the opening balance that year plus interest expense minus the cash paid as coupon payment.
The financial statements for Castile Products, Inc., are given below:
Castile Products, Inc.
Balance Sheet
December 31
Assets
Current assets:
Cash $ 20,000
Accounts receivable, net 230,000
Merchandise inventory 350,000
Prepaid expenses 7,000
Total current assets 607,000
Property and equipment, net 890,000
Total assets $ 1,497,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities $ 210,000
Bonds payable, 9% 330,000
Total liabilities 540,000
Stockholders’ equity:
Common stock, $10 par value $ 110,000
Retained earnings 847,000
Total stockholders’ equity 957,000
Total liabilities and equity $ 1,497,000
Castile Products, Inc.
Income Statement
For the Year Ended December 31
Sales $ 2,120,000
Cost of goods sold 1,200,000
Gross margin 920,000
Selling and administrative expenses 650,000
Net operating income 270,000
Interest expense 29,700
Net income before taxes 240,300
Income taxes (30%) 72,090
Net income $ 168,210
Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $290,000. All sales were on account.
Assume that Castile Products, Inc., paid dividends of $2.95 per share during the year. Also assume that the company’s common stock had a market price of $72 at the end of the year and there was no change in the number of outstanding shares of common stock during the year.
Required:
Compute financial ratios as follows:
1.
Earnings per share. (Round your answer to 2 decimal places.)
2.
Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your final percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)
3.
Dividend yield ratio. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)
4.
Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)
5.
Book value per share. (Round your answer to 2 decimal places.)
Answer:
1. The Earning per share is $ 15.29 per share
2. The Dividend payout ratio is 0.193 or 19.3%
3. The Dividend yield ratio is 0.041 or 4.1%
4. The Price-earnings ratio is 4.7
5. The Book value per share is $ 87 per share
Explanation:
1. To calculate Earning per share we use the following formula:
Earning per share = Net income /Number of common shares
Number of common shares= 110,000 /10 = 11,000 shares
Earning per share= $168,210 /11,000
Earning per share = $ 15.29 per share
2. To calculate Dividend payout ratio we use the following formula:
Dividend paid = 2.95*11n000= $32,450
Payout ratio = $32,450 / $168,210
Payout ratio =0.193 or 19.3%
3. To calculate Dividend yield ratio we use the following formula:
Dividend yield ratio =dividend /current price
Dividend yield ratio = 2.95 / 72
Dividend yield ratio =0.041 or 4.1%
4. To calculate Price-earnings ratio we use the following formula:
PE ratio =Market price per share /EPS
PE ratio= 72 /15.29
PE ratio = 4.7
5. To calculate Book value per share we use the following formula:
Book value per share =Total sharehoders equity /number of share
Book value per share= $957,000/11,000
Book value per share= $ 87 per share
1. The Earning per share is $15.29 per share
2. The Dividend payout ratio is 19.3%
3. The Dividend yield ratio is 4.1%
4. The Price-earnings ratio is 4.7
Calculation of Net income1. To Compute Earning per share we use the following formula:
The formula of Earning per share is = Net income /Number of common shares
Number of common shares is = 110,000 /10 = 11,000 shares
Earning per share is = $168,210 /11,000
Earning per share is = $15.29 per share
2. To compute Dividend payout ratio we use the following formula:
Dividend paid is = 2.95*11n000= $32,450
Payout ratio is = $32,450 / $168,210
Therefore, Payout ratio =0.193 or 19.3%
3. To Compute Dividend yield ratio we use the following formula:
Then Dividend yield ratio =dividend /current price
Dividend yield ratio = 2.95 / 72
Therefore, Dividend yield ratio is = 0.041 or 4.1%
4. To Compute Price-earnings ratio we use the following formula:
PE ratio is =Market price per share /EPS
PE ratio is = 72 /15.29
Thus, PE ratio = 4.7
5. To Compute the Book value per share we use the following formula:
Book value per share is =Total shareholders equity /number of share
Then, Book value per share= $957,000/11,000
Hence, Book value per share= $ 87 per share
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Match each form of unemployment with an example. Note that every item may not have a match.
a. cyclical unemployment
b. structural unemployment
c. frictional unemployment
1. An unemployed paper mill worker. The local paper mill shut down due to lack of demand for paper products in a digital age.
2. An unemployed banker during a recession. The banker would be hired back once the economy began growing normally again.
