Bluegill Company sells 7,500 units at $320 per unit. Fixed costs are $120,000 and income from operations is $1,560,000. Determine the following: Round the contribution margin ratio to two decimal places.
a. Variable cost per unit $
b. Unit contribution margin $ per unit
c. Contribution margin ratio %

Answers

Answer 1

Answer:

a) $96 per unit

b) $224 per unit

c) 70%

Explanation:

We will have to compute variable cost and contribution margin

Sales $2,400,000

7,500 × 320

Less; Variable cost $720,000

Contribution margin $1,680,000

Less : Fixed cost $120,000

Operating income. $1,560,000

a) Variable cost per unit

= Total variable cost ÷ Total number of units

= $720,000 ÷ 7,500 units

= $96 per unit

b) Unit contribution margin

= Selling price per unit - Variable cost per unit

= $320 - $96

= $224

c) Contribution margin ratio

= (Selling price per unit - Variable cost per unit) ÷ Selling price per unit × 100

= ($320 - $96) ÷ $320 × 100

= $224 ÷ 320 × 100

= 70%


Related Questions

2. The world has now become a “global village” in many respects. a) Explain any 5 factors working to make the world “a global village” for businesses. b) Discuss 4 major reasons why businesses go global.

Answers

Answer:

the watch has been totally fed tractors working to make a words a Glover villa for measures reserve between two globin respect as a global wind I have been by practice and a business discuss and white business as a work of the word for

Suppose you invested in the Ishares High Yield Fund​ (HYG) a month ago. It paid a dividend of today and then you sold it for . What was your dividend yield and capital gains yield on the​ investment?

Answers

Complete Question:

Suppose you invested $100 in the Ishares High Yield Fund HYG your dividend yield and capital gains yield on the investment?

It paid a dividend of $2 today and then you sold it for $95. What was Dividend Yield and Capital Gains Yield on the investment?

Answer:

Dividend Yield is 2%

Capital Gains Yield is -5%

Explanation:

Dividend Yield:

We can calculate the Dividend Yield using the following formula:

Dividend Yield = D0 / Initial Stock Price

Here

D1 was Dividend paid just now and is $2 per share

Initial Stock Price before the dividend payment was $100 per share

By putting values, we have:

Dividend Yield = $2 per share / $100 per share = 2%

Capital Gains Yield:

We can find capital gains yield by using following formula:

Capital Gains Yield = (P1 - P0) / P0

Here

P1 is $95

P0 is $100

By putting values we have:

Capital Gains Yield = ($95 - $100) / $100 = -5%

Average Rate of Return
Determine the average rate of return for a project that is estimated to yield total income of $148,500 over five years, has a cost of $300,000, and has a $30,000 residual value.
%

Answers

Answer:

22%

Explanation:

The formula to compute the accounting rate of return is shown below:

= Average net income ÷ average investment

where,  

Average net income is

= Total income ÷ number of years

= $148,500 ÷ 5 years

= $29,700

And, the average investment would be

= (Cost - salvage value) ÷ 2

= ($300,000 - $30,000) ÷ 2

= $270,000 ÷ 2

= $135,000

Now put these values to the above formula  

So, the rate would equal to

= $29,700 ÷ $135,000

= 22%

The date the directors vote to pay a dividend is called the: Multiple Choice Date of declaration. Date of record.

Answers

Answer: Date of declaration

Explanation:

The declaration date is also known as announcement date. The date of declaration is the date when the board of directors announces when the next dividend will be paid.

It should be noted that the statement consist of the size of the dividend, date of the previous dividend and also the next dividend payment date.

The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Eleanor spends all of her money on paperback novels and mandarins. In 2012, she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply. The price of a mandarin is 0.33 paperback novels in 2012. Eleanor's wage is 3 paperback novels per hour in 2012. The price of a mandarin is $3.00 in 2012. Which of the following give the real value of a variable? Check all that apply. The price of a paperback novel is $9.00 in 2012. Eleanor's wage is $27.00 per hour in 2012. The price of a paperback novel is 3 mandarins in 2012. Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Eleanor's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a mandarin is $6.00. In 2017, the relative price of a paperback novel is . Between 2012 and 2017, the nominal value of Eleanor's wage , and the real value of her wage . Monetary neutrality is the proposition that a change in the money supply nominal variables and real variables.

