Answer:
The answer is 'it increases the number of shares outstanding'
Explanation:
Stock split increases the number of shares outstanding. It causes dilution of earnings per share.
For example, ABC Inc. has 50,000 shares outstanding and it announces a stock split of 3-for- 1.
This means that any shareholder that has 1 will exchange that 1 share for 3 shares. So at the end of the stock split the total number of shares outstanding will be 150,000 shares (50,000 x 3)
McKerley Corp. has preferred stock outstanding that will pay an annual dividend of $3.70 per share with the first dividend exactly 14 years from today. If the required return is 3.6 percent, what is the current price of the stock?
Answer:
$64.89
Explanation:
Calculation for the current price of the stock
First step is to find the preference stock value at end of 13 years
Using this formula
P13= Annual dividend/Required return
Let plug in the formula
P13=$3.70/.036
P13= $102.78
The second step is to calculate for the current price of the stock
Using this formula
P0= P13/(1+Required return)^Dividend years
Let plug in the formula
P0= $102.78/(1 + .036)^13
P0=$102.78/(1.036)^13
P0=$102.78/1.5837
P0=$64.89
Therefore the current price of the stock will be $64.89
You own 150 shares of Western Feed Mills stock valued at $41.20 per share. What is the dividend yield if your annual dividend income is $372
Answer:
6.01%
Explanation:
Calculation for the dividend yield
Using this formula
Dividend yield=(Annual dividend income/Numbers of shares)/Amount per shares
Let plug in the formula
Dividend yield =($372/150 shares)/$41.20 per share
Dividend yield =$2.48/$41.20
Dividend yield =0.0601*100
Dividend yield =6.01%
Therefore Dividend yield will be 6.01%
Upton Co. is growing quickly. Dividends are expected to grow at 20 percent for the next three years, with the growth rate falling off to a constant 8 percent thereafter. If the required return is 11 percent and the company just paid a dividend of $1.45, what is the current share price
Answer:
$71.03
Explanation:
To find the current share price we need to find the value of future dividends first and then discount it by the given rate of return
DATA
Growth rate = g = 20%
Time period = 3 years
Required return = 11%
Current dividend = Do = $1.45
Share price =?
Solution
Future dividend = Current dividend ( 1 + growth rate)
D1 = (1.45 x 1.20) = $1.74
D2 = (1.74 x 1.20) = $2.088
D3 = (2.088 x 1.20) = $2.5056
Value after year 3 = (D3 x Growth rate) / (Required return-Growth rate)
Value after year 3 = (2.5056*1.08) / (0.11-0.08)
Value after year 3 =$90.2
current share price = Future dividends x Present value of discounting factor
current share price = (1.74/1.11)+($2.088/1.11^2)+(2.5056/1.11^3)+($90.2/1.11^3)
current share price = 1.56 + 1.69 + 1.83 + 65.95
current share price =$71.03
When gasoline gallons are priced in terms of number of seashells, seashells serve as: Group of answer choices
Answer:
Unit of account
Explanation:
Money serves three functions :
1. Unit of account : money serves the function of determining the value of a good or service. It is usually assumed that goods that are more highly priced are more valuable that goods that have lower prices
2. Medium of exchange : goods and services can be exchanged for money. For example, if I want to buy a gallon of gasoline and pay 4 seashells, money has served as a medium of exchange.
3. store of value: money can be saved, retrieved and exchanged sometimes in the future
Jack's gross pay for the week is . His yeartodate pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is % and that Jack's yeartodate pay has previously exceeded the cap. What is the total amount of payroll taxes that Jack's employer must record as payroll tax expenses? (Do not round your intermediate calculations. Assume a FICAOASDI Tax of % and FICAMedicare Tax of %.)
Answer: $122.40
Explanation:
Jack's year to date pay has already exceeded the $7,000 limit on which State and Federal Unemployment taxes can be charged on his pay.
The amount the employer will pay is;
= FICA OASI Tax + FICA Medicare tax
= (1,600 * 6.2%) + (1,600 * 1.45%)
= 99.20 + 23.20
= $122.40
On November 1, Orpheum Company accepted a $10,900, 90-day, 12% note from a customer to settle an account. What entry should be made on the November 1 to record the note acceptance
Answer:
Note Receivable $10,900 (debit)
Sales Revenue $10,900 (credit)
Explanation:
Recognize the Asset : Note Receivable and Sales Revenue to the amount of the value of the note of $10,900.