3. A retiree. After a successful career in real estate, she now lives off her retirement savings and Social Security.
4. An unemployed stockbroker who is willingly taking some time off before looking for a new job.
5. An unemployed cashier. A small clothing store shut down due to its customers buying clothes from a new big-box retailer.
Answer:
1. Structural unemployment
2. Cyclical Unemployment
3. No match
4. Frictional unemployment
5. No match.
Explanation:
a. Cyclical Unemployment can be described as an unemployment that occurs when there is a low demand for goods and services in a country as a result of slow economic growth or recession.
b. Structural unemployment is an unemployment that occurs because of industrial reorganization coming from technological change that makes current skills of workers obsolete.
c. Frictional unemployment is unemployment that occurs when people are in the process of searching a new job and changing from one job to another.
Based on the above definition, we have:
1. Structural unemployment
2. Cyclical Unemployment
3. No match
4. Frictional unemployment
5. No match.
Answer: No 1, cyclicnal unemployment
2, Cyclical Unemployment
a, Cyclical unemployment is unemployment that results when the overall demand for goods and services in an economy cannot support full employment. It occurs during periods of slow economic growth or during periods of economic contraction. This can be match to 1 and 2
b, 3and 4.
Frictional unemployment is a type of unemployment. It is sometimes called search unemployment and can be based on the circumstances of the individual. It is time spent between jobs when a worker is searching for a job or transferring from one job to another.
C. 5,
Structural unemployment is a form of involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers. Structural unemployment is often brought about by technological changes that make the job skills of many workers obsolete.
Explanation:
Unemployment is a term referring to individuals who are employable and seeking a job but are unable to find a job.
Usually measured by the unemployment rate, which is dividing the number of unemployed people by the total number of people in the workforce, unemployment serves as one of the indicators.
Mills Corporation acquired as a long-term investment $225 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $250.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $240.0 million.
Required:
1. Prepare the journal entry to record Mills'investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective market) rate.
2. At what amount will Mills report its investment in the December 31, 2021, balance sheet?
Answer:
Dr investment in bonds $225 million
Dr premium on bonds investment
Cr cash $250 million
Dr cash $9,000,000
Cr interest income 7,500,000
cr bonds premium 1,500,000
Dr cash $9,000,0000
Cr interest income $ 7,545,000.00
Cr bond premium $ 1,455,000.00
Mills would report the investment at $ 246,955,000.00
Explanation:
The journal entry to record Mill's investment is to simply debit investment accounts with cash paid for the investment and credit same amount to cash account.
The premium paid on the investment=cash paid-face value=$250 million-$225 million=$25 million
Find attache bond investment amortization schedule
Two firms, A and B, each currently dump 20 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives each firm 10 pollution permits, which it can either use or sell to the other firm. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. After the two firms buy or sell pollution permits from each other, we would expect that:_________.
Answer:
Firm B will no longer pollute and firm A will no longer reduce its pollution at all.
Explanation:
It is noticed here that this is used as a form to calculate the pollution production rate of both firms in the case above.
Therefore, firm B will have to sell out its allotted 20 permits, and clean up all of its 50 units of pollution. The price per permit will be above $50 each. Firm A will BUY ALL 20 of B's permits. It will then dump 40 tons into the water, and will clean up its remaining 10. The price it pays for a permit will be under $100.
Based on the information given, it will be expected that Firm A will no longer pollute; and Firm B will not reduce its pollution at all.
Pollution simply means the introduction of harmful materials into the environment. The harmful materials are known as pollutants.
It should be noted that buying 10 permits from firm B, firm A can reduce all its pollution to zero. Also, Since B has sold the permits to A, firm B will not be in a position to reduce any of its pollution levels. The firm makes a profit by selling 10 permits purchased for $500 to $1000 to firm A since it is beneficial both for A and B.
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York’s outstanding stock consists of 80,000 shares of noncumulative 6.5% preferred stock with a $5 par value and also 250,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends.
2016 total cash dividends $15,500 2018 total cash dividends $225,000
2017 total cash dividends 24,000 2019 total cash dividends 375,000
Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. Also compute the total dividends paid to each class for the four years combined.