Answers

Answer:

In 2012, she earned $27.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $3.00. Which of the following give the nominal value of a variable? Check all that apply.

The price of a mandarin is $3.00 in 2012.

Nominal values are expressed in terms of current money. real variables are represented in terms of other goods or services.

Which of the following give the real value of a variable? Check all that apply.

The price of a paperback novel is 3 mandarins in 2012.

Nominal values are expressed in terms of current money. real variables are represented in terms of other goods or services.

Suppose that the Fed sharply increases the money supply between 2012 and 2017. In 2017, Eleanor's wage has risen to $54.00 per hour. The price of a paperback novel is $18.00 and the price of a mandarin is $6.00. In 2017, the relative price of a paperback novel is still 3 mandarins.  

Between 2012 and 2017, the nominal value of Eleanor's wage doubled, and the real value of her wage remained constant.

Monetary neutrality is the proposition that a change in the money supply affects nominal variables and does not affect real variables.

_____ refers to the growth and spread of investment, trade, production, communication, and new technology around the world.

Answers

Answer:

Globalisation

Explanation:

Globalisation occurs when there is integration and interrelation between companies, governments, and people accross the globe. It is referred to as a capitalistic expansion where local individuals and businesses integrate into a global unregulated market.

Advanced in communication and transportation has also facilitated globalisation by easing flow of information and goods across different parties across the world.

Globalisation tends to result in spread of investment, trade, production, communication, and new technology around the world.

If a company has the following data, is the budget variance favorable or unfavorable? Budgeted Sales $10,000 Actual Sales. $8,000

Answers

Answer:

$2,000 unfavorable

Explanation:

The computation of the budget variance is shown below:

Budget variance is

= Budgeted sales - actual sales

where,

Budgeted sales is $10,000

And the actual sales is $8,000

Now placing these values to the above formula

So, the budget variance is

= $10,000 - $8,000

= $2,000 unfavorable

Since the actual sales is less than the budgeted sales so the same is to be unfavorable else it is favorable

The net income reported on the income statement for the current year was $121,900. Depreciation recorded on store equipment for the year amounted to $20,100. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $48,030 $44,190 Accounts receivable (net) 34,440 32,660 Merchandise inventory 47,020 49,710 Prepaid expenses 5,280 4,200 Accounts payable (merchandise creditors) 45,000 41,800 Wages payable 24,590 27,310 a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: $ Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities $ b. Cash flows from operating activities differs from net income because it does not use the of accounting. For example revenues are recorded on the income statement when .

Answers

Answer:

See answers below.

Explanation:

In order to get net cash flow through indirect method, we will have to make adjustment to the net income; hence we get the increase or decrease of different accounts with the data balance.

a) End beginning cash $48,030 $44,190

Increase in cash $3,840

Accounts receivable(net) $34,440 $32,660

Increase in accounts receivable $1,780

Merchandise Inventory $47,020 $49,710

Decreased inventory -$2,690

Prepaid expenses $5,280 $4,200

Increase prepaid expenses $1,080

Accounts payable(Merchandise creditors) $45,000 $41,800

Accounts payable increase $3,200

Wages payable $24,590 $27,310

Decreased wages payable -$2,720

Per below, we have some accounts that are added (+) to the net income while some are also deducted (-).

Net income $121,900

Adjustment to reconcile the net income to cash

+ Depreciation $20,100

+ Increase in cash $3,840

- Increase in accounts receivable ($1,780)

+ Inventory decrease $2,690

- Increase prepaid expenses ($1,080)

+ Accounts payable increase $3,200

- Decreased wages payable ($2,720)

Net cash $146,150

b) Briefly explain why net cash flow from operating activities is different other than net income.

