Answer:
Margin of safety = $200,000
Explanation:
Given:
Actual profit = $80,000
Break-even point = $500,000
Variable expenses = 60% of sales
Find:
Margin of safety
Computation:
Assume sales = a
So,
Variable expenses = 0.6a
Pv ratio = [(Sales - Variable expenses) / Sales]100
Pv ratio = [(a - 0.6a)/a]100
Pv ratio = 40%
Margin of safety = Profit / Pv ratio
Margin of safety = 80,000 / 40%
Margin of safety = $200,000
Rolling Coast Inc. issued BBB bonds two years ago. These bonds provided a yield to maturity (YTM) of 11.5 percent. Long-term risk-free government bonds were yielding 8.7 percent at the time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the risk-free long-term government bonds are currently yielding 7.8 percent, then at what interest rate should Rolling Coast expect to issue new bonds
Answer: 9.2%
Explanation:
The interest rate that Rolling Coast should expect to issue new bonds will be calculated thus:
Firstly, we will calculate the previous risk premium on BBB bonds which will be:
= 11.5% - 8.7% = 2.8%
Then, the new risk premium on BBB bonds will be:
= Previous risk premium / 2
= 2.8% / 2
= 1.4%
Then, the interest rate that Rolling Coast should expect to issue new bonds will be:
= 7.8% + 1.4%
= 9.2%
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $234,000 including installation. The company estimates that the equipment will have a residual value of $27,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows:
Year Hours Used
1 2,800
2 1,900
3 2,000
4 2,000
5 1,800
6 1,500
Required:
a. Prepare a depreciation schedule for six years using the straight-line method.
b. Prepare a depreciation schedule for six years using the double-declining-balance method.
c. Prepare a depreciation schedule for six years using the activity-based method.
Answer:
University Car Wash
a. Straight-line Method:
Year Cost Depreciation Accumulated Net Book
Expense Depreciation Balance
1 $234,000 $34,500 $34,500 $199,500
2 $234,000 $34,500 $69,000 $165,000
3 $234,000 $34,500 $103,500 $130,500
4 $234,000 $34,500 $138,000 $96,000
5 $234,000 $34,500 $172,500 $61,500
6 $234,000 $34,500 $207,000 $27,000
b. Double-Declining-Balance Method:
Year Cost Depreciation Accumulated Net Book
Expense Depreciation Balance
1 $234,000 $77,220 $77,200 $156,780
2 $234,000 $51,737 $128,937 $105,043
3 $234,000 $34,664 $163,601 $70,379
4 $234,000 $23,225 $186,826 $47,154
5 $234,000 $15,561 $202,387 $31,583
6 $234,000 $4,593 $206,980 $27,000
c. Activity-Based Method:
Year Cost Depreciation Accumulated Net Book
Expense Depreciation Balance
1 $234,000 $48,300 $48,300 $185,700
2 $234,000 $32,775 $81,075 $152,925
3 $234,000 $34,500 $115,575 $118,425
4 $234,000 $34,500 $150,075 $83,925
5 $234,000 $31,050 $181,125 $52,875
6 $234,000 $25,825 $206,950 $27,050
Explanation:
a) Data and Calculations:
Cost of new machines = $234,000
Residual value of equipment = $27,000
Depreciable amount = $207,000
Estimated useful life = 6 years
Straight-line depreciation expense per annum = $34,500 ($207,000/6)
Double-declining-balance rate = 33% (100%/6 * 2)
Year Depreciation Declining Balance
1 $77,220 $156,780
2 $51,737 $105,043
3 $34,664 $70,379
4 $23,225 $47,154
5 $15,561 $31,583
6 $4,593 $27,000
Estimated useful life in hours = 12,000
Depreciation rate per hour = $17.25 ($207,000/12,000)
Actual usage per year:
Year Hours Used Usage Charge
1 2,800 $48,300 (2,800 * $17.25)
2 1,900 $32,775 (1,900 * $17.25)
3 2,000 $34,500 (2,000 * $17.25)
4 2,000 $34,500 (2,000 * $17.25)
5 1,800 $31,050 (1,800 * $17.25)
6 1,500 $25,825 (1,500 * $17.25)
While on a trip to South Africa, Madison was impressed with the colorful woven outdoor placemats, floor mats, chair cushions, and umbrellas that local artisans were weaving. Upon returning to the United States, she was confident that U.S. consumers would be as intrigued by these accessories as she was. Madison decided to explore the possibility of starting an import business to bring these products to the United States. Which statement seems to be good advice for Madison?
Answer: A) Learn from others who import goods from abroad, and particular from Africa.