Per Value Dividend Rate Dividend Per Number of Preferred
Per Preferred Share Preferred Share Preferred Share Dividend
Annual Preferred Dividend:
Total Cash Paid to Paid to Dividends in
Dividend Paid Preferred Common Arrears at year-end
2016 15,500
2017 24,000
2018 225,000
2019 375,000
Total: $639,500
Answer and Explanation:
The presentation of each year dividend amount and the total dividend paid is shown below:
Particulars Par Dividend Dividend No. of Preferred
value Rate Per preferred dividend
Preferred Preferred shares
shares shares
Annual
preferred
dividend $5 6.50% $0.325 $80,000 $26,000
Particulars Total cash Paid to Paid to Dividend in arrears
dividend preferred common paid at year end
2016 $15,500 $15,500 $0 $0
2017 $24,000 $24,000 $0 $0
2018 $225,000 $26,000 $199,000 $0
2019 $375,000 $26,000 $349,000 $0
Total $639,500 $91,500 $548,000 $0
The dividend is the amount which is paid to the preference shareholders and the equity shareholders but the first the payment is made to preference shareholders
Answer:
The presentation of each year dividend amount and the total dividend paid is shown below:
Particulars Par Dividend Dividend No. of Preferred
value Rate Per preferred dividend
Preferred Preferred shares
shares shares
Annual
preferred
dividend $5 6.50% $0.325 $80,000 $26,000
Particulars Total cash Paid to Paid to Dividend in arrears
dividend preferred common paid at year end
2016 $15,500 $15,500 $0 $0
2017 $24,000 $24,000 $0 $0
2018 $225,000 $26,000 $199,000 $0
2019 $375,000 $26,000 $349,000 $0
Total $639,500 $91,500 $548,000 $0
The dividend is the amount which is paid to the preference shareholders and the equity shareholders but the first the payment is made to preference shareholders !!!!!!!!!!!!!!!
Explanation:
When friends of Brian Richardson went to the carnival, they always wanted to take him with them because Richardson had an uncanny ability to win almost every arcade game he played. Usually by the end of the evening his friends were also winning because Richardson did not mind sharing his secrets. His friends urged him to write a book. After several attempts, Richardson created The Secrets of Amusement Park Games-Revealed. In the 85-page book, Richardson reduces the art of playing arcade games to a science. According to him, the trick is to realize each game is not a game of chance. Richardson's mini-book is available at Amazon for $5.95.
Refer to the scenario Since, with the use of Richardson's book, most people dan win arcade games and carry home as many stuffed animals as their arms can hold, what would carnival operators hope for?
a. a slow diffusion of the book
b. the book's purchase and promotion
c. a rapid diffusion of the book
d. intensive distribution and promotion
Answer:
Option A, slow diffusion of the book.
Explanation:
The book contains the secret or tricks to win the game so as many as people will get the book the population of people who can win the game will increase. However, the winning of people in the game is the loss of a carnival operator because he has to give more winning amount. Therefore, the book will increase the winning probability of people so carnival operators will hope its slow diffusion so that people do not get to know the winning techniques.
Suppose Cook Plus manufactures cast iron skillets. One model is a 10-inch skillet that sells for $ 22. Cook Plus projects sales of 650 10-inch skillets per month. The production costs are $ 11 per skillet for direct materials, $ 4 per skillet for direct labor, and $ 6 per skillet for manufacturing overhead. Cook Plus has 75 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 40% of the next month's sales. Selling and administrative expenses for this product line are $ 1,200 per month. Cook Plus has budgeted cost of goods sold of $ 13,650 for July.
Required:
1. How many 10-inch skillets should Chef Plus produce in July?
Answer:
Production budget = 835
Explanation:
The production budgeted for a particular period is the expected units to be produced after adjusting the sales budget figures for opening and closing inventories.
Production = Sales budget + closing inventory - opening inventory
Inventory at the end of July = 40%×650= 260
Opening inventory = 75
Sales budget = 650
Production budget = 650+ 260 - 75= 835
Production budget = 835
Glaston Company manufactures a single product using a JIT inventory system. The production budget indicates that the number of units expected to be produced are 193,000 in October, 201,500 in November, and 198,000 in December. Glaston assigns variable overhead at a rate of $0.75 per unit of production. Fixed overhead equals $150,000 per month. Compute the total budgeted overhead that would appear on the factory overhead budget for month of October.Group of answer choices$343,000.$150,000.$144,750.$301,125.$294,750.
Answer:
$294,750
Explanation:
The computation of the total budgeted overhead is shown below:
Particulars October November December
Fixed overhead $150,000 $150,000 $150,000
Number of units 193,000 201,500 198,000
Variable overhead $144,750
(193,000 units × $0.75)
Total budgeted overhead $294,750
For computing the total budgeted overhead we simply fixed overhead and the variable overhead so that the total budgeted overhead could come
Read the following scenario to answer the questions in below.