Subsequently, the Interest will accrue on the note capitalized at the rate of 12%.
The shareholders' equity of Green Corporation includes $376,000 of $1 par common stock and $560,000 par of 7% cumulative preferred stock. The board of directors of Green declared cash dividends of $66,000 in 2021 after paying $36,000 cash dividends in each of 2020 and 2019. What is the amount of dividends common shareholders will receive in 2021
Answer:
The amount of dividends common shareholders will receive in 2021 is $20,400
Explanation:
Arrears in Preferred Stock Dividend = (560,000*7%*2 - 36,000 - 36000)
Arrears in Preferred Stock Dividend = 78,400 - 36,000 - 36,000
Arrears in Preferred Stock Dividend = $6,400
Current Preferred Stock Dividend = 560,000 * 7%
Current Preferred Stock Dividend = $39,200
The amount of dividends common shareholders = $66,000 - $39,200 - $6,400
The amount of dividends common shareholders = $20,400
Duerr company makes a $73,000, 90-day, 10% cash loan to Ryan Co. The maturity value of the loan is: (Use 360 days a year.)
Answer: $74,825
Explanation:
Maturity value is the amount that a borrower will pay to the lender when the loan matures.
Based on the above analysis, the interest will be:
= $73,000 × 10% × 90/360
= $73,000 × 0.1 × 0.25
= $1825
Maturity value will now be the addition of the principal and the interest. This will be:
= $73,000 + $1825
= $74,825
A firm pays a current dividend of $1.00 which is expected to grow at a rate of 5% indefinitely. If current value of the firm’s shares is $35.00, what is the required return based on the constant growth dividend discount model (DDM)?
Answer:
8%
Explanation:
A firm pays a current dividend of $1
The growth rate is 5%
= 5/100
= 0.05
The current value of the firm's share is $35
Therefore, the required return using the constant growth discount dividend model can be calculated as follows
K = 1×(1+0.05)/35 + 0.05
K= 1×1.05/35 + 0.05
= 1×0.03 + 0.05
= 0.03 + 0.05
= 0.08×100
= 8%
Hence the required return is 8%
Schwab’s customers can assemble their own investment portfolios with its mutual fund evaluator tool, an example of
Answer:
A choiceboard.
Explanation:
This is generally described to be a graphical view or a teaching pattern where a tutor allows the said students to use these graphical knowledge to learn and understand a concept been impacted to them at their own pace. This choiceboard is been set up for so many reasons which may include; the encouraging of communication by giving the children means to request a particular object, also giving children certain visual prompt to say the correct words, it is also seen to streamline the selection of choice down there which could be a selection of choices.
Which of the following statements is not true about self-awareness?
a. Self-awareness involves a capacity to monitor and control biases that potentially affect your decision making.
b. Managers who have low self-awareness are superior performers.
c. Self-awareness can be increased by acquiring multiple experiences in diverse situations and with diverse others.
d. Self-awareness is best described as the capacity for introspection and the ability to reconcile oneself as an individual separates from the environment and other individuals.
Answer:
b. Managers who have low self-awareness are superior performers.
Explanation:
Self-awareness can be defined as a mental process, which occurs when an individual has knowledge about himself, about his knowledge, his actions and attitudes.
Therefore, in the workplace, having self-awareness is essential for a manager to achieve high performance, as this is a skill that includes knowing your skills, values, internal resources that ensure that there is the possibility of better monitoring of environments and oneself, control of emotions and improved perception of oneself and others.
This is a characteristic that adds to a manager 's assertive ability to establish communication focused on ethics, mutual respect, cordiality, etc.
The statement that is not true about self awareness from the list is B. "Managers who have low self-awareness are superior performers."
Self awareness refers to the ability of one to understand their thoughts, feelings, impulses and actions. Being self aware is a very important leadership attribute.
Therefore the statement that 'managers who have low self awareness are superior performers' is wrong.
A manager that lacks self awareness will definitely not perform their job effectively.
Self awareness helps one to become better at making decisions, it helps control biases, communicate more effectively and build good relationships in the work place or other places.
Thus, we can conclude that managers who have low self awareness are not superior performers.
Learn more about self awareness here https://brainly.com/question/2071859?referrer=searchResults
four (4) ways to harvest an investment in a business.