The reason is that while net income refers to the earned profit by a company for a period ; cash flow from operating activities are measurement of daily cash (in and out) expended on business operation. Cash flow give explanation on the use of cash in an organization on a daily basis which includes net income from the income statement, changes in working capital, adjustments to net profits etc. t is to be noted that the starting point of calculating cash flow from operating activities is the net income.

a proposed new project has projected sales of $222000, costs of $96500, and deperciation of $26100. The tax rate is 24 percent.Calculate operating cash flow using the four different approaches.

Answers

The question is incomplete. Here is the complete question

A proposed new project has projected sales of $222000, costs of $96500, and deperciation of $26100. The tax rate is 24 percent.Calculate operating cash flow using the four different approaches.

(Do not round intermediate calculations.)

A. EBIT+Depreciation-Taxes

B. Top-Down

C. Tax-Shield

D.Bottom-Up

Answer:

(A) $101,644

(B) $101,644

(C) $101,644

(D) $101,644

Explanation:

A proposed new project has a sales of $222,000

The cost is $96,500

The depreciation is $26,100

The tax rate is 24%

= 24/100

= 0.24

(A) Using the EBIT + Depreciation - Taxes approach, the operating cash flow can be calculated as follows

EBIT= Sales-Cost-Depreciation

= $222,000-$96,500-$26,100

= $99,400

Taxes= EBIT × tax rate

= $99,400 × 0.24

= $23,856

EBIT + Depreciation - Taxes

$99,400+$26,100-$23,856

= $125,500-$23,856

= $101,644

(B) Using the Top down approach, the operating Cash flow can be calculated as follows

Top down= Sales-Cost-Taxes

= $222,000-$96,500-$23,856

= $101,644

(C) Using the tax shield approach, the operating cash flow can be calculated as follows

Tax shield= (sales-cost)×(1-Tax rate)+(depreciation×tax rate)

= ($222,000-$96,500) × (1-0.24) + ($26,100×0.24)

= 125,500×0.76+6,264

= $101,644

(D) Using the bottom up approach, the operating cash flow can be calculated as follows

Bottom up = NI + depreciation

NI=EBIT-Taxes

= $99,400-$23,856

= $75,544

Bottom up=$75,544 + $26,100

= $101,644

Bella Pool Company sells prefabricated pools that cost $80,000 to customers for $144,000. The sales price includes an installation fee, which is valued at $20,000. The fair value of the pool is $128,000. The installation is considered a separate performance obligation and is expected to take 3 months to complete. The transaction price allocated to the pool and the installation is

Answers

Answer:

The transaction price allocated to the pool and the installation is $124,540.54 and  $19,459.46 respectively.

Explanation:

Price Allocation to Pool = $144,000 * (128,000 / (128,000 + 20,000))

Price Allocation to Pool = $144,000 * 0.864865

Price Allocation to Pool = $124,540.54

Price Allocation to Installation = $144,000 * (20,000 / (128,000 + 20,000))

Price Allocation to Installation = $144,000 * 0.135135

Price Allocation to Installation = $19,459.46

A stock has a beta of 1.28, the expected return on the market is 12 percent, and the risk-free rate is 4.5 percent. What must the expected return on this stock be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answers

Answer:

Expected return on stock =14.1 0%

Explanation:

The Capital Asset pricing Model (CAPM) can be used to determined the expected return on the stock.  

According to the Capital Asset pricing Model the expected return on stock  is dependent on the level of reaction of the the stock to changes in the return on a market portfolio.

These changes are captured as systematic risk. The magnitude by which a stock is affected by systematic risk is measured by beta.  

Under CAPM, Ke= Rf + β(Rm-Rf)  

Rf-risk-free rate (treasury bill rate), β= Beta, Rm= Return on market, Ke-return on stock

Using this model, we can work out the return on stock as follows:

DATA

Ke-?

Rf- 4.5%

β-1.2 8

Rm- 12%

Ke = 4.5% + 1.28× (12-4.5)%=14.1 0%

Expected return on stock =14.1 0%

Southtown Realty has entered into agency agreements with Sara, a seller and Tom, a buyer. Tom wants to make an offer on Sara’s home. Is this possible?