As the book-keeper for your company you are required to create quarterly financial statements (Income Statement, Statement of Owner's Equity Balance Sheet and Statement of Cash Flows) in order to report on the financial activities of the company for the quarter (three months).
It is now March 29th, and in preparation for creating the 1st quarter's financial statements (as of 3/31), you have called a meeting with the Dept. Managers for Accounts Receivable and Accounts Payable to confirm deadlines that have to be met for recording March-related transactions. As the meeting starts the owner walks in - she sits quietly as you explain the deadlines, but as soon as you have finished she says "Well, for this quarter, if we have not paid March invoices by March 31, there is no need to record them in March. We can record/expense those invoices when we pay them in April or May."
Questions:
1. Do you agree with the owner, or, do you feel that an adjusting entry is necessary in the situation described? If so - which type of adjusting entry is needed?
2. Discuss the impact (understated or overstated) on the accounts affected if the adjustment is not made and explain how the adjustment affects the appropriate financial statements
Answer:
1. I do not agree with the owner that expenses not paid for in March should not be accrued in March but recorded in April or May when actual payment is made. Such practise violates the accrual concept and matching principle of accounting. They require expenses to be matched to the period's income.
The adjusting entry needed to record the expenses is accrual adjustment, which requires the expense account to be debited and the expense payable account credited as a liability (unpaid financail obligation).
2. If the adjustment is not made, the particular expense account will be understated. This will also result in the overstatement of the net income.
The adjustment affects the Income Statement and the Balance Sheet. The income statement is affected because it is there that expenses are deducted from the gross profit to arrive at income before tax. The carryover effect is that the Retained Earnings, which adjust the net income after tax is also overstated.
Explanation:
Adjusting entries are journal entries used to recognize income or expenses that occurred but are not accurately displayed in the records. Adjusting journal entries are created at the end of an accounting period to balance debits and credits and match expenses to the income for the period in accordance with the accrual concept and matching principle of generally accepted accounting principles.
Assume you had determined that John Firestone, vice president of Pierce Chemicals, was a prospect for your paper and metal containers. You call Mr. Firestone to see if he can see you this week. When his secretary answers the telephone, you say, "May I speak to Mr. Firestone, please?" and she says, "What is it you wish to talk to him about?"
a) How would you answer her question?
b) What would you say if you were told, "I’m sorry, but Mr. Firestone is too busy to talk with you"?
Answer: Please refer to Explanation.
Explanation:
1. Honesty.
State the purpose of your call to the secretary and sell your product. For instance, " Hello, my name is Mr. Petal and I represent a fast rising Paper and Metal Container company. After researching about your company, I felt it most expedient to get in touch with Mr. Firestone as I believe this is business he will be interested in. We offer perks that are unmatched in the industry".
2. Persistence.
You can be persistent on the phone if you detect deceit in the secretary's tone.
For instance,
" Having been in the chemical industry myself, I know such an opportunity does not come often and I really do guarantee that we give the best benefits in the industry. If you can, just let me talk to Mr. Firestone, I promise that neither of you will regret it".
If it still doesn't work, ask for a convenient time you can call back.
Assume that on September 1, Office Depot had an inventory that included a variety of calculators. The company uses a perpetual inventory system. During September, these transactions occurred:
Sept. 6 Purchased calculators from Crane Co. at a total cost of $1,610, terms n/30.
9 Paid freight of $40 on calculators purchased from Crane Co.
10 Returned calculators to Crane Co. for $52 credit because they did not meet
specifications.
12 Sold calculators costing $580 for $760 to Fryer Book Store, terms n/30.
14 Granted credit of $45 to Fryer Book Store for the return of one calculator that
was not ordered. The calculator cost $32.
20 Sold calculators costing $650 for $800 to Heasley Card Shop, terms n/30.
Instructions:
Journalize the September transactions.
Answer:
Explanation:
Journal entry is a record of transaction listing the debit and credit entry of respective account .
Debit entry represent an inflow while credit entry represent an outflow
Date Description Debit Credit
Sept, 6 Inventory 1610
Acct. Payable 1610
Sept . 9 Inventory 40
Cash 40
Sept. 10 Acct payable 52
Inventory 52
Sept 12 Receivable 760
Sales 760
Cost of goods 580
Inventory 580
Sept 14 Returned sales 40
Receivable 40
Inventory 32
Cost of goods 32
Sept. 20 Receivable 800
Sales 800
Cost of goods 650
Inventory 650
Which of the following is an example of cannibalization?