Answer:
Harvesting an investment in a business
Four ways to harvest:
a. Outright sale of a company or the investment
b. Issue of Initial Public Offering (IPO)
c. Gradual elimination of a product, especially after the cow stage.
d. Withdrawal of additional investment and earning of profits.
Explanation:
These strategies can be employed by a business to reap the fruits from an investment. The purpose for the investment and the risk profile of the investor determines the actual strategy or combination of strategies used by the investor.
You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace. This information is not available to the general public. This neighbor continually brags to you about the profits he earns on these trades. Given this, you would tend to argue that the financial markets are at best _____ form efficient.
Answer:
Semi-strong Form Efficient.
Explanation:
There are three levels of market efficiency as weak, semi-strong and strong.
In a semi-strong form efficient market, the stock prices change independently of the previous return points and the current information so it is not possible to predict the future stock prices.
The example given in the question, which states that the neighbor has non-public information, can be classified as a semi-strong form efficient market.
I hope this answer helps.
Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,225,000. The project is expected to generate the following net cash flows:
Year Cash Flow
Year 1 $275,000
Year 2 $475,000
Year 3 $400,000
Year 4 $500,000
Happy Dog Soap Company's weighted average cost of capital is 8%, and project Beta has the same risk as the firm's average project. Based on the cash flows, what is project Beta's NPV?
a. -$5,056,663
b. -$1,831,663
c -$2,106,412
d. -$2,197,996
Answer:
-$1,878,086.608
Explanation:
The computation of the net present value is shown below;
(in dollars) (in dollars)
Year Cash flows Discount factor Present value
0 -3225000 1 -3225000 (A)
1 275000 0.9259259259 254629.630
2 475000 0.8573388203 407235.940
3 400000 0.793832241 317532.896
4 500000 0.7350298528 367514.926
Total 1346913.392 (B)
Net present value -$1,878,086.608 (A - B)
This is the answer but the same is not provided in the given options
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 20,000 Variable expenses 12,000 Contribution margin 8,000 Fixed expenses 6,000 Net operating income $ 2,000 Required: 1. What is the contribution margin per unit
Answer:
Unitary contribution margin= $8
Explanation:
Giving the following information:
Sales $ 20,000
Variable expenses 12,000
Contribution margin 8,000
To calculate the unitary contribution margin, we need to use the following formula:
Unitary contribution margin= total contribution margin / total units
Unitary contribution margin= 8,000 / 1,000
Unitary contribution margin= $8
The cash register tape for Bluestem Industries reported sales of $28,372.00.
Record the journal entry that would be necessary for each of the following situations. (a) Cash to be accounted for exceeds cash on hand by $52.00. (b) Cash on hand exceeds cash to be accounted for by $26.50. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 52.75.)
Answer:
Bluestem Industries
Journal Entries
a) Cash to be accounted for exceeds cash on hand by $52.00
Debit Cash Shortage $52.00
Credit Cash Account $52.00
To record the cash shortage.
b) Cash on hand exceeds cash to be accounted for by $26.50
Debit Cash Account $26.50
Credit Cash Overage $26.50
To record the cash overage.
Explanation:
Handling cash in Bluestem Industries will occasionally give rise to cash shortages and cash overages. The best practise is to enact a company policy to guide actions and decisions with respect to cash shortages and overages. And then the accounting for these will be in accordance with the policy. However, the problem of shortages and overages may be pointing at other underlying problems involved in cash handling. Where only the shortages are reported frequently, then the company may need to find ways to minimize cash handling, e.g. using credit cards to receive payments and refunding employees for expenses through bank accounts.
A producer can produce a product at a variable cost per unit of $7. The producer can sell the product for $10 each. If the fixed cost is $60,000.
Required:
a. How many units must the producer sell to break-even?
b. What is revenue at 35,000 units?
c. What is total cost at 35,000 units?
d. How many units must the producer sell in order to earn a profit of $60,000?
Answer:
a.
Break even in units = 20000 units
b.
Revenue at 35000 units = $350000
c.
Total cost (35000 units) = $305000
d.
Units required for target profit = 40000 units
Explanation:
a.
The break even in units is the number of units that must be sold in order to earn enough total revenue as to cover total costs. The break even in units can be calculated as follows,
Break even in units = Fixed cost / Contribution margin per unit
Where,
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = 10 - 7 =$3
Break even in units = 60000 / 3
Break even in units = 20000 units
b.
Revenue = Price * Quantity
Revenue at 35000 units = 10 * 35000
Revenue at 35000 units = $350000
c.