Answers

Answer: Yes it's possible as long as Tom and Sara gives a written consent to the dual agency arrangement.

Explanation:

From the question, we are informed that Southtown Realty has entered into agency agreements with Sara, a seller and Tom, a buyer. Tom wants to make an offer on Sara’s home.

This is possible as long as Tom and Sara gives a written consent to the dual agency arrangement.

Mr. Fred Mitchell is requesting the birth record for Amy, his birth daughter. Mr. and Mrs. Mitchell gave Amy up for adoption four years ago. Should you release the records to him? Why or why not? Yes or No

Answers

Answer:

"No" would be the correct choice.

Explanation:

The documentation could not be issued to him whenever their Amy is indeed not Mr. Mitchel's legal offspring attributable to some other individual's custody. They cannot compensate for the demand as well as text.Whether there is some doubt about either the approved note's authenticity, seek to contact the individual by contacting himself, either correlate signs on organizational documents.

Which of the following reasons would cause a company to reject an offer to accept business at a special price?

a. The additional sales will increase differential income.
b. The additional sales will not increase fixed expenses
c. The additional sales will increase fixed expenses
d. The additional sale will not conflict with regular sales.

Answers

Answer:

The additional sale will not conflict with regular sales.

Explanation:

Accept business at a special price if the additional sales conflict regular sales. That is, special price must maintain the status quo or improve it.

Gabriel Industries stock has a beta of 1.12. The company just paid a dividend of $1.15, and the dividends are expected to grow at 4 percent. The expected return on the market is 11.4 percent, and Treasury bills are yielding 3.8 percent. The most recent stock price is $85. (a) Calculate the cost of equity using the dividend growth model method. (b) Calculate the cost of equity using the SML method. (c) Why do you think your estimates in (a) and (b) are so different?

Answers

Answer and Explanation:

a. The computation of cost of equity using the dividend growth model method is shown below:-

Expected Dividend = Current dividend × (1 + Growth rate)

= $1.15 × (1.04)

= $1.196

Current Stock Price = $85

Cost of Equity =  (Expected dividend ÷ Current stock price) + growth rate

= (1.196 ÷ 85) + 0.04

= 0.05407

or

= 5.41 %

b. The computation of cost of equity using the SML method is shown below:-

Using CAPM, Cost of Equity = Risk free rate + Stock beta × (Market return - Risk free rate)

= 3.8 + 1.12 × (11.4 - 3.8)

= 12.31%

c. Since there are two different methods like SML and dividend growth model for determining the cost of equity so the estimates are so different

The production budget shows expected unit sales of 40000. Beginning finished goods units are 3800. Required production units are 41600. What are the desired ending finished goods units

Answers

Answer:

desired ending inventory= 5,400 units

Explanation:

Giving the following information:

Sales= 40,000 units

Beginning finished goods= 3,800 units

Production= 41,600 units

To calculate the desired ending inventory, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

41,600= 40,000 + desired ending inventory - 3,800

41,600 + 3,800 - 40,000= desired ending inventory

desired ending inventory= 5,400 units

Research on women working in the corporate world indicates that one reason professional women leave their jobs is that the common corporate structure does not value:

Answers

Answer:

A. an interdependent worker.

Explanation:

Interdependent worker means the person who is handling the day to day operations of the business independently.

According to the given question, if the women are working in the corporate world than the chances of the leaving of their jobs is that the general corporate structure do not value them as an interdependent worker just because the person is a woman

Therefore the correct option is A

intext:"A company has net sales of $1,200,000 and average accounts receivable of $400,000. What is its accounts receivable turnover for the period"

Answers

Answer:

i think it would be 4x

Explanation:

im dumb

9) Selected information regarding a company's most recent quarter follows (all data in thousands). 9) _______ Direct labor $540 Beginning work in process inventory $330 Ending work in process inventory $420 Cost of goods manufactured $1620 Manufacturing overhead $830 What was the cost of direct materials used for the quarter

Answers

Answer:

Direct material= $340

Explanation:

Giving the following information:

Direct labor $540

Beginning work in process inventory $330

Ending work in process inventory $420

Cost of goods manufactured $1620

Manufacturing overhead $830

To calculate the direct material used in production, we need to use the following formula:

cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP

1,620= 330 + DM + 540 + 830 - 420

Direct material= $340

Company FM2 must pay 100,000 in 4 years. In order to fully immunize from changes in interest rate, the company invests in a 3 year zero coupon bond that matures for 45,000 and a 5 year zero coupon bond that matures for X. The actuary for Company FM2 determined that their portfolio fully immunized their ability to meet their obligations at the current interest rate i. Calculate i.