A. A toothpaste manufacturer adds a new line of toothpaste (that contains baking soda) to its product line.
B. A basketball manufacturer adds basketball hoops to its product line.
C. A convenience store begins selling preminuspaid cell phones.
D. A grocery store begins selling Tminusshirts featuring the local university's mascot.
Answer:
A. A toothpaste manufacturer adds a new line of toothpaste (that contains baking soda) to its product line.
Explanation:
Market cannibalization is explained to be a loss in sales caused by a company's introduction of a new product that displaces one of its own older products.
Introduction of a new toothpaste containing baking soda is a perfect example, because it will reduce or alter sales in the other brand units.
The cannibalization of existing products leads to no increase in the company's market share despite sales growth for the new product. Market cannibalization can occur when a new product is similar to an existing product, and both share the same customer base. Cannibalization can also occur when a chain store or fast food outlet lose customers due to another store of the same brand opening nearby.
In the Month of March, Baldwin Corporation received orders of 158 units at a price of $15.00 for their product Bolt. Baldwin uses the accrual method of accounting and offers 30 day credit terms. Baldwin delivers 106 units in March and the balance of 53 units in April. They received payment for 53 units in March, 53 units in April, and 53 units in May. How much revenue is recognized on the March income statement from this order
Answer:
The revenue recognized is "$1,470".
Explanation:
In March, no sales will be acknowledged because the goods became shipped in April although Baldwin follows the financial reporting accrual process.Both sales will be recognized in April because the distribution of the goods was in April. An application being filled or revenue is recognized after all the burden is passed on to the customer and distribution according to Accrual Accounting.Therefore sales in April was recognized,
= [tex]98\times 15[/tex]
= $[tex]1470[/tex]
SnowParadise 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 10 % return on investment on the company's $ 270,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. SnowParadise projects fixed costs to be $ 31,000 for the ski season. The resort serves about 725,000 skiers and snowboarders each season. Variable costs are about $ 7 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices. Would SnowParadise emphasize target pricing or cost-plus pricing? Why?
Answer and Explanation:
The cost plus pricing refers to the pricing in which the markup percentage is added to the cost of the goods and services the company so that the selling price could be determined
According to the given situation, it is mentioned that the resort have a favorable reputation among skiers which derives that the company products and pricing is different from other company dealing is same type of business. And due to the favorable reputation, the managers have some control over the ticket prices
So it shows the cost plus pricing situation.
Concord County owned an idle parcel of real estate consisting of land and a factory building. Concord gave title to this realty to Pharoah Company as an incentive for Pharoah to establish manufacturing operations in the County. Pharoah paid nothing for this realty, which had a fair value of $230000 at the date of the grant. Pharoah should record this nonmonetary transaction as a:_______
a. Credit to Contribution Revenue for $280000
b. Memo entry only
c. Credit to Donated Capital for $280000.
d. Credit to Comprehensive Income for $280000.
Answer:
a. Credit to Contribution Revenue for $230000
Explanation:
Nonmonetary transaction can be said to occur in a situation where a business activity is said to be concluded without the transfer of money between accounts for parties which is been tied to the transaction .
Example is change of address or in a situation where a more complex transactions occured.
Therefore Pharoah should record this nonmonetary transaction as a Credit to Contribution Revenue for $230000 because
Pharoah paid nothing for this realty, which had a fair value of $230000 at the date of the grant.
Answer:
Credit to Donated capital for $230000 ( C )
Explanation:
pharaoh receiving a parcel of real estate from Concord County with a fair value of $230000 and not paying for it i.e as a grant. Pharaoh will record such non monetary transaction as credit to donated capital. this is because the cost/capital he would have spent in acquiring that property for his business have been saved and the asset was Donated to him by Concord County which means he still got the property which is very essential for his business.this is why he should record this transaction under Donated capital.
Candlewood LLC started business on September 1, 2019, and adopted a calendar year. During 2020, Candlewood incurred $6,500 in legal fees for drafting the LLC's operating agreement and $3,000 in accounting fees for tax advice of an organizational nature, for a total of $9,500 of organizational costs. Candlewood also incurred $30,000 of preopening advertising expenses and $24,500 of salaries and training costs for new employees before opening for business, for a total of $54,500 of startup costs. The LLC wants to take the largest deduction available for these costs.
If required, round any division to five decimal places and use in subsequent computations. Round your final answers to the nearest dollar.
In 2019, the LLC may deduct $___________ as organizational expenses and $____________ as startup expenses.