Total cost = Variable cost + Fixed cost
Total cost (35000 units) = 7 * 35000 + 60000
Total cost (35000 units) = $305000
d.
To calculate the units required to earn a target profit, we simply add the target profit amount to the fixed costs in the break even in units equation.
Thus, the number of units required to earn a target profit of $60000 is,
Units required for target profit = (60000 + 60000) / 3
Units required for target profit = 40000 units
Metals and energy currency futures contracts are actively traded on Group of answer choices propane. gold. All of the options are correct. gold and silver. silver.
Answer: All of the options are correct.
Explanation:
Futures refer to a Derivative Instrument contract that mandates a person to buy an asset (underlying asset) at a future date and at a certain price. This enables the buyer of the contract to be certain of an asset's price in future thereby getting rid of various risks.
Metal futures are mostly traded on gold, silver, and copper and energy futures are traded on energy resources like oil and natural usable gas like Propane which is used for most gas related appliances in the household such as cooking gas.
Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions) for 2020 are presented below.
End of Year Beginning of Year
Cash and cash equivalents $1,424 $140
Accounts receivable (net) 4,000 3,800
Inventory 1,800 1,800
Other current assets 636 591
Total current assets $7,860 $6,331
Total current liabilities $3,930 $3,122
For the year, net credit sales were $8,258 million, cost of goods sold was $5,328 million, and net cash provided by operating activities was $1,251 million.
Instructions:
Compute the current ratio, current cash debt coverage, accounts receivable turnover, average collection period, inventory turnover, and days in inventory at the end of the current year.
Answer and Explanation:
The computation is shown below:-
1. Current ratio is
= Current Assets ÷ Current Liabilities
= $7,860 ÷ $3,930
= 2
2. Current cash debt coverage is
= Net Cash Provided by Operating Activities ÷ Average Current Liabilities
Average Current Liabilities = ($3,930 + $3,122) ÷ 2
= $3,526
Current Cash Debt Coverage Ratio = $1,251 ÷ $3,526
= 25.48%
3. Accounts receivable turnover is
= Net Credit Sales ÷ Average Accounts Receivables
= $8,258 ÷ (($4,000 + $3,800) ÷ 2)
= $8,258 ÷ $3,900
= 2.12 times
4. Average collection period is
= 365 ÷ Account Receivable Turnover
= 365 ÷ 2.12
= 172.17
5. Inventory Turnover is
= Cost of Goods Sold ÷ Average Inventory
= $5,328 ÷ ((1,800 + 1,800) ÷ 2
= $5,328 ÷ 1,800
= 2.96
6. Days in Inventory is
= 365 ÷ Inventory Turnover Ratio
= 365 ÷ 2.96
= 123.31 days
Pearl Corporation issued 1,700 $1,000 bonds at 103. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined. Use the incremental method to record the issuance of the bonds and warrants.
ex. account title DR
Account title CR
Answer:
Solution as seen below
Explanation:
Bond = 1,700 × $1,000 × 98%
= $1,666,000
Allocation :
Issue price $1,751,000
(1,700 × $1,000 × 103%)
Bonds ( $1,666,000 )
Warrants $85,000
($1,751,000 - $1,666,000)
Bond face value $1,700,000
(1,700 × $1,000)
Allocated FMV ($1,666,000)
Discounts $34,000
($1,700,000 - $1,666,000)
Which of the following countries would likely have the greatest success is exporting television and other media to Mexico?
a. Brazil
b. Canada
c. Japan
d. Spain
Answer:
d. Spain
Explanation:
The country that would have the greatest success in doing this would be Spain. This is mainly due to the fact that Mexico's main language is Spanish just like in Spain (even though the dialect is different). The other countries listed all speak different languages which will not fair well with Mexican audiences since they will not understand the media. In Brazil, they speak Portuguese. In Canada, they speak English. In Japan, they speak Japanese.
Walnut has received a special order for 2,700 units of its product at a special price of $200. The product normally sells for $260 and has the following manufacturing costs: Per unit Direct materials $ 64 Direct labor 34 Variable manufacturing overhead 44 Fixed manufacturing overhead 103 Unit cost $ 245 Walnut is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Walnut accepts the order, what effect will the order have on the company’s short-term profit?
a. $162,000 decrease
b. $121,500 increase
c. $121,500 decrease
d. Zero.
Answer:
a. $162,000 decrease
Explanation:
Sales $540,000
(2700 unit * $200)
Less:
Direct materials $172,800
(2700 unit * 64)
Direct labor $91,800
(2,700 unit * $34)
Variable manufacturing overhead $118,800
(2700 unit * $44)
Contribution loss from existing sale $318,600 $702,000
2700 unit * ($260-$64-$34-$44)
Effect on Net operating income -$162,000
Idaho Industries Inc. is considering a project that has an initial aftertax outlay or aftertax cost of $450,000. The respective future cash inflows from its fiveyear project for years 1 through 5 are $95,000 each year. Idaho expects an additional cash flow of $60,000 in the fifth year. The firm uses the IRR method and has a hurdle rate of 10%. Will Idaho accept the project? A. Idaho accepts the project because it has an IRR greater than 10%. B. Idaho accepts the project because it has an IRR greater than 5%. C. Idaho rejects the project because it has an IRR less than 10%. D. There is not enough information to answer this question.
Answer:
c
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 using a financial calculator
Cash flow in year 0 = $-450,000
Cash flow each year from year 1 to 4 = $95,000
Cash flow in year 5 = $95,000 + $60,000 = $155,000
IRR = 5.62%
Idaho would reject the project because the IRR is less than the hurdle rate
To find the 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.
A stock had returns of 17.88 percent, −5.16 percent, and 20.39 percent for the past three years. What is the variance of the returns?
Answer:
Variance of the return = 0.01983
Explanation:
[tex]S^{2}[/tex]= Σ[tex](X-X)^{2}[/tex]/ N - 1
Mean return = 17.88% + -5.16% + 20.39% = 11.0367%
Variance = [(17.88% - 11.0367%)2 + (-5.16% - 11.0367%)2 + (20.39% - 11.0367%)2] /(3 - 1)
Variance = [0.004683 + 0.026233 + 0.008748]/2
Variance = 0.01983
Suppose Real GDP is $700 billion and Natural Real GDP is $620 billion. To eliminate this ________________gap, Keynesian theory indicates that government should ______________________.
Answer: d. inflationary; decrease government purchases or increase taxes
Explanation:
Suppose Real GDP is $700 billion and Natural Real GDP is $620 billion. To eliminate this inflationary gap, Keynesian theory indicates that government should decrease government purchases or increase taxes.
The Real GDP is greater than the Natural real GDP which is the potential GDP. When that happens the Economy is said to be overheated and producing above its limits as Aggregate Demand is above Aggregate Supply.
To combat this the Government according to Keynes should embark on policy that will reduce economic activity. The Government can use Contractionary Fiscal Policy that will see it reduce its spending and/or increase taxes. Both of these will have the effect of reducing the amount of money in the economy left for both investment and consumption and cause a fall in the Aggregate Demand.
The break-even point is a.the maximum possible operating loss. b.where the total sales line intersects the total costs line on a cost-volume-profit chart. c.the total fixed costs. d.the maximum possible operating income.
Answer:
The answer is B.
Explanation:
To a layman, break-even point is the point where an entity neither make profit nor loss. It is the point where total revenue equals total cost(where the total sales line intersects the total costs line on a cost-volume-profit chart).
Points greater or above this intersection or point mean the firm is making profit and points lesser or below this intersection or point mean the firm is making loss.
IOP Company purchased a machine on 1/1/22 costing $500. Estimated life was 5 years; estimated salvage value was $100. In 2025, IOP discovered that the bookkeeper correctly used straight-line depreciation, but erroneously used an estimated life of 8 years in computing depreciation for the first 3 years of life. The Prior Period Adjustment to be recorded in 2025 will be:
Answer:
The Prior Period Adjustment to be recorded in 2025 will include a $90 debit as adjustment to Retained Earnings
Explanation:
Correct depreciation would have been = ($500-$100)/5 = $80
Depreciation charged wrongly as ($500-$400)/8 = $50
Therefore depreciation has been charged short by $30 for three years, thereby reflecting income greater by $30 each year for 3 years.
Since due to wrong depreciation retained earnings is higher by $90, therefore we have to debit retained earnings by $90
World Class Rings produces class rings. Its best-selling model has a direct materials standard of 16 grams of a special alloy per ring. This special alloy has a standard cost of $63.30 per gram. In the past month, the company purchased 16,800 grams of this alloy at a total cost of $1,061,760. A total of 16,300 grams were used last month to produce 1,000 rings.
Requirements:
1. What is the actual cost per gram of the special alloy that World Class Rings purchased last month? (Round your answer to the nearest cent.) The actual cost per gram of the special alloy that World Class Rings purchased last month is $_____.
2. What is the direct material price variance? (Abbreviations used: DM = Direct materials) Begin by determining the formula for the price variance, then compute the price variance for direct materials.
3.·What is the direct material quantity variance? (Abbreviations used: DM = Direct materials) Determine the formula for the quantity variance, then compute the quantity variance for direct materials.
4. How might the direct material price variance for the company last month be causing the direct material quantity variance?
The_____direct material price variance might mean that World Class Rings purchased a______. As a result, the company______quantity (efficiency) variance alloy than the standard allows. This accounts for the_____quantity (efficiency) variance.
Answer:
1. What is the actual cost per gram of the special alloy that World Class Rings purchased last month? (Round your answer to the nearest cent.) The actual cost per gram of the special alloy that World Class Rings purchased last month is $_____.
= $1,061,760 / 16,800 grams = $63.20 per gram
2. What is the direct material price variance? (Abbreviations used: DM = Direct materials) Begin by determining the formula for the price variance, then compute the price variance for direct materials.
direct materials price variance = (AP - SP) x AQ = ($63.20 - $63.30) x 16,300 = -$1,630 favorable variance
3.·What is the direct material quantity variance? (Abbreviations used: DM = Direct materials) Determine the formula for the quantity variance, then compute the quantity variance for direct materials.
direct materials quantity variance = SP x (AQ - SQ) = $63.30 x (16,300 - 16,000) = $18,990 unfavorable variance
4. How might the direct material price variance for the company last month be causing the direct material quantity variance?
The FAVORABLE direct material price variance might mean that World Class Rings purchased a LOWER QUALITY MATERIAL. As a result, the company USED MORE ALLOW THAN STANDARD quantity (efficiency) variance alloy than the standard allows. This accounts for the UNFAVORABLE quantity (efficiency) variance.
If the Fed increases the discount rate, which of the following accurately describes the sequence of events that will follow in the banking system, finally leading to a decline in money supply?
A. Reserves ↓: Excess reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
B. Loans ↓; Deposits ↓; Reserves ↓; Excess reserves ↓; Money supply ↓
C. Deposits ; Reserves: Excess reserves; Loans ↓; Money supply ↓
D. Excess reserves ↓; Reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
Answer: A. Reserves ↓: Excess reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
Explanation:
The discount rate is the rate at which the Fed lends money to banks and other depository type institutions. Normally banks have a reserve requirement that the Fed requires of them which states how much they are to leave with the Fed as a reserve. Banks tend to fall short of this reserve sometimes and so can borrow from the Fed to balance it off.
If the Fed increase the rate at which these banks can borrow, they will not want to do so thus leaving their Reserves at the Fed lower than it should be. They will then use their excess reserves which is money kept in reserve more than the Fed requires, to balance off their reserve at the Fed.
As a result of this reduction in their Excess reserve, they will have less money to give out as loans. With less loans being made, people will not have as much money to deposit after taking the loans. Money supply will then fall as a whole.
Muckenthaler Company sells product 2005WSC for $30 per unit. The cost of one unit of 2005WSC is $27, and the replacement cost is $26. The estimated cost to dispose of a unit is $3, and the normal profit is 40% of selling price. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market
Answer:
The product 2005WSC should be reported at $26 per unit.
Explanation:
The lower-of-cost-or-market (LCM) method is a method of recording the inventory of a company which requires that the inventory cost of the company must recorded at whichever is lower between the inventory's original cost or current market price.
Applying lower-of-cost-or-market, the amount per unit at whcih product 2005WSC should be reported can be determined as follows:
Net realizable value (NRV) = Selling price per unit - Cost of disposal per unit = $30 - $3 = $27
Replacement cost (RC) = $26
NRV - Profit Margin = $27 - ($30 * 40%) = $15
Cost per unit = $27
Note that the market is the middle value of Net realizable value (NRV), $27; Replacement cost (RC), $26; and "NRV - Profit Margin", $15. Since the Replacement cost (RC) of $26 is the middle value, that the market value.
Since the market value of $26 per unit is lower than Cost per unit of $27, by applying lower-of-cost-or-market, the product 2005WSC should be reported at $26 per unit.