Answers

Answer:

5. 11.1%

Explanation:

the options for this question are missing:

5%7.8%10%10.5%11.1%

I prepared the following equation:

$100,000 = $45,000(1 + i)³ + x(1 + i)⁵

There is something that we must remember about zero coupon bonds, and that is that they are sold in thousands. This equation is complex, but there is an easier way to solve it. We can plug in the options to determine which % will result in a possible answer.

The answer is 11.1%, since the other options resulted in numbers which are not even close to a thousand.

$100,000 = $45,000(1.111)³ + x(1.111)⁵

$100,000 = $61,709.88 + 1.2763x

$38,290.12 = 1.2763x

x = $38,290.12 / 1.2763 = $30,000

On July 1, 20X1, James and Short formed a partnership. James contributed cash. Short, previously a sole proprietor, contributed property other than cash, including realty subject to a mortgage, which the partnership assumed. Short’s capital account on July 1, 20X1, should be recorded at

Answers

Answer:

James and Short LLC

Short's capital account on July 1, 20X1 should be recorded at the fair value of contributed property minus the mortgage liability, which the partnership assumed.

Explanation:

The fair value of contributed property is the current market value of the contributed property by Short.  It is the market value that will determine how the contributed property can be valued.  The market value assumes that the contributed property is being sold in pieces and not as a whole.  This is why the value is considered a fair basis for recognizing the capital contribution of Short into the partnership.

Unable to borrow from other banks, University Bank is forced to turn to the Federal Reserve for needed funds. The interest rate that the Federal Reserve will charge University Bank is called the

Answers

Answer:

Discount rate

Explanation:

The discount rate is the rate of interest i.e. charged by the Fed for extending the loan to the commercial bank

In order to apply the expansionary monetary policy, Fed redcued the discount rate and apply the contractionary monetary policy so that the Fed could raise the interest rate

Therefore in the given case, the charge we called as a discount rate

If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,168, the marginal propensity to consume is __________ percent.

Answers

Answer:

The marginal propensity to consume is 92 percent.

Explanation:

Marginal propensity to consume (MPC) refers to the additional expenditure on consumption by consumer as a result of an in national income.

That is, MPC is a measure of the proportion or percentage of the additional income that goes consumption expenditure.

MPC can be calculated using the following formula

MPC = ΔC / ΔY ......................................... (1)

Where;

ΔC = Change in consumption = New consumption - Old consumption = $1,168 - $800 = $368

ΔY = Change in income = New income - Old income = $1,400 - $1,000 = $400

Substituting the values into equation (1), we have:

MPC = $368 / $400 = 0.92, or 92%

Therefore, the marginal propensity to consume is 92 percent.

Self minus Defense ​Schools, Inc. is authorized to issue​ 200,000 shares of ​$2 par common stock. The company issued 73,000 shares at $ 5 per share. When the market price of common stock was $ 7 per​ share, Self minus Defense Schools declared and distributed a 14​% stock dividend.​ Later, Self minus Defense Schools declared and paid a $ 0.70 per share cash dividend.


Required:

a. Journalize the declaration and the distribution of the stock dividend.

b. Journalize the declaration and the payment of the cash dividend.