Answer:
The answer to this question can be described as follows:
Explanation:
The beginning expenses relate to the costs incurred in starting of the company. Once starting Activities lead to successful trade, instead of investment amounts. It can be removed throughout the taxable income for the company will be the year of graduation. In this question two blank is available, which can be described as follows:
Expenditures payment of living for the new company. Rs 5000 reduced by half the start-up expenses surpass 50,000 as far as the new company.Huey Company acquires 100% of the stock of Solar Corporation on January 1, 2019, for $2,400,000 cash. As of that date Solar had the following account balances: Book Value Fair value Cash $300,000 $300,000 Accounts receivable 325,000 325,000 Inventory 350,000 400,000 Building-net (10 year life) 1,000,000 900,000 Equipment-net (5 year life) 300,000 400,000 Land 600,000 900,000 Accounts Payable 125,000 125,000 Bonds Payable (Face amount $1,000,000, due 12/31/2023) 2,000,000 2,050,000 Common stock 700,000 Additional paid-in capital 250,000 Retained earnings 880,000 In 2019 and 2020, Solar had net income of $250,000 and $240,000, respectively. In addition, Solar paid dividends of $16,000 in both years. Inventory is assumed to be sold in 2019. Assume straight line amortization/ depreciation for assets and bonds payable. What is the amount of goodwill at date of acquisition?
Answer:
Amount of goodwill $270,000
Explanation:
As per the data given in the question,
Excess of acquisition price $570,000
which is come from
= Total consideration paid - common stock - additional paid in capital - retained earnings
= $2,400,000 - $700,000 - $250,000 - $880,000
= $570,000
Now
Adjustment for difference (fair value minus book value) :
Particulars Book value Fair value Amount
Inventory $350,000 $400,000 $50,000
Building-net $1,000,000 $900,000 ($100,000 )
Equipment-net $300,000 $400,000 $100,000
Land $600,000 $900,000 $300,000
Bonds payable $2,000,000 $2,050,000 ($50,000 )
Total amount $300,000
Now
Amount of goodwill is
= $570,000 - $300,000
= $270,000
Suppose Chef Plus manufactures cast iron skillets. One model is a 10-inch skillet that sells for $ 35. Chef Plus projects sales of 650 10-inch skillets per month. The production costs are $ 6 per skillet for direct materials, $ 4 per skillet for direct labor, and $ 1 per skillet for manufacturing overhead. Chef Plus has 25 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 30% of the next month's sales. Selling and administrative expenses for this product line are $ 1 comma 400 per month. How many 10-inch skillets should Chef Plus produce in July?
Answer:
Production Budget = 820 units
Explanation:
Chef Plus Manufacturers
Production Budget
The production budget is calculated by using the following formula.
Sales + Desired Ending Inventory - Opening Inventory= Production Budget
Units
Sales 650
+Desired Ending Inventory (30 % of 650 ) 195
Less Opening Inventory 25
Production Budget 820
The desired ending inventory is calculated by finding the 30 % of 650 units which is given in the question .
Desired Ending Inventory = 30 % of Sales = 30 % of 650 = 195
Also the opening inventory is given for July= 25 units
Park Corporation is planning to issue bonds with a face value of $750,000 and a coupon rate of 7.5 percent. The bonds mature in 4 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent.
Required:
1. Provide the journal entry to record the issuance of the bonds.
2. Provide the journal entry to record the interest payment on June 30 and December 31 of this year.
3. What bonds payable amount will Claire report on this year's December 31 balance sheet?
Answer:
Bond issuance
Dr Cash $725,010.82
Dr Discount on bonds payable $ 24,989.18
Cr bonds payable $750,000
30 June :
Dr interest expense 30,812.96
Cr cash 28,125.00
Dr bonds discount 2,687.96
December 31:
Dr interest expense 30,927.20
Cr cash 28,125.00
Dr bonds discount 2,802.20
Bonds payable at 31st Dec: $ 730,500.98
Explanation:
The price on the bonds issue is computed using pv formula in excel as shown below:
=-pv(rate,nper,pmt,fv)
rate is the semiannual market interest of 4.25% i.e 8.5%*6/12
nper is the number of semiannual coupon payments of the bond which is 4 years multiplied by 2=8
pmt is the semiannual coupon payment=$750,000*7.5%*6/12=$ 28,125.00
fv is the face value of $750,000
=-pv(4.25%,8,28125,750000)=$725,010.82
find attached amortization schedule
discount on bonds payable=$750,000-$725,010.82=$24,989.18