Explanation:
Nothing beats experience when it comes to acquiring knowledge so if Madison wants to acquire the knowledge necessary to bring the goods she saw in South Africa to the U.S., she should go to people who have experience in the matter and find out what they know.
This will giver her insight on the amount of money she needs to startup with as well as what business status she should have. They will also give her insight into cost cutting measures to enable her import with more efficiency and make more profit.
The following statements describe why profits for firms in a perfectly competitive industry tend to vanish in the long run. Select the explanation that most accurately reflects this scenario?
A) Firms try to increase supply to cover their costs if they experience losses, and this leads to zero profits.
B) Firms are unable to generate revenue over time because the demand for products drops.
C) When other perfectly competitive firms see an opportunity to earn profits and enter the market prices drop.
D) When other perfectly competitive firms see an opportunity to earn profits and enter the market, prices rise.
Answer:
The correct answer is the option C: When other perfectly competitive firms see an opportunity to earn profits and enter the market the prices drop.
Explanation:
To begin with, in the microeconomics theory the perfect competitive market is characterized by the fact that there a lot of companies that sell an homogenous product and that are price takers of the market itself. So therefore that the only big difference in the firms are the costs and the prices that they have. Moreover, in the long run the firms are obtaining great profits so that leads to the enter of another more companies to the market and the supply rises the prices will have to go low so that will implicate as well a decrease in the prices of every company that now works in that industry.
If a perfectly competitive firm raises its price, the quantity demanded of its product ____________. a. diminishes temporarily in the short run b. falls to zero c. stays the same d. falls below marginal cost
Answer:
B. Fall to Zero
Explanation:
In a perfectly competitive market, product cost are all relatively the same. If a firm decides to raise its price on a product it's demanded quantity becomes relatively nonexistent due to the other competitors whos prices have either remained the same or even dropped in price.
Holt Enterprises recently paid a dividend, D0, of $3.50. It expects to have nonconstant growth of 19% for 2 years followed by a constant rate of 10% thereafter. The firm's required return is 13%. How far away is the horizon date? The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. The terminal, or horizon, date is infinity since common stocks do not have a maturity date.
Answer:
Holt Enterprises
The terminal, or horizon, date is:
the date when the growth rate becomes constant. This occurs at the end of Year 2.
Explanation:
a) Recent dividend, DO = $3.50
Expected non-constant growth = 19%
Period of non-constant growth = 2 years
Expected constant rate of growth = 10% after 2 years of non-constant growth
The firm's required return rate = 13%
b) The terminal or horizon date is, therefore, from the end of year 2 or beginning of year 3, when constant growth sets in with the Holt stock.
At the horizon date the dividend, D3, must have grown to $5.42 approx.
Then, the horizon value is given by the formula = D3 / required rate - growth rate
= 5.42 / 0.13 - 0.01
= 5.42 / 0.03
= $181
Bush Company reported net income of $60,000 for the year. During the year, accounts receivable decreased by $8,000, accounts payable increased by $4,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is Group of answer choices
Answer:
Net income from operating activities = $77000
Explanation:
Below is the calculation for Net income from operating activities:
Given the net income = $60000
Decrease in accounts receivable = $8000
Increase in accounts payable = $4000
Depreciation = $5000
Add the values in the net income in order to get the net income from operating activities.
Net income from operating activities = 60000 + 8000 + 4000 + 5000
Net Income from operating activities = $77000
Your sister just deposited $5,500 into an investment account. She believes that she will earn an annual return of 8.8 percent for the next 6 years. You believe that you will only be able to earn an annual return of 8 percent over the same period. How much more must you deposit today in order to have the same amount as your sister in 6 years
Answer:
$5749.02
Explanation:
The first step is to determine the future value of my sister's deposit
The formula for calculating future value:
FV = P (1 + r)^n
FV = Future value
P = Present value
R = interest rate
N = number of years
5500 (1.088)^6 = $9122.97
the second step is to determine the present value of $9122.97 using an interest rate of 8%
$9122.97 / (1.08)^6 = $5749.02
Assume that an investor purchased a put option on BP with an exercise price of $1.900 for $0.0215 per unit. There are 31,250 units in a GBP options contract. At the time of the option expiration date, the spot price for GBP was $1.885. What was the net profit/loss on this option to the investor?
a. $203.125
b. $671.8750
c. $468.75
d. $1,140.625
Answer:
a. $203.125
Explanation:
Calculation to determine the net profit/loss on this option to the investor
Net profit/loss=((1.900 - 1.885) - 0.0215)(31,250)
Net profit/loss=(0.015-0.0215)*31,250
Net profit/loss=0.0065*31,250
Net profit/loss=$203.125
Therefore the net profit/loss on this option to the investor will be $203.125
Enterprise mashup technology does not provide a mechanism to easily customize and share knowledge throughout the company.
a. True
b. False
Danielle has loaned $500 to Richard at a 4% annual rate of interest for one year. If the inflation rate is constant at 7% for the entire term of the loan, how much purchasing power is lost after Richard repays the loan in full
Answer:
$15
Explanation:
In order to calculate the purchasing power lost the following formulae will be used:
Purchasing power lost = Loaned amount * (inflation rate - nominal rate)
Purchasing power lost = $500 * (0.07 - 0.04)
Purchasing power lost = $500 * 0.03
Purchasing power lost = $15
Hence, the purchasing power lost after Richard repays the loan in full is $15.
3. Assume that on January 2, 2022, the copyrighted item was impaired in its ability to continue to produce strong revenues. The other intangible assets were not affected. Starn estimated that the copyright would be able to produce future cash flows of $22,100. The fair value of the copyright was determined to be $21,100. Compute the amount, if any, of the impairment loss to be recorded.
Answer:
The amount of the impairment loss to be recorded is $6,800.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
On January 1, 2020, Starn Tool & Manufacturing Company purchased a copyright for $31,000 cash. It is estimated that the copyrighted item will have no value by the end of 10 years.
Assume that on January 2, 2022, the copyrighted item was impaired in its ability to continue to produce strong revenues. The other intangible assets were not affected. Starn estimated that the copyright would be able to produce future cash flows of $22,100. The fair value of the copyright was determined to be $21,100. Compute the amount, if any, of the impairment loss to be recorded.
The explanation of the answer is now provided as follows:
Amortization expenses for 2020 = Annual amortization expense = Copyright cost / Estimated useful life of the copyright = $31,000 / 10 = $3,100
Book value of copyright on January 2, 2022 = Copyright cost - Amortization expenses for 2020 = $31,000 - $3,100 = $27,900
Copyright fair value = $21,100
Impairment loss = Book value of copyright on January 2, 2022 - Copyright fair value = $27,900 - $21,100 = $6,800
Therefore, the amount of the impairment loss to be recorded is $6,800.
A high Power Distance Index score implies that the people who hold power in a country are entitled to privileges.
a. True
b. False
Answer:
a. True
Explanation:
The Power-Distance Index refers to the relationship and interaction between a high ranking individual and a low ranking individual. The index depends on how a low ranking individual reacts to a high ranking individual.
It measures the degree where the members of a society or group accepts the hierarchy of the power and the authority.
Thus according to the high power distance index score, individuals with high power are entitled to number of privileges in a country or in society.
Hence the answer is TRUE.
You are given the following facts about a 40% owner of an S corporation, and you are asked to prepare her ending stock basis.
Owner's beginning stock basis $36,800
Increase in AAA 32,000
Increase in OAA 6,300
Payroll tax penalty 2,140
Tax-exempt interest income 4,800
Life insurance premiums paid (nondeductible) 2,700
Owner's purchases of additional stock 22,000
Answer:
$74,120
Explanation:
Preparation of her ending stock basis
ENDING STOCK BASIS:
Beginning stock basis $36,800
Add:Increase in AAA $12,800
(.40 * $32,000)
Add:Increase in OAA $2,520
(.40 * $6,300)
Add:Stock purchase $22,000
Total Ending stock basis $74,120
Therefore her ending stock basis is $74,120
Melanie is the director of human resources for a small manufacturing firm. She has a strong personal interest in technology, and is known throughout the firm as the one with the most knowledge about new kinds of communications technologies. If the firm decides to upgrade its network, Melanie will probably function in what role in the firm's buying center
Answer:
Influencer
Explanation:
An influencer is a person that has the ability to affect the purchasing decision of customers through their authority, position, relationship, or relationship.
They have good social relations and this is an asset in directing customer buying decision.
In the given scenario Melanie has a strong personal interest in technology, and is known throughout the firm as the one with the most knowledge about new kinds of communications technologies.
This knowledge will be beneficial in the buying centre, where she can be an influencer.
Installing an automated production system costing $300,000 is initially expected to save Zia Corporation $52,000 in expenses annually. If the system needs $7,500 in operating and maintenance costs each year and has a salvage value of $30,000 at year 10, what is the IRR of this system
Answer:
8.87%
Explanation:
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = $-300,000
Cash flow each year from year 1 to 9 = $52,000 - $7,500 = $44500
Cash flow in year 10 = $44500 + $30,000 = $74500
IRR = 8.87%
To determine the value of IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
Martha B's has total assets of $1,810. These assets are expected to increase in value to either $1,900 or $2,400 by next year. The company has a pure discount bond outstanding with a face value of $2,000. This bond matures in one year. Currently, U.S. Treasury bills are yielding 5.5 percent. What is the value of the equity in this firm
Answer:
$7.24
Explanation:
PV at the risk free rate = $1,900 / (1 + 0.055)
PV at the risk free rate = $1,900 / 1.055
PV at the risk free rate = $1,800.95
Number of options needed = (2,400 - 1,900) / (400 - 0)
Number of options needed = 500 / 400
Number of options needed = 1.25
Total assets = (No of options needed*Value of equity) + Present value at the risk free rate. Let Value of equity be C0
$1,810 = (1.25*C0) + $1,800.95
$1,810 - $1,800.95 = 1.25*C0
C0 = $9.05 / 1.25
C0 = $7.24
So, the Value of equity in this firm is $7.24.
Suppose that the price of a cupcake is $4. At this price, 50 cupcakes will be demanded. If the price rises to $5 per cupcake, consumer surplus will
Answer: fall by less than $50.
Explanation:
The options are:
• fall by more than $50.
• fall by less than $50.
• rise by less than $50.
• rise by more than $50.
Expert Answer
Consumer surplus, is referred to as the economic measure of the excess benefit that a customer gets. The consumer surplus is the difference between the amount that the customer is willing to pay and the amount that he or she eventually pays.
Based on the question, the total Price paid is: 50 × $4 = $200
Total Revised Price = 50 × $5 = $250
Therefore, there will be a fall by $50 that's ($250 - $200).
The allowable increase for a constraint is Group of answer choices how much resource to use to get the optimal solution. the amount by which the resource can increase given shadow price. how many more units of resource to purchase to maximize profits. the amount by which the constraint coefficient can increase without changing the final optimal value.
Answer: the amount by which the resource can increase given shadow price.
Explanation:
The allowable increase refers to the amount by which the coefficient of the objective function can be increased without bringing about a change in the optimal basis.
The allowable increase for a constraint is the amount by which the resource can increase given shadow price. Therefore, the correct option is B.
If Fees Earned has been credited, it is most likely that:
A. a correcting entry for the overstatement of revenue was recorded. B. a customer paid in advance
C. services were provided.
D. the owner made an investment.
Answer:
C. services were provided.
Explanation:
If Fees Earned has been credited, it is most likely that: "services were provided."
For fees to be earned it means something must have been done in exchange for the fee. Considering this is a business-related issue, then it is correct to conclude that "If Fees Earned has been credited, it is most likely that: services were provided."
Option A is not correct because the overstatement of revenue is not related to the fee warmed being credited.
Option B is not correct, because a payment made in advance does not correlate to a fee earned. Option D is not correct as well, because an investment has nothing to do with a few earned.
Which type of communication technology is attractive to businesses
because it eliminates travel expenses by allowing simultaneous
communication globally?
O Groupware
Extranets
Intranets
Hotspots
Client-server networks
Complete each statement with the term that correctly defines each platform strategy advantage.
Platform businesses tend to frequently ____________ pipeline businesses.
Platforms scale more efficiently than pipelines by eliminating __________
Platform businesses _________ digital technology can grow much faster
Answer:
Note See full and organized question in the attached picture below
1. Platform businesses tend to frequently outperform pipeline businesses.
2. Platforms scale more efficiently than pipelines by eliminating gatekeepers.
3. Platform businesses leveraging digital technology can grow much faster.
4. Platforms unlock new sources of value creation and supply.
5. Feedback loops from consumers to the producers allow platforms to fine-tune their offerings and to benefit from big data analytics.
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $219,017 and average assets of $1,413,720. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $36,220 more than under FIFO, and its average assets would have been $31,640 less than under FIFO.
Required:
Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO).
Answer:
a) Under the FIFO method:-
ROI = 15.49%.
Under LIFO method:-
ROI = 13.2%
Explanation:
ROI = Net Income * 100 / Avverage assets.
a) Under the FIFO method
[tex]ROI= \frac{219017*100}{1413720} \\ROI = 15.49[/tex]
ROI = 15.49%.
Under LIFO method
[tex]ROI= \frac{182797*100}{1382080} \\ROI=13.2%[/tex]
ROI = 13.2%
Net income Under LIFO= Net income under FIFO-Increased cost of goods sold
= $219017-$36,220= $182797.
Average assets under LIFO= Average assets under FIFO-Average assets that are less under LIFO
= $1413720 - $31,640= $1382080.
A dispute between labor and management at an automobile production plant has effectively stopped production for 2 months and has cost the company a tremendous amount of money. Despite the use of third parties, neither side can agree on a solution, but they do agree that the dispute must be settled soon. How should this dispute at this stage be settled
Answer:
Arbitration
Explanation:
The arbitration process seems to be the best way to make the settlement process happen in this case. The arbitration process will be between labor and management as an impartial third party (arbitrator or arbitral tribunal) takes charge of the process. Once both parties have agreed to arbitraueb, the arbitrator then proffers powerful ways of ensuring dispute resolution in such a way that a mutual agreement is reached by both labor and management. Even though proferred solution shouldn't be compulsorily adopted by the conflicting parties.
g e-Dynamix Technologies, another electronics manufacturing firm, in important factors such as manufacturing capability and adaptability to market conditions. Which of the following terms best describes Futura-Core's abilities in comparison to Core-Dynamix? A. absolute advantage B. collective bargaining C. comparative advantage D. competitive advantage
Complete Question:
Futura-Core Technologies, an electronics manufacturing firm, has advantages in financial capability and sustainability, but a disadvantage in speed of innovation. It is also at a disadvantage relative to Core-Dynamix Technologies, another electronics manufacturing firm, in important factors such as manufacturing capability and adaptability to market conditions.
Answer:
C. comparative advantage
Explanation:
Comparative advantage in economics is the ability of an individual or country to produce a specific good or service at a lower opportunity cost better than another individual or country.
Generally, comparative advantage gives a country or business firm a stronger sales margin than their competitors because they are able to sell their specific products or render their peculiar services at a lower opportunity cost.
Hence, the term which best describes Futura-Core's abilities in comparison to Core-Dynamix is comparative advantage.
The Allowance for Bad Debts account had a balance of $10,600 at the beginning of the year and $12,200 at the end of the year. During the year (including the year-end adjustment), bad debts expense of $18,800 was recognized.
Required:
Calculate the total amount of past-due accounts receivable that were written off as uncollectible during the year. (Hint: Make a T-account for the Allowance for Bad Debts account, plug in the amounts that you know, and solve for the missing amount.)
Bad debt write-offs _________
Answer:
Written off = $17,200
Explanation:
Allowance for Bad Debt Account
Debtors (Write off) (Bal. fig) $17,200 Beginning Bal. $10,600
Bad debt expense $18,800
Ending Balance $12,200
Thus, the total amount of past-due accounts receivable that were written off as uncollectible during the year is $17,200.
In the simple Keynesian model, there are three simplifying assumptions. Among these assumptions is: __________
a. the price level is flexible no foreign sector
b. the price level is constant until
c. the economy reaches its full-employment level
d. the money supply always rises b and c
Answer: B and C
No foreign sector
The price level is constant until the economy reaches its full-employment level
Explanation:
Keynesian economics refers to the theory that relates to total spending in the economy and how it affects output, Inflation and employment in the economy.
Assumptions of the Keynesian Model include:
• No foreign sector as economy is closed.
• Demand creates its own supply.
• The aggregate price level is fixed. ...
• The price level is constant until the economy reaches its full-employment level
• No retained earnings etc.
For years, Luke has had the idea of making his own business. As Luke will realize, he will face three basic economic questions. What are these questions?
a. When, How, For whom
b. Who, when, why
c. What, How, for whom
d. What, When, How
Common stock holders: Group of answer choices have one vote in the election of how the company operates. are last in line to receive income. are guaranteed to get paid when the company fails. receive income before preferred stockholders.
Answer:
are last in line to receive income.
Explanation:
Common stock holders are referred to as the owners of the company. They own shares that gives them the right to vote in a company's general meeting, receive dividends, and they have the right to get newly issued shares in the company before others.
However they are also called unsecured creditors of the company because when the business makes income they are the last in line to receive dividends if any remains.
Also in the case of bankruptcy preference share holders and other creditors are paid first. Common share holders are paid last.
Warner Company purchases $52,200 of raw materials on account, and it incurs $62,200 of factory labor costs. Supporting records show that (a) the Assembly Department used $31,900 of the raw materials and $44,200 of the factory labor, and (b) the Finishing Department used the remainder. Manufacturing overhead is assigned to departments on the basis of 160% of labor costs. g
Answer and Explanation:
The journal entry is given below:
Work in process - finishing department $28,800 ($62,200 - $44,200) × 160%
Work in process - assembly department $70,720 ($44,200 × 160%)
To Manufacturing overhead $99,520
(Being the overhead allocated to assembly and finishing department)
Here the work in process is debited as it increased the assets and the manufacturing overhead is credited as it decreased the expesne