Answers

Answer: Please see answer in explanation column

Explanation:

Number of outstanding shares =73,000

Stock Dividend declared %  14%

Market value per share  $7

a) journal entry to record  the declaration of stock dividend

Account                                             Debit                         Credit

Stock dividend                               $71,540

Commo9n stock divo9dend redistributable                  $20,440

Paid in capital in excess of par  

($71,540 - $20,440)                                                            $51,100    

Calculations

Stock dividend = 73,000 x 14% x $7=$71,540

Common stock dividend redistributable =73,000 X 14% X $2=$20,440

b) journal entry to record  the distribution of stock dividend

Account                                                         Debit             Credit

Common stock dividend redistributable    $20,440                

Common stock                                                                 $20,440

Calculation= Common stock dividend redistributable =73,000 X 14% X $2=$20,440

c) journal entry to record the declaration of cash dividend

Account                                             Debit                         Credit

    Cash dividend                              $58,254

Dividend payable - common stock                                  $58,254              

Calculations

Cash dividend= Numberof shares outstanding×Cash dividend per share

=[73, 000 shares+(73,000 shares×14%)]×$0.70 each

=[73,000 shares+ 10,220 shares]×$0.70 each

=83,220 shares×$0.70 each

= $58,254

​  

d)journal entry to record the payment of cash dividend

Account                                                Debit                         Credit

Dividend payable - common stock   $58,254    

     Cash dividend                                                              $58,254    

A technical analyst has been charting the price movements of ABC stock. The stock has been fluctuating in price between $63 and $67 per share for the past 3 months. If the analyst expects a breakout through the support level, which order should be placed

Answers

Answer:

The trader should orders to buy ABC stock or take a long position to the stock.

Explanation:

The stock has been fluctuating for 3 months, hence, its value should be well analysed. Now if there is a breakout through the support level, usually with a good quarterly performance report, the stock is likely to go "bull". Buying and holding the stock is a rational decision.

A customer buys 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has dropped to $40. The minimum maintenance margin requirement is:

Answers

Answer:

$10,000

Explanation:

A customer buys 1,000 shares of XYZ

The shares are bought at $60 in a margin account

Two days after the price of XYZ drops to $40

The first step is to calculate the current market value

= 1,000 shares×$40

= $40,000

Therefore, the minimum maintenance margin requirement can be calculated as follows

= 25/100 × current market value

= 25/100 × 40,000

= 0.25×40,000

= $10,000

Hence the minimum maintenance margin requirement is $10,000

Informal groups: Group of answer choices exist primarily for the benefit of their members. perform routine organizational goals. perform uncommon tasks of the organization. always have a high level of interdependence. are initiated by the organization for special purposes.

Answers

Answer:

exist primarily for the benefit of their members.

Explanation:

Informal groups in an organization are created when individuals form a bond based on the experience that they share, they appear from friendship and not by rules inside the company but they influence how people interact and how they perform their job. Also, companies promote the apperance of these groups because they help people interact and improve their communication. According to that, the answer is that informal groups exist primarily for the benefit of their members as they are created by the friendship between employees and not by the company.

The other options are not right because informal groups don't perform routine organizational goals or uncommon tasks of the organization, they don't have a high level of interdependence and they are not initiated by the organization for special purposes because they are created by the employees and are not part of the company's structure.

Larry Nelson holds 1,000 shares of General Electric common stock. The annual shareholders meeting is being held soon, but as a minor shareholder, Larry doesn’t plan to attend. Larry did not sell his shares but gave his voting rights to the management group running GE. Larry must have signed a that gives the management group control over his shares. Larry also holds 2,000 shares of common stock in a company that only has 20,000 shares outstanding. Currently, the company’s stock is valued at $43.00 per share. The company needs to raise new capital to invest in its future production activities. The company is anticipating issuing 5,000 new shares at a price of $34.40 per share. Larry worries about the value of his investment. Larry’s current investment in the company is worth $ . If the company issues its new shares and Larry makes no additional investments in the company, then his investment will be worth $ . This scenario is an example of . Larry could be protected if the firm’s corporate charter includes a provision. If Larry exercises the provisions in the corporate charter to protect his stake, his investment value in the firm will become

Answers

Answer:

Larry must have signed a PROXY AGREEMENT that gives the management group control over his shares.

A proxy agreement is generally used for stockholders voting procedures, they basically grant another person the right to vote on behalf of another stockholder.

Larry's current investment in the company is $86,000.

= 2,000 stocks x $43 = $86,000

If the company issues new shares and Larry makes no additional purchase, Larry's investment will be worth $82,560.

company's new market value = (20,000 x $43) + (5,000 x $34.40) = $1,032,000

new stock price = $1,032,000 / 25,000 stocks = $41.28

= $41.28 x 2,000 = $82,560

This scenario is an example of STOCK DILUTION.

The stock price will lower because the increase in the company's value is less than proportional to the increase in the number of stocks.

Larry could be protected if the firm's corporate charter includes a PREEMPTIVE provision.

Preemptive rights give current stockholders the right to purchase more stocks (in case the company issues more stocks) before any outside investors.

If Larry exercises the provisions in the corporate charter to protect his stake, his investment value in the firm will become $103,200.

= [(5,000 / 10) x $34.40] + $86,000 = $17,200 + $86,000 = $103,200

On July 1, Year 1, Yellow Rose Corp. paid $25,000 cash for a machine and paid an additional 8% sales tax. On the same date, an electrician was paid $1,000 to install custom switches to enhance the functionality of the machine. Yellow Rose estimates a five-year useful life, uses straight-line depreciation, and expects a $2,000 salvage value. The machine was placed in service on October 1, Year 1. Yellow Rose has a calendar year-end.On December 31, Year 2, the machine was sold for $14,000 cash. Depreciation expense for Year 2 was properly recorded.Use the data above to prepare each of the journal entries for Yellow Rose specified below.1. Prepare the journal entry to record the cost of the machine.2. Prepare the journal entry to record the Year 1 depreciation for the machine.3. Prepare the journal entry to record the sale of the machine.

Answers

Answer:

Journal entries are given below

Explanation:

July 1, Year 1 (Yellow Rose Corp. purchased a machine)

                                            DEBIT      CREDIT

Machine                            $28,000  

Cash                                                     $28,000

Working

Cost of machine = Purchase price + Sales tax + Installation

Cost of machine =  $25,000 + $2,000 + $1,000

Cost of machine =   $28,000

Depreciation for year 1 (October to December)

                                                       DEBIT      CREDIT

Depreciation Expenses                $1,300  

Accumulated Depreciation                             $1,300

Working

Annual Depreciation expense = (Cost - salvage value) / useful life

Annual Depreciation expense = (28000 - 2000) / 5 = $5,200

Depreciation for 3 months

Depreciation = $5,200 x 3/12

Depreciation = $1300

Sale of the machine

                                                       DEBIT      CREDIT

Cash                                        $14,000  

Loss on Sale                                 $7,500  

Accumulated Depreciation         $6,500  

Machinery                                                       $28,000

Workng

Gain/Loss on sale = Sale proceed - carrying value

Gain/Loss on sale = 14,000 - 21,500

Loss on sale = $7,500

Carrying value = Cost - Accumulated depreciation

Carrying value = 28,000 - 6500 = 21500

Accumulated depreciation = $1,300 + $5,200 = $6,500

Assume a corporation has earnings before depreciation and taxes of $123,000, depreciation of $41,000, and that it has a 35 percent tax bracket. a. Compute its cash flow using the following format. (Input all answers as positive values.) b. How much would cash flow be if there were only $21,000 in depreciation

Answers

Answer:

a.                     Computation of cash flow

Earnings before depreciation and taxes    $123,000

Less: Depreciation                                         $41,000

Earnings before taxes                                   $82,000

Less: Taxes ($82,000*35%)                          $28,700

Earnings after taxes                                       $53,300

Add: Depreciation                                          $41,000

Cash Flow                                                      $94,300

b.  If Depreciation = 21,000  

                     Computation of cash flow

Earnings before depreciation and taxes  $123,000

Less: Depreciation                                          $21,000

Earnings before taxes                                    $102,000

Less: Taxes($102,000*35%)                           $35,700

Earnings after taxes                                        $66,300

Add: Depreciation                                           $21,000

Cash Flow                                                        $87,300

